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World

Ship insurers to cancel war cover for Russia, Ukraine from Jan. 1

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LONDON, Dec 28 (Reuters) – Ship insurers said they are cancelling war risk cover across Russia, Ukraine and Belarus, following an exit from the region by reinsurers in the face of steep losses.

Reinsurers, who insure the insurers, typically renew their 12-month contracts with insurance clients on Jan. 1, giving them the first opportunity to scale back exposure since the war in Ukraine started, after being hit this year by losses related to the conflict and from Hurricane Ian in Florida.

P&I (protection and indemnity) clubs American, North, UK and West are no longer able to offer war risk cover for some liabilities in the region from Jan. 1, they said in recent notices on their websites. The clubs are among the biggest P&I insurers who cover around 90% of the world’s ocean-going ships.

UK P&I Club said on Dec. 23 that the issue had arisen because of a lack of availability of reinsurance for reinsurers, also known as retrocession.

“The Club’s reinsurers are no longer able to secure reinsurance for war risk exposure to Russian, Ukrainian or Belarus territorial risks,” it said.

American P&I said on Dec. 23 that it had received a “notice of cancellation” for the region from its war risk reinsurers and was cancelling its own insurance as a result.

Ships typically have P&I insurance, which covers third-party liability claims including environmental damage and injury. Separate hull and machinery policies cover vessels against physical damage.

The withdrawal of cover for Ukraine and Russia applies to some but not all types of policy offered by the P&I clubs, three P&I insurance sources said.

“This is being driven by reinsurance,” said Stephen Rebair, deputy global director, underwriting at North, adding that reinsurers were limiting their exposure to the region and “those exclusions have to be passed down the line”.

The exclusions will make it harder for charterers to find insurance, increase prices and may mean some ships sail uninsured, industry sources say.

Providers of reinsurance and retrocession include global players Hannover Re (HNRGn.DE), Munich Re (MUVGn.DE) and Swiss Re (SRENH.S), as well as syndicates in the Lloyd’s of London (SOLYD.UL) market. The firms all declined to comment.

Reuters reported earlier this month that a proposed contract clause being circulated by reinsurers excluded war-related claims for both planes and ships in Ukraine, Russia and Belarus.

The Japanese government has urged insurers to take on additional risks to continue providing marine war insurance for liquefied natural gas (LNG) shippers in Russian waters, a senior official at the industry ministry said this week.

Reporting by Carolyn Cohn and Jonathan Saul in London
Editing by Muralikumar Anantharaman and Matthew Lewis

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World

Hearses queue at Beijing crematorium, even as China reports no new COVID deaths

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  • Queue of hearses outside Beijing crematorium
  • China reports no new deaths; some criticise its accounting
  • Beijing faces surge in severe COVID in next two weeks – expert

BEIJING, Dec 21 (Reuters) – Dozens of hearses queued outside a Beijing crematorium on Wednesday, even as China reported no new COVID-19 deaths in its growing outbreak, sparking criticism of its virus accounting as the capital braces for a surge of cases.

Following widespread protests, the country of 1.4 billion people this month began dismantling its unpopular “zero-COVID” regime of lockdowns and testing that had largely kept the virus under control for three years though at great economic and psychological cost.

The abrupt change of policy has caught a fragile health system unprepared and hospitals are scrambling for beds and blood, pharmacies for drugs, and authorities are racing to build special clinics. Experts predict China could face more than a million COVID deaths next year.

At a crematorium in Beijing’s Tongzhou district, a Reuters witness saw a queue of about 40 hearses waiting to enter while the parking lot was full.

Inside, family and friends, many wearing traditional white clothing and headbands of mourning, gathered around about 20 coffins awaiting cremation. Staff wore hazmat suits and smoke rose from five of the 15 furnaces.

There was a heavy police presence outside the crematorium.

Reuters could not verify whether the deaths were caused by COVID.

Some Beijing residents have to wait for days to cremate relatives or pay steep fees to secure faster service, funeral home workers said.

A worker at one Beijing funeral parlour posted on social media an offer of “speedy arrangement of hearses, no queue for cremation” for a fee of 26,000 yuan ($3,730).

Reuters could not verify the offer.

‘2020 MINDSET’

China uses a narrow definition of COVID deaths and reported no new fatalities for Tuesday, even crossing one off its overall tally since the pandemic began, now at 5,241 – a fraction of the tolls of many much less populous countries.

