Stock Market News Today 2018/09/04
Thames Water to invest record £12bn on infrastructure upgrades, utilities group vows to keep average bills flat, but rivals signal cuts.
Britain’s biggest water company plans to invest a record amount on improving infrastructure and will cap payouts to investors in a bid to help repair its reputation after a barrage of criticism over its performance.
Thames Water, which supplies more than 15m people, said it would invest £11.7bn as part of its next five-year business plan, £2bn more than in the previous period. It includes £2.1bn to reduce leakage and improve the resilience of its infrastructure, including the building of a storage reservoir in Oxfordshire. The company, however, said that average bills would stay flat in real terms over the five-year period even as several of its peers promised to cut prices for their customers.
Thames Water has been a lightning rod for criticism of the industry, which has been accused of piling up debt and failing on maintenance while rewarding shareholders through hefty dividend payments. Michael Gove, the environment secretary, in March attacked the industry’s high rewards for executives. His comments came after sustained criticism from Jeremy Corbyn, the leader of the opposition Labour party, who has threatened to renationalise the industry.
Britain’s 17 regional water monopolies submitted their five-year spending plans to Ofwat, the industry regulator, on Monday. United Utilities and Severn Trent said they would cut average bills by 10.5 per cent and 5 per cent respectively from 2020 while promising to invest in infrastructure in response to rising regulatory pressure to provide better service.
South West Water, which is owned by Pennon Group, said it would cut leakage by 15 per cent while keeping bills lower by 2025 than they were in 2010. It also plans to offer dividend-paying shares to its customers, a move that would mark the first return to partial public ownership of a water company in England since privatisation. Anglian Water said it would increase its bills by less than 1 per cent arguing its region faced specific challenges including rapid housing growth.
Argentine peso slides despite government plan to stem crisis.
New York traders may be on holiday, but the Argentine peso took another dip on Monday despite the government’s promise to accelerate its austerity programme.
Argentina’s dollar-denominated international government bonds enjoyed a small rebound and even the local peso bond market found some support on Monday, but the peso’s slide resumed, falling 4.3 per cent against the dollar to trade at ARS38.54.
That eliminated most of the currency’s Friday bounce, and takes it back to the near record lows touched at the peak of last week’s currency turmoil. The peso has now lost over half its value against the dollar this year, making it the world’s worst performing currency according to Bloomberg data, pipping even the Turkish lira and Angolan kwacha.
The renewed currency pressure comes despite president Mauricio Macri admitting that Argentina has been “living beyond our means” and promising to eliminate the government’s “primary” budget deficit by next year. The primary budget balance does not take debt servicing costs and repayments into account.
Reacting to Monday’s fall, some analysts warned the currency could suffer more substantially on Tuesday, when the US market reopens:
“Extrapolating from pre-labour day markets is misleading. We may well see additional volatility today simply on the back of thin markets, but we are likely to see some measure of risk appetite resumption after the holiday. ARS is especially vulnerable to these fluctuations given its particularly vulnerable state,” said Ilya Gofshteyn, forex analyst at Sandard Chartered.
Investors have long called for the government to accelerate its fiscal tightening — it previously promised to cut only the primary deficit to 1.3 per cent of GDP next year — and many have said they will need to see tangible proof of the renewed commitment before diving back in.
Egypt to pay Spanish-Italian JV $2bn in natural gas dispute, ruling by World Bank panel poised to accelerate resumption of country’s LNG exports.
A joint venture between Spain’s Naturgy and Italy’s Eni has been awarded a $2bn settlement from Egypt over gas supplies by a World Bank arbitration body, in a move that could accelerate the resumption of the country’s liquefied natural gas exports.
The ruling by the International Centre for Settlement of Investment Disputes comes after Egypt stopped supplying gas to Unión Fenosa Gas joint venture’s Damietta LNG plant as the country faced internal energy shortages in the wake of the political turmoil unleashed by the Arab Spring.
Unión Fenosa Gas took its case to the ICSID in 2014. The arbitration body on Monday found that in stopping the gas supply Egypt had failed to grant Unión Fenosa Gas “fair and equitable treatment”, contravening the country’s bilateral investment protection treaty with Spain, Naturgy said in a statement.
The $2bn is likely to be paid in the form of renewed gas supplies to Damietta rather than in cash, according to people familiar with the matter.
