EU to kick off pandemic plan with €10bn bond issue -French minister

EU to kick off pandemic plan with €10bn bond issue -French minister
France’s junior minister for European affairs said Monday the EU plans to kick off its 750 billion euro pandemic recovery package with an initial 10 billion euro bond issue. (Shutterstock)
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Updated 01 June 2021

EU to kick off pandemic plan with €10bn bond issue -French minister

EU to kick off pandemic plan with €10bn bond issue -French minister
  • More than €100 billion would be injected into the European economy from this year
  • European Commission would launch the debt issuance process on June 1

PARIS: The European Union plans to kick off its €750 billion ($917 billion) pandemic recovery package with an initial €10 billion  bond issue, France’s junior minister for European affairs, Clement Beaune, said on Monday.
In an interview with French financial daily Les Echos, Beaune also said that more than €100 billion would be injected into the European economy from this year.
Beaune said the European Commission would launch the debt issuance process on June 1 by calling on big European and international banks, and the securities would be issued in June.
“The market appetite should be very major and the interest rates very favorable,” he told Les Echos.
Asked whether the new bonds would be called corona-bonds, he said “let’s avoid this radioactive term,” and added that with the recovery package an embryonic European Union treasury was taking shape.
Proceeds of the issue would be spent from July onwards and by the end of the year Europe will inject more than €100 billion into its economy to finance the recovery of its member states, he said.
Asked about a G7 initiative for a minimum corporate tax rate of 15 percent, he said that within the European Union, Ireland was the most hostile to the principle of a minimum tax and taxation of Internet companies, and to a lesser degree Cyprus and Malta.
He added that the Netherlands was not opposed to the principle but will be demanding about its implementation.
“The European Union is blocked because of the unanimity rule. When there is a legal blockage, we need a political battle ... given the US position and the global agreement that we hope for in July, this will put a lot of political pressure on the reticent member states,” he said.

Support growing to add WTI oil to Brent benchmark to improve liquidity

Support growing to add WTI oil to Brent benchmark to improve liquidity
Updated 17 sec ago

Support growing to add WTI oil to Brent benchmark to improve liquidity

Support growing to add WTI oil to Brent benchmark to improve liquidity

LONDON: The UK North Sea has been in a state of perpetual transformation in recent years. As oil majors left the aging basin for less expensive and larger fields across the globe it has been forced to sharply cut costs to compete for investment.

Then the US fracking boom upset global prices. If that wasn’t enough, investment, which has fallen by more than a third, is also under threat from lukewarm support from the UK government amid the global transition to greener energy. Oil major Shell last week pulled out of a large-scale development in the aging basin amid accusations that government pandering to environmentalists was behind delays in formally licensing the scheme and had made it uneconomical.

Now it appears the very definition of the black gold extracted from the forbidding waters of the North Sea is also under threat with the news that UK oil major BP is backing calls to add US West Texas Intermediate Midland crude to the global Brent benchmark index.

Brent is the benchmark for almost two thirds of the world’s oil — around 100 million barrels per day (bpd) — including African, European, and Middle Eastern crude.

These days it is based on five North Sea crudes — Forties, Brent, Osebe Ekofisk and Troll — all of which are in long-term decline.

However, now BP, one of the UK’s biggest companies and an oil major with a long and profitable North Sea history, believes Brent should now include WTI.

BP discovered the Forties field in 1970. The Brent field was discovered by Royal Dutch Shell a year later.

In an internal document quoted by Reuters news agency this week BP said it “strongly believes that the inclusion of WTI Midland, properly executed, is the best solution to improve liquidity and retain Brent as a well-supplied and reliable sweet and light benchmark”.

BP declined to comment. 

Adding WTI to Brent poses a problem in that their prices are based on two different markets, with different price drivers.

However, the move, which was first put forward by S&P Global Platts — the energy prices agency which first established the Brent benchmark — is becoming widely seen necessary because falling North Sea supplies have made it difficult to rely on the benchmark as a reliable indicator of the price of light, sweet crude oil preferred by refiners.

WTI, the benchmark used in much of North America, refers to the gathering point in West Texas where pipelines from fields in the American interior converge. Like North Sea oil, WTI is defined as light sweet, which is low in sulphur.

While quality and the location of where oil is drilled are key factors in valuations, there are essentially just three types of oil in terms of global prices. Brent, the most heavily traded, WTI, and Dubai/Oman.

The percentage of sulfur in crude determines the amount of processing needed to refine the oil into energy products. Brent and WTI sweet crude both contain less than 1 percent sulfur making them easier to refine, particularly for diesel and gasoline.

Dubai/Oman has a much higher sulfur content but is the main benchmark reference for Persian Gulf oil delivered to the Asian market.

However, analysis carried out by S&P Global Platts indicates North Sea crude is getting heavier and more sulfurous. It adds medium sour crude will make up around 30 percent of the basin’s volumes by 2040 compared to just over 2 percent in 2010.

Thus another solution to declining production of North Sea light sweet crude is to include heavier oil from Norway’s massive North Sea Johan Sverdrup field, oil which is in demand in Asia.

However, BP states in the leaked document that it does not support the idea of adding the Sverdrup field to Brent because it’s a too sour grade of crude and it wants to maintain the lighter, easier to refine market.

Thus, the momentum to include WTI to keep Brent sweet and provide liquidity to the market is growing and is likely to prevail.

And in words that show sentiment plays no part in business, the BP document added: “BP also believes that in the medium term, Forties and Brent (the two cornerstones of North Sea development) should be removed from the benchmark, as their values are becoming increasingly difficult to assess due to declining volumes.”

Markets bullish on continuing uncertainty surrounding omicron

Markets bullish on continuing uncertainty surrounding omicron
Updated 14 min 7 sec ago

Markets bullish on continuing uncertainty surrounding omicron

Markets bullish on continuing uncertainty surrounding omicron

LONDON: Is everyone buying the dip? Global equity markets have bounced back, recovering last week’s omicron-driven losses, as fears about the impact of the latest coronavirus variant on economic growth ease.

Oil prices joined the party after plunging last week on omicron fears. Gas prices also pushed higher though that is more linked to Washington’s warning of “nuclear” sanctions against Russia if it decides to invade Ukraine.

But whatever the markets are saying right now, it is clear the number of omicron cases is rising quickly and governments are worried enough to have imposed fresh restrictions on at least some — mostly leisure related — economic activity to combat the increase.

Financial markets have perhaps bullishly interpreted the WHO declaration that it is too early to determine whether omicron causes more serious illness, or whether it is immune to current vaccines. The WHO also pointed out that no one has so far died with the variant despite its existence in 38 countries.

Against that, a study from South Africa, published on Friday, found omicron is 2.4 times more likely than previous variants to reinfect someone who has already had COVID-19. Jeremy Farrar, director of the medical research group Wellcome Trust, commented recently that the “variant reminds us all that we remain closer to the start of the pandemic than the end.”

This is why, unlike financial markets, governments are currently hedging their bets.

Speaking last week, US Treasury Secretary Janet Yellen, warned the variant could slow global economic growth by exacerbating existing pandemic induced supply chain problems and choking consumer demand.

Her view was echoed by International Monetary Fund chief Kristalina Georgieva.

Further disruption to supply chains will intensify existing record inflationary pressures in the global economy amid the still tentative vaccine induced recovery.

Thus, along with the risk omicron poses, there are concerns about central bank tightening, primarily from the US Federal Reserve.

Mark Haefele at UBS Global Wealth Management is optimistic about growth but cautioned: “We see two bear cases: First, that omicron has sufficiently severe symptoms and transmissibility that governments turn to lockdowns to control the outbreak. The second bear case is that government restrictions delay a normalization of supply chains and drive fears of stagflation and monetary tightening.”

Commenting on omicron impact on the oil market, JP Morgan analyst Natasha Kaneva said she expected a 650 kbd (1,000 barrels per day) impact to oil demand, with reduction almost evenly split in percentage terms among jet fuel, diesel and gasoline. “However, our models suggest that, once potential omicron-related lockdown measures ease heading into summer 2022, there will be a bounce-back effect, likely indicative of pent-up demand,” she said.

Based on the current omicron infection rates the best case scenario at the moment is that while the variant is highly transmissible, those infected will continue to show only mild symptoms.

So far, the response from governments in Europe and the US has been largely limited to restricting travel from abroad — including arrivals from some countries being forced to quarantine in hotels —  and increased testing for travelers, to try and stop the spread.

This week, energy ministers from oil producing countries, including Saudi Arabia and Qatar, decided not to travel to the US for the delayed World Petroleum Congress in Houston due to omicron concerns.

However, the omicron variant is now increasingly found in people who haven’t traveled anywhere, or in many cases, had any connections with travelers.

Governments, reluctant to embark on another round of fresh domestic restrictions, have focused on ratcheting up vaccination programs encouraging people to get booster jabs.

But restrictions are being slowly reintroduced.

All international travelers to the US are now required to test within one day of their departure.

In Germany, Europe’s biggest economy, the government has banned unvaccinated people from most public spaces, prohibiting them from entering  all premises apart from grocery stores and pharmacies. It is also plans to make vaccination compulsory next year.

Belgium’s government has told people to work from home and will close its schools a week earlier for Christmas. In Italy unvaccinated people are prohibited from certain leisure activities. France and Ireland have closed night clubs and restricted gatherings.

Austria is back in lockdown and unvaccinated people who breach lockdown rules face fines of up to €500 ($562). Anyone refusing to comply with vaccination status checks could be fined up to €1,450.

The new crackdown, though in most cases mild compared to earlier lockdowns, has resulted in a number of protests over the last two weeks in some countries.

Against that backdrop, the current bull market in the midst of uncertainty that omicron is causing to governments is surprising.

Despite fears about tighter monetary policy, Barclays Capital’s managing director Emmanuel Cau summed up the current confidence in financial markets. He said: “We remain of the view that overall macro and liquidity conditions are supportive of equities, and advise to add on weakness, looking for the bull market to carry on.”

For once financial institutions appear to have confidence in uncertainty. 

Over 170 companies delisted from major US stock exchanges in a year, says report

Over 170 companies delisted from major US stock exchanges in a year, says report
Updated 07 December 2021

Over 170 companies delisted from major US stock exchanges in a year, says report

Over 170 companies delisted from major US stock exchanges in a year, says report

RIYADH: Major US stock exchanges delisted 179 companies between 2020 and 2021, according to a report carried by

Citing data the report said in 2021, the number of companies on Nasdaq and the New York Stock Exchange stands at 6,000, dropping 2.89 percent from last year’s figure of 6,179. In 2019, the listed companies stood at 5,454.

“NYSE recorded the highest delisting with companies on the platform, dropping 15.28 percent year-over-year from 2,873 to 2,434. Elsewhere, Nasdaq listed companies grew 7.86 percent from 3,306 to 3,566,” it added.

As of 2021, it said, Nasdaq had 2,819 listed domestic companies, while foreign entities stood at 747. NYSE accounts for 1,848 domestic companies, with the foreign entities standing at 586.

The report attributed the delisting to the emergence of alternative markets.

"Furthermore, the delisting on US major exchanges might be due to the emergence of new alternative markets, especially in Asia. China and Hong Kong markets have become more appealing, with regulators making local listings more attractive. Over the years, exchanges in the region have strived to emerge as key players amid dominance by US equity markets."

It, however, said the number of foreign companies listing on US exchanges also surged. 

Qatar approves its budget, expects to revenue to rise by 22.1%

Qatar approves its budget, expects to revenue to rise by 22.1%
Updated 07 December 2021

Qatar approves its budget, expects to revenue to rise by 22.1%

Qatar approves its budget, expects to revenue to rise by 22.1%

Qatar has approved its budget for the 2022 fiscal year, the country’s Minister of Finance Ali Al Kuwari said in a press conference on Tuesday.

Revenues are expected to amount to 196 billion riyals ($53.8 billion), a 22.4 percent rise compared to last year’s budget estimates, Asharq reported. 

Estimates for the budget were made while assuming oil prices to be $55 per barrel during the year on the back of healthier global energy prices.

Additionally, expenditures are predicted to hit 204.3 billion riyals, growing by an annual rate of 4.9 percent.

This will lead to a budget deficit of 8.3 billion riyals. Al Kuwari added that this deficit will be addressed through current monetary balances and the issuance of local and foreign debt instruments if needed.

EU’s economy

Output in the EU expanded by a quarterly rate of 2.1 percent in this year’s third quarter, according to preliminary estimates by Eurostat. 