The National Health Commission said on Tuesday only deaths caused by pneumonia and respiratory failure in patients who had the virus are classified as COVID deaths.

Benjamin Mazer, an assistant professor of pathology at Johns Hopkins University, said that classification would miss “a lot of cases”, especially as people who are vaccinated, including with Chinese shots, are less likely to die of pneumonia.

Blood clots, heart problems and sepsis – an extreme body response to infection – have caused countless deaths among COVID patients around the world.

“It doesn’t make sense to apply this sort of March 2020 mindset where it’s only COVID pneumonia that can kill you,” Mazer said.

“There’s all sorts of medical complications.”

‘ACT QUICKLY’

The death toll might rise sharply in the near future, with the state-run Global Times newspaper citing a Chinese respiratory expert predicting a spike in severe cases in Beijing over the coming weeks.

“We must act quickly and prepare fever clinics, emergency and severe treatment resources,” Wang Guangfa, a respiratory specialist from Peking University First Hospital, told the newspaper.

Wang expected the COVID wave to peak in late January, with life likely to return to normal by late February or early March.

The NHC also played down international concern about the possibility of virus mutations, saying the likelihood of new strains that are more pathogenic was low.

Paul Tambyah, President of the Asia Pacific Society of Clinical Microbiology and Infection, supported that view.

“I do not think that this is a threat to the world,” he said. “The chances are that the virus will behave like every other human virus and adapt to the environment in which it circulates by becoming more transmissible and less virulent.”

Several prominent scientists and World Health Organization advisers told Reuters a potentially devastating wave to come in China means it may be too early to declare the end of the global pandemic emergency.

SICK WORKERS

Some U.S. and European officials have offered to help mitigate a crisis they fear will hurt the global economy and disrupt supply chains.

From the epicentre in northern China, infections are spreading to manufacturing belts, including the Yangtze River Delta, near Shanghai, disrupting workforces.

Retail and financial service businesses have been hard hit by staff shortages, with factories not far behind, industry bodies say.

Staff at Communist Party and government institutions or enterprises in the southwestern city of Chongqing who have mild COVID symptoms can go to work if they wear a mask, state-run China Daily reported.

Other media reported similar decisions in other cities.

China is still largely cut off from the outside world with COVID restrictions on international travel but there are signs those rules too are easing.

Chelsea Xiang, 35, said she only needed to do two days of quarantine in southwestern city of Chengdu after returning from Hong Kong on Sunday, rather than the minimum five officially required.

“I feel I have my human rights again,” Xiang said.

Reporting by Thomas Peter, Alessandro Diviggiano, Albee Zhang, Bernard Orr, Martin Pollard, Eduardo Baptista, Joe Cash and Ryan Woo in Beijing, Casey Hall in Shanghai, Julie Steenhuysen in Chicago and Chen Lin in Singapore; Writing by Marius Zaharia;
Editing by Lincoln Feast, Robert Birsel

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Business

Positive Moderna, Merck cancer vaccine data advances mRNA promise, shares rise

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CHICAGO, Dec 13 (Reuters) – An experimental cancer vaccine from Moderna Inc (MRNA.O) based on the messenger RNA (MRNA) technology used in successful COVID-19 vaccines has been shown to work against melanoma, sending Moderna shares more than 20% higher and driving up of other biotechs working on similar treatments.

A combination of Moderna’s personalized cancer vaccine and Merck & Co’s (MRK.N) blockbuster immunotherapy Keytruda cut the risk of recurrence or death of the most deadly skin cancer by 44% compared with Keytruda alone in a mid-stage trial, the companies said on Tuesday.

The result was considered a “statistically significant and clinically meaningful improvement,” the companies said.

Moderna shares were up nearly 23% at $202.80 on Tuesday, while Merck’s shares rose 1%. Shares of BioNTech SE (22UAy.DE), which also has successful mRNA vaccine technology, were up 6%, and tiny Gritstone Bio Inc (GRTS.O), which has a cancer vaccine in development, jumped 20% to $3.09.

The study is the first randomized trial to show that combining mRNA vaccine technology with a drug that revs up the immune response would offer a better result for melanoma patients and potentially for other cancers.

“It’s a tremendous step forward in immunotherapy,” Eliav Barr, Merck’s head of global clinical development and chief medical officer, said in an interview.

Paul Burton, Moderna’s chief medical officer, said in a separate interview that the combination “has the capacity to be a new paradigm in the treatment of cancer.”

The ongoing study involved 157 patients with stage III/IV melanoma whose tumors were surgically removed before being treated with either the drug/vaccine combo or Keytruda alone with the aim of delaying disease recurrence.

The combination was generally safe and demonstrated the benefit compared with Keytruda alone after a year of treatment. Serious drug-related side effects occurred in 14.4% of patients who received the combination compared with 10% with Keytruda alone.

A PROMISING FIELD

In October, Merck exercised an option to jointly develop and commercialize the treatment, known as mRNA-4157/V940, sharing costs and any profits equally. Merck and Moderna plan to discuss the results with regulatory authorities and start a large Phase III study in melanoma patients in 2023.

The Merck/Moderna collaboration is one of several combining powerful drugs that unleash the immune system to target cancers with mRNA vaccine technology. They are designed to target highly mutated tumors.

The personalized vaccine works in concert with Merck’s Keytruda, a so-called checkpoint inhibitor designed to disable a protein called programmed death 1, or PD-1, that helps tumors to evade the immune system.

To build the vaccine, researchers took samples of patients’ tumors and healthy tissue. After analyzing the samples to decode their genetic sequence and isolate mutant proteins associated only with the cancer, that information was used to design a tailor-made cancer vaccine.

When injected into a patient, the patient’s cells act as a manufacturing plant, producing perfect copies of the mutations for the immune system to recognize and destroy.

Moderna’s personalized vaccine can be made in about eight weeks, a time frame the company eventually hopes to halve, Burton said.

Barr said the companies intend to study the approach in other highly mutated cancers, such as lung cancer. Other such cancers include bladder cancers and some breast cancers.

Moderna mRNA rival BioNTech has several cancer vaccine trials in the works including one with Memorial Sloan Kettering Cancer Center in New York testing a personalized vaccine in combination with Roche’s (ROG.S) Tecentriq in patients with pancreatic cancer.

Gritstone is testing a personalized, self-amplifying mRNA vaccine in combination with Bristol Myers Squibb’s (BMY.N) immunotherapies Opdivo and Yervoy in a midstage trial in patients with advanced solid tumors.

Experts said the personalized vaccines were among several promising cancer vaccine ideas in the works after many failures in the field.

“In general, I think cancer vaccines are kind of at a tipping point, and there are going to probably be a lot of vaccines coming down the pipeline in the next five years,” said Dr. Mary Lenora Disis, director of the UW Medicine Cancer Vaccine Institute in Seattle.

Although the COVID-19 pandemic demonstrated the speed, ease and safety of mRNA vaccines, they came out of years of cancer vaccine research, Disis said.

Reporting by Julie Steenhuysen in Chicago, Michael Erman in New Jersey and Aditya Samal in Bengaluru; Editing by Caroline Humer, Edwina Gibbs and Bill Berkrot

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Business

FX swap debt a $80 trillion ‘blind spot’ global regulator says

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LONDON, Dec 5 (Reuters) – Pension funds and other ‘non-bank’ financial firms have more than $80 trillion of hidden, off-balance sheet dollar debt in FX swaps, the Bank for International Settlements (BIS) said.

The BIS, dubbed the central bank to the world’s central banks, also said in its latest quarterly report that 2022’s market upheaval had largely been navigated without major issues.

Having repeatedly urged central banks to act forcefully to dampen inflation, it struck a more measured tone and picked over crypto market troubles and September’s UK bond market turmoil.

Its main warning concerned what it described as the FX swap debt “blind spot” that risked leaving policymakers in a “fog”.

FX swap markets, where for example a Dutch pension fund or Japanese insurer borrows dollars and lends euro or yen before later repaying them, have a history of problems.

They saw funding squeezes during both the global financial crisis and again in March 2020 when the COVID-19 pandemic wrought havoc that required central banks such as the U.S. Federal Reserve to intervene with dollar swap lines.

The $80 trillion-plus “hidden” debt estimate exceeds the stocks of dollar Treasury bills, repo and commercial paper combined, the BIS said. It has grown from just over $55 trillion a decade ago, while the churn of FX swap deals was almost $5 trillion a day in April, two thirds of daily global FX turnover.

For both non-U.S. banks and non-U.S. ‘non-banks’ such as pension funds, dollar obligations from FX swaps are now double their on-balance sheet dollar debt, it estimated.

“The missing dollar debt from FX swaps/forwards and currency swaps is huge,” the Switzerland-based institution said, adding the lack of direct information about the scale and location of the problems was the key issue.

