Business

By Rowena Edwards, Maha El Dahan and Alex Lawler

LONDON (Reuters) -Policymakers, lawmakers and insufficient oil and gas sector investments are to blame for high energy prices, not OPEC, the producer group’s new Secretary General Haitham Al Ghais told Reuters on Thursday.

A lack of investment in the oil and gas sector following a price slump sparked by COVID-19 has significantly reduced OPEC’s spare production capacity and limited the group’s ability to respond quickly to further potential supply disruption.

The price of Brent crude came close to an all-time high of $147 a barrel in March, after Russia’s ordering of troops into Ukraine exacerbated supply concerns. While prices have since declined, they are still painfully high for consumers and businesses globally. 

“Don’t blame OPEC, blame your own policymakers and lawmakers, because OPEC and the producing countries have been pushing time and time against for investing in oil (and gas),” Al Ghais, who took office on Aug. 1, said in an online interview.

Oil and gas investment is up 10% from last year but remains well below 2019 levels, the International Energy Agency said last month, adding that some of the immediate shortfalls in Russian exports needed to be met by production elsewhere.

The OPEC official also pointed the finger at a lack of investment in the downstream sector, adding that OPEC members had increased refining capacity to balance the decline in Europe and the United States.

“We are not saying that the world will live on fossil fuels forever … but by saying we’re not going to invest in fossil fuels … you have to move from point A to point B overnight,” Al Ghais said.

OPEC exists to ensure the world gets enough oil, but “it’s going to be very challenging and very difficult if there is no buy-in into the importance of investing,” he said, adding that he hopes “investors, financial institutions, policymakers as well globally seriously take this matter (to) heart and take it into their plans for the future.”

RELATIVELY OPTIMISTIC

Oil has tumbled since March and Brent hit a six-month low below $92 a barrel this week.

The slide reflects fears of economic slowdown and masks physical market fundamentals, Al Ghais said as he took a relatively optimistic view on the outlook for 2023 as the world tackles rising inflation.

“There is a lot of fear,” he said. “There is a lot of speculation and anxiety, and that’s what’s predominantly driving the drop in prices.”

“Whereas in the physical market we see things much differently. Demand is still robust. We still feel very bullish on demand and very optimistic on demand for the rest of this year.”

“The fears about China are really taken out of proportion in my view,” said Al Ghais, who worked in China for four years earlier in his career. “China is a phenomenal place of economic growth still.”

The Organization of the Petroleum Exporting Countries, plus Russia and other allies, known as OPEC+, has unwound record oil-output cuts made in 2020 at the height of the pandemic and in September is raising output by 100,000 barrels per day.

Ahead of the next meeting which OPEC+ holds on Sept. 5, Al Ghais said it was premature to say what it will decide, although he was positive about the outlook for next year.

“I want to be very clear about it – we could cut production if necessary, we could add production if necessary.”

“It all depends on how things unfold. But we are still optimistic, as I said. We do see a slowdown in 2023 in demand growth, but it should not be worse than what we’ve had historically.”

“Yes, I am relatively optimistic,” he added of the 2023 outlook. “I think the world is dealing with the economic pressures of inflation in a very good way.”

OPEC+ began to restrain supply in 2017 to tackle a supply glut that built up in 2014-2016, and OPEC is keen to ensure Russia remains part of the OPEC+ oil production deal after 2022, Al Ghais said.

“We would love to extend the deal with Russia and the other non-OPEC producers,” he said.

“This is a long-term relationship that encompasses broader and more comprehensive forms of communication and cooperation between 23 countries. It’s not just in terms of production adjustment.”

(Reporting by Rowena Edwards, Alex Lawler, Dmitry Zhdannikov, Maha El Dahan and Olesya Astakhova; Editing by David Evans and David Holmes)

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By Bansari Mayur Kamdar and Devik Jain

(Reuters) – Wall Street’s main indexes struggled for direction and pared early gains Thursday as investors scrutinize the Federal Reserve’s minutes of the July meeting for a “less hawkish” tone against the backdrop of data that had eased inflation worries.

While the minutes did not clearly hint at the pace of rate increases, it showed policymakers committed to raising rates to tame inflation even as they start to acknowledge the risk they might go too far and curb economic activity too much.

Traders expect a greater chance of a 50 basis point rise in borrowing costs in September instead of a 75 basis point increase for a third time. [FEDWATCH]

“The recent rally clearly has been driven by a combination of better than feared economic data and earnings,” said Art Hogan, chief market strategist at B. Riley Wealth, calling the Fed’s minutes as “less hawkish”.

High-growth technology stocks such as Alphabet and Nvidia rose 0.3% and 1.9%, respectively, in choppy trading as U.S. Treasury yields pulled back. [US/]

Wall Street’s indexes have been gaining over the last few weeks after a softer-than-expected inflation in July, with focus now on the Fed’s annual Jackson Hole symposium late next week.

Either a 50 bps or 75 bps rate hike in September would be a “reasonable” way to get short-term borrowing costs to a little over 3% by year end and a little higher than that in 2023, San Francisco Federal Reserve Bank President Mary Daly said on Thursday.

The Fed has lifted its benchmark interest rate by 225 bps so far this year to control four-decades high inflation.

Meanwhile, number of Americans filing new claims for unemployment benefits fell last week and data for the prior period was revised sharply down, suggesting the labor market remains tight despite a slowdown due to higher interest rates.

“The Fed is looking at the (labor market) and they will continue to be data dependent,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

“We’ve had big gains, the market is digesting that at this point. Right now, we’re in a holding pattern and some folks are worried that we’re going to see another low.”

At 12:44 p.m. ET, the Dow Jones Industrial Average was down 115.86 points, or 0.34%, at 33,864.46, the S&P 500 was down 5.08 points, or 0.12%, at 4,268.96, and the Nasdaq Composite was down 8.79 points, or 0.07%, at 12,929.34.

The tech-heavy Nasdaq has bounced nearly 22% from its mid-June lows, while the benchmark S&P 500 has risen 17%, supported by upbeat quarterly results.

However, retail earnings have been mixed so far. Encouraging reports from Walmart and Home Depot earlier this week were offset by Target’s profit slump, which dragged the retail sector down 1.2% in the previous session.

Kohl’s Corp slid 5.5% after the retailer cut its full-year sales and profit forecasts.

Verizon Communications Inc declined 2.6% after MoffettNathanson downgraded the telecom operator’s shares.

Declining issues outnumbered advancers for a 1.07-to-1 ratio on the NYSE and a 1.25-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and 29 new lows, while the Nasdaq recorded 47 new highs and 50 new lows.

(Reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru; Editing by Shounak Dasgupta)

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By Kevin Yao

BEIJING (Reuters) -China’s central bank is set to take more easing steps, pressured by a shaky economy that is undercutting jobs, but it faces limited room to manoeuvre due to worries over rising inflation and capital flight, policy insiders and analysts said.

Analysts now expect cuts in the country’s benchmark lending rates as early as Monday, after the People’s Bank of China (PBOC) unexpectedly lowered two key rates this week as data showed the economy unexpectedly slowed in July.

But the PBOC is walking a tightrope — seeking to support the COVID-ravaged economy while avoiding massive stimulus that could add to inflationary pressures and risk outflows from China’s struggling stock and bond markets, as the U.S. Federal Reserve, and other economies, aggressively raise interest rates.

China’s economy narrowly avoided contracting in the second quarter amid widespread lockdowns and a deepening property crisis, which have badly damaged consumer and business confidence, and COVID cases have rebounded again in recent weeks. Nomura estimates 22 cities are currently in full or partial lockdowns, making up 8.8% of GDP.

“Currently, the main problem that China faces is slowing economic growth, safeguarding growth is the top priority,” Yu Yongding, an influential government economist who previously advised the PBOC, told Reuters.

“What we should do is to continue to adopt expansionary fiscal and monetary policy, including cutting interest rates,” he said.

China is likely to cut its benchmark lending rate for companies and home buyers, known as the loan prime rate (LPR), at its next setting on Aug. 22, policy insiders and analysts said.

Shortly before weak data was released on Monday, the PBOC unexpectedly cut the rate on its medium-term lending facility (MLF) for the second time this year, by 10 basis points. It also cut its reverse repo rate by the same margin. Both were already at record lows.

“The rate cut is not enough – we should step up easing,” said a government adviser who spoke on condition of anonymity.

However, the central bank is unlikely to cut banks’ reserve requirement ratio (RRR), a traditional tool to boost liquidity, any time soon, given the financial system is already awash with cash, China watchers said.

The central bank already has slashed the average RRR level to 8.1% from 14.9% in early 2018, pumping a staggering 9 trillion yuan ($1.33 trillion) into the economy. 

The PBOC may instead use structural policy tools, such as low-cost loans, to give targeted support to ailing small firms and sectors favoured by state policies, they said.

The sputtering of the world’s second-largest economy comes at an inopportune moment for President Xi Jinping, who is poised to secure a precedent-breaking third leadership term at a once-in-five-years congress of the Communist Party later this year.

Of particular concern, youth unemployment has remained stubbornly high, reaching a record 19.9% in July, while the nationwide survey-based jobless rate has eased slightly but remains elevated at 5.4%.

On Tuesday, Premier Li Keqiang said that Beijing will step up policy support for the economy and take more steps to spur consumption and investment.

Even then, some analysts said modest rate cuts may only help at the margin if companies and consumers remain wary of taking on more debt. New bank lending in China in July fell more than expected and was less than a quarter of the level in June.

SHAKY RECOVERY

China’s leaders have recently downplayed the necessity of hitting the government’s annual growth target of “around” 5.5%, which was widely seen as out of reach.

With no sign that the government is easing its tough “zero-COVID” policy, some private economists expect the economy to grow by about 3% this year, which would be the slowest since 1976 excluding the 2.2% expansion in 2020, during the initial COVID outbreak.

But while Chinese policymakers may quietly accept lower growth without publicly revising the target, they have stressed they still want to achieve the “best possible results”, counting on fiscal policy measures — particularly infrastructure spending — to spur activity in a politically sensitive year, policy insiders said.

“Monetary policy will be relatively loose to support growth, but the room will be limited,” Xu Hongcai, deputy director of the economic policy commission at the state-backed China Association of Policy Science, told Reuters.

INFLATION WORRIES

Meanwhile, signs of consumer inflation pressures – long benign in China – are beginning to emerge.

The July consumer price index (CPI) increased 2.7% from a year earlier, the fastest pace since July 2020, even as activity cooled. While CPI is still within the official comfort zone, the central bank has recently forecast that price rises may breach the official threshold of 3% in coming months and warned against complacency.

In its second-quarter policy implementation report published last week, the PBOC said China should learn a lesson from the “misjudgment” of Western central banks on soaring inflation.

“In the short term, China’s structural inflation pressure may increase, import inflation pressure still exists, and the price rise may rebound in stages due to multiple factors. We should not take it lightly,” the central bank said.

Still, most economists don’t believe inflation is creating a big headache for policymakers for now, given weak demand.

“Although we face rising inflation due to internal and external factors, this is not the main danger,” Yu said.

($1 = 6.7745 Chinese yuan renminbi)

(Reporting by Kevin Yao; Editing by Kim Coghill)

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By Medha Singh and Aishwarya Nair

(Reuters) -Bed Bath & Beyond Inc shares nosedived late in the session on Wednesday from a 45% surge earlier after investor and GameStop Chairman Ryan Cohen filed for a proposed sale of his stake in the struggling home goods retailer.

The highly shorted shares continued their fall after the bell and were down more than 15% as Cohen’s venture capital firm RC Ventures, the second largest investor, said it intends to sell 9.45 million shares, including options, through JP Morgan Securities.

The company said it reached an agreement with RC Ventures in March and is working with financial advisors and lenders to strengthen its balance sheet as it struggles with declining revenue and liquidity concerns.

It will provide more information in an update by the end of this month.

Cohen did not respond to a request for comment. His venture capital firm had on Tuesday bought call options expiring in January 2023 on 1.67 million shares with a strike price ranging from $60 to $80.

Cohen’s bets led to the highest single-day purchase of the BBBY shares in at least five years, with individual investors dabbling in highly shorted shares buying $73.2 million worth of the company’s shares in the previous session.

On Wednesday too, Bed Bath & Beyond was the most actively traded single stock option, far ahead of popular options trades including Apple Inc and Tesla Inc, data from Options Clearing Corp showed.

The resurgence in retail trading comes after a rebound in U.S. stocks that helped the S&P 500 recoup more than half of the benchmark index’s losses since its June low.

Bed Bath & Beyond has been gaining in 14 out of the last 15 sessions, helping its market value rise fourfold to more than $2 billion.

On Wednesday, the shares rose up to $30 and closed down at $23.08. The stock had lost more than 60% of its value in June and July.