Naturgy, formerly known as Gas Natural Fenosa, said the award would allow it to reach a “comprehensive agreement” with Egypt to resume gas supplies to the plant, which were halted four years ago.
Egypt has been a major importer of LNG in recent years, but it is expected to resume exports in the future following a number of significant natural gas discoveries in the country, including Eni’s giant Zohr field in the Egyptian sector of the Mediterranean.
Oman Minister Says Prices Unlikely to Rise Above $80 This Year.
Oil prices were mixed on Tuesday. Trade was expected to be slow as U.S. stock markets were closed on Monday for a holiday, while reports that Oman’s oil and gas minister said oil prices are unlikely to rise above $80 this year raised some eyebrows.
West Texas Crude Oil WTI Futures for October delivery rose 0.4% to $70.06 a barrel as of 12:34 AM ET (04:34 GMT). Meanwhile Brent Oil Futures for November delivery, the benchmark for oil prices outside the U.S., slipped 0.1% to $78.08.
Mohammed bin Hamad Al Rumhy, Oman’s Minister of Oil and Gas told CNBC on an interview on Monday that he believed prices were currently “fair.”
“I think for the rest of this year we should see stability between $70 and the high 70s (dollars a barrel), or low 70s to high 70s,” he said.
“Because this is the wish of all of us who are cooperating with OPEC to provide the market with enough crude to make sure that the consumers are not impacted and we think that the current price is a fair price.”
Oman is the largest non-OPEC producer in the Middle East.
Oil prices have been driven higher in the past few months as demand for oil outsrips supply and upcoming U.S. sanctions against Iran have also supported prices. The financial sanctions against Iran will target the petroleum sector of Iran in November, when a drop of crude supply is expected. Iran is the third-biggest producer in the Organization of the Petroleum Exporting Countries (OPEC), supplying around 2.5 million barrels per day (bpd) of crude and condensate to markets this year, equivalent to around 2.5% of global consumption.
Dollar edges higher as EM contagion worries linger.
The dollar index edged higher and major currencies receded in early Asia-Pacific trading on Tuesday amid fears over a bleak outlook for emerging market currencies.
The dollar index measuring the greenback against a basket of peers was up 0.1 per cent at 95.222. The euro was off 0.2 per cent at $1.1601 against the dollar and the pound slipped 0.1 per cent to $1.259.
The Australian dollar was down 0.2 per cent at $0.7196 ahead of an interest rates decision from the Reserve Bank of Australia. All but one of 43 economists polled by Reuters tipped the central bank to keep its powder dry on Tuesday.
Turkey’s lira was flat at LR6.6305 per dollar, having pulled back on Monday from a fall of nearly 3 per cent in the wake of a statement from Turkey’s central bank, which said it would adjust its monetary stance at a policy meeting later in August.
Euro zone manufacturing growth eases on trade war worries.
Euro zone manufacturing growth slowed to a near two-year low in August as optimism dwindled amid growing fears of an escalating global trade war, a survey showed on Monday.
However, this edition of the survey should be treated with some caution. It only represents about 70 percent of the usual sample size as swathes of European factories take a break over the summer months. IHS Markit’s August final manufacturing Purchasing Managers’ Index dropped to a 21-month low of 54.6 from July’s 55.1, unchanged from an initial reading, yet still comfortably above the 50 level that separates growth from contraction.
An output index, which feeds into a composite PMI due on Wednesday and is regarded as a good gauge of economic health, nudged up to 54.7 from 54.4.
“Euro zone factories reported a further solid production gain in August, but prospects dimmed further as growth of new orders hit a two-year low and worries about the outlook deepened,” said Chris Williamson, chief business economist at IHS Markit.
Forward-looking indicators such as employment, optimism and new orders all fell, suggesting there would be little if any pick-up in activity this month.
The future output index, which measures optimism, fell from 62.4 to 61.0 – its second lowest reading since late 2015.
Manufacturers are increasingly concerned about a growing global trade dispute. U.S. President Donald Trump has told aides he is ready to impose tariffs on $200 billion more in Chinese imports.
So to try and drum up demand, factories increased prices at the weakest rate in a year. Official data on Friday showed inflation in the bloc eased to 2.0 percent last month, supporting the European Central Bank’s assessment that a recent spike may only be temporary.
Still, price pressures have built up enough for the ECB to curb some of its measures. The central bank plans to end its bond purchase program this year, although interest rates are expected remain unchanged for another year.