Off and on-balance sheet dollar debt

CLOSER

The report also assessed broader recent market developments.

BIS officials have been loudly calling for forceful interest rate hikes from central banks as inflation has taken hold, but this time it struck a more measured tone.

Asked whether the end of the tightening cycle may be looming next year, the head of the BIS’ Monetary and Economic Department Claudio Borio said it would depend on how circumstances evolve, noting also the complexities of high debt levels and uncertainty about how sensitive borrowers now are to rising rates.

The crisis that erupted in UK gilt markets in September also underscored that central banks could be forced to step in and intervene – in the UK’s case by buying bonds even at a time when it was raising interest rates to curb inflation.

“The simple answer is one is closer than one was at the beginning, but we don’t know how far central banks will have to go,” Borio said about interest rates.

“The enemy is an old enemy and is known,” he added, referring to inflation. “But it’s a long time since we have been fighting this battle”.

Market volatility

DINO-MITE

The report also focused on findings from the recent BIS global FX market survey, which estimated that $2.2 trillion worth of currency trades are at risk of failing to settle on any given day due to issues between counterparties, potentially undermining financial stability.

The amount at risk represents about one third of total deliverable FX turnover and is up from $1.9 trillion from three years earlier when the last FX survey was carried out.

FX trading also continues to shift away from multilateral trading platforms towards “less visible” venues hindering policymakers “from appropriately monitoring FX markets,” it said.

The bank’s Head of Research and Economic Adviser Hyun Song Shin, meanwhile, described recent crypto market problems such as the collapse of the FTX exchange and stable coins TerraUSD and Luna as having similar characteristics to banking crashes.

He described many of the crypto coins sold as “DINO – decentralised in name only” and that most of their related activities took place through traditional intermediaries.

“This is people taking in deposits essentially in unregulated banks,” Shin said, adding it was largely about the unravelling of large leverage and maturity mismatches, just like during the financial crash more than a decade ago.

Reporting by Marc Jones; Editing by Toby Chopra and Alexander Smith

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Business

Shares rise, U.S. Treasury yields drop ahead of Fed minutes’ release

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  • Fed minutes for November due at 1900 GMT
  • Wall Street stocks trade higher
  • U.S. Treasury yields retreat
  • Crude prices drop more than 4%
  • U.S. dollar falls

NEW YORK, Nov 23 (Reuters) – World equities rose while U.S. Treasury yields were lower ahead of the release of the Federal Reserve’s meeting minutes that would offer a glimpse on whether officials are likely to soften their stiff monetary policy stance.

Traders are expecting the minutes, which will be published on Wednesday, to provide clues that the Fed is set to end its pace of sharp interest rate hikes in response to a moderation in economic conditions.

Labor Department data showed on Wednesday that U.S. jobless claims increased more than expected last week while U.S. business activity contracted for a fifth month in November, according to the S&P Global flash U.S. Composite PMI Output Index.

“What investors are hoping for is that the Fed acknowledges that since the consumer price index looks like it might be peaking that there’s going to be some language that they see a pause on the near-term horizon,” said Jordan Kahn, chief investment officer at ACM Funds in Los Angeles, California.

The MSCI All Country stock index (.MIWD00000PUS) was up 0.8%, while European shares (.STOXX) rose 0.62%.

U.S. Treasury yields were trading lower. Benchmark 10-year notes were down to 3.7242% while the yields on two-year notes dropped to 4.4835%.

The yield curve that compares these two bonds widened further into negative territory, to -76.30 basis points. When inverted, that part of the curve is seen as an indicator of an upcoming recession.

“I tend to think that investors that are looking for any sought of hint of a pause are going to be disappointed. I think the Fed is going to keep the message they’ve been saying for a while, which is that their job isn’t done yet and need to bring down demand,” Kahn said.

“The yield curve is still screaming that the economy is on the precipice of a slowdown,” he added.

On Wall Street, all three major indexes were trading higher, led by gains in technology, consumer discretionary, communication, and industrial stocks.

The Dow Jones Industrial Average (.DJI) rose 0.29% to 34,196.78, the S&P 500 (.SPX) gained 0.56% to 4,025.81 and the Nasdaq Composite (.IXIC) added 0.96% to 11,282.14.

Oil prices fell more than 4% as the Group of Seven (G7) nations looked at a price cap on Russian oil that is above where it is currently trading and as gasoline inventories in the United States built more than analysts expected.

