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Business

Musk bullish on Tesla sales as price cuts boost demand

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Jan 25 (Reuters) – Tesla Inc’s (TSLA.O) aggressive price cuts have ignited demand for its electric vehicles, Chief Executive Elon Musk said on Wednesday, playing down concerns that a weak economy would throttle buyers’ interest.

The company slightly beat Wall Street targets for fourth-quarter revenue and profit earlier on Wednesday despite a sharp decline in vehicle profit margins, and it sought to reassure investors that it can cut costs to cope with recession and as competition intensifies in the year ahead.

Deep price cuts this month have positioned Tesla as the initiator of a price war, but its forecast of a 37% rise in car volume for the year, to 1.8 million vehicles, was down from 2022’s pace.

However, Musk, who has missed his own ambitious sales targets for Tesla in recent years, said 2023 deliveries could hit 2 million vehicles, absent external disruption.

Tesla’s sales prospects, as it confronts a weaker economy, are a key focus for investors. The company said it maintains a long-term target of a compounded 50% annual rise in sales.

Musk addressed the issue at the start of a call with investors and analysts.

“These price changes really make a difference for the average consumer,” he said, adding that vehicle orders were roughly double production in January, leading the automaker to make small price increases for the Model Y SUV.

He said he expected a “pretty difficult recession this year,” but demand for Tesla vehicles “will be good despite probably a contraction in the automotive market as a whole.”

Shares rose 5.3% in extended trading.

CYBERTRUCK

The company is relying on older products and Musk said its Cybertruck, its next new electric pickup truck, would not begin volume production until next year. Reuters in November reported that the highly anticipated model would not be produced in volume until late this year.

Tesla will detail plans for a “next-generation vehicle platform” at its investor day in March.

Tesla’s vehicles “are all in desperate need of updates beyond software,” said Jessica Caldwell, Edmunds’ executive director of insights. She said Tesla will largely depend on the cheaper unit as well as Model 3 and Model Y to bring EVs to the masses.

“It’s unlikely that the Cybertruck will attempt to achieve mass-market volumes like the Detroit competitors.”

Reuters Graphics

[1/5] A Tesla supercharging station is seen in the early morning sun, in Kettleman City, California, U.S., January 25, 2023. REUTERS/Mike Blake

Reuters Graphics

Analysts said Tesla’s goal is bullish given the macroeconomic uncertainties.

“I think that you’re going to see some severe demand destruction across consumer spending and I think cars are going to take a big hit,” Edward Moya, senior market analyst at OANDA, said.

Tesla said it does not expect meaningful near-term volume growth from China, since its Shanghai factory was running near full capacity, rebounding from production challenges last year.

“Even a small cooling of demand will have significant implications for the bottom line,” said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.

Tesla said that its automotive gross margins, which dropped to a two-year low of 25.9% in the reported quarter, were pressured by the costs of ramping up battery production and new factories in Berlin and Texas, as well as higher raw material, commodity, logistics and warranty costs.

Tesla expected its automotive gross margin to remain above 20%.

Margins generally are expected to be under further pressure from its aggressive price cuts. Tesla, which had made a series of price increases since early 2021, reversed course and offered discounts in December in the United States, followed by price cuts of as much as 20% this month.

Analysts had said Tesla’s profitability gave it room to cut prices and pressure rivals. The company’s $9,000 in net profit per vehicle in the past quarter was more than seven times the comparable figure for Toyota Motor Corp (7203.T) in the third quarter. But it was down from almost $9,700 in the third quarter.

“In severe recessions, cash is king, big time,” Musk said, adding that Tesla is well positioned to cope with an economic downturn because of its $20 billion of cash.

The company’s stock posted its worst drop last year, hit by demand worries and Musk’s acquisition of Twitter, which fueled investor concerns he would be distracted from running Tesla.

Musk dismissed surveys that suggest his political comments on Twitter are damaging the Tesla brand. “I might not be popular” with some, he said, “but for the vast majority of people, my follow count speaks for itself.” He has 127 million followers.

Revenue was $24.32 billion for the three months ended Dec. 31, compared with analysts’ average estimate of $24.16 billion, according to IBES data from Refinitiv.

Tesla’s full-year earnings were bolstered by $1.78 billion in regulatory credits, up 21% from a year earlier.

Adjusted earnings per share of $1.19 topped the Wall Street analyst average of $1.13.

It ended the fourth quarter with 13 days’ worth of vehicles in inventory, more than four times higher than the start of 2022, and a record $12.8 billion in value.

Reporting by Hyunjoo Jin in San Francisco and Akash Sriram in Bengaluru, Additinoal reporting by Joe White and Ben Klayman in Detroit and Kevin Krolicki in Singapore
Writing by Peter Henderson
Editing by Sriraj Kalluvila, Matthew Lewis, Sam Holmes and David Goodman

Our Standards: The Thomson Reuters Trust Principles.

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World

WHO urges ‘immediate action’ after cough syrup deaths

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LONDON, Jan 23 (Reuters) – The World Health Organization has called for “immediate and concerted action” to protect children from contaminated medicines after a spate of child deaths linked to cough syrups last year.

In 2022, more than 300 children – mainly aged under 5 – in Gambia, Indonesia and Uzbekistan died of acute kidney injury, in deaths that were associated with contaminated medicines, the WHO said in a statement on Monday.

The medicines, over-the-counter cough syrups, had high levels of diethylene glycol and ethylene glycol.

“These contaminants are toxic chemicals used as industrial solvents and antifreeze agents that can be fatal even taken in small amounts, and should never be found in medicines,” the WHO said.