“It truly is a quality company (but) shares are probably overvalued in the low teens and it is ridiculously overvalued at high $20s,” said Jake Dollarhide, chief executive at Longbow Asset Management in Tulsa, Oklahoma.

About 55% of Bed Bath & Beyond’s free float is shorted, an increase of 19% in the past 30 days despite the price surge, according to S3 Partners.

“It’s possible for the meme rally to spread since there is a lot of short-term capital entering the market. We’ve seen the same with Chinese meme stocks over the past few weeks,” Siddharth Singhai, chief investment officer at New York-based hedge fund Ironhold Capital.

(Reporting by Medha Singh and Aishwarya Nair in Bengaluru, Additional reporting by Bansari Mayur Kamdar and Rachna Dhanrajani; Editing by Maju Samuel and Arun Koyyur)

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By David Lawder

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen has directed the head of the Internal Revenue Service to produce a detailed plan for deploying $80 billion in newly enacted enforcement funding within six months, an internal Treasury memo showed on Wednesday.

Yellen wrote in the memo to IRS Commissioner Charles Rettig, reviewed by Reuters, that the operational plan “should include details on how resources will be spent over the ten-year horizon on technology, service improvement, and personnel.”

“This operational plan is key to ensuring the public and Congress are able to hold the agency accountable as it pursues needed improvements,” she wrote, adding that it must include metrics for areas of focus and targets for the agency to achieve in coming years.

The $80 billion in new resources is a key revenue-raising provision in President Joe Biden’s $430 billion tax, climate and prescription drugs law signed on Tuesday. The Congressional Budget Office has estimated that the new resources would result in collection of an additional $204 billion in tax revenues over 10 years through improved tax compliance.

An earlier version of the bill would have statutorily required a detailed IRS spending plan within six months but that provision was later stricken. Yellen’s memo administratively restored the deadline.

Yellen told Rettig that she was prepared to approve the near-term use of funds for improvements to next year’s tax filing season, but the IRS plan was a “pre-requisite” for any broader use of funds by the agency.

Yellen also repeated her directive last week that she does not want the IRS investments to result in an increased chance of audits for households earning less than $400,000 or for small businesses, compared to “historical levels.”

But it is unclear which historical audit rates Yellen is targeting. The Tax Policy Center, a Washington think tank run by the Brookings Institution and the Urban Institute, says a decade of budget cuts slashed overall audit rates in 2019 to 0.4% of individual tax returns from 1.1% in 2010 and the COVID-19 pandemic cut those rates further.

(Reporting by David Lawder; editing by Richard Pullin)

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India-Israel Relationship Growing, a Trade Deal Expected Soon

‘India can be a great mediator’ in forging ties between Israel and Muslim countries such as Bangladesh, expert says

The deepening of Israel-India relations and hope for a future free trade agreement (FTA) brought out Israel’s political and economic elite on Monday night for a gala celebration of the 75th anniversary of India’s independence and 30 years of diplomatic relations between the two countries. Israeli President Isaac Herzog and Opposition Leader Benjamin Netanyahu were among the guests at the event, hosted by the Indian Embassy to Israel at the Dan Tel Aviv Hotel. Prime Minister Yair Lapid made a virtual appearance via video.

Herzog addressed the gathering, saying, “India’s influence as a regional and global power is steadily on the rise, and I am confident that the greater your level of engagement, the greater the positive change.”

The Israeli president, emphasizing the strategic partnership between the two nations that has been fostered over the past three decades, went on to comment: “Israel and India both aim for equality and prosperity, we both face challenges, internal and external, and we are both open to expanding partnerships.”

Sanjeev Singla, Indian ambassador to Israel, noted that it was during the presidency of Herzog’s father, Chaim Herzog, “that our bilateral diplomatic ties were upgraded to full ties.”

Anat Bernstein-Reich, CEO and co-founder of BDO Israel-India Investment Banking and Consulting, told The Media Line, “It’s really obvious that this as a relationship will continue to grow from strength to strength.”

Bernstein-Reich explains that during the overlapping administrations of India’s Prime Minister Narendra Modi and his Israeli counterpart, Binyamin Netanyahu, there was a remarkable positive change. She says that even if India’s political leadership changes, which seems unlikely in the near future, these relations will last, commenting, “The relationship is built on a strong infrastructure; there is a good foundation to continue the collaboration between the two countries.”

