Aurelia Butler

PARIS (Reuters) -France on Tuesday accused Moscow of using energy supplies as “a weapon of war” as Russian gas giant Gazprom (MCX:GAZP) reduced deliveries to one of its main utilities and prepared to halt flows along the major pipeline to Germany from Wednesday.European governments are trying to find a response to soaring energy costs for businesses and households and to find alternatives to Russian supply to store for winter.Western nations fear that Moscow is driving up gas prices to try to weaken their resolve in opposing its invasion of Ukraine, a tactic Ukraine’s President Volodymyr Zelenskiy on Monday dubbed economic terrorism. Moscow denies it is doing this.The Nord Stream 1 pipeline, the main conduit for Russian gas into Europe, has become a flash point in the economic war between Moscow and Brussels. Europe is already on notice that supplies will be squeezed as Gazprom shuts off Nord Stream 1 from Wednesday to Friday for maintenance.Kremlin spokesman Dmitry Peskov said on Tuesday that technological problems caused by Western sanctions are the only thing standing in the way of supplying gas via Nord Stream 1. But France’s Energy Transition Minister Agnes Pannier-Runacher said on Tuesday: “Very clearly Russia is using gas as a weapon of war and we must prepare for the worst case scenario of a complete interruption of supplies.” She was speaking to France Inter radio after French utility Engie said it would receive less gas from Gazprom from Tuesday because of an unspecified contractual dispute.Russia has been pumping gas via Nord Stream 1 at only 20% of capacity and there are fears that this week’s outage could be extended. “There are guarantees that, apart from technological problems caused by sanctions, nothing hinders the supplies,” the Kremlin’s Peskov said when asked if there are guarantees that Gazprom will restart gas flows via Nord Stream 1.RISING BILLEuropean energy ministers will hold an emergency meeting on Sept. 9 to discuss the crisis.Germany, Europe’s largest economy, is open to discussing a price-cap scheme on gas supplies at a European level, a source in Italy said, citing a text message Germany’s economy minister sent to his colleagues across Europe.The source said Robert Habeck sent a message to European energy ministers flagging that Berlin was open to discuss the price cap at next week’s meeting.Italian Prime Minister Mario Draghi has been pushing for a price cap, and has also called for steps to decouple the cost of electricity from the gas price. Such a move would allow European households to get the benefits from electricity produced from cheaper sources such as renewables.There was some respite on Tuesday when benchmark Dutch wholesale gas prices eased as Europe almost reached its target of gas stores being 80% full, the idea of a price cap circulated and traders took profits following record high prices last week.The front-month gas contract was down 3% at 259 euros/MWh on Tuesday morning, off all-time highs hit last week, and is trading at levels more than five times those seen a year ago. “Any action which caps power prices will limit the profitability of burning gas for power generation which could possibly feed through to lower gas demand,” ING analysts said.The rising cost of the crisis was illustrated when EU member Austria said that it was preparing to pump billions of euros into the electricity company that supplies much of the capital Vienna after a price surge on power markets left it unable to afford the guarantees needed to cover market transactions. More

The EU’s executive arm is still in the process of devising various options for how the bloc could try to bring down the price of electricity, which is about 10 times higher than it was a year ago, the diplomats say.When European energy ministers gather in Brussels on Sept. 9 for an extraordinary meeting, they will aim to reach a political agreement on how the bloc should act, while leaving the regulatory details for later. Another big clue could come when von der Leyen delivers her annual state of the union speech on Sept. 14.“We need an emergency instrument which would be triggered very quickly, in weeks perhaps,” von der Leyen said Monday evening in Berlin. “After that, there will have to be a deep and structural reform of the energy market. I think that will come at the beginning of next year.”The mere announcement of the plan to intervene sent power prices plunging on Tuesday, despite the lack of details. German power for next year fell as much as 26%, while Dutch natural gas fell some 11%. Both benchmark contracts extended losses from Monday, after surging to records last week. Read more: EU Nears Gas Storage Goal Early Despite Russian Supply Cut (1)But the EU now has the difficult task of trying to devise a solution that all 27 nations — with varying power sources and needs — can agree on.The Czech Republic, which holds the bloc’s rotating presidency, is proposing to cap prices of natural gas used for electricity generation and is working to get others on board. In recent months, other countries have been recommending different steps, including Italy, which called for a limit on the price of gas imports from Russia. Greece has suggested separating electricity produced from renewable, hydropower and nuclear sources from those generated via fossil fuels when setting power prices.  Windfall TaxGerman Economy Minister Robert Habeck suggested implementing an excessive profit tax as a way to help companies and consumers cope with the price shocks.“This phase of transition should be used to skim some of these excessive profits,” he said Monday evening. “The companies would still earn this money, but then it would be taken from them and be used to preserve the social cohesion and also to finance any aid for the companies, until we have developed and implemented the new market design.”Once the bloc settles on a particular path, it will likely be implemented in the form of a regulation that can be fast-tracked but will still likely take at least several weeks to draft, review and approve.Von der Leyen also said it was time for the commission to come up with a longer-term plan to decouple electricity prices from natural gas. “We need to balance two things: one, of course, the seriousness of the situation and the consequences faced by consumers and industry,” Eric Mamer, the commission’s chief spokesman, told reporters Tuesday. “But, on the other hand, the need to come up with proposals that are suited to the complexity of our energy markets, and in particular of our electricity markets. So it’s very important that we take the time to come up with proposals that can cater to these two different dimensions.”French President Emmanuel Macron also repeated his call for a reform of the EU electricity market on Monday, saying he’s aiming for a market “protected from elements of speculation” and with new pricing formulas.Diplomats say that the drafting process for this more ambitious plan may start later this year, with a thorough study of its potential impact to be the first step. A legislative proposal could come next year in a process that usually takes as long as two years to be turned into a binding law. ©2022 Bloomberg L.P. More

European shares and US stock futures turned higher on Tuesday, following two days of declines triggered by concerns that central banks would raise interest rates aggressively to tame inflation.The regional Stoxx 600 share gauge added 0.7 per cent by mid-morning, while Germany’s Dax gained 1.9 per cent. London’s FTSE 100 rose 0.1 per cent, after it resumed trading after a holiday.Those moves came after global equities weakened in the previous session, following last week’s annual economic symposium in Jackson Hole, Wyoming. Central bankers reaffirmed their commitment to tackle rapid price growth at the summit, even as the prospect of tighter monetary policy threatens to induce a protracted slowdown.In a hawkish speech on Friday, Federal Reserve chair Jay Powell said the US central bank “must keep at it until the job is done” on inflation.Wall Street stock futures showed signs of stabilising on Tuesday, with contracts tracking the broad S&P 500 and the technology-heavy Nasdaq 100 up 0.9 and 1.1 per cent respectively.Investors could take advantage of the recent fall in prices to buy coveted stocks cheaply, said Willem Sels, global chief investment officer at HSBC Global Private Bank. “The bottom is a solid bottom — most investors think that — and as we approach it, people are happy to pick up the quality names on their bucket list,” he said. “But we’re not expecting a V-shaped rally.” Expectations of persistently high interest rates weighed on Chinese equities earlier in the session, with Hong Kong’s Hang Seng index falling as much as 1.9 per cent before trimming its losses to close 0.4 per cent lower. The mainland CSI 300 index finished 0.3 per cent lower. Japan’s Topix had a brighter day, up 1.3 per cent.At last week’s meeting in Jackson Hole, Powell said successfully reducing inflation would probably result in lower economic growth for “a sustained period”.Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said he was “happy” to see markets lose ground following Powell’s speech, because it indicated that investors had taken the Fed’s commitment to bring inflation back to 2 per cent seriously.As UK markets reopened, the yield on the UK’s 10-year gilt added 0.11 percentage points on Tuesday to more than 2.7 per cent, catching up after large moves for other government bonds on Monday. The policy-sensitive two-year US yield had on Monday hit its highest level since 2007, as the price of the debt instrument fell.Other government bond markets were relatively subdued during European morning trading, with the yield on the benchmark 10-year US Treasury note slipping 0.03 percentage points lower to 3.08 per cent and the equivalent German yield trading flat. In currencies, the dollar slipped 0.4 per cent, having made gains since Powell’s comments in Wyoming.Fresh economic data due in the coming days will be scrutinised by investors for further clues about the health of the global economy, and how far and fast central banks will move to raise interest rates.Eurozone inflation figures for August will be released on Wednesday, with economists polled by Reuters expecting a year-on-year reading of 9 per cent, up from 8.9 per cent in July. US jobs data due on Friday may offer insights into the level of heat in the labour market of the world’s biggest economy. Economists polled by Reuters expect non-farm payrolls data to show the US added 300,000 new jobs in August. Additional reporting by William Langley in Hong Kong More

Metropolises from the southern tech hub of Shenzhen to southwestern Chengdu and the northeastern port of Dalian ordered measures such as lockdowns in big districts and business closures aimed at stamping out fresh outbreaks.The latest curbs, which will delay the start of the school year for some, reflect China’s strict adherence to a “dynamic COVID zero” policy of quashing every flare-up.That insistence makes it an outlier as the rest of the world tries to live with coronavirus despite the cost to the world’s second-largest economy.While many of the measures are initially planned to run just a few days, any major escalation or extension in some of China’s biggest cities risks further hurting already tepid growth.While the two most populous cities of Beijing and Shanghai have faced only sporadic cases recently, COVID worries still weighed on Chinese stocks. “Markets could once again be hit in the next couple of weeks, likely triggering another round of cuts by economists on the street,” Nomura warned in a note, highlighting the significance of cities such as Shenzhen, also a major port. On Tuesday, the Shenzhen district of Longhua, which has 2.5 million residents, closed entertainment venues and wholesale markets, and suspended large events.People must show proof of negative test results within 24 hours to enter residential compounds, and restaurants must limit patrons to half of capacity, Longhua’s district authorities said. The new curbs will run until Saturday. The moves followed similar measures on Monday covering three other districts that affected over 6 million in Shenzhen, which has fought outbreaks of Omicron sub-variants this year. City officials have stopped short of a blanket delay for the new school year, but six parents of young children said their schools had told them of postponements, as many in parent chat groups expressed anxiety over the uncertainty. PORT CITY SHUT DISTRICTSIn Dalian, a major import hub for soybeans and iron ore, a lockdown begun on Tuesday is set to run until Sunday in the main urban areas with about 3 million residents. Households may send one person each day to shop for daily needs.The lockdown requires non-essential workers to work from home, while manufacturing companies must cut on-site staff and maintain only basic and urgent operations.The southwestern city of Chengdu, with a population of 21 million, ordered blanket closure of public entertainment and cultural venues from Tuesday.It planned to delay the start of the fall school semester, and mandated residents to have proof of negative test result within 24 hours for entry to certain areas. The northern municipality of Tianjin, home to 13.7 million, started a new round of citywide COVID testing, its fourth since Saturday.The city of Tianjin said it would delay resuming offline classes for many schools. In the northern city of Shijiazhuang, about 3-1/2-hours drive from Beijing, four big districts have ordered more than 3 million people to work from home until Wednesday afternoon, except for those in essential jobs. Mainland China reported 1,717 domestically transmitted COVID infections for Aug. 29, 349 of these symptomatic and 1,368 asymptomatic, official data showed on Tuesday. From more than 20 places that reported infections for Monday, Tibet, Qinghai and the province of Sichuan, of which Chengdu is the capital, accounted for the bulk of daily cases. Qinghai’s capital of Xining, with a population of 2.5 million, ordered a lockdown from Monday until Thursday morning in key urban areas, halting public transport and limiting movement. Cases have been rising in Hong Kong, which does not have the same zero-COVID measures as mainland China, with government advisers expecting a daily tally of 10,000 infections this week, fanning fears of a tightening of just-eased curbs. More