As well as the countries above, the WHO told Reuters on Monday that the Philippines, Timor Leste, Senegal and Cambodia may potentially be impacted because they may have the medicines on sale. It called for action across its 194 member states to prevent more deaths.

[1/4] Logo of Marion Biotech, a healthcare and pharmaceutical company is seen on a gate outside their office in Noida, India, December 29, 2022. REUTERS/Anushree Fadnavis

“Since these are not isolated incidents, WHO calls on various key stakeholders engaged in the medical supply chain to take immediate and coordinated action,” WHO said.

The WHO has already sent specific product alerts in October and earlier this month, asking for the medicines to be removed from the shelves, for cough syrups made by India’s Maiden Pharmaceuticals and Marion Biotech, which are linked with deaths in Gambia and Uzbekistan respectively.

It also issued a warning last year for cough syrups made by four Indonesian manufacturers, PT Yarindo Farmatama, PT Universal Pharmaceutical, PT Konimex and PT AFI Pharma, that were sold domestically.

The companies involved have either denied that their products have been contaminated or declined to comment while investigations are ongoing.

The WHO reiterated its call for the products flagged above to be removed from circulation, and called more widely for countries to ensure that any medicines for sale are approved by competent authorities. It also asked governments and regulators to assign resources to inspect manufacturers, increase market surveillance and take action where required.

It called on manufacturers to only buy raw ingredients from qualified suppliers, test their products more thoroughly and keep records of the process. Suppliers and distributors should check for signs of falsification and only distribute or sell medicines authorised for use, the WHO added.

Reporting by Jennifer Rigby; Editing by Mark Heinrich and Christina Fincher

Our Standards: The Thomson Reuters Trust Principles.

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Business

Oil settles mixed after hitting 7-week high on strong China outlook

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  • Brent, U.S. crude hit highest since early December
  • G7 seeks two price caps for Russian oil products
  • India’s crude imports hit 5-month high in December

NEW YORK, Jan 23 (Reuters) – Oil prices settled mixed on Monday, retreating as investors cashed in on a jump to a seven-week high on optimism about a possible recovery in demand of top oil importer China as the economy recovers this year from pandemic lockdowns.

Brent crude settled 56 cents higher at $88.19 a barrel. The session high was $89.09 a barrel, the highest since Dec. 1. U.S. West Texas Intermediate (WTI) crude settled 2 cents lower at $81.62 a barrel, off the session high $82.64 a barrel, the highest since Dec. 5.

Prices pulled back at the end of the session as investors took profits, said Phil Flynn, analyst at Price Futures Group.

Still, the market wants to preserve long positions in case Chinese growth resumes, said Sukrit Vijayakar, director of Mumbai-based energy consultancy Trifecta.

Data shows a solid pick-up in travel in China after COVID-19 curbs were eased, ANZ commodity analysts said in a note, pointing out that road traffic congestion in the country’s 15 key cities so far this month is up 22% from a year ago.

Crude oil prices in much of the world’s physical markets have started the year with a rally as China has shown signs of more buying and traders have worried that sanctions on Russia could tighten supply.

“While the (China) reopening itself will no doubt prove to be complicated, particularly over the holiday season, early indications suggest there has been a rise in activity, meaning the economy could perform better,” said OANDA analyst Craig Erlam.

Brent is expected to move back into a range between $90 and $100 as the oil market tightens, Erlam said.

Demand for products has lifted the oil market and refining margins, Flynn said. The 3-2-1 crack spread , a proxy for refining margins, rose to $42.18 per barrel on Monday, the highest since October.

The European Union and Group of Seven (G7) coalition will cap prices of Russian refined products from Feb. 5, in addition to the price cap on Russian crude in place since December and an EU embargo on imports of Russian crude by sea.

The G7 has agreed to delay a review of the level of the price cap on Russian oil to March, a month later than originally planned, to provide time to assess the impact of the oil products price cap.

In India, crude oil imports rose to a five-month high in December, government data showed on Monday, as refiners stocked up discounted Russian fuel amid a steady increase in consumption in the country.

Reporting by Stephanie Kelly in New York; additional reporting by Ron Bousso in London, Mohi Narayan in New Delhi and Sonali Paul in Melbourne
Editing by David Goodman, David Gregorio and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.

Stephanie Kelly

Thomson Reuters

A New-York-based correspondent covering the U.S. crude market and member of the energy team since 2018 covering the oil and fuel markets as well as federal policy around renewable fuels.

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World

Pakistan begins restoring power after second major grid breakdown in months

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ISLAMABAD, Jan 23 (Reuters) – Pakistan’s government began restoring power to millions of people on Monday after a breakdown in the grid triggered the worst electricity outage in months and highlighted the weak infrastructure of the heavily indebted nation.

An inquiry has been launched into the outage, which began at around 7:00 a.m. local time (0200 GMT) and has so far lasted more than 12 hours during the peak winter season.

As evening drew on and homes were without electricity in the dark, Energy Minister Khurram Dastgir wrote on Twitter that authorities had started restoring power across the country.

Dastgir had told reporters earlier: “We have faced some hurdles but we will overcome these hurdles, and will restore the power.”

The outage, which the minister had said was due to a voltage surge, is the second major grid failure in three months, and adds to the blackouts that Pakistan’s nearly 220 million people suffer on an almost-daily basis.

Power was beginning to return in parts of the capital Islamabad and the southwest province of Balochistan, said Dastgir.

Pakistan’s largