Economy

(Reuters) – China’s central bank cut its interest rates on Monday for the second time this year, but analysts suspect it will do little to spur lending in an economy awash with cash but lacking in consumer demand and business confidence.The People’s Bank of China (PBOC) lowered the rate on its one-year and 7-day lending facilities by 10 basis points after a string of data for July painted a gloomier economic picture than previously.(Graphic: China’s borrowing costs cut – https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwyaogvo/China%20borrowing%20costs%20cut.jpg )Housing prices fell. Property investment also sank and new construction was weak.(Graphic: China’s housing prices fall – https://fingfx.thomsonreuters.com/gfx/mkt/egvbkdqowpq/china%20housing%20prices.jpg )China’s retail sales grew 2.7% in July, compared with 3.1% in June, pointing to slowing consumer spending.(Graphic: China’s retail sales -https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrwlzbvm/China%20retail%20sales.jpg )Industrial production also missed expectations. Concerns over fresh COVID-19 flare-ups, worries about jobs and the crisis in the property sector have dented borrowing by companies and consumers.Chinese banks extended 679 billion yuan ($101 billion) in new yuan loans in July, less than a quarter of June’s amount, according to data released by the PBOC last week.(Graphic: China’s social financing – https://fingfx.thomsonreuters.com/gfx/mkt/xmvjomenapr/China%20social%20financing.jpg )Most of China’s recent monetary and fiscal stimulus has been flowing into savings. Chinese households added 10.3 trillion yuan in deposits in the first half of 2022. (Graphic: China’s bank deposits – https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnazlmvq/China%20bank%20deposits.jpg )According to Refinitiv Lipper, the total net assets of Chinese mutual funds has surged to a record $1.58 trillion at the end of June, 6.7% higher than at the start of the year.(Graphic: Chinese money market mutual funds have the second biggest asset size – https://graphics.reuters.com/GLOBAL-MARKETS/gkplgoalmvb/chart.png )In the stock market, outstanding margin loans have climbed to a four-month high of 1.64 trillion yuan, while equity mutual funds have attracted $7 billion in the last two months.(Graphic: China margin lending https://fingfx.thomsonreuters.com/gfx/mkt/xmpjomebavr/China%20margin%20lending1.jpg ) More

Investors are now more pessimistic about the German economy than they have been at any time since the eurozone debt crisis more than a decade ago, worrying that a sharp fall in Russian natural gas supplies and soaring energy prices will plunge the country into recession.The ZEW Institute’s gauge of investor expectations about Europe’s largest economy has sunk to its lowest level since 2011, dropping from minus 53.8 to minus 55.3, underlining the deepening gloom about the economic fallout from Russia’s invasion of Ukraine.The think-tank’s survey of financial market participants provides an early indicator of economic sentiment after Russia reopened the Nord Stream 1 pipeline following a maintenance break last month, but kept the main conduit for delivery of gas to Europe operating at only a fifth of capacity.Economists have slashed their estimates for growth in Germany and the wider eurozone this year, while raising their inflation forecasts and warning that an end to Russian energy supplies would force Berlin to ration gas supplies for heavy industrial users.On Tuesday, German baseload power for delivery next year, the benchmark European price, rose over 5 per cent to a record €502 per megawatt hour, according to the European Energy Exchange. This is six times higher than the price a year ago — driven upwards by the sharply higher cost of gas used to generate electricity and the prolonged European heatwave that has disrupted generating capacity.The surging price of energy has driven up the cost of imports for Germany and other eurozone countries, sending the bloc’s trade deficit up to €24.6bn in June, compared with a surplus of €17.2bn for the same month a year earlier, according to data from Eurostat, the European Commission’s statistics bureau. The value of exports from the bloc rose 20.1 per cent in June from a year ago, but imports were up 43.5 per cent.“The still high increase in consumer prices and the expected additional costs for heating and electricity are currently having a particularly negative impact on the prospects for the consumer-related sectors of the economy,” said Michael Schröder, a researcher at the ZEW.He said investor sentiment also worsened due to an expected tightening of financing conditions after the European Central Bank raised its deposit rate by 0.5 percentage points to zero in response to record levels of eurozone inflation.Carsten Brzeski, head of macro research at Dutch bank ING, said the German economy was “quickly approaching a perfect storm” caused by “high inflation, possible energy supply disruptions, and ongoing supply frictions”. A heatwave and dry spell has reduced water levels on the Rhine below the level at which barges can be loaded fully, restricting important supplies for factories, which Brzeski estimated was likely to knock as much as 0.5 percentage points off German growth this year.

Adding to the gloom, German households will have to pay hundreds of euros more in fuel bills this winter after the government unveiled an extra gas levy of 2.419 cents per KWH from October. This is expected to push up the cost for a family of four by €240 in the final three months of the year.Germany’s top network regulator told the Financial Times this month that the country must cut its gas use by a fifth to avoid a crippling shortage this winter. The economy ministry has also ordered all companies and local authorities to reduce the minimum room temperature in their workspaces to 19C over the winter.The country has achieved its target of filling gas storage facilities to three-quarters of capacity two weeks ahead of schedule, after high prices and fuel saving measures led to reduced use. But there are worries its objective to lift gas storage to a 95 per cent target of capacity by November will be more challenging if Russia keeps throttling supplies.The German economy stagnated in the second quarter, the weakest performance of the major eurozone countries. Last month, the IMF slashed its forecast for German growth next year by 1.9 percentage points to 0.8 per cent, the biggest downgrade of any country.Additional reporting by Harry Dempsey More

Turkey’s exports to Russia grew 46 per cent by value over the past three months compared with the same period last year as Ankara allowed its companies to step into the gap created by an exodus of western businesses.From May to July, Turkish exports to Russia were worth $2.04bn, $642mn higher than in those same months in 2021, according to export data compiled by the trade ministry and the Turkish Statistical Institute. For last month alone, the value of exports to Russia increased 75 per cent year on year, from $417mn in July 2021 to $730mn.The $313mn rise between July 2021 and July 2022 was the largest for any country that Turkey exports to. Russia’s share of Turkey’s total exports in July was 3.9 per cent, up from 2.6 per cent 12 months earlier.The surge follows an initial decline after Russia’s full-scale invasion of Ukraine in late February. While the overall sums involved remain relatively small — and are dwarfed by Turkey’s large imports from Russia, dominated by energy — the evidence of growing trade between the two countries is likely to irk western officials dismayed by talk of deepening economic co-operation between Ankara and Moscow.Figures from the Turkish Exporters Assembly, an industry body, suggest sales of chemicals, fresh fruit and vegetables and other food products, along with textiles, electricals and furniture drove the increase in exports to Russia.

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A four-hour meeting between presidents Recep Tayyip Erdoğan and Vladimir Putin in the Russian resort of Sochi this month culminated in a joint promise of expanding collaboration on energy and trade, triggering warnings from western capitals that Turkey could face retaliatory steps if it acts as a conduit for sanctions evasion. Turkey, a Nato member that has supplied armed drones to Ukraine while also seeking to maintain and deepen its ties with Russia, has not signed up to western sanctions, choosing instead to pursue what it calls a “balanced” approach to the conflict.

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Western officials have largely accepted that Ankara will not adopt the measures aimed at punishing Putin for the war against Ukraine. However, EU member states are becoming increasingly uneasy about Turkey’s booming trade with Russia and the potential for it to assist Moscow as a substitute for other European imports and exports, two EU officials told the Financial Times. Some capitals have requested information from Ankara regarding its relationship with the Kremlin. “It’s on our radar,” said one of the officials. “It’s not nice and is not being perceived well by the EU. It’s an irritant.”A spokesman for the Turkish trade ministry said there was “not a remarkable change” in trade volumes with Russia. The person did not return phone calls when asked for additional details.The lira has lost a quarter of its value against the dollar this year as Turkey sticks with a loose monetary policy despite runaway inflation. Relatively cheap Turkish products have helped boost export sales. In value terms, exports were 13 per cent higher last month than in July 2021, with sales to the US up by 25 per cent to $1.32bn, the trade ministry said.Some Turkish officials are celebrating the growing commercial links with Russia. Adil Karaismailoğlu, the transport minister, said in a tweet that a 58 per cent jump in automotive trade by sea with Russia in the past three months, compared with the first four months of the year, showed the “leadership of Turkey” in opening sea corridors.

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EU sanctions against Russia, imposed in seven packages since Putin’s invasion of Ukraine, include bans on exports of cutting-edge technology such as high-end electronics and software, types of machinery and transportation equipment, goods and technologies used by the oil refining, energy, aviation and space industries.Several western officials also voiced alarm at the idea that Ankara sees the exodus of western companies from Russia as an opportunity for Turkish businesses to step in — something that some Turkish officials and business figures have voiced in the past.“At the time when the European Community is scaling down its ties with Russia in response to its aggression against Ukraine, it is not really appropriate to increase links or engagement with Moscow,” said Peter Stano, spokesman for the EU’s foreign and diplomatic arm.

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But potential action against Turkey is complicated by its role as a powerful and influential Nato member and its role in hosting almost 4mn Syrian refugees.Western officials acknowledge that Erdoğan’s ability to negotiate with Putin remains an asset, as demonstrated by the recent deal to allow Ukraine to restart seaborne grain exports, which was brokered by the Turkish president along with the UN.“It’s Turkey, everyone [in the EU] needs them, for one reason or another,” said a European official, who spoke on condition of anonymity owing to the sensitivity of the issue. “And the EU has to be aware of its abilities . . . we can’t just tell [Erdoğan] he has to follow our rules.”Eir Nolsøe in London, Laura Pitel, Ayla Jean Yackley and Funja Güler in Ankara and Henry Foy in Brussels More

Investing.com — The health of the U.S. consumer is in focus as Walmart and Home Depot report earnings. Stock futures are cautiously lower ahead of the releases. Monthly data for U.S. housing starts and building permits will likely corroborate a sharp drop in the NAHB’s market index. Germany’s economic outlook worsens as power prices surge to new records, and a revival of the UN-Iran nuclear deal edges closer. Here’s what you need to know in financial markets on Tuesday, 16th August.1. Walmart, Home Depot earningsTwo big bellwethers for the American consumer report earnings early. Home Depot’s (NYSE:HD) numbers are already out, fractionally ahead of expectations.However, the big number is Walmart (NYSE:WMT), whose scale and breadth of operations make it a generally reliable proxy for consumer spending in general. The group’s disappointing first quarter figures and outlook had set the stage for a nightmarish couple of weeks for the retail sector, so there’s a lot riding on whether or not the Walton family store has gotten on top of its problems since then.Analysts expect Walmart to report earnings per share down 15c from a year ago to $1.63, while inflation is expected to have taken revenue up to $150.9 billion from $141 billion a year ago.2. Housing starts data to follow an apocalyptic warning from the NAHBThe U.S. will report housing starts and building permits for July, two numbers that are expected to show a further cooling-off in a housing market struggling with affordability issues and the sharp rise in mortgage rates over the first half of the year.Housing starts are expected to have fallen for a third straight month to 1.54 million, which would be their lowest since October. Building permits are likewise expected to have edged down to 1.65 million, which would be their lowest since September.In a longer term historical context, those numbers are still well above average – building permits would still be in line with their pre-pandemic record-high – but attention is likely to focus on the pace of the decline, given the precipitous drop in the National Association of Home Builders’ activity index on Monday.3. Stocks set to open cautiously lower; Tencent, Meituan eyedU.S. stock markets are set to open cautiously lower, with futures sitting out the release of Walmart’s data before making any major moves.By 06:20 ET (10:20 GMT), Dow Jones futures were down 56 points, or 0.2%, while S&P 500 futures and Nasdaq 100 futures were down by a fraction more.In addition to the major retail earnings, Agilent (NYSE:A) and Jack Henry (NASDAQ:JKHY) will report after the closing bell. Other stocks likely to be in focus later include Chinese ADRs Tencent (OTC:TCEHY) and Meituan (OTC:MPNGY), after a report suggesting that Tencent is looking at selling its entire holding in the food delivery group to relieve the pressure from Chinese antitrust and Internet regulators.4. German power prices hit new high as Rhine dries out, gas surges againEurope’s energy crisis shows no sign of easing up as the continent’s drought compounds the misery created by the sharp reduction in Russian gas supplies.Germany’s benchmark baseload power price rose to a record for a fifth consecutive trading session, briefly topping 500 euros a megawatt-hour against the backdrop of another 7% rise in natural gas prices.The latest leg up has been caused by water levels in the river Rhine dropping below a critical threshold, stopping barges from carrying alternative fuels such as coal and diesel to power plants in the south of Germany. Power prices have now doubled since June. The drought has also forced a sharp cut in output from France’s nuclear reactors, which are typically big exporters to the rest of Europe.Earlier, the ZEW German economic sentiment index, the first of the big European sentiment surveys this month, showed a further decline – although a smaller one than feared.5. Oil under pressure as Iran deal edges closer to revival; API inventories dueCrude oil continues to bounce along near its 2022 lows amid signs that Iran is inching toward acceptance of an EU-proposed plan to revive the 2015 nuclear deal.The EU said it had seen ‘nothing alarming’ in Iran’s response to the plan, received late on Monday, which raises the chance of the Biden administration also accepting it – subject to the usual caveats of U.S. politics.By 6:30 AM ET, U.S. crude futures were down 1.2% at $88.34 a barrel, while Brent crude was down 1.6% at $93.63 a barrel. The American Petroleum Institute releases weekly inventory data at 04:30 PM ET as usual. More

(Reuters) – Seven U.S. Western states that share Colorado River water are poised to miss a federal deadline for drastic consumption cuts amid a megadrought.The U.S. Bureau of Reclamation in June gave the states 60 days, until mid-August, to devise a plan as human-influenced climate change worsens the region’s driest 22-year period in at least 1,200 years.Without a deal, the bureau may mandate reductions.”Despite the obvious urgency of the situation, the last 62 days produced exactly nothing in terms of meaningful collective action to help forestall the looming crisis,” one of the negotiators, John Entsminger, general manager of the Southern Nevada Water Authority, said in an open letter to the bureau on Monday.While officials had given the states 60 days to negotiate an agreement, the firm deadline was seen as Tuesday, when officials with the reclamation bureau were scheduled to release their projections for Colorado’s two largest reservoirs, Lake Mead and Lake Powell. Bureau officials have scheduled a news conference on both topics for 1 p.m. ET (1700 GMT) on Tuesday.The impasse is testing the strength of the 100-year-old Colorado River compact, which determines the water rights of Arizona, California, Colorado, New Mexico, Nevada, Utah and Wyoming.Citing “dangerously low” water levels at Lake Mead and Lake Powell, federal officials called on states to cut their overall usage of Colorado River water by 2 million to 4 million acre-feet of water per year, an unprecedented reduction of 15% to 30% in the coming year.The lakes hover at around 25% of capacity. If they fall much lower they will be unable to generate hydroelectric power for millions in the West, and also will not allow water to flow downstream.”The bureau is asking institutions used to working over the time frame of decades to do something drastic in a few months. States have been given 60 days to come up with more than twice the cuts that they agreed to over 20 years of previous drought agreements,” said author and former water manager Eric Kuhn, who supports the ambitious cuts sought by the bureau.The Colorado River compact assumes the river would have roughly 20 million acre-feet of water each year. The river’s actual flow the past two decades has averaged 12.5 million acre-feet, leaving state water managers with more rights on paper than water that exists in the river. More

PUTRAJAYA, Malaysia (Reuters) – Malaysia’s top court on Tuesday denied a request by former Prime Minister Najib Razak to introduce new evidence in his final appeal against a 12-year jail sentence for a case linked to the multibillion-dollar 1MDB financial scandal.Najib, 69, faces dozens of charges over the alleged theft of $4.5 billion from 1MDB, a state fund he co-founded as premier in 2009, in a wide-ranging scandal that has ensnared high-ranking officials and financial institutions stretching from Hollywood to the Middle East.In the first of several trials, he was convicted in July 2020 for criminal breach of trust, abuse of power, and money laundering, for illegally receiving about $10 million from SRC international, a former unit of state fund 1Malaysia Development Berhad (1MDB). An appeals court upheld the verdict last year. Najib, who has pleaded not guilty to all charges, replaced his legal team just three weeks before his final appeal at the Federal Court began Monday. Out on bail pending the hearings, he could become the country’s first prime minister, former or sitting, to be jailed if the appeal fails.Defence lawyers had asked the court to admit new evidence that they said would prove that the trial judge who convicted Najib had a conflict of interest, owing to his previous employment at a bank that had conducted business with 1MDB.In a unanimous judgment, the five-member court on Tuesday rejected the motion, finding that the evidence sought had either been publicly available or could have been obtained with reasonable diligence during the trial.”The entirety of the additional evidence sought to be introduced is, in our view, irrelevant to the charges proffered against the applicant and fails to disclose any conflict of interest,” Chief Justice Tengku Maimun Tuan Mat said. The court also denied a request by Najib’s newly-appointed lawyers for a three- to four-month postponement, to fully prepare their arguments given the complexity of the case.Najib told reporters after the hearing he was “shocked and disappointed” by the judges’ ruling, but remained hopeful that he would eventually be exonerated.The ex-premier has previously cited 94 reasons why he should be acquitted, including that lower courts had erred in some of their findings, documents submitted before the appeal showed.The hearing resumes on Thursday. More

WASHINGTON (Reuters) – The U.S. Transportation Department said on Tuesday it is awarding $1.66 billion in grants to cities and states to buy 1,800 buses in a shift to cleaner, lower-emission travel.The grants will fund 1,100 zero-emission buses, which will nearly double the existing 1,300 zero-emission transit buses, the White House said.The funding for 150 bus fleets from the $1 trillion 2021 infrastructure law will help cities and states retire older polluting buses.The funding will also buy 700 buses, which include hybrid-electric, natural gas and diesel models. “These grants are going to be used in every corner of this country,” White House infrastructure coordinator Mitch Landrieu told reporters.Buses account for about half of the 10 billion U.S. transit trips Americans took in 2019. But there are still few green buses – just 18% of the 72,000 U.S. transit buses were hybrid electric in 2020, according to the American Public Transportation Association. Public transit suffered through COVID-19 as tens of millions of Americans worked from home and curbed business and tourism travel, but systems are reporting increasing use as Americans return to offices and travel.The New York Metropolitan Transportation Authority (MTA), the busiest U.S transit system, will receive $116 million to buy about 230 electric buses to replace older diesel ones, electrifying nearly 4% percent of its 5,800-bus fleet.The Los Angeles County Metropolitan Transportation Authority (Metro) will receive $104.1 million to acquire about 160 electric buses to replace older compressed natural gas (CNG) buses, while the Massachusetts Bay Transportation Authority will get $116 million to buy up to 85 EV buses to replace diesel models.The infrastructure law provides $5.5 billion over five years for bus grants, six times prior funding levels and $2 billion for buying and rehabilitating buses and building bus maintenance facilities.Memphis will receive $54 million to build an operations/ maintenance facility, while New Jersey Transit will get $44.6 million to renovate its Union City garage near New York and create a public bus terminal. More

In June, Prime Minister Boris Johnson said he wanted to start a new trade system to reduce costs and simplify rules for 65 developing countries to replace the EU’s Generalised System of Preferences, which applies import duties at reduced rates.Trade minister Anne-Marie Trevelyan said the Developing Countries Trading scheme (DCTS) would extend tariff cuts to hundreds more products exported from developing countries, a system, she said, that goes further than the EU scheme.”As an independent trading nation, we are taking back control of our trade policy and making decisions that back UK businesses, help with the cost of living, and support the economies of developing countries around the world,” Trevelyan said in a statement.”UK businesses can look forward to less red tape and lower costs, incentivising firms to import goods from developing countries.”The DCTS covers 65 countries, simplifies rules such as rules of origin, which dictate what proportion of a product must be made in its country of origin, and removes some seasonal tariffs, such as making cucumbers tariff-free in the winter. More