A group of UK pub chains has warned that soaring energy prices could lead to a swath of closures and urged the government to provide a package of support.In an open letter published on Tuesday, six breweries called for “immediate government intervention” to help with energy bills that are expected to rise beyond already record high levels in the winter.The pub chains are Greene King, Admiral Taverns, JW Lees, Carlsberg Marston’s, Drake & Morgan and St Austell Brewery.In the letter, the companies said some price rises were “upwards of 300 per cent on pre-pandemic energy bills, with the current average increase around 150 per cent” across the sector.The increases were “putting jobs and businesses at risk. As more fixed price contracts come up for renewal this is only worsening. The time to act is now,” the letter said.“Without swift and substantial intervention from government . . . we will witness a huge number of pubs close their doors for good, leaving individuals without jobs during a cost of living crisis and communities without [their] social heartbeat.”Ofgem, the UK energy regulator, on Friday said that the price cap on household bills would rise 80 per cent in October to almost £3,600 per year as the war in Ukraine drives up gas prices. There is no energy price cap for businesses.Chris Jowsey, chief executive of Admiral Taverns, said that tenanted pubs now paid more for their energy bills than they did in rent.“The challenge is huge. There will be serious risk to licensees and the communities they serve. We urgently need a small business energy cap.” Although Jowsey said Admiral, which has 1,600 pubs, had invested in energy-saving measures, the higher energy costs were “of such a scale” that the chains “desperately need the government to intervene”.Jowsey criticised the government for failing to implement support measures until after the Conservative party elects a leader next Monday.“I raised this issue personally with ministers more than six months ago, and I find it incredible that we need to wait for one person to be elected before we get some decisions and some policy,” he said.Nadhim Zahawi, UK chancellor, on Tuesday said that more government measures to help businesses and households with their energy bills were on the way.Zahawi said he was “preparing options for the incoming prime minister to do even more” to assist with energy bills. “We know we need to do more because . . . into next year, those bills will probably go up further. We are working up all the options. Nothing is off the table.” More

The success of a “significant reorganisation” of Russian forces in Ukraine will be “key” in deciding the outcome of Kyiv’s drive to push them from the area around Kherson, the UK’s defence ministry has said.The Ministry of Defence issued its latest intelligence update on Twitter on Tuesday after Ukraine on Monday claimed to have launched a counterattack to retake Kherson, which Russia captured early in its renewed attack on Ukraine in February.The MoD acknowledged Kyiv’s move, saying “several brigades” of Ukraine’s armed forces had increased artillery fire in sectors across the south of the country. But it was “not yet possible” to confirm the extent of their advances, the ministry said.It noted, however, that since the start of August Russia had made “significant efforts” to strengthen its troops on the western bank of the River Dnipro around Kherson. Most Russian forces are east of the river.Latest Defence Intelligence update on the situation in Ukraine – 30 August 2022Find out more about the UK government’s response: https://t.co/q3wYzVuyKz🇺🇦 #StandWithUkraine 🇺🇦 pic.twitter.com/gG1qJfkkwS— Ministry of Defence 🇬🇧 (@DefenceHQ) August 30, 2022“The Southern Military District’s 49th Combined Arms Army has highly likely been augmented with components of the Eastern Military District’s 35th Combined Arms Army,” the ministry wrote.Most of the units around Kherson were probably understaffed and reliant upon fragile supply lines, the ministry added.“This integration of [the two district] units suggests a significant reorganisation of Russia’s force in Ukraine,” the ministry wrote.There was a “realistic possibility” Russia had “moved to rationalise” the command structure that contributed to its poor performance early in the invasion, the MoD added.The success of that reorganisation would be critical to the outcome of Ukraine’s offensive, the department concluded.“If Ukraine succeeds in undertaking sustained offensive operations, the cohesion of this untested structure will likely be a key factor in the sustainability of Russian defences in the south,” the department wrote. More

Daniel only moved to Tel Aviv from Australia two years ago. But fed up with the soaring cost of life in Israel’s hedonistic coastal metropolis, he is already preparing to leave.The 36-year-old web entrepreneur was drawn to the beach city by its laid-back reputation. But now, he and his fiancée have decided to seek somewhere more affordable, rather than continue to shell out Shk9,500 ($2,900) a month for a 75 sq m apartment. “[The cost of living] kind of put me against the wall . . . I would rather buy my own property and pay my own mortgage than be a stupid idiot and pay an arm and a leg just to say I am living in Tel Aviv,” he said. “Everything — even a coffee — every single thing you touch, it’s overpriced.” Daniel and his fiancée are not alone in their frustration at Israel’s high cost of living. Inflation — at 5.2 per cent — is lower than in much of Europe or the US. But prices for many goods are already high and are now rising at their fastest rate since 2008. Last year, the Economist Intelligence Unit ranked Tel Aviv the most expensive city in the world and opinion polls suggest that the cost of living will be a critical issue in November’s general election.Tel Aviv is particularly exposed to these pressures. Israel’s tech capital has profited hugely from the sector’s boom, which has drawn in both start-ups and investors. Last year, Israeli tech groups raised $25.4bn in funding, while the likes of Blackstone and SoftBank decided to open offices in the city. Sleek glass-and-steel towers have sprung up to house expanding tech groups, while expensive restaurants and boutiques cater to their well-paid workers, who make up roughly a tenth of Israel’s workforce.But the city has also had to contend with rising inequality, with surging rents and high prices for everyday staples displacing working-class citizens. The city was the centre of cost of living protests in 2011 that remain the biggest in Israel’s history and residents complain that, for the less well-off, life is increasingly unaffordable.Prices for many goods are rising at their fastest rate since 2008 © Corinna Kern/Reuters“It’s always been an expensive place to live . . . but it really feels like in the last year it has reached the point of ridiculousness,” said Emma, a life coach from Jaffa, a rapidly gentrifying district around the historic port once best known for its citrus exports. “For me it’s the supermarket. I’m single and I live alone, and sometimes it just doesn’t make sense for me to go to the supermarket because it is just as expensive as ordering a takeaway,” said Emma.Even comparatively well-paid residents are not immune to the pressures. “I’m 35 and I’ve got friends around my age, and we’ve all got decent jobs,” said Julia, a tech sector worker who moved to the city seven years ago. “But I don’t think that many of them have been able to save much — except the ones who were lucky and managed to get options in their company.”Economists say Israel’s high prices stem from several factors. The retail and import sectors are dominated by a small number of players, as is the food business — where kosher certification adds an extra layer of costs. In sectors such as agriculture, import restrictions protect local producers. “In general, we have insufficient competition,” said Karnit Flug, vice-president of the Israel Democracy Institute and former head of the Bank of Israel.This has been compounded by surging property prices. House prices rose 11.6 per cent in real terms in the year to March, according to data from the Bank for International Settlements. Rents have followed suit, particularly in big cities such as Tel Aviv and Jerusalem. In Tel Aviv, an app called “Rent WTF”, which shows users pictures of apartments and then lets them guess — and rage at — the rent, recently went viral.Flug said a combination of rapid population growth — Israel’s, at 1.6 per cent per year, is among the quickest in high-income economies — insufficient releases of building land by successive governments, and low interest rates had contributed to the surge in real estate prices.

But in Tel Aviv, the phenomenon has also been turbocharged by the success of Israel’s tech scene, where the average gross monthly wage of Shk26,878 a month is more than double the national average of Shk11,753.“In downtown Tel Aviv at the moment you can see rent increases of 7 to 10 per cent. And I don’t see prices dropping in the near term. There is just so much demand,” said Julian Nathan, managing director at Hold Real Estate.“Whatever comes on to the market from a sales or rental perspective gets moved on very quickly. You have queues of people waiting to look at apartments,” Nathan said.Israel’s central bank last week stepped up its efforts to contain accelerating prices, raising interest rates for its fourth meeting in a row. Activists have also called for reforms to protect tenants against excessive rent increases, as well as a boost to the amount of social housing, which has declined steadily over the past five decades. But Tel-Aviv dwellers such as Emma, the life coach, are not optimistic that the situation will improve.“Everyone likes to complain here [about the cost of living], but no one is really doing anything about it, so I guess we are all to blame,” she said.“If you see an apartment and it costs X and you say, ‘No, I don’t want to pay that’, someone else will. So it just perpetuates itself, and I can’t see there being any change.”Are you facing difficulties managing your finances as the cost of living rises? Our consumer editor Claer Barrett and finance educator Tiffany ‘The Budgetnista’ Aliche discussed tips on the best ways to save and budget as prices across the globe increase in our latest IG Live. Watch it here. More