Dr. Oshrit Birvadker, a senior researcher at JISS and expert on India’s foreign policy, told The Media Line, “India needs Israel to improve its economy. One of the most importantthings India needs is technology, especially when comes to important reforms in agriculture that could enable India to become the breadbasket of the world.”

Professor Harsh V. Pant, vice president of the Observer Research Foundation, New Delhi, agreed, telling The Media Line, “Israel’s help in agricultural and water conservation in India is a major part of the relationship. … There is a domestic consensus today in India that Israel is a very important partner.”

Birvadker added, “Israel needs India, too. India is buying arms and defense equipment worth billions of dollars from Israeli companies and with changing geopolitical dynamics, Israel is increasing its engagements in this region and the size of the Indian markets hold enormous potential for Israeli-made products.”

David Keynan, vice chairman of the Federation of Indo-Israeli Chambers of Commerce, told The Media Line that India’s relations with Israel “have grown tremendously with the bilateral trade crossing $7.8 billion.” Keynan views the attainment of an FTA as a goal that would further expand the trade and wealth coming into India and Israel.

Birvadker further posited that this growing relationship served not only economic but diplomatic interests, as well. “The Abraham Accords and I2U2 [an economic bloc comprising India, Israel, the United Arab Emirates, and the United States] are a result of the changing dynamics in the region. Israel is looking to normalize relations with Muslim countries and India can be a great mediator for that – for example,normalizing relations with Bangladesh.”

Pant noted that Israel’s and India’s differing stances on how to respond to regional threats from Iran and China may cause “friction in future relations” but ultimately “it is unlikely these issues will be disruptive to the Israel-India relationship today.”

He commented that it was shared technological interest that was driving this relationship “given that Israel has developed such a niche in high–end technology and India is looking for this to happen within India. … This is something the Israeliscan use to build upon their economic relationship with India.”

Bernstein-Reich sees the two governments aiming for an FTA. The idea has been in discussion for almost 10 years, but she thinks it could happen any time now, given that both sides are “heavily investing and growing” in each other’s economies.

Bernstein-Reich attributed the success of trade talks to shared values and interests. “We are both democracies, both fight Islamic terror, and we share similar values of family and education. Both countries put the focus on IT and innovation in this regard.”

Pant agreed that an Israel-India FTA was imminent. India’s drive to forge FTAs was gathering momentum, he said, pointing to trade agreements with the UAE and Australia in the last three months, and a plan to conclude a similar agreement with the UK in November, to be followed by FTAs with the European Union and Canada. All of this was an indication of New Delhi’s “great willingness to conclude a trade agreement [with Israel] in the next year or so,” despite India being “a country where free trade agreements are very difficult to conclude.”

With Israeli companies providing vital desalination and water management technologies to India, combined with a shared interest in R&D projects, and collaborative efforts in defense, the two nations are targeting signing a deal in the coming months. Israel’s display of support for India during its 75thindependence anniversary was just a further sign of a growing push to deepen the Israel-India relationship.

Isla-Rose Deans is a student at the University of Leeds and an intern in The Media Line’s Press and Policy Student Program.

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By Samuel Shen and Brenda Goh

SHANGHAI (Reuters) -China’s surprise cut in key policy rates this week highlights a dilemma facing Beijing as authorities try to revive an economy awash with cash in the financial system but still lacking in consumer demand.

Monday’s 10 basis point cuts in the People’s Bank of China’s (PBOC) 7-day and one-year lending rates isn’t much of a spur for banks to boost lending – they already lend to each other at much lower rates – and analysts say more fundamental measures are needed to revive confidence in an economy ravaged by a property crisis and ongoing COVID lockdowns.

The PBOC is facing the challenge of a “partial liquidity trap”, says Alicia García Herrero, chief economist for Asia Pacific at Natixis, as interest rates are not low enough to be defined as a Japan-style liquidity trap, but “cash remains trapped in the largest banks” due to growing systemic risks.

Beijing needs more “heterodox measures” to lift growth, for example, injecting liquidity into smaller banks that lend to small businesses, albeit creating a moral hazard, García Herrero said.

Other analysts say China requires measures beyond monetary easing to revive its economy, such as less severe COVID policies, and government bailout of failing companies.

Rocky Fan, economist at Guolian Securities, said the property market downturn is affecting confidence, as people dare not buy houses amid a debt crisis and boycotts to pay mortgages for unfinished homes.

“You need to address the property woes to revive the economy, but it’s a thorny issue,” Fan said.

“I don’t see a solution unless the government bails out all the troubled developers, at the risk of moral hazards.”

TRAPPED CASH

Official data on Monday showed China’s economy slowed across the board in July, dashing hopes for a post-lockdown economic boom.

Bucking a global trend of rate hikes to combat red-hot inflation, China has been easing monetary policies, and repeatedly prodding banks to lend more. Still, new bank lending in China tumbled in July while broad credit growth slowed, reflecting anaemic demand.

The banking system, however, is bursting with cash. China’s broadest measure of money supply M2, that includes cash and deposits, jumped 12% last month, the fastest pace in six years. Chinese households added 10.3 trillion yuan ($1.52 trillion) in deposits in the first half.

“Chinese banks are amassing deposits at an alarming rate as both corporates and households over-save,” Jefferies analysts said in a note.

Monday’s rate cuts are “a response to a dearth of spending, which has resulted in a flood of deposits,” the brokerage said, adding the move is “unlikely to move the economic needle”.

David Chao, global market strategist, Asia Pacific ex-Japan at Invesco says cutting rates “is a good start, though more policy support is needed, especially to put a floor in the property market and to boost household and corporate sentiment”.

Concrete measures could include cutting mortgage rates, relaxing payment requirements, reducing bureaucratic red tape, and easing leverage limits for developers, he suggests.

BALANCE SHEET RECESSION

Kaiwen Wang, China strategist at Clocktower Group, said that, with short-term interbank rates already near record low, “it is unclear whether PBOC will feel comfortable with a much lower rate environment given its concern over financial bubbles.”

Even before Monday’s rate cuts, China’s interbank market rates were already much lower than policy rates, making PBOC’s move look superfluous.

Balances at money market funds (MMF) ballooned to a record 11 trillion yuan in May, overtaking Europe as the world’s second-biggest MMF market, after only the United States, according to Fitch.

There are already signs of froth in some corners of the financial markets, as some investors seek higher yields.

Trading in the domestic money market jumped 44% from a year earlier in June, according to latest official data, while average daily turnover of exchange-traded bonds more than doubled from a year earlier, amid signs of more leveraged trading.

In the stock market, outstanding margin loans have climbed to a four-month high of 1.64 trillion yuan, while the small-cap CSI1000 index – more vulnerable to speculative trading – has jumped more than 40% from an April low, to a five-month high.

“The rate cuts can only trigger a carnival in the bond market,” said Xia Chun, chief economist at wealth manager Yintech Investment Holdings, referring to a jump in bonds after the policy move that saw China’s 10-year treasury futures hitting two-year highs.

“The problem is there’s not a shortage of liquidity, but households and companies have gloomy expectations and weak confidence. It’s a typical balance sheet recession.”

($1 = 6.7928 Chinese yuan renminbi)

(Reporting by Samuel Shen and Winni Zhou; additional reporting by Jason XueEditing by Vidya Ranganathan & Shri Navaratnam)

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By Caroline Valetkevitch

NEW YORK (Reuters) – U.S. stocks closed lower on Wednesday, with indexes volatile after minutes from the Federal Reserve’s meeting in July suggested policymakers may be less aggressive than previously thought when they raise interest rates in September.

Major indexes sharply cut their losses after the release of the minutes, with the Dow briefly turning positive, before they returned to earlier lower levels.

Weak results from Target weighed on the market for much of the session, along with megacap growth shares including Amazon.com. Amazon.com ended down 1.9%.

The Fed minutes also showed policymakers committed to raising rates as high as necessary to bring inflation under control.

The Fed has lifted its benchmark overnight interest rate by 225 points this year to a target range of 2.25% to 2.50%. After the release of the minutes, traders of futures tied to the Fed’s policy rate saw a half-percentage-point rate hike as more likely in September.

“They stayed hawkish, but they also opened the door perhaps for a half of a percentage point hike in September as opposed to 75,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

The Dow Jones Industrial Average fell 171.69 points, or 0.5%, to 33,980.32, the S&P 500 lost 31.16 points, or 0.72%, to 4,274.04 and the Nasdaq Composite dropped 164.43 points, or 1.25%, to 12,938.12.

Target shares ended down 2.7% after the retailer reported a 90% fall in quarterly earnings and missed comparable sales estimates. The S&P 500 retail index fell 1.2%.

The news followed upbeat results and outlooks from Walmart and Home Depot the day before.

After a brutal first-half of the year, stocks are up since the start of July. Upbeat corporate earnings have helped fuel a rebound, while investors have also been optimistic lately that the Fed can achieve a soft landing for the economy.

Home improvement chain Lowe’s Cos Inc were up 0.6% after the company posted a better-than-expected quarterly profit.

Early in the day, data showed U.S. retail sales were unexpectedly unchanged in July as falling gasoline prices weighed on receipts at service stations, but consumer spending appeared to pick up at the start of the third quarter.

Volume on U.S. exchanges was 10.76 billion shares, compared with the 10.92 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 4.04-to-1 ratio; on Nasdaq, a 3.04-to-1 ratio favored decliners.

The S&P 500 posted 4 new 52-week highs and 29 new lows; the Nasdaq Composite recorded 36 new highs and 57 new lows.

(Reporting by Caroline Valetkevitch; Additional reporting by Bansari Mayur Kamdar, Devik Jain and Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta and Grant McCool)

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PONTIAC, Mich. (AP) — Thundering gas-powered muscle cars, for decades a fixture of American culture, will be closing in on their final Saturday-night cruises in the coming years as automakers begin replacing them with super-fast cars that run on batteries.

Stellantis’ Dodge brand, long the performance flag-bearer of the company formerly known as Fiat Chrysler, is officially moving toward electricity. On Wednesday night, Dodge unveiled a battery-powered Charger Daytona SRT concept car, which is close to one that will be produced in 2024 as the sun sets on some petroleum models.

Stellantis says it will stop making gasoline versions of the Dodge Challenger and Charger muscle cars and the Chrysler 300 large car by the end of next year. The Canadian factory that makes them will be converted to electric vehicles. Other automakers are moving — or have moved — in the same direction.

General Motors has said it will build an all-electric Chevrolet Corvette. Tesla says its Model S Plaid version is the fastest production vehicle made, able to go from zero to 60 mph (97 kilometers per hour) in under 2 seconds. Audi, Mercedes, Porsche and other European automakers already have high-performance electric models on sale. And Polestar, an electric-performance spinoff from Volvo, just announced a new Polestar 6 roadster for 2026.

One reason for the industry shift is that electric vehicles are simply faster off the starting line. Their handling is typically better, too, because their heavy batteries create a low center of gravity.

Stricter government pollution requirements are another factor, too. As automakers in the U.S. face more stringent fuel-economy requirements adopted by the Biden administration and produce a broader range of EV vehicles, they will have to jettison some of their gas-fueled muscle-car models.

Tim Kuniskis, CEO of the Dodge brand, said the possibly of government fines for not meeting gas-mileage requirements hastened the shift to the electric Charger. “Compliance fines and things like that associated with a big cast-iron supercharged V8, yes, it’s tough,” he said.

Still, it will take a few years for the gas-powered classics to go away.

“Over the next several years, I think we’ll continue to have some internal combustion stuff, probably through most of the decade,” said Sam Abuelsamid, a research analyst at Guidehouse Insights. “But increasingly, the focus is going to be on the electric ones.”

Under new gas-mileage standards that were unveiled in April, the fleet of new vehicles will have to average around 40 miles per gallon in 2026, up from 25.4 mpg now, the EPA says. The standards are likely to become even stronger in the future, a trend that will compel U.S.-based automakers to shed some gasoline muscle cars if they are to avoid fines.

Of all major automakers, the EPA says, Stellantis had the lowest average fuel economy — 21.3 miles per gallon — and the highest average carbon dioxide emissions. So the company likely will have to eliminate some models to avoid fines. Its limited-edition Charger SRT Widebody, with a supercharged 6.2-liter Hemi Hellcat V-8, for instance, gets only 12 mpg in city driving and 21 mpg on the highway.

To many gearheads, the thought of a muscle car without noise and smells is heresy. But Kuniskis says Dodge is working hard to make the electric experience match internal combustion. The Charger, he said, will generate its own air flow to make an exhaust noise that rivals gas performance cars. And the transmission will shift gears.

Electric vehicles, he said, have the potential to perform better than gas muscle cars with fast acceleration. But he said they are kind of sterile. “It doesn’t have the emotion. It doesn’t have the drama. It doesn’t have the kind of dangerous feeling that ICE (an internal combustion engine) has when it’s loud and rumbling and shifting and moving the car around.”

