Business

By Andy Bruce and Andrea Shalal

LONDON (Reuters) -The International Monetary Fund and ratings agency Moody’s ramped up pressure on Britain to reverse a new economic strategy that was roiling financial markets for a fourth day on Wednesday and has sparked growing alarm about the UK housing market.

The rare intervention in a G7 country from the IMF, the global lender of last resort, underscored the severity of the situation facing Britain. The value of the pound and British bonds have collapsed since Friday, when finance minister Kwasi Kwarteng laid out his plans to boost economic growth, forcing the Bank of England to signal a “significant” rate hike ahead.

In mid-morning London trading on Wednesday the pound was down 0.4% at $1.0688, 30-year government bond yields pushed past 5% to hit a 20-year high, and bond strategists warned that markets were becoming close to untradeable due to volatility.

Raymond Thomas Dalio, co-chief investment officer of the world’s largest hedge fund, Bridgewater Associates, said he could not believe the mistakes being made by new Prime Minister Liz Truss’s government.

“The panic selling you are now seeing that is leading to the plunge of UK bonds, currency, and financial assets is due to the recognition that the big supply of debt that will have to be sold by the government is much too much for the demand,” he said on Twitter.

Julian Jessop, an economist who provided informal advice to Truss during her leadership campaign, said the economy was at risk of falling into a “doom loop”.

The latest crisis to hit the British state was triggered by Kwarteng’s plans for deep tax cuts and deregulation to snap the economy out of a long period of stagnation, seen as a return to Thatcherite and Reaganomics doctrines of the 1980s.

With the cost of British borrowing soaring, mortgage lenders pulled hundreds of products and anecdotal reports said people were struggling to get through to lenders to either complete or change mortgage deals.

That would mark a major shock in a country where rising house prices have for years conveyed a sense of overall affluence, and where home buyers have got used to more than a decade of rock-bottom interest rates.

The IMF said the proposals, which sent the pound to an all-time low of $1.0327 on Monday, would add to a crisis of credibility after the government cut taxes and hiked borrowing just as the Bank of England lifts interest rates to tackle surging inflation.

“Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy,” an IMF spokesperson said.

Jim Reid, research strategist at Deutsche Bank, described the “rebuke” as “quite scathing”.

HUMILIATION

The IMF holds symbolic importance in British politics: its bailout in 1976 following a balance-of-payments crisis forced huge spending cuts and has long been regarded as a humiliating low point in the country’s modern economic history.

In a sign that the situation was being watched around the world, Spain’s socialist economy minister Nadia Calvino used it to attack her conservative opposition.

“We are all capable of seeing how it is leading the country not adrift, but into disaster,” she said. “An irresponsible, destructive fiscal policy.”

In a blunt release, Moody’s said large unfunded tax cuts were “credit negative” for Britain, risking structurally higher funding costs that could weaken the economy.

Stuart Rose, a business veteran who has led many of the country’s biggest retailers, said the new bout of uncertainty would force companies to halt investment.

“It won’t stimulate things today,” he told BBC Radio, adding that businesses would wait to see what happens next. “Particularly in the capital markets, when debt is going up in price and availability of debt is actually scarce.”

Kwarteng, an economic historian who was business minister for two years, has responded to the criticism by insisting that tax cuts for the wealthy alongside support for energy prices are the only way to reignite economic growth.

The IMF said his fiscal plan on Nov. 23 would provide an “early opportunity for the UK government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high-income earners”.

Britain’s Treasury department said the November announcement would detail government plans to cut debt in the medium term.

“We are focused on growing the economy to raise living standards for everyone,” a spokesperson said.

With anxiety growing in the financial sector and among lawmakers in the governing Conservative Party, Kwarteng has spoken to bosses in the banking, insurance and financial sectors and will meet with more banking bosses on Wednesday.

On Tuesday, Bank of England Chief Economist Huw Pill said the central bank was likely to deliver a “significant” rate increase when it meets next in November, adding that financial market upheaval would have a big impact on the economy and would be factored into its next forecasts.

“It is hard not to draw the conclusion that this will require a significant monetary policy response,” Pill told the CEPR Barclays Monetary Policy Forum.

($1 = 0.9330 pounds)

(Writing by Kate Holton; Additional reporting by William James, Dhara Ranasinghe, David Milliken and William Schomberg in London and Emma Pinedo Gonzalez in Madrid; Editing by Mark Potter, Alex Richardson and Catherine Evans)

source

LONDON (AP) — Bank of England announces temporary purchase of U.K. government bonds to avert “material risk to UK financial stability.”

source

(Reuters) – U.S. stock index futures signaled shares would extend their sharp selloff on Wednesday, as they dropped after a report said tech major Apple had shelved its plan to increase production of its new iPhones on weak demand.

Shares of the world’s most valuable public company fell 3.6% after Bloomberg reported that Apple had told suppliers to curtail efforts to increase assembly of its flagship iPhone 14 product family by as many as 6 million units in the second half of this year.

Other megacap growth names such as Amazon.com Inc, Microsoft Corp, Meta Platforms Inc and Tesla Inc fell between 0.8% and 1.2% in premarket trading with U.S. 10 year bond yields back at their highest since 2010.

Chipmakers Advanced Micro Devices, Qualcomm Inc Nvidia Corp and Micron Tech fell between 1.6% and 2.5%.

The report added to investor worries that include the U.S. Federal Reserve’s aggressive monetary policy tightening as it seeks to tame stubbornly high inflation even at the risk of tipping the economy into a recession.

At 5:10 a.m. ET, Dow e-minis were down 232 points, or 0.79%, S&P 500 e-minis were down 35.5 points, or 0.97%, and Nasdaq 100 e-minis were down 151.25 points, or 1.33%.

Wall Street sank deeper into a bear market on Tuesday, with the S&P 500 recording its lowest close in almost two years.

Bucking the trend, Biogen surged 51% in ppremarket trade after its Alzheimer’s drug, developed with Japanese partner Eisai’s 4523.T>, succeeded in slowing cognitive decline.

Shares of Eli Lilly & Co, which is also developing an Alzheimer’s drug, rose 7.8%.

(Reporting by Susan Mathew in Bengaluru; Editing by Vinay Dwivedi)

source

(Reuters) – Canadian cinema chain operator Cineplex has reached out to lenders of its bankrupt rival Cineworld Group seeking to revive a potential merger with the British firm’s Regal Entertainment Group franchise, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.

(Reporting by Shanima A in Bengaluru; Editing by Savio D’Souza)

source

By Foo Yun Chee

BRUSSELS (Reuters) – Individuals and companies that suffer harm from drones, robots and other products or services equipped with artificial intelligence software will find it easier to sue for compensation under EU draft rules seen by Reuters.

The AI Liability Directive, which the European Commission will announce on Wednesday, aims to address the increasing proliferation of AI-enabled products and services and the patchwork of national rules across the 27-country European Union.

Victims can sue for compensation for harm to their life, property, health and privacy due to the fault or omission of a provider, developer or user of AI technology or was discriminated in a recruitment process using AI, the draft rules said.

The rules seek to lighten the burden of proof on victims by introducing a “presumption of causality”, which means victims only need to show that a manufacturer or user’s failure to comply with certain requirements caused the harm and then link this to the AI technology in their lawsuit.

Under a “right of access to evidence”, victims can ask a court to order companies and suppliers to provide information about high-risk AI systems so that they can identify the liable person and find out what went wrong.

The EU executive will on Wednesday also update the Product Liability Directive which sets out the scope of manufacturers’ liability for defective products ranging from smart technology to machinery and to pharmaceuticals.

The proposed changes will allow users to sue for compensation when software updates render their smart-home products unsafe or when manufacturers fail to fix cybersecurity gaps.

Users with unsafe non-EU products will be able to sue the manufacturer’s EU representative for compensation.

The AI Liability Directive will need the green light from EU countries and EU lawmakers before it can become law.

(Reporting by Foo Yun Chee. Editing by Jane Merriman)

source

By Noel Randewich and Shreyashi Sanyal

(Reuters) – Wall Street sank deeper into a bear market on Tuesday, with the S&P 500 recording its lowest close in almost two-years as Federal Reserve policymakers showed an appetite for more interest rate hikes, even at the risk of throwing the economy into a downturn.

The benchmark S&P 500 is down about 24% from its record high close on Jan. 3. Last week, the Fed signaled that high rates could last through 2023, and the index erased the last of its gains from a summer rally and recorded its lowest close since November 2020.

The S&P 500 has declined for six straight sessions, its longest losing streak since February 2020.

Graphics: S&P 500 sinks deeper into bear market – https://fingfx.thomsonreuters.com/gfx/mkt/xmvjozodypr/Pasted%20image%201664305293156.png

Speaking on Tuesday, St. Louis Fed President James Bullard made a case for more rate hikes, while Chicago Fed President Charles Evans said the central bank will need to raise rates by at least another percentage point this year.

“It’s disappointing, but it’s not a surprise,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “People are concerned about the Federal Reserve, the direction of interest rates, the health of the economy.”

Analysts at Wells Fargo now see the U.S. central bank taking its target range for the Fed funds rate to between 4.75% and 5.00% by the first quarter of 2023.

Seven of 11 S&P 500 sector indexes fell, with utilities and consumer staples each down about 1.7% and leading declines.

The energy sector index rallied 1.2% after Sweden launched a probe into possible sabotage after major leaks in two Russian pipelines that spewed gas into the Baltic Sea.

Tesla gained 2.5% and Nvidia added 1.5%, with both companies helping keep Nasdaq in positive territory.

Traders exchanged over $17 billion worth of Tesla shares, more than any other stock.

The benchmark U.S. 10-year Treasury yield touched its highest level in more than 12 years amid the hawkish comments from Fed officials. [US/]

The Dow Jones Industrial Average fell 0.43% to end at 29,134.99 points, while the S&P 500 lost 0.21% to 3,647.29.

The Nasdaq Composite climbed 0.25% to 10,829.50.

Concerns about corporate profits taking a hit from soaring prices and a weaker economy have also roiled Wall Street in the past two weeks.

Analysts have cut their S&P 500 earnings expectations for the third and fourth quarters, as well as for the full year. For the third quarter, analysts now see S&P 500 earnings per share rising 4.6% year-over-year, compared with 11.1% growth expected at the start of July.

Volume on U.S. exchanges was 11.7 billion shares, compared with an 11.3 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 1.25-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored advancers.

The S&P 500 posted no new 52-week highs and 146 new lows; the Nasdaq Composite recorded 28 new highs and 502 new lows.

(Reporting by Ankika Biswas, Shreyashi Sanyal and Susan Mathew in Bengaluru; Editing by Shounak Dasgupta, Arun Koyyur and David Gregorio)

source

By Anna Ringstrom and Stine Jacobsen

STOCKHOLM/COPENHAGEN (Reuters) – Europe was investigating on Tuesday what Germany, Denmark and Sweden said were attacks which had caused major leaks into the Baltic Sea from two Russian gas pipelines at the centre of an energy standoff.

But it remained far from clear who might be behind the leaks that were first reported on Monday or any foul play, if proven, on the Nord Stream pipelines that Russia and European partners spent billions of dollars building.

German Economy Minister Robert Habeck told business leaders the leaks were due to targeted attacks on the infrastructure and Berlin now knew for sure “that they were not caused by natural occurrences or events or material fatigue.”

Sweden’s and Denmark’s prime ministers said the leaks were clearly caused by deliberate actions, with information suggesting likely sabotage, while Poland’s premier blamed sabotage, without citing evidence.

Russia, which slashed gas deliveries to Europe after the West imposed sanctions over Moscow’s invasion of Ukraine, also said sabotage was a possibility and that the leaks undermined the continent’s energy security.

A senior Ukrainian official called the incident a Russian attack to destabilise Europe, without giving proof.

“We see clearly that it’s an act of sabotage, related to the next step of escalation of the situation in Ukraine,” Polish Prime Minister Mateusz Morawiecki said at the opening of a new pipeline between Norway and Poland.

Sweden’s Prime Minister Magdalena Andersson told a news conference that two blasts had been detected in relation to the leaks and though this did not represent an attack on Sweden, her government was in close contact with partners such as NATO and neighbours such as Denmark and Germany concerning the developments.

Seismologists in Denmark and Sweden said they had registered two powerful blasts on Monday in the vicinity of the leaks.

“The signals do not resemble signals from earthquakes. They do resemble the signals typically recorded from blasts,” the Geological Survey of Denmark and Greenland (GEUS) said.

And seismologists at Sweden’s Uppsala University, which cooperates with GEUS, said the second, bigger explosion “corresponded to more than 100 kilos (kg) of dynamite”, adding the blasts were in the water not under the seabed.

The Nord Stream pipelines have been flashpoints in an escalating energy war between capitals in Europe and Moscow that has damaged major Western economies, sent gas prices soaring and sparked a hunt for alternative supplies.

“Germany is a country that knows how to defend itself. And Europe is a continent that can protect its energy infrastructure,” Germany’s Habeck said, adding the energy supply of Europe’s largest economy was not affected.

Denmark’s armed forces said the largest gas leak had caused a surface disturbance of well over 1 km (0.6 mile) in diameter.

GRAPHIC – Map: Leaks reported from Russian Nord Stream pipelines

https://graphics.reuters.com/UKRAINE-CRISIS/ENERGY/xmpjozoewvr/leakage-map.jpg

‘RISK OF EXPLOSIONS’

The leaks were very large and it could take perhaps a week for gas to stop draining out of the Nord Stream 2 pipeline, the head of Denmark’s Energy Agency Kristoffer Bottzauw said.

Ships could lose buoyancy if they entered the area.

“The sea surface is full of methane, which means there is an increased risk of explosions in the area,” Bottzauw said.

The Swedish Maritime Administration (SMA) said two leaks on Nord Stream 1, one in the Swedish economic zone and another in the Danish zone, were northeast of Denmark’s Bornholm.

“We are keeping extra watch to make sure no ship comes too close to the site,” an SMA spokesperson said.

Kremlin spokesperson Dmitry Peskov called it “very concerning news. Indeed, we are talking about some damage of an unclear nature to the pipeline in Denmark’s economic zone.” He said it affected the continent’s energy security.

Neither pipeline was pumping gas to Europe at the time the leaks were found, but the incidents will scupper any remaining expectations that Europe could receive fuel via Nord Stream 1 before winter.

Operator Nord Stream said the damage was “unprecedented.”

Gazprom, the Kremlin-controlled company with a monopoly on Russian gas exports by pipeline, declined comment.

“There are some indications that it is deliberate damage,” said a European security source, adding it was still too early to draw conclusions. “You have to ask: Who would profit?”

Norway, meanwhile, said it will strengthen security at its oil and gas installations in the wake of leaks and reports of drone activities in the North Sea, Energy Minister Terje Aasland said in a statement.

Authorities in Denmark asked that the level of preparedness in its power and gas sector be raised, a step that would require heightened safety for power installations and facilities.

CUTTING SUPPLIES

Russia reduced gas supplies to Europe via Nord Stream 1 before suspending flows altogether in August, blaming Western sanctions for causing technical difficulties. European politicians say that was a pretext to stop supplying gas.

The new Nord Stream 2 pipeline had yet to enter commercial operations. The plan to use it to supply gas was scrapped by Germany days before Russia sent troops into Ukraine, in what Moscow calls a “special military operation,” in February.

“The multiple undersea leaks mean neither pipeline will likely deliver any gas to the EU over the coming winter, irrespective of political developments in the Ukraine war,” Eurasia Group wrote in a note.

European gas prices rose on the news, with the benchmark October Dutch price climbing almost 10% on Tuesday. Prices are still below this year’s peaks but remain more than 200% higher than in early September 2021.

(Reporting by Reuters bureaus; Writing by Matthias Williams, Jan Harvey and Alexander Smith; Editing by Emelia Sithole-Matarise, Marguerita Choy and Chris Reese)

source

(Reuters) -Canopy Growth Corp said on Tuesday it will divest its retail business across Canada, as the pot producer steps up efforts to turn profitable.

The business includes stores operating under the Tweed and Tokyo Smoke retail banners.

Canopy has been focusing on premium high-potency offerings and has undertaken cost cuts through layoffs, exits from some international markets and store closures in its bid to turn profitable.

The master license deal between Canopy and Alimentation Couche-Tard Inc related to the use of the Tweed brand for brick-and-mortar retail stores operating in Ontario has also been terminated, it added.

(Reporting by Arunima Kumar in Bengaluru; Editing by Shailesh Kuber)

source

By Carolyn Cohn and Xie Yu

LONDON/HONG KONG (Reuters) – World stocks picked up from 21-month lows on Tuesday and sterling rallied after hitting record lows versus the dollar a day earlier on UK plans for tax cuts, as market slides ran out of steam.

U.S. S&P futures bounced 0.94% after Wall Street fell deeper into a bear market on Monday, benchmark 10-year Treasury yields dipped from the previous session’s 12-year high and the dollar eased from 20-year highs on a basket of currencies.

Markets remain nervous, however, after U.S. Federal Reserve officials on Monday said their priority remained controlling domestic inflation.

“U.S. rate expectations have increased fairly significantly,” said Andrew Hardy, investment manager at Momentum Global Investment Management, though he added that “there’s a huge amount of bearishness already priced into markets”.

Markets are pricing in a 76% probability of a further 75 basis point move at the next Federal Reserve meeting in November.

Central bank speakers on Tuesday include Fed chair Jerome Powell and ECB president Christine Lagarde.

The MSCI world equity index rose 0.29% after hitting its lowest since Nov 2020 on Monday. European stocks gained more than 1% and Britain’s FTSE rose 0.6%.

Sterling collapsed to a record low $1.0327 on Monday as the government tax cut plans announced on Friday came on top of huge energy subsidies.

The British currency recovered 4.6% from that low to $1.0801 on Tuesday.

After the pound’s plunge, the Bank of England said it would not hesitate to change interest rates and was monitoring markets “very closely”.

Bank of England Chief Economist Huw Pill will speak on a panel at 1100 GMT.

A lack of confidence in the government’s strategy and its funding also hammered gilts on Friday and again on Monday.

The yield on five-year gilts rose as much as 100 basis points in two trading days, though it slipped off the highs on Tuesday.

“(It) is definitely something that’s unfolding…probably we’re only at a certain initial stage of seeing how the market digests that kind of information,” said Yuting Shao, macro strategist at State Street Global Markets.

“Of course the tax cut plan itself was really aimed to stimulate growth, reduce household burdens, but it does raise the question of what the implications are in terms of the monetary policies.”

Spillover from Britain kept other assets on edge.

Bond selling in Japan pushed yields up to the Bank of Japan’s ceiling and prompted more unscheduled buying from the central bank in response. [JP/]

The German 10-year bond yield briefly hit a new nearly 11-year high of 2.142%.

Ten-year U.S. bond yields dropped 3.2 bps after reaching a high on Monday of 3.933%.

MSCI’s broadest index of Asia shares outside Japan hit a fresh two-year low before bouncing 0.5%. Japan’s Nikkei was up 0.5%.

The dollar index eased 0.13% to 113.72, after touching 114.58 on Monday, its strongest since May 2002.

The European single currency was up 0.24% on the day at $0.9629 after hitting a 20-year low a day ago.

Oil rose more than 1% after plunging to nine-month lows a day earlier, amid indications that producer alliance OPEC+ may enact output cuts to avoid a further collapse in prices.[O/R]

U.S. crude gained 1.4% to $77.70 a barrel. Brent crude rose 1.27% to $85.20 per barrel.

Gold, which hit a 2-1/2 year low on Monday, rose 0.8% to $1,634 an ounce.

Bitcoin broke above $20,000 for the first time in about a week, as cryptocurrencies bounced, along with other risk-sensitive assets.

(Reporting by Xie Yu; Editing by Edmund Klamann, Muralikumar Anantharaman and Raissa Kasolowsky)

source

By Anna Ringstrom and Stine Jacobsen

STOCKHOLM/COPENHAGEN (Reuters) – European countries on Tuesday scrambled to investigate unexplained leaks in two Russian gas pipelines running under the Baltic Sea near Sweden and Denmark, infrastructure at the heart of an energy crisis since Russia’s invasion of Ukraine.

Sweden’s Maritime Authority issued a warning about two leaks in the Nord Stream 1 pipeline, shortly after a leak on the nearby Nord Stream 2 pipeline was discovered that had prompted Denmark to restrict shipping in a five nautical mile radius.

Both pipelines have been flashpoints in an escalating energy war between Europe and Moscow that has pummelled major Western economies and sent gas prices soaring.

Neither pipeline was pumping gas to Europe at the time leaks were found amid the dispute over the Ukraine war but both still contained gas under pressure. The incidents will hinder any effort to start or restart either pipelline for commercial operations.

“Yesterday, a leak was detected on one of the two gas pipelines between Russia and Denmark – Nord Stream 2. The pipeline is not in operation, but contains natural gas, which is now leaking,” Denmark’s energy minister Dan Jorgensen said in a written comment.

“Authorities have now been informed that there have been 2 more leaks on Nord Stream 1, which is also not in operation but contains gas,” he added.

Gazprom declined comment.

Russia slashed gas supplies to Europe via Nord Stream 1 before suspending flows altogether in August, blaming Western sanctions for causing technical difficulties. European politicians say that was a pretext to stop gas supplies.

The new Nord Stream 2 pipeline had just been completed but had not entered commercial operations. The plan to supply gas via the pipeline was scrapped by Germany days before Russia sent troops into Ukraine in February.

‘EXTRA WATCH’

“There are two leaks on Nord Stream 1 – one in Swedish economic zone and one in Danish economic zone. They are very near each other,” a Swedish Maritime Administration (SMA) spokesperson told Reuters.

The leaks were located northeast of the Danish island Bornholm, the spokesperson said. It was not immediately clear what had caused the leaks.

“We are keeping extra watch to make sure no ship comes too close to the site,” a second SMA spokesperson said.

The Baltic Pipe, a new subsea pipeline delivering Norwegian gas to Poland with an annual capacity of 10 billion cubic metres per day, is due to be inaugurated later on Tuesday.

Danish authorities have asked that the country’s level of preparedness for the power and gas sector be raised after the leaks.

“Breaches of gas pipelines happen extremely rarely … We want to ensure thorough monitoring of Denmark’s critical infrastructure in order to strengthen security of supply in the future,” said the head of the Danish energy agency, Kristoffer Bottzauw.

The raised level would mean that companies in the power and gas sector have to implement measures to increase safety at for example plants, buildings and installations.

Vessels can lose buoyancy if they enter the area, and there may be a risk of an ignition over the water and in the air, said the Danish energy agency, adding there were no security risks associated with the leak outside the exclusion zone.

It said the gas leak would only affect the environment locally, which means that only the area where the gas plume in the water column is located would be affected.

There would be a climate-damaging effect from the escaping methane gas escaping into the air, it said in a written comment.

(Reporting by Reuters bureaus; Writing by by Matthias Williams; Editing by Edmund Blair)

source