Eurozone inflation will hit a double-digit rate in the autumn and remain higher for longer as a result of the surge in gas prices, economists have warned.The higher inflation expectations are adding pressure on the European Central Bank to consider a bigger rise in interest rates despite many economists forecasting an increasingly deeper recession as soaring energy prices hit business and consumer activity.ECB policymakers warned at last weekend’s gathering of central bankers at Jackson Hole, Wyoming, that greater sacrifices in terms of lost growth and jobs will be needed to bring inflation back under control. The European gas price last week hit a record of €343 per megawatt hour, more than double the figure at the end of July and seven times the price in the same period last year. Reduced flows of Russian gas have increased fears of shortages, with the EU preparing emergency measures to curb soaring prices. Many economists, who have also revised up their inflation forecast for next year, now predict that the annual change in consumer prices will accelerate from July’s record level of 8.9 per cent to above 10 per cent in October. They expect August’s inflation figure, to be released on Wednesday, to reach 9 per cent. A flash estimate released on Tuesday showed Spanish inflation had fallen to 10.4 per cent in the year to August as a result of a fall in fuel prices, even as the cost of other consumer goods and services continued rising.The figure was slightly higher than expected by economists polled by Reuters, but it marked a retreat from 10.8 per cent in July, which was the fastest price growth recorded in Spain since 1985.“The surge in gas prices deals a new severe blow to the European economies,” said Holger Schmieding, chief economist at financial company Berenberg. “Higher prices for consumers and higher costs for companies will deepen the recession and worsen the inflation outlook.”Economists surveyed by Consensus Economics this month revised up their eurozone inflation forecasts for 2023 to an average of more than 4 per cent, double the ECB’s 2 per cent target and nearly a percentage point higher than the average forecast in June. That month the ECB predicted that inflation would fall to 3.5 per cent next year; it will update its forecast at the next meeting on September 8.The economists’ consensus forecast for eurozone gross domestic product in 2023 has become increasingly gloomy, with growth expectations halved from June to less than 1 per cent. Many are more pessimistic. Schmieding revised down Berenberg’s forecast for 2023 eurozone GDP to a 1.5 per cent contraction, while raising inflation expectations for that period to 6.1 per cent, from 5 per cent. “A full pass-through” of wholesale gas prices of about €200 per MWh would add 7 to 8 percentage points to German inflation, Schmieding said. But the additional pressure would be diluted by long-term gas contracts, delays in higher prices passing through the production process, businesses absorbing some of the costs and government mitigation measures, he added.After countries were boosted by a resurgence in tourism this summer, the eurozone’s GDP “will likely contract significantly until spring 2023 as private consumption, business investment and exports fall”, Schmieding said.The impact of surging gas prices on eurozone growth could be long-lasting, warned Andrew Kenningham, chief Europe economist at Capital Economics. “The eurozone is less likely to regain its pre-pandemic trend growth rate because there will be some permanent loss of competitiveness which will lead to some loss of activity, especially in sectors such as metals and chemicals,” he said.The five-year inflation swaps rate, a market indication of where inflation will be in five years’ time, has been rising in the eurozone in the past few weeks. Giada Giani, economist at Citi, expects eurozone inflation to peak at 10.3 per cent in the autumn with higher energy costs and the euro’s fall to below parity with the dollar contributing to higher consumer prices. She noted that “more importantly, the whole inflation trajectory for 2023 has shifted higher”, with Citi’s 2023 average now at 6.2 per cent, up from 4.8 per cent in July with higher prices for items such as food and energy-intensive services embedded into the new projections.While the largest upward revisions in inflation were forecast for Germany, the Netherlands and Spain, many economists noted that the policy response will be vital to managing energy price growth. Germany, for example, is planning an extra gas levy from October, although the impact on households will be partly offset by a cut in VAT on gas sales. But several other temporary measures by governments to cushion the blow of high prices, such as Germany’s €9 monthly train ticket that expires on September 1, are due to end soon, which could push inflation even higher.Additional reporting by Martin Arnold in Frankfurt More