Brent futures for January delivery fell 4.2% to $84.65 a barrel, while U.S. crude fell 4.46%, to $77.34 per barrel.

The U.S. dollar fell across the board ahead of the release of the Fed’s minutes and new data showing weaker economic conditions. The dollar index fell 0.7%, with the euro up 0.62% to $1.0366.

Gold prices were choppy as the U.S. dollar fell. Spot gold added 0.1% to $1,742.66 an ounce, while U.S. gold futures fell 0.10% to $1,736.50 an ounce.

Reporting by Chibuike Oguh in New York
Editing by Bernadette Baum

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World

Russia says UK navy blew up Nord Stream, London denies involvement

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  • Russia says UK navy personnel blew up pipelines
  • Russia says UK navy personnel helped attack Crimea
  • Russia does not give evidence for claim
  • Britain denies Russian claims

LONDON, Oct 29 (Reuters) – Russia’s defence ministry said on Saturday that British navy personnel blew up the Nord Stream gas pipelines last month, a claim that London said was false and designed to distract from Russian military failures in Ukraine.

Russia did not give evidence for its claim that a leading NATO member had sabotaged critical Russian infrastructure amid the worst crisis in relations between the West and Russia since the depths of the Cold War.

The Russian ministry said that “British specialists” from the same unit directed Ukrainian drone attacks on ships of Russian Black Sea fleet in Crimea earlier on Saturday that it said were largely repelled by Russian forces, with minor damage to a Russian minesweeper.

“According to available information, representatives of this unit of the British Navy took part in the planning, provision and implementation of a terrorist attack in the Baltic Sea on September 26 this year – blowing up the Nord Stream 1 and Nord Stream 2 gas pipelines,” the ministry said.

Britain denied the claim.

“To detract from their disastrous handling of the illegal invasion of Ukraine, the Russian Ministry of Defence is resorting to peddling false claims of an epic scale,” it said.

“This invented story, says more about arguments going on inside the Russian government than it does about the West.”

Russia has previously blamed the West for the explosions that ruptured the Russian-built Nord Stream 1 and Nord Stream 2 pipelines on the bed of the Baltic Sea.

But it had not previously given specific details of who it thinks was responsible for the damage to the pipelines, previously the largest routes for Russian gas supplies to Europe.

A sharp drop in pressure on both pipelines was registered on Sept. 26 and seismologists detected explosions, triggering a wave of speculation about sabotage to one of Russia’s most important energy corridors.

Reuters has not been able to immediately verify any of the conflicting claims about who was to blame for the damage.

PIPELINE MYSTERY

Sweden and Denmark have both concluded that four leaks on Nord Stream 1 and 2 were caused by explosions, but have not said who might be responsible. NATO Secretary-General Jens Stoltenberg has called the damage an act of sabotage.

Sweden has ordered additional investigations to be carried out into the damage done to the pipelines, the prosecutor in charge of the case said in a statement on Friday.

The Kremlin has repeatedly said allegations of Russian responsibility for the damage were “stupid” and Russian officials have said Washington had a motive as it wants to sell more liquefied natural gas (LNG) to Europe.

The United States has denied involvement.

The Nord Stream 1 and Nord Stream 2 pipelines have a joint annual capacity of 110 billion cubic metres – more than half of Russia’s normal gas exports volumes.

Sections of the 1,224-km (760-mile) long pipelines, which run from Russia to Germany, lie at a depth of around 80-110 metres.

Russia said meanwhile that Ukrainian forces attacked ships from the Black Sea Fleet in Sevastopol, the biggest city in Russian-annexed Crimea, in the early hours of Saturday.

“Nine unmanned aerial vehicles and seven autonomous marine drones were involved in the attack,” the defence ministry said.

“The preparation of this terrorist act and the training of servicemen of the Ukrainian 73rd Special Center for Naval Operations were carried out under the guidance of British specialists located in the town of Ochakiv.”

All the air drones were destroyed though minor damage was done to the minesweeper Ivan Golubets, the ministry said. Sevastopol is the headquarters of Russia’s Black Sea Fleet.

Reporting by Reuters
Editing by Guy Faulconbridge and Frances Kerry

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Business

Credit Suisse seeks billions from investors in make-or-break overhaul

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ZURICH, Oct 27 (Reuters) – Credit Suisse plans to raise 4 billion Swiss francs ($4 billion) from investors, cut thousands of jobs and shift its focus from investment banking towards its rich clients, as the bank attempts to put years of scandals behind it.

The Swiss lender outlined on Thursday what its chairman Axel Lehmann dubbed a “blueprint for success”, after it racked up an unexpected 4 billion Swiss franc loss in the third quarter of the year.

The announcement followed torrid weeks for the bank and fell flat with investors. Its stock, which has plumbed record lows in recent weeks, dropped about 14 percent in early trading, valuing the embattled bank around 11 billion francs.

Credit Suisse said clients pulled funds in recent weeks at a pace that saw the lender breach some regulatory requirements for liquidity, underscoring the impact on its business of wild market swings and a social media storm.

The group added that it was stable throughout.

Analysts gave the announcement a lukewarm welcome. Vontobel’s Andreas Venditti said the bank was embarking on a “lengthy process to restore credibility”.

“Resolute execution and no further missteps will be key and it will take time until results will begin to show,” he said.

The turnaround plan has many elements, from cutting jobs to refocusing on banking for the wealthy.

It will cut 2,700 jobs or 5% of its workforce by the end of this year, and ultimately reduce its workforce by roughly 9,000 to about 43,000 by the end of 2025.

The Swiss bank said it also aims to separate out its investment bank to create CS First Boston, focused on advisory work such as mergers and acquisitions and arranging deals on capital markets.

The bank envisions selling a stake but keeping roughly 50% in the new business, said one person familiar with the issue. It is also exploring the possibility of an initial public offering, another source familiar with the matter said.

Saudi National Bank, majority-owned by the government of Saudi Arabia, said it will invest up to 1.5 billion francs in Credit Suisse to take a stake of up to 9.9% and may invest in the investment bank.

The move bolsters Saudi influence in one of Switzerland’s best-known banks. Olayan Group, one of the biggest Saudi family-owned conglomerates, with a multibillion dollar investment portfolio, also owns a 5% stake in the bank.

The Qatar Investment Authority – which owns about 5% of the Swiss bank – declined to comment on whether it plans to buy any shares.

Credit Suisse said it will create a capital release unit to wind down non-strategic, higher-risk businesses, while announcing plans to sell a large part of its securitised products business to an investor group led by Apollo.

The bank will also wind down some trading businesses in emerging markets and equities.

Its heavy loss in the third quarter was due in large part to write-offs linked to its investment banking overhaul, including adjustments for lost tax credits.

JPMorgan analysts said that “question marks remain” over the restructuring of investment banking, adding that the share sale would also weigh on the stock.

The latest revamp, aiming to overcome the bank’s worst crisis in its history, is the third attempt in recent years by successive CEOs to turn the group around.

Reuters Graphics Reuters Graphics

Once a symbol for Swiss reliability, the bank’s reputation has been tarnished by a series of scandals, including an unprecedented prosecution at home involving laundering money for a criminal gang.

The bank had been rushing to raise money and free up capital by selling assets, keen to limit how much cash it would have to raise from investors to fund its overhaul, handle its legacy litigation costs and retain a cushion for rough markets ahead.

Credit Suisse needs to revamp after a series of costly and morale-sapping blunders that triggered a wholesale change of management.

In refocusing away from risky investment banking to banking for the globe’s rich, Credit Suisse is following in the footsteps of its bigger Swiss rival, UBS.

The UBS turnaround succeeded in large part because of a flood of freshly printed money from the world’s central banks to reignite the economy during the financial crisis.

Credit Suisse, on the other hand, is attempting to refocus its business in a world facing war, an energy crisis, rocketing inflation and an economic slide.

Last year, the bank took a $5.5 billion loss from the unravelling of U.S. investment firm Archegos and had to freeze $10 billion worth of supply chain finance funds linked to insolvent British financier Greensill, highlighting risk-management failings.

Its deepening problems even put it on the radar of day traders earlier this month, when a frenzy of wild speculation about its health sent its stock price into a tailspin to a record low.

($1 = 0.9858 Swiss francs)

Additional reporting by Michael Shields in Zurich and Yousef Saba in Dubai; Writing by John O’Donnell; Editing by Edmund Klamann

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Business

European stocks up as investors see signs Fed could slow rate rises

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LONDON, Oct 25 (Reuters) – European stocks rose in early trading on Tuesday, as investors took confidence from signs that the U.S. Federal Reserve could slow down its rate increases, although concern about China’s economy still weighed on Asian markets.

