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Business groups and industry call for Britain and the EU's carbon markets to be linked
Over 50 business groups and companies from across Europe have called for Britain and the EU at a upcoming summit to begin talks on linking their carbon market, which will they claim help reduce costs for consumers. When leaders meet on the 19th of May, Britain will seek enhanced cooperation in security, law enforcement, and removing trade barriers between the EU. As part of a larger effort to reduce emissions and achieve climate targets, the EU and UK Emission Trading Systems charge power plants and industrial entities per ton of CO2 they emit. The letter, signed by Equinor Orsted RWE and other companies, said that the EU-UK ETS linkage will create price convergence, while avoiding distortions in competition, preventing carbon leakage, and reducing costs to both EU and UK customers. By linking the two schemes, Britain could also avoid the penalties under the European Carbon Border Adjustment Method, which will impose a fee on the importation of steel, aluminum, fertilisers and electricity to the EU from 2026. Energy groups have warned that the CBAM design could lead to an increase in the cost of exporting clean, renewable energy from Britain to Europe. This would also add to the already high EU electricity prices. The UK scheme currently trades at around 48 pounds per metric ton less than the EU where the benchmark contract is around 66 euros. Analysts say that linking the two systems will likely cause UK prices to rise in order to match those of the EU, which could increase carbon costs for UK companies on the short-term. They say that in the long term, it will be cheaper because the import levies will no longer apply. (1 pound = 0.7484 pounds; 1 euro = 0.8799 Euros) (Reporting by Susanna Twidale, Editing by Elaine Hardcastle).
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Oil price outlook dims due to tariffs and potential OPEC+ production boost
An oil price poll on Wednesday showed that OPEC+’s decision to reduce supplies and a demand outlook clouded with trade disputes between China and the U.S. will have a negative impact on prices in 2018. In April, a survey of 40 analysts and economists projected that Brent crude would average $68.98 per barrel in 2025. This is down from the estimate of $72.94 in March. U.S. crude oil is forecast to average $65.08 a barrel, down from last month's $69.16 estimate. Ole Hansen is the head of commodity strategy for Saxo Bank. He said that crude oil would be caught in a dilemma between fears about a slowing economy and an increase in OPEC+ production, on one hand, and support due to sanctions and low prices that could hurt production growth by high-cost producers. The U.S. has announced a series of tariffs that are tit for tat. This has dampened global economic growth. Oil prices fell to their lowest level in four years earlier this month due to concerns over tariffs. The International Energy Agency (IEA) lowered its forecast for demand growth to 730,000 barrels a day this month. The Organization of the Petroleum Exporting Countries, or OPEC, also lowered its forecast growth this month. Now, they expect growth of 1.3 millions barrels a day by 2025. Analysts said that if the OPEC+ plan to increase supply is carried out as planned, it will have a negative impact on oil prices. Sources say that several members of the group will propose to the group at its meeting on May 5 that it accelerates oil production increases in June for the second consecutive month. Some analysts say that further OPEC+ increases may not occur. Florian Grunberger is a senior analyst at Kpler. He said that while the medium-sour crude oil market in general remains tight, OPEC+'s production cuts, including revised compensation plans, are unlikely to be completed as planned by 2025 due to mounting risks for demand. HSBC stated in a note dated April 15, that lower oil prices would slow the growth of supply, but with a delay. The first to respond will be U.S. shale. "With average half-cycle breaksevens at $60 per barrel, it is inevitable that oil prices will continue to rise if they remain at the current levels of $65 a barrel Brent/lower $60s a barrel WTI ..."
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Investors react positively to a wave of corporate earnings, boosting UK shares
British stocks rose Wednesday, as investors considered mixed corporate results. The main indexes are poised to end a volatile, but largely positive, month. They have almost recovered from the losses caused by U.S. Trade policies. The blue-chip FTSE 100 index was up 0.1% as of 1009 GMT and is on course for its 13th consecutive session with a positive result. The midcap index, which is primarily focused on domestic companies, advanced by 0.7% to reach its sixth consecutive session of gains. Despite recovering from the steep tariffs announced in early this month, FTSE 100 is still poised to report a monthly drop. The markets have stabilized recently on the optimism surrounding U.S. Trade Deals, especially with China. Details are still limited but U.S. commerce secretary Howard Lutnick mentioned a first foreign power deal. GSK rose 4.1% after reaffirming its outlook for the year 2025. The drugmaker said that it was "well-positioned" to minimize any impact from possible sector-specific tariffs. Genus, a company that develops animal protein genetics, jumped 28.3% to be the best performing midcap stock. The firm announced the U.S. FDA had approved the PRP (PRRS resistant pig) gene editing for use in U.S. food chains. The Healthcare Index gained 2%. FTSE 100 was dragged down by industrial metal miners. Glencore, a commodity trader and mining company, fell 6% following a 30% decline in its first-quarter production of copper. Anglo American and Antofagasta, two other miners, also dropped over 3% apiece. They were among the worst performers in the blue-chip index. Barclays booked a stronger-than-expected increase in first-quarter profit but its shares were down 1.6%, with the bank index shedding 2.8%. According to Nationwide, a mortgage lender, British house prices dropped 0.6% in April. This was their biggest monthly drop in more than 18 months. A property transaction discount had ended. Smith+Nephew, a medical products manufacturer, jumped 6.8% on the back of its forecasted sales and profit margins for the full year. (Reporting by Ragini Mathur in Bengaluru; Editing by Vijay Kishore)
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Indian benchmarks gain monthly on hopes of a trade deal, but Pakistan tensions weigh
Indian benchmarks closed at the same level on Wednesday, but ended a solid month. Both the Nifty and Sensex posted monthly gains due to expectations of a U.S. India trade deal and new foreign inflows. The BSE Sensex fell 0.06% on Wednesday to 80,242.24 and the Nifty 50 lost 0.01% at 22,334.2. The Nifty and Sensex both gained 3.5% in April. HDFC Bank has slowed down its daily moves as it offsets the pressure of tensions with Pakistan. The banks and financial sector led the monthly gains, supported by stable earnings and foreign inflows. The IT index dropped 3% in April. This is its fourth consecutive month of declines - the longest losing streak it has had since October 2016. The optimism surrounding trade deals with the U.S. has fueled the FPIs to invest $4.4 billion into Indian stocks over the past ten sessions. This is their largest buying spree in almost two years. Both countries' officials have hinted that a bilateral agreement could be reached as soon as this week or the following. Samrat Dasgupta is CEO of Esquire Capital Investment Advisors. He said that the markets rose in April due to the influx of money from the U.S. to emerging markets because of economic uncertainty. He warned, however, that the jitters about a possible escalation between India and Pakistan may keep markets volatile in the future. According to reports on Tuesday, Indian Prime Minister Narendra Modi gave military chiefs the freedom to respond to the deadly militant attack that took place in Kashmir last week. Brokers cited a weak quarterly pre-provision and higher credit costs for the decline in Bajaj Finance, a non-bank lender. HDFC Bank rose by 0.9% and supported the benchmarks. The Indian stock markets will be closed on Thursday for a public holiday. Trading will resume Friday, May 2.