Kuniskis wouldn’t say how fast the electric Charger will go from zero to 60 mph, but said it would be faster than the company’s current petroleum performance cars. He also wouldn’t say the range-per-charge for the new Challenger, but added that range isn’t as important as making it a true muscle car.

Rick Nelson, the owner of Musclecar Restoration & Design in Pleasant Plains, Illinois, near Springfield, cautioned that switching from loud fuel-burning engines to quiet electricity may be a hard sell to old-timers who grew up with the sounds and smells of racing.

Nelson, 61, said he restored his first car while a teen-ager and spent hours at drag strips. He acknowledged that the switch to electricity is inevitable and is needed to attract a new generation that has become used to quiet speed. Still, he said, electric muscle cars won’t have manual shifters, and he’ll miss the smell of racing fuel at the track.

Already, Nelson said, businesses are cropping up to put electric powertrains in classic muscle cars. He has been in touch with an engineer at Tesla about retrofitting batteries and electric motors into some classics.

“Guys like me are just going to frown on it and laugh at it,” Nelson said of electric muscle cars. “But this isn’t about my generation.”

Kuniskis says the shift to electricity doesn’t mean the end of the muscle car. It’s just a new era.

“It’ s OK,” he said. “Let us show you what the future looks like.”

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By Danilo Masoni

(Reuters) – World shares struggled and oil prices fell on Wednesday as the UK’s highest inflation since 1982 and a rate hike in New Zealand reminded investors of the challenges facing the global economy.

MSCI’s benchmark for global stocks came off initial highs and by 1055 GMT it was barely changed, signalling that a bounce started in July was running out of steam.

European shares fell 0.3%, while the MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1%, off earlier highs.

Wall Street looked set for a weaker start, with S&P 500 futures down 0.7% after strong gains on Tuesday following stronger-than-expected results from Walmart and Home Depot which bolstered optimistic views on the health of consumers.

But a bigger than expected jump in British consumer price inflation to 10.1% in July highlighted growing pressures on households and helped cement expectations of another 50 basis point (bps) rate hike at the Bank of England’s next meeting.

After an initial spike on the data, sterling pared some gains and was little changed against the dollar, while UK two-year bond yields surged to their highest level in almost 14 years.

“Higher inflation should trigger a more aggressive monetary policy response from the Bank of England – a bullish signal for sterling,” said Matthew Ryan, Head of Market Strategy at Ebury.

“On the other hand … higher prices present a clear downside risk to economic activity, and raise the possibility of a potentially prolonged UK recession, which is clearly bearish for GBP.”

UK two-year yields, which are sensitive to rate hike expectations, rose above 10-year yields, marking an inversion of the yield curve that many investors say is a harbinger of a major economic slowdown.

New Zealand shares were flat. After an initial spike the kiwi dollar turned negative after the country’s central bank announced a fourth consecutive 50 bps rate hike without giving hints of slowing down.

The hike was in line with forecasts, but Imre Speizer, head of NZ market strategy at Westpac, said the tone of RBNZ’s statement was more hawkish than expected.

“Clearly they’re a bit more worried about wage inflation and a very tight labour market, that’s been a big recent development,” Speizer said.

In foreign exchange markets, the dollar index gained 0.1% to 106.59 ahead of the release of minutes from the Federal Reserve’s latest meeting which investors will scrutinise for more clues on its policy tightening outlook.

The index, which tracks the greenback against six main peers, has recovered most of the ground it lost last week after a cooler-than-expected U.S. inflation reading but remains well off its mid-July top.

In Europe, yields rose as the UK inflation data shifted investors’ focus back to potential further monetary tightening in the euro area. German two-year bond yields rose 13 bps to 0.714%, their highest since July 21.

Ten-year Treasury yields rose 4 bps to 2.865%.

Oil hit a six-month low after a brief rally as concerns about the prospect of a global recession overshadowed a report showing lower U.S. crude and gasoline stocks. [O/R]

Brent crude was down 0.4% at $92 a barrel while U.S. West Texas Intermediate crude was down 0.1% at $86.4.

Spot gold traded in a narrow range and was last down around 0.3% at $1,771 an ounce.

(This story refiles to fix media identifier, text unchanged)

(Reporting by Danilo Masoni and Sam Byford in Tokyo; Editing by Nick Macfie and Catherine Evans)

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