Asian equities struggled to make gains due to uncertainty over whether Xi Jinping’s new leadership team would prioritise economic growth. China’s onshore yuan finished the domestic session with its weakest close since late 2007 .

European stock indexes opened higher, with the STOXX 600 up 0.4% at 0809 GMT (.STOXX).

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The MSCI world equity index, which tracks shares in 47 countries, was up 0.1% on the day (.MIWD00000PUS) and MSCI’s main European Index (.MSER) hit a five-week high, up 0.8% on the day (.MSER).

“The proximate cause appears to be some hope that the pace of central bank tightening may start to slow later this year and that’s giving some investors cause to be relieved,” said Hani Redha, a portfolio manager at Pinebridge Investments.

U.S. business activity contracted for a fourth straight month, data on Monday showed, suggesting that the Fed’s rate increases have softened the economy, which in turn raised hopes that the central bank could begin slowing the pace of the hikes.

The expected peak for Fed rates has edged down to around 4.93%, from above 5% early last week .

Economists polled by Reuters said that the central bank should not pause until inflation falls to around half its current level.

Some better-than-expected earnings results also supported European stock market sentiment, with Swiss bank UBS (UBSG.S) among those beating market expectations. But Europe’s largest bank, HSBC, reported a 42% slump in third quarter profit, prompting a 4% fall in its shares (.HSBA.L).

Tech giants Alphabet and Microsoft report earnings later in the session.

Pinebridge’s Redha said that earnings estimates have been edging lower in recent months but that the pace of this has been “fairly modest”.

“The potential relief that investors feel in terms of coming towards the end of the hiking cycle, that seems to dominate over the grinding lower of earnings estimates.”

The U.S. dollar index was a touch higher on the day, up 0.1% at 112.01 .

The euro slipped, down 0.1% at $0.98675 . The European Central Bank meets on Thursday and is set to raise rates by 75 basis points.

The British pound was up 0.2% at $1.1309 . It recovered from session lows and gilt yields fell sharply on Monday in a sign of investor relief when it was announced that former finance minister Rishi Sunak would be the next prime minister.

Euro zone government bond yields were down, with the benchmark German 10-year yield down 7 bps at 2.272% .

German business morale fell slightly in October but the data still beat analyst estimates.

The data “suggests that at least business sentiment is forming a trough”, said ING global head of macro Carsten Brzeski in a client note. “This, however, does not mean that any improvement in the economy is near.”

Oil prices were up, although gains were limited by fears about slowing growth in the United States and China.

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Reporting by Elizabeth Howcroft

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Elizabeth Howcroft

Thomson Reuters

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and the money driving “Web3”.

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US

Lafarge pleads guilty to supporting Islamic State, will pay U.S. $778 million

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NEW YORK, Oct 18 (Reuters) – French cement maker Lafarge pleaded guilty on Tuesday to a U.S. charge that it made payments to groups designated as terrorists by the United States, including Islamic State.

The admission in Brooklyn federal court marked the first time a company has pleaded guilty in the United States to charges of providing material support to a terrorist organization. Lafarge, which became part of Swiss-listed Holcim (HOLN.S) in 2015, agreed to pay $778 million in forfeiture and fines as part of the plea agreement.

U.S. prosecutors said that Lafarge paid Islamic State and al Nusra Front, through intermediaries, the equivalent of approximately $5.92 million.

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Lafarge is also facing charges of complicity in crimes against humanity in Paris for keeping a factory running in Syria after a conflict broke out in 2011.

Lafarge eventually evacuated the cement plant in September 2014, U.S. prosecutors said. At that point, Islamic State took possession of the remaining cement and sold it for the equivalent of $3.21 million, prosecutors said.

U.S. Deputy Attorney General Lisa Monaco said on Tuesday during a news conference that the company’s actions “reflect corporate crime that has reached a new low and a very dark place.”

“Business with terrorists cannot be business as usual,” Monaco added.

The cement maker previously admitted after an internal investigation that its Syrian subsidiary paid armed groups to help protect staff at the plant. But it had denied charges that it was complicit in crimes against humanity.

Lafarge Chair Magali Anderson said in court on Tuesday that from August 2013 until November 2014 former executives of the company “knowingly and willfully agreed to participate in a conspiracy to make and authorize payments intended for the benefit of various armed groups in Syria.”

“The individuals responsible for this conduct have been separated from the company since at least 2017,” she said.

Monaco said that French authorities have arrested some of the executives involved but did not provide names. Court records refer to six unnamed Lafarge executives.

In a statement, Holcim noted that none of the conduct involved Holcim, “which has never operated in Syria, or any Lafarge operations or employees in the United States, and it is in stark contrast with everything that Holcim stands for.”

Holcim said that former Lafarge executives involved in the conduct concealed it from Holcim, as well as from external auditors.

The SIX Swiss Exchange suspended trading in Holcim shares before the news.

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Reporting by Luc Cohen in New York and Karen Freifeld;
Editing by Noeleen Walder and Lisa Shumaker

Our Standards: The Thomson Reuters Trust Principles.

Luc Cohen

Thomson Reuters

Reports on the New York federal courts. Previously worked as a correspondent in Venezuela and Argentina.

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Business

Credit Suisse pays down debt to calm investor fears

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  • To buy back up to $3 billion in debt
  • Seen as bid to reassure nervous investors
  • Move comes weeks ahead of planned overhaul
  • Shares up as much as 3% in early trade

ZURICH, Oct 7 (Reuters) – Credit Suisse (CSGN.S) will buy back up to 3 billion Swiss francs ($3 billion) of debt, the embattled Swiss bank said on Friday, making a show of strength as it seeks to reassure investors after a tumultuous week.

The move trims the bank’s debts and is an attempt to bolster confidence after steep falls in its stock price and bonds. Unsubstantiated rumours that its future was in doubt have swirled on social media amid concern it may need to raise billions of francs in fresh capital.

One of the largest banks in Europe, Credit Suisse is embarking on a radical turnaround after losing more than $5 billion from the collapse of investment firm Archegos last year, when it also had to suspend client funds linked to failed financier Greensill.

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Bank executives spent last weekend reassuring large clients and investors about its financial strength, seeking to dispel speculation about its future.

CEO Ulrich Koerner also told staff in a memo that it has sufficient capital and liquidity. read more

But his words only fuelled rumours about the bank, as a social media storm gathered pace, triggering a sell-off of its stock.

The bank said the debt buyback would “allow us to take advantage of market conditions to repurchase debt at attractive prices”.

Investors took heart. Credit Suisse shares gained as much as 3% in early trading on Friday, while the price of its euro-denominated bonds rose.

“It’s an opportunistic move to take advantage of market conditions that might be reassuring to some investors,” said Vontobel analyst Andreas Venditti. “If bought below par, a gain results that will increase capital slightly.”

TROUBLED CHAPTER

Earlier this week, in an unusual step, the Swiss National Bank, which oversees the financial stability of systemically important banks in Switzerland, said it was monitoring the situation at Credit Suisse.

Banks are deemed systemically important if their failure would undermine the Swiss economy and financial system.

The move is reminiscent of a multi-billion-euro debt buyback by Deutsche Bank in 2016, when it faced a similar crisis and doubts over its future.

Dixit Joshi, a former Deutsche executive, has recently joined Credit Suisse as finance chief.

Zuercher Kantonalbank said the bonds are currently trading at a high discount, which allows Credit Suisse to cut debt at a low cost. Analyst Christian Schmidiger said the move was also a “signal that Credit Suisse has sufficient liquidity”.

Credit Suisse said it was making a 1 billion euro cash tender offer in relation to eight euro or pound sterling denominated senior debt securities and another offer to buy back 12 U.S. dollar denominated senior debt securities for up to $2 billion.

The developments unfolded after sources recently told Reuters that Credit Suisse was sounding out investors for fresh cash, approaching them for the fourth time in around seven years.

Under a restructuring launched by Chairman Axel Lehmann, the bank envisions shrinking its investment bank to focus even more on its flagship wealth management business. Chiefly, he hopes to close a troubled chapter for the bank and repair its reputation.

Over the past three quarters alone, losses have added up to nearly 4 billion Swiss francs. Given the uncertainties, the bank’s financing costs have surged.

The bank is due to present its new business strategy on Oct. 27, when it announces third-quarter results.

Rating agency Moody’s Investors Service expects losses for Credit Suisse to swell to $3 billion by year-end, Moody’s lead analyst on the bank told Reuters on Thursday. read more

The bank has also said it is looking to sell its upmarket Savoy Hotel, one of the best-known hotels in Zurich. read more

($1 = 0.9897 Swiss francs)

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Writing by John Revill and John O’Donnell; additional reporting by Amanda Cooper in London; editing by Mark Potter and Jason Neely

Our Standards: The Thomson Reuters Trust Principles.

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