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Vedanta, an Indian miner, doubles its quarterly profit on lower taxes and higher commodity prices
Vedanta, an Indian conglomerate that converts metals into oil, reported a fourth-quarter profit more than doubling. This was boosted by lower taxes and higher prices for zinc and aluminium. The quarter saw a 154% increase in the miner's profit that was attributable by the owners to the company, to 34.83 Billion Rupees (around 412 Million Dollars). The company reported that its normalised tax rates dropped from 46% to 28% in the previous quarter. This was primarily due to changes in profit mix, and a decrease in the tax rate for a foreign subsidiary. According to data from brokerages, the overall revenue increased by 14%, reaching 397.89 billion rupies. This was largely due to higher prices of aluminium and zinc which rose by 19.6%, 17.5% and 19.6% respectively, during the quarter. Vedanta’s aluminium division is the largest in India, and accounts for about 40% of its revenue. Zinc, its second biggest business, is followed by copper. Copper prices rose 9.3% during the third quarter. Earnings before interest, tax, depreciation, and amortization (EBITDA), which are the company's profits, rose by 30% to 116.18 bn rupees. The strong commodity prices, as well as cost-saving measures, have helped to increase the EBITDA margin from 30% to 35%. Vedanta subsidiary Hindustan Zinc announced a higher profit for the fourth quarter, but its finance chief warned of price volatility because of uncertainty over U.S. Tariffs. ($1 = 84.6170 Indian Rupees) (Reporting and editing by Savio d'Souza in Bengaluru)
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Gold continues to fall as dollar gains and trade tensions ease
The gold price fell on Wednesday for the second consecutive session, mainly due to a stronger dollar, and signs that tensions between the U.S. and China have de-escalated. Meanwhile, attention was focused on a number of economic reports from the U.S. scheduled this week. As of 1017 GMT, spot gold was down by 1.3%, at $3,274.10 per ounce. But bullion is on course to record its fourth consecutive month of gains, with a gain of nearly 5% in April. U.S. Gold Futures fell 1.5% to $3283.50. The market is experiencing high volatility due to the competition between two-way flows. Ross Norman, a independent analyst, said that it appears gold is entering a period of consolidation. The dollar index increased by 0.2% in comparison to its rivals. This makes bullion prices more expensive for holders of other currencies. In a recent note, Frank Watson, a market analyst with Kinesis Money said that gold prices were lower and more stable as the market took in what appeared to a de-escalation in the U.S. led trade war, which has shaken the financial markets over the past few weeks. Gold's unwillingness to fall much further can be interpreted as a sign of the continued volatility in the financial markets amid the uncertainty surrounding U.S. Trade Policies and their impact on the global economy. On Tuesday, U.S. president Donald Trump signed two orders to ease the impact of his auto tariffs. His trade team also announced its first agreement with a trading partner abroad. Bullion, which is a safe haven against financial and political turmoil, reached a record-high price of $3,500.05 an ounce last April 22, as investors sought to escape the global economic turmoil. Investors are likely to focus on a number of economic reports from the United States, such as the personal consumption expenditures (PCE), which will be released later today, and the non-farm employment report, due on Friday. These data could provide more insight into the Federal Reserve’s outlook for interest rates. Silver spot fell 2.1%, to $32.27 per ounce. Platinum dropped 1.1%, to $966.86, and palladium was down 0.6%, to $929.44.
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Copper drops over 2% and heads for the worst month since November
The copper price fell by over 2% Wednesday and is heading for its worst month since November, due to weak data coming from China's top metals consumer as well as lingering uncertainty in trade. London Metal Exchange benchmark copper fell 2.2% at 1045 GMT to $9,231 per metric ton, its lowest price since April 17. Prices dropped 5% in April. Comex copper contracts fell 4.3% to $4.63 a lb, the lowest since April 17. The data released on Wednesday shows that China's manufacturing activity declined at its fastest rate in 16 months, in April. This is a call for more stimulus. John Meyer, analyst at SP Angel, said that macroeconomic uncertainties are currently holding back copper. While Trump's tariffs could create a mini recession in the West we believe that new stimuli in China and Asia will continue keep manufacturers moving and drive growth. The lack of progress made in the de-escalation of the U.S./China trade dispute has weighed on financial markets. China denies any ongoing discussions, despite claims by U.S. officials. U.S. Treasury secretary Scott Bessent stated on Tuesday that it would become apparent to Beijing over time that the Chinese tariffs were not sustainable. The data due on Wednesday will likely show that the U.S. economic growth slowed or even contracted during the first quarter. Dollar-priced materials are now more expensive for those