Austria experienced the highest rise in activity, recording an economic growth rate of 3.9 percent. France and Portugal came next, as their economies widened by 3 percent and 2.9 percent, respectively.

Household consumption mainly drove the production’s rise in the region, going up by 4 percent, accelerating from the previous quarter’s 3.7 percent expansion. 

Government final consumption expenditure climbed by 0.3 percent while gross fixed capital formation declined by 0.6 percent.

Meanwhile, employment growth reached 0.9 percent in the third quarter of 2021 when compared to the previous quarter.

In addition, the euro area’s Indicator of Economic Sentiment improved by 0.9 points in December to hit 26.8 points, Zew, a Germany economic policy institute, said. 

However, the outlook was different for Germany, as its sentiment indicator fell by 1.8 points to reach 29.9 points. Deteriorations caused by the pandemic, as well as supply chain disruptions, are dragging the German economy down, the Mannheim-based firm noted.

Economic expectations also fell, signalling that forecasts about healthy short-term growth are not gaining momentum.

Moreover, the country’s industrial production went up by a monthly rate of 2.8 percent in October, preliminary estimates by Germany’s Federal Statistics Office showed.

In particular, production of capital goods widened by 8.2 percent while output of intermediate goods dropped by 0.4 percent.

Japan’s household spending

Household spending in Japan continued to fall, on an annual basis, for the third month in a row. This was attributed to weak consumer sentiment that is still recovering from the pandemic.

Spending by the sector dropped by a yearly rate of 0.6 percent in October, compared to a 1.9 percent fall in the previous month.

The country’s government recently introduced a $490 billion stimulus package to boost the economy, unlike other countries that are starting to roll back on their spending programs, Reuters reported.

Australia’s monetary policy

Australia’s central bank maintained its monetary policy and interest rate unchanged. The decision was driven by concerns over omicron, the new coronavirus variant.

The country’s interest rate remained at 0.1 percent, according to Bloomberg. The bank noted that it will raise interest rates when inflation reaches its target of 2-3 percent.

The bank added that the labor market and economy are experiencing upturns.

China’s trade

Exports and imports in China grew annually by 22 percent and 32 percent in November when compared to a year earlier, reaching all-time records.

Yet, exports growth slowed down due to a thinning demand and a rise in costs.

Yemeni rial bounces back as central bank restructured

Yemeni rial bounces back as central bank restructured
Updated 07 December 2021

Yemeni rial bounces back as central bank restructured

Yemeni rial bounces back as central bank restructured

AL-MUKALLA: The Yemeni rial recovered on Tuesday by roughly 30 percent hours after the Yemeni president reshuffled the country’s central bank board in a bid to rein in the rapid currency devaluation. 

Local moneychangers told Arab News that the Yemeni rial began bouncing back on Monday night when President Abed Rabbo Mansour Hadi dismissed the governor of the Aden-based central bank and his deputy. 

By Tuesday morning, the Yemeni currency rose from 1,700 to 1,100 against the dollar before dropping again to 1,250 in the afternoon. 

The rial has rapidly tumbled during the past couple of weeks, reaching a historic record low of 1,750 this week, compared to 215 in early 2015. 

Yemen’s president appointed Ahmed bin Ahmed Ghaleb as the new governor and head of the central bank’s administrative board. Mohammed Omer Banaja was appointed his deputy. 

The official news agency reported that the president authorized the Central Agency for Control and Accountability to monitor the bank’s current and previous financial activities. 

Four previous central bank chiefs, all appointed Hadi, failed to prevent the rial’s plunge despite their expertise and strong educational backgrounds.

The central bank had closed dozens of exchange firms and shops that violated the bank’s monetary rules and were involved in speculative activities on foreign currency. The central bank also ordered banks in the Houthi-controlled areas to move offices and operations to Aden, or face punitive measures and provided fuel and food importers with dollars. The rial continued losing value against the dollar, as several blacklisted firms and banks continued operations  in the Houthi-controlled Sanaa.

Mustafa Nasr, director of the Economic Media Center, has urged local and international support to the bank’s new administration to succeed in putting into place economic policies and also demanded resuming the flow of oil and gas exports and reviving money-generating state bodies. “

Richard Oppenheim, British ambassador to Yemen, said the reshuffle of the bank’s administrative board would help the Yemeni government carry out vital reforms to steady the economy.