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Morning Bid: Something’s off | Reuters

Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in Manhattan in New York City, New York, U.S., October 26, 2020. REUTERS/Mike Segar/File Photo

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A look at the day ahead in markets from Julien Ponthus.

It’s the final day of trading of April and it does look like despite the fireworks on Wall Street last night, this month bears sombre omens for what’s to come, notably with Asian shares on the verge of their worst month since the COVID-19 March 2020 crash.

It’s even worse for the Nasdaq (.NDX) which is on course for its biggest losses in a month since the financial crisis of 2008.

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For all the enthusiasm surrounding the earnings of Meta Platforms (FB.O), Amazon.com (AMZN.O) delivered a disappointing quarter while Apple (AAPL.O) had dire news to share with the market after the bell, despite record profits and sales. read more

COVID-19 lockdowns snarl production and demand in China and the iPhone maker warned that the war in Ukraine, which led Apple to stop sales in Russia, would cut sales more deeply in the fiscal third quarter.

Overall, the S&P 500 has had a terrible ride so far in 2022, losing roughly 10% of its value, wiping off four trillion dollars in market capitalisation.

And it’s hard to ignore the dotcom bubble flavoured ‘irrational exuberance’ whiff that surrounds Elon Musk’s $44 billion cash deal for Twitter, particularly when the social media reported revenue and ad sales that fell short of expectations. read more

There’s also been plenty of puzzling market moves lately. The dollar enjoyed its best month in a decade and hit its highest level in 20 years but data showed the U.S. economy unexpectedly contracted in the first quarter. read more

Of course, with investors betting on a 50 basis point interest rate hike at the Federal Reserve’s meeting next week, a U.S. aggressive monetary tightening remains the driving force across financial markets for the foreseeable future.

In that light, it is not surprising that a warning from Japan’s Ministry of Finance failed to deter the dollar from cruising above 130 yen for the first time since 2002.

Perhaps not surprising either that the euro, weakened by the Russian gas standoff, also felt the might of the greenback and fell to a five-year low of $1.04 even as 10-year German bund yields rose 10 basis points with German inflation hitting its highest level in more than 40 years.

Key developments that should provide more direction to markets on Friday:

-French economic growth stalls in first quarter, misses forecasts read more

-BASF confirms earnings guidance but flags risks

-Danske Bank Q1 net profit below expectations read more

-Swiss National Bank’s annual general meeting of shareholders

-China to step up policy support to steady economy read more

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Reporting by Julien Ponthus

Our Standards: The Thomson Reuters Trust Principles.

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Scholz says top priority is avoiding NATO confrontation with Russia

German Chancellor Olaf Scholz makes a statement after talks with European leaders and U.S. President Joe Biden, in Berlin, Germany, April 19, 2022. REUTERS/Lisi Niesner/Pool

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  • Scholz warns Germany may be considered party to war if it sends tanks
  • Scholz could soon be forced to decide on approving exports
  • Says top priority is avoiding nuclear war
  • Does not believe banning Russian gas would end war

BERLIN, April 22 (Reuters) – NATO must avoid a direct military confrontation with Russia that could lead to a third world war, German Chancellor Olaf Scholz said in an interview with Der Spiegel when asked about Germany’s failure to deliver heavy weapons to Ukraine.

Scholz is facing growing criticism at home and abroad for his government’s apparent reluctance to deliver heavy battlefield weapons, such as tanks and howitzers, to Ukraine to help it fend off Russian attacks, even as other Western allies step up shipments.

Asked in an extensive interview published on Friday why he thought delivering tanks could lead to nuclear war, he said there was no rule book that stated when Germany could be considered a party to the war in Ukraine.

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“That’s why it is all the more important that we consider each step very carefully and coordinate closely with one another,” he was quoted as saying. “To avoid an escalation towards NATO is a top priority for me.

“That’s why I don’t focus on polls or let myself be irritated by shrill calls. The consequences of an error would be dramatic.”

This was a departure from his previous statements on the topic, focusing on the fact that the stocks of Germany’s own military were too depleted to send any heavy battlefield weapons while those the German industry has said it could supply could not easily be put into use.

Asked why he would not explain that his government’s reluctance was due to the threat of nuclear war, he said such “simplifications” were not helpful.

However, Scholz could soon be forced to take a clear position on whether heavy weapons can be sent directly from Germany to Ukraine. The Welt am Sonntag newspaper reported that defence contractor Rheinmetall had applied for a licence to sell 100 Marder armoured personnel carriers to Ukraine.

According to the contractor, the Marders could be delivered quickly, but all military exports have to be approved by a committee on which the chancellor sits.

Germany has in the past allowed other countries, including the Netherlands, to send heavy weapons it made to the Ukraine.

Separately, Scholz defended his decision not to immediately end German imports of Russian gas in response to the invasion of Ukraine.

“I absolutely do not see how a gas embargo would end the war. If (Russian President Vladimir) Putin were open to economic arguments, he would never have begun this crazy war,” Scholz said.

“Secondly, you act as if this was about money. But it’s about avoiding a dramatic economic crisis and the loss of millions of jobs and factories that would never again open their doors.”

Scholz said this would have considerable consequences not just for Germany but also for Europe and the future financing of the reconstruction of Ukraine.

Russia calls its invasion a “special military operation” to demilitarise and “denazify” Ukraine. Kyiv and its Western allies reject that as a false pretext for a war that has killed thousands and uprooted a quarter of Ukraine’s population.

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Reporting by Riham Alkousaa and Kirsti Knolle; Writing by Sarah Marsh; Editing by Tomasz Janowski and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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Coal stocks lose ground after Glasgow climate deal

Smoke billows from a chimney at a coking factory in Hefei, Anhui province October 2, 2010. REUTERS/Stringer/File Photo

  • Coal miner stocks fall in China, elsewhere
  • Selling crimps long rally amid energy squeeze
  • Oil down, gas steady
  • China coal futures sink amid output surge

SYDNEY, Nov 15 (Reuters) – An international agreement to reduce coal use dragged miners’ shares lower on Monday, but tight supply of the commodity provided a floor for a sector that has chalked up huge gains this year.

U.N. climate talks in Glasgow ended on Saturday with a deal targeting fossil fuel use. Wording was softened to call for a “phase down” rather than “phase out” of coal after lobbying from India, among others.

Big miners China Shenhua Energy and Yanzhou Coal fell 1% and 2.4% respectively in Hong Kong, where the broader stock market (.HSI)edged up slightly. An index of mainland-listed miners (.CSI000820) fell about 1%. Coal stocks in other regions also came under pressure.

“Climate activists will undoubtedly frame COP26 as failing on coal (and fossil fuels). We look past this frustration (and current energy market conditions) and see ongoing incremental consensus in the need to reduce demand for fossil fuel,” said Cowen analyst John Miller. .

In Indonesia, the world’s biggest coal exporter, declines were exacerbated by surging production in China, a top customer. No. 1 miner Bumi Resources (BUMI.JK)fell 5.7%, while Adaro Energy (ADRO.JK) and Indika Energy (INDY.JK) tumbled 4.5% and 7% respectively.

Shares in Australia-listed thermal coal miner Whitehaven Coal (WHC.AX) fell about 1.6% and rival New Hope (NHC.AX) about 1% in a slightly firmer broad market.

‘CASH GENERATOR’

Metallurgical coal miners South32 (S32.AX) and Coronado Global Resources (CRN.AX) dropped some 1.4% and 4% respectively. The moves extend a recent pullback that has taken the edge off huge year-to-date gains for Whitehaven, South32 and New Hope amid a global energy crunch. They are each up more than 40%.

“The reality is that coal is going to be used during the next decade or so. It’s still going to be a cash generator,” said Mathan Somasundaram, chief executive officer at Sydney-based research firm Deep Data Analytics.

China, the world’s biggest producer and consumer of coal, churned out its highest tonnage in more than six years last month, official data showed, which helped to knock near-term spot prices , on Monday. read more

The Glasgow deal has elicited promises of future cuts to use, resolved rules for carbon markets and also takes aim at fossil fuel subsidies – all of which could speed up the transition to other energy sources. read more

Elsewhere in Asia, Seoul-listed mine owners and suppliers KEPCO (015760.KS), LX International (001120.KS) and Doosan Heavy (034020.KS)traded between a fall of 2.5% and a gain of 0.6% in a broader market that was up 1%. Thai miner Banpu (BANPU.BK) fell 2.7%. Shares in Coal India (COAL.NS) slid 4.3%, also weighed down by soft quarterly results. NTPC (NTPC.NS)edge up.

Among other mining stocks, Anglo American (AAL.L), the world’s third largest exporter of metallurgical coal, fell around 1% in London, while Sasol (SOLJ.J), which operates coal mines in South Africa, was steady.

George Boubouras, head of research at K2 Asset Management in Melbourne, said under-investment in coal projects would probably keep spot prices elevated from a historical perspective but the fuel’s likely eventual demise might limit gains for stocks.

“High thermal coal prices… will not necessarily translate into higher share prices to the same degree,” he said. Oil fell around 1% and gas a touch firmer in European hours and stocks in the sector were broadly steady.

Some investors see uranium filling some of the gap left as energy firms retreat from coal. This hashelped uranium futures to soar along with other commodities in recent weeks.

Large miners have rallied, lifting Canada’s Cameco (CCO.TO) to a decade high last week and Kazakhstan’s Kazatomprom (KZAP.KZ) to a record.

Reporting by Tom Westbrook; Additional reporting Joori Roh in Seoul, Muyu Xu in Beijing, Chandini Monnappa in Bengaluru and Melanie Burton in Melbourne and Danilo Masoni in Milan; Editing by Edwina Gibbs

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The cost of coal in South Africa: dirty skies, sick kids

EMALAHLENI, South Africa, Nov 4 (Reuters) – In 2019, scientists working for South Africa’s government completed a study on the health impacts of pollution from the country’s sprawling coal industry.

The researchers for the state-owned Council for Scientific and Industrial Research had been assured by government authorities that their years-long study would be published, according to three people familiar with the matter.

So far, it has not seen the light of day.

The study, a copy of which was reviewed by Reuters, showed more than 5,000 South Africans die annually in the nation’s coal belt because the government has failed to fully enforce its own air quality standards. It also revealed that nearly a quarter of households in the region, where 3.6 million people live, have children with persistent asthma. That’s double the national rate.

South Africa’s government has since 2015 granted waivers from emissions limits to its indebted state power and fuel companies, Eskom and Sasol, allowing them to save money.

That kind of continuing government support highlights an issue in many coal-dependent nations, from Australia to Indonesia, that is hobbling the transition to cleaner energy. In producing countries, governments, businesses and local residents often see coal as an economic lifeline.

South Africa’s coal industry, the world’s fifth largest, employs 90,000 miners, generates 80% of the country’s electricity, and supplies the feedstock for about a quarter of the country’s liquid fuel for vehicles, all at a time of soaring unemployment and frequent blackouts.

The costs of a mammoth coal industry are also high, and not just for the climate. South Africa’s coal belt is blanketed in smog and coal ash; the stink of sulfur pervades. The area east of Johannesburg is among the world’s most polluted, experts say, rivaling Beijing and New Delhi.

In 2017, British air pollution expert Mike Holland calculated that the health impacts from Eskom’s emissions alone cost South Africa $2.37 billion every year.

Environment Minister Barbara Creecy, whose department commissioned the 2019 coal health study, declined to say why it remains unpublished. She said the government still intends to release it at some point.

“We understand that there are serious health challenges facing communities,” she said, adding that the government considers improving air quality “absolutely imperative.”

But Creecy’s agency – the Department of Fisheries, Forestry and the Environment – has publicly defended its lax enforcement of pollution regulations as an economic necessity in court battles with activists. In a recent filing, it said its main challenge is addressing pollution without hurting “the poor, who are desperate for job opportunities.”

COAL IN THE CROSSHAIRS

As the United Nations’ climate conference, COP26, in Glasgow gets underway this month, coal is in the crosshairs of a global push to replace it with cleaner fuels. read more

South Africa is the world’s 12th largest greenhouse gas emitter, according to the non-profit Global Carbon Atlas. This water-stressed country also stands to be one of the big losers from climate change. Temperatures in southern Africa are rising twice as fast as the global average, according to the International Panel on Climate Change, pushing the region’s northwestern deserts south.

In an effort to secure foreign investment, Eskom is pitching a $10 billion plan to shut most of its coal-fired plants by 2050 and embrace renewables like wind and solar, with financing from wealthy nations. The United States, Britain, France, Germany and the European Union on Tuesday provided that effort a big boost, offering $8.5 billion to help South Africa transition off coal.

Eskom’s green push, however, has put the company in conflict with Energy Minister Gwede Mantashe, who has called ditching coal “economic suicide.” read more

Mantashe represents a powerful constituency within the ruling ANC that includes workers’ unions on whose support the party depends to win elections. Those unions, like Mantashe, are concerned about job losses.

“We should not collapse our economy because they are greedy for green funding,” Matashe told a South Africa mining conference in October. He has previously said switching off the nation’s coal plants would allow South Africans to “breathe fresh air in the darkness.”

Mantashe declined to comment for this story.

Darkness is already a familiar experience in the coal belt. Power cuts are a daily reality for the shanties threaded between the mine shafts and cooling towers of towns like Emalahleni — “The Place of Coal” in the Zulu language.

If people stay, it is for the chance of a job.

‘HER CHEST WAS RASPING’

Mbali Matabule, poses for a photograph while her daughter Asemahle looks on at their home in Emalahleni, in Mpumalanga province, South Africa, June 2, 2021. REUTERS/Siphiwe Sibeko

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Mbali Matabule and her partner were senior high school students when they swapped phone numbers on a dirt track in Vosman, a township outside Emalahleni. After graduation, her partner found work in Sasol’s Secunda plant, which transforms coal into liquid fuel for cars. The following year, Matabule bore their first child, Princess.

His salary allowed them to feed and clothe their daughter and buy trappings of middle-class life: a TV, microwave, fridge and electric cooker to put in their shack at her parents’ compound.

Then, in May 2018, as she approached her fourth birthday, Princess started struggling to breathe. They rushed her to the hospital, where a doctor put a mask on Princess’s face attached to a nebuliser.

“They said she had asthma,” Matabule said. “I was thinking: why? She was not born with asthma.”

Toward the end of that year, they had a second child, Asemahle, who soon also developed breathing problems.

“Her chest was rasping,” Matabule said.

Hospital visits became routine, and the medical costs started to mount. Without health insurance, the couple was spending 2,500 rand ($184.03) a month on medical bills for their kids, nearly half Mbali’s partner’s salary.

AMONG THE WORLD’S WORST

Smog released from burning coal is laced with chemicals like sulphur and nitrogen oxides, mercury and lead, and radioactive elements like uranium and thorium.

“We know air pollution from coal causes lung problems, cardiac diseases. It impairs cognitive development of children,” said Mohammed Tayob, a doctor in Middleberg, one of the worst affected towns in the coal belt.

The 2019 CSIR study obtained by Reuters concluded that 5,125 lives could be saved every year in the coal belt by enforcing national air quality standards on soot, otherwise known as particulate matter.

The air in Emalahleni, it said, contains around 20% more particulate matter than the nation’s limit of 40 micrograms per cubic meter, and more than three times more than recommended by the World Health Organization.

The region’s sulphur dioxide levels, meanwhile, are off the charts. The non-profit Centre for Research on Energy and Clean Air this month found Eskom alone emits more SO2 than the entire power sector of the United States and China combined.

Clearing up the air would require a crackdown on polluting industries.

Eskom environmental manager Deidre Herbst told Reuters the government waivers allowing his company to exceed pollution limits were an economic necessity: it would cost 300 billion rand ($20 billion) and take 10-15 years to fully meet national SO2 standards, leading to prolonged outages in the meantime.

“It’s impossible for us to become immediately compliant,” she said, and South Africa can’t simply switch off all its coal plants.

Sasol spokesperson Matebelo Motloung said the company’s emissions were permitted under its operating licenses and that the company hoped to embrace cleaner technologies in the future.

‘PEOPLE WERE SICK AND DYING’

Matabule had not imagined the haze in her neighborhood was behind her childrens’ illness until she attended a local meeting about air pollution and heard the stories of neighbors.

“I became so angry because nobody was doing anything, and people were sick and dying,” Matabule said.

But, like her husband who relies on coal for a paycheck, many in her community are wary of a transition to cleaner energy.

Vosman resident Valentia Msiza, 33, said her family has done well since her husband got his job in the coal mines. They worry a transition could leave them behind.

They, too, have a child with respiratory problems – and they can’t pay for his care without the husband’s salary and health insurance. The family is seeking a medical specialist to treat their toddler’s lung disease.

“That’s our last hope now,” Valentia said.

Editing by Richard Valdmanis and Brian Thevenot

Our Standards: The Thomson Reuters Trust Principles.

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