Economy

Wholesale gas prices were volatile in April-June, driven by maintenance in key supplier Norway, where Shell (LON:RDSa) unexpectedly extended an outage at its Nyhamna processing plant.Shell cited “seasonality and fewer optimisation opportunities” as reasons for its lower gas trading result.The company does not provide figures for its gas trading results or say what proportion of its business it accounts for.The benchmark front-month Dutch gas contract last traded at 32.90 euros per megawatt hour, down from above 100 euros last year – including a spike to over 300 euros in August – and 70 euros at the start of this year.Shell shares were up around 0.5% at 1234 GMT, lagging a European index of oil and gas companies, which was up 0.7%.”Shell’s trading update included a number of operational indicators which were broadly in line with our forecasts,” said RBC equity analyst Biraj Borkhataria in a note.”Weaker trading across oil and gas which should be expected by the market given lower gas prices and the seasonality of Shell’s LNG portfolio.”Shell’s trading typically generates smaller profits in the second quarter due to lower seasonal demand.The company added that trading performance in its chemicals and products business was also expected be lower than in the first quarter, with the indicative refining margin forecast to drop to $9 a barrel from $15 a barrel.U.S. rival Exxon (NYSE:XOM) also guided to lower refining margins this week.In an update ahead of second-quarter results on July 27, Shell also flagged $3 billion in writedowns for the quarter, primarily driven by a 1% increase in the discount rate used for impairment testing.This is an accounting move to reflect a higher-interest rate environment, a spokesperson said. More

BEIJING (Reuters) -U.S. Treasury Secretary Janet Yellen called on Friday for market reforms in China and criticized the world’s second-largest economy for its recent tough actions against U.S. companies and new export controls on some critical minerals.Yellen arrived in Beijing on Thursday to try to repair fractious U.S.-Chinese relations, but made clear in her public remarks that Washington and its Western allies will continue to hit back at what she called China’s “unfair economic practices.”Despite talk of U.S.-China economic decoupling, recent data show a trade relationship that is fundamentally solid, with two-way trade hitting a record $690 billion last year. “We seek healthy economic competition that is not winner-take-all but that, with a fair set of rules, can benefit both countries over time,” Yellen told Chinese Premier Li Qiang in a meeting on Friday that the Treasury said was “candid and constructive.”Yellen also spoke to the American Chamber of Commerce in China (AmCham) after what a Treasury official called “substantive” talks with former Chinese economy czar Liu He, a close confidante of President Xi Jinping, and outgoing top Chinese central banker Yi Gang.”Strengthening cooperation is the realistic need and correct choice of China and the United States … to inject stability and positive energy into China-U.S. relations,” state media reported Li as saying.Yellen and other U.S. officials are walking a diplomatic tightrope, trying to repair ties with China after the U.S. military shot down a Chinese government balloon over the United States while continuing to push Beijing to halt practices they view as harmful to U.S. and Western companies.Yellen said she hoped her visit would spur more regular communication between the two rivals, and said any targeted actions by Washington to protect its national security should not “needlessly” jeopardize the broader relationship.U.S. officials have downplayed the prospects for any major breakthroughs, while highlighting the importance of more regular communications between the world’s two biggest economies.China hopes the United States will take “concrete actions” to create a favourable environment for the healthy development of economic and trade ties, its finance ministry said in a statement on Friday.”No winners emerge from a trade war or from decoupling and ‘breaking chains’,” the statement added.Li told Yellen a rainbow that appeared as her plane landed from Washington on Thursday offered hope for the future of U.S.-China ties.”I think there is more to China-U.S. relations than just wind and rain. We will surely see more rainbows,” he said.U.S. companies in China hope Yellen’s visit will ensure trade and commercial lanes between the two economies remain open, regardless of the temperature of geopolitical tensions. AmCham President Michael Hart welcomed Yellen’s “extra firepower” in pressing for changes in China’s policies, and said her visit could pave the way for more exchanges at lower levels between the two sides. “I think if there was another year of no visits by top U.S. government leaders, the market would get colder,” he added.TEEING UP POSSIBLE BIDEN-XI MEETINGThe U.S. diplomatic push comes ahead of a possible meeting between President Joe Biden and Xi as soon as September’s Group of 20 Summit in New Delhi or the Asia-Pacific Economic Cooperation gathering scheduled for November in San Francisco.Secretary of State Antony Blinken traveled to Beijing last month and agreed with Xi that the mutual rivalry should not veer into conflict, and Biden’s climate envoy John Kerry is expected to visit later this month.Yellen told the U.S. business executives a “stable and constructive relationship” between the two countries would benefit U.S. companies and workers, but Washington also needed to protect its national security interests and human rights.Regular exchanges could help both countries monitor economic and financial risks at a time when the global economy was facing “headwinds like Russia’s illegal war in Ukraine and the lingering effects of the pandemic,” Yellen added.At the same time, she said she would raise concerns with Chinese officials about Beijing’s use of expanded subsidies for state-owned enterprises and domestic firms, barriers to market access for foreign firms, and its recent “punitive actions” against U.S. firms.New Chinese export controls on gallium and germanium, critical minerals used in technologies like semiconductors, were also concerning, she said, adding the move underscored the need for “resilient and diversified supply chains.”MARKET REFORMSYellen also took aim at China’s planned economy, urging Beijing to return to more market-oriented practices that had underpinned its rapid growth in past years.”A shift toward market reforms would be in China’s interests,” she told the AmCham event.”A market-based approach helped spur rapid growth in China and helped lift hundreds of millions of people out of poverty. This is a remarkable economic success story.”Yellen noted that China’s enormous and growing middle-class provided a big market for American goods and services, and stressed that Washington’s targeted actions against China were based on national security concerns.”We seek to diversify, not to decouple,” she said. “A decoupling of the world’s two largest economies would be destabilizing for the global economy, and it would be virtually impossible to undertake.” More

Johan Löf is a senior economist and head of forecasting at Handelsbanken Capital Markets in Stockholm. Last week Alphaville wrote an interesting post on pandemic savings based on Deutsche Bank analysis, with the punchy subtitle “Pray for Swedes”. As a Swedish economist I can’t help but point out that, well, it’s entirely wrong, at least when it comes to Sweden. For the Swedish economy, the DB analysis fails even the first inspection, unfortunately. Here is the actual saving rate (see also here).

As you can clearly see in the chart above, Swedes’ saving rate soared when the pandemic hit, and since then it has declined but not been unusually low, suggesting that households still hold at fair amount of “excess savings”.While Sweden had relatively loose legal pandemic restrictions, self-isolation was extensive and de facto restrictions were reasonably tight. Therefore, consumption plummeted, like in other countries. Incomes dropped too, as unemployment picked up, but the decline was limited as furlough programs allowed many to stay employed (while keeping 90 per cent of their regular pay). The chart below illustrates these developments, which add up to the higher-than-normal saving rate showed in the previous chart.

This also shows the pre-pandemic trends (exponential) for the individual variables that lie behind the household saving rate. This way of analysing “excess savings” has been popular over the past 1-2 years. But in the most recent Fed staff paper that Deutsche Bank refers to, a method applied to the aggregate saving rate is used. I don’t want to speculate, but perhaps there are some caveats with the method that caused DB to slip up.Finally, here is a chart with the resulting estimate of “excess savings” in Sweden. Exact results will always be open to debate since excess savings isn’t an exactly defined concept, but I’m confident this representation gives a rather reasonable picture of what the Swedish statistics tell us, and the DB analysis got wrong.

Basically, yes, excess savings have declined in Sweden, but not nearly as alarmingly as some seem to think. More

According to Refinitiv Lipper data, global equity funds received a net $5.94 billion in inflows in the week ended July 5, after witnessing net buying of $3.36 billion in the previous week.Last week’s personal consumption expenditures (PCE) report from the U.S Commerce Department showed cooler-than-expected inflation in May, while consumer spending abruptly decelerated, providing further evidence that the Fed’s barrage of rate hikes are having their desired effect.Investors allocated $4.44 billion to U.S. equity funds and $2.29 billion to Asian equity funds, while withdrawing $1.29 billion from European funds.Among sector funds, inflows of $871 million were observed in industrials, $278 million in consumer staples, and $275 million in technology. However, financials experienced an outflow of $548 million.Meanwhile, global bond funds received a net $10.4 billion in a second straight week of net buying.Global government bond funds attracted inflows of $1.82 billion, while corporate bond funds recorded the largest weekly inflow in six weeks with $2.19 billion. Additionally, high-yield funds saw net purchases of $536 million, rebounding after two consecutive weeks of outflows.Investors also pumped $53.1 billion into money market funds, marking their first weekly net buying in four weeks.Data for commodity funds showed that investors withdrew $767 million from precious metal funds in a sixth straight week of net selling, but energy funds received about $35 million after two weekly outflows in a row. Meanwhile, data for 24,130 emerging market funds showed equity funds had $504 million worth of outflow during the week, the first in four weeks, but bond funds received about $1.4 billion in inflows. More

Traders now see about a 20% chance of a rate hike in September and a 40% chance of one by November, after what is nearly universally expected to be a quarter-point increase at the U.S. central bank’s late-July meeting. Before the Labor Department report, they had seen a nearly even chance that rates would get to a 5.5%-5.75% range by November. The report, which showed employers hired 209,000 workers last month, is “consistent with steady and gradual slowing of the labor market,” wrote III Capital Management’s Karim Basta. While that’s not enough to dissuade the Fed a July rate hike, he said, an increase in September is “very much an open question.”The Fed held its policy rate steady last month, targeting a 5%-5.25% range, but policymakers signaled further rate hikes ahead given still unacceptably high inflation and its slow progress toward’s the Fed’s 2% goal amid a strong labor market. More

This will include a proposed rule that closes loopholes companies use to offer misleading short-term insurance products, discriminate based on pre-existing conditions, offer little to no coverage and saddle consumers with thousands of dollars worth of medical expenses, White House Domestic Policy Adviser Neera Tanden told reporters. The Obama administration in 2016 limited short-term insurance plans to three months to try to get more people on year-round plans, but regulations adopted by the Trump administration in 2018 allowed people to stay on such plans for 12 months and renew them for three years.”These plans leave families surprised by thousands of dollars in medical expenses when they actually use health care services like a surgery,” the White House said on Friday.With inflation still a potent political issue, the Biden administration has made it a priority to fight hidden fees by asking federal regulators to increase their oversight of companies across a range of industries including hotels, banks and airlines.Biden, who in over two years as president has witnessed a sharp rebound from the COVID-19-induced recession, has nonetheless watched his public approval ratings sag under the weight of voters’ anxiety about inflation and the economy’s direction.Job creation and low unemployment are the positives while elevated inflation and the knock-on effects of spiking interest rates over the past year in areas such as the housing market have stoked fears of recession.Biden will also announce new rules to cut down on surprise medical billing, limit the use of third-party medical credit cards that include “teaser rates” and do not fully disclose the risks, Tanden said.Surprise bills can occur when people are taken to the nearest hospital for emergency care or when someone goes to an in-network hospital but one of the doctors who treat them there is out-of-network, leading to surprise bills, the White House said.More than half of Americans disapprove of how Biden is handling his job, while just 35% of respondents approve of his stewardship of the economy, according to a Reuters/Ipsos poll conducted in June. Voters rate the economy as their top issue. More

(Reuters) – Wall Street’s main indexes were set to open slightly lower on Friday after latest data signaled resilience in the labor market in the face of the Federal Reserve’s aggressive monetary tightening. The data showed that while U.S. job growth slowed more than expected in June after surging in the previous month, labor market conditions remained tight, with the unemployment rate retreating from a seven-month high and strong wage gains continuing.”Today’s numbers confirm the job market is still strong… and this report gives the green light to the Fed to raise rates,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “As far as the markets are concerned, the key is the Fed threat, and as you can see, we’re pulling back in futures.”Traders stuck to bets the Fed will raise its benchmark interest rate this month to a 5.25%-5.5% range, but were skeptical of further hikes beyond that.Traders now see about a 37% chance of a further rate hike in November, down from nearly even odds before the report, according to CME’s Fedwatch tool.Most tech and growth megacaps, valuations in which come under pressure when borrowing costs rise, edged down in premarket trading, with Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) down 0.3% each.Wall Street’s main indexes ended sharply lower on Thursday in a broad selloff, with the benchmark S&P 500 posting its biggest daily percentage drop in six weeks.At 09:01 a.m. ET, Dow e-minis were down 75 points, or 0.22%, S&P 500 e-minis were down 10.5 points, or 0.24%, and Nasdaq 100 e-minis were down 28.25 points, or 0.19%.All three major U.S. stock indexes were on track to end the week lower as escalating tensions between Beijing and Washington also weighed on market sentiment.Among other early movers, Tesla (NASDAQ:TSLA) edged up 0.5% after it said it would offer new buyers of its top-selling electric vehicles in China a cash bonus equivalent to almost $500 if they have a referral from an existing owner. Levi Strauss & Co (NYSE:LEVI) tumbled 7.5% as the denim clothing maker cut its annual profit forecast on Thursday. More

WASHINGTON (Reuters) – U.S. job growth slowed more than expected in June after surging in the prior month, but labor market conditions remain tight, with the unemployment rate retreating from a seven-month high and fairly strong wage gains continuing.Nonfarm payrolls increased by 209,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for May was revised lower to show payrolls rising 306,000 instead of 339,000 as previously reported. Economists polled by Reuters had forecast payrolls rising 225,000. The economy needs to create 70,000-100,000 jobs per month to keep up with growth in the working-age population. The unemployment rate slipped to 3.6% from 3.7% in May. Though job growth is slowing, the labor market remains unbowed despite the Federal Reserve delivering 500 basis points worth of rate hikes since March 2022 when it embarked on its fastest monetary policy tightening campaign in more than 40 years. For now, it is helping the economy to defy economists’ predictions of a recession. Average hourly earnings rose 0.4% last month after climbing by the same margin in May. In the 12 months through June, wages increased 4.4%, matching May’s advance. Annual wage growth remains too high to be consistent with the Fed’s 2% inflation target. The U.S. central bank is almost certain to resume raising interest rates later this month as signaled by Fed Chair Jerome Powell, after pausing in June. While the higher paying industries like technology and finance are purging workers, sectors like leisure and hospitality as well local government education are still catching up after losing employees and experiencing accelerated retirements during the COVID-19 pandemic.Companies are also hoarding workers, a legacy of the dire labor shortages experienced as the economy rebounded from the COVID-19 downturn in 2021 and early 2022.But some economists argued that worker hoarding was masking weakness in the economy, pointing to worker productivity, which slumped in the first quarter. They also noted that while gross domestic product, the traditional measure of economic growth, was solid in the January-March quarter, an alternative gauge, gross domestic income, has contracted for two straight quarters.Though businesses are content for now to continue hoarding workers, that could change once slowing consumer spending starts to erode profits, the economists said, predicting major layoffs. There are also concerns that the slowdown in wage growth, driven by the loss of high-paying technology and finance jobs among others, portends slower consumer spending, the main anchor of the economy. More