who use other currencies. Another huge drop was in inventories due to the copper price floor. In warehouses monitored the Shanghai Futures Exchange, which fell 23.5% last Friday, to 89.307 tons. This is their lowest level since January 17. The price of the commodity fell 32 %.last week. Copper imports to the U.S. have been diverted due to tariff threats against U.S. imports and tight scrap supply. Meyer said that the shortage of scrap in China was a major problem. A huge copper concentrate deficit caused Chinese smelters reduce their capacity. Aluminium dropped 1%, to $2.442 per ton. Zinc fell 0.5%, to $2.635.5. Lead fell 0.7%, to $1.963.5. Tin rose 0.4%, to $32,015; and nickel increased 0.3%, to $15,595. All metals are headed towards monthly declines. (Reporting and editing by Sahal Muhammad in Bengaluru, Ashitha Shivaprasad from Bengaluru)
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South Korea's SK Innovation claims that refinery margins will improve following a surprise Q1 loss
SK Innovation Co Ltd, the owner of South Korea’s largest oil refiner SK Energy swung into an unexpected operating loss during the first quarter due to lower oil prices. However, the company forecasts a recovery in the refining margins for the second quarter. The company reported an operating loss for the third quarter ended March 31 of 45 billion won (32 million dollars), a sharp drop from the 625 billion won profits it recorded a year earlier. According to LSEG SmartEstimate, analysts had estimated a profit of 393 billion won. "Operating Income declined despite improving earnings from the Battery Business, due to lower international oil prices and refinery margins," SK Innovation stated in a press release. Operating profit for its refining operations decreased from the previous quarter, due to concerns about a global slowdown in the economy, an easing of OPEC+'s production cuts and increased output from Africa and the Middle East. The company expects that refining margins will improve in the second-quarter, backed by increased cooling demand as summer approaches and the beginning of the driving season. Battery subsidiary SK On has recorded a 299 billion won operating loss, down from a 332 billion won loss a year ago. SK Innovation stated that the battery business will see an increase in sales in North America starting in the second quarter and continue to grow throughout the year. The battery production output in the U.S. is also expected to improve significantly this year. SK On's competitor LG Energy Solution earlier said on Wednesday that it expects lower revenue for the second quarter ending in June, partly due to uncertainty caused by U.S. tariff policies. Analysts said that while SK On is expanding its customer base by announcing deals with Nissan, Slate and other suppliers, its performance may be impacted by the recent decision of Kia to reduce its EV target. SK Innovation's revenue for the first quarter of 2014 increased 12.2% on an annual basis to 21.1 trillion Won. The shares of SK Innovation fell 2.5% before the earnings announcement. This was below the benchmark KOSPI which rose 6.6% and has dropped 15.7% for the year.
RWE is facing growing criticism from investors as the returns on renewable energy are declining
RWE's shareholders will increase the pressure on Germany’s top power company on Wednesday. They'll demand bolder measures to close a gap in valuation with competitors, including larger share buybacks or even a special distribution.
The German utility is also the second largest developer of offshore wind farm in the world. It has come under increasing criticism for its capital allocation policy, most notably by activist investor Elliott.
The U.S. investor disclosed last month a stake worth around 1.28 billion euro ($1.46 billion) and urged the group to increase its existing share buyback program by up to 1.5 billion euro.
RWE has been forced to reduce ambitious investment programs and look for alternatives to increase value due to lower returns in the clean energy industry. This is partly because of higher interest rates.
RWE's competitors, such as Enel Iberdrola Endesa have announced or implemented buybacks.
High inflation, geopolitical tensions and uncertainty about renewable energy regulations in certain markets have all put pressure on the development of renewable projects.
According to the text of the speech that will be delivered at the annual general meeting of the RWE group, Ingo Speich is the head of sustainability and corporate Governance at Deka.
He said that the reduction in RWE's expenditure plans had freed up cash to buybacks between 1 billion and 1.5 billion euros each year. This was a better way to increase shareholder value, he added, than chasing after projects with uncertain returns.
RWE trades today at an EV/EBITDA multiplier of 7.4, LSEG data shows. This is lower than Iberdrola’s 9.6 multiple and SSE’s 8.8.
RWE said that buybacks will remain a part of their future strategy but they have not yet changed the current program.
Henrik Pontzen, of Union Investment, called for a special distribution. He said that shareholders would directly benefit.
In prepared remarks, he stated that "if capital can't be invested profitably at this time, it should be divided."
Elliott declined to comment. Reporting by Christoph Steitz, editing by Philippe Fletcher.
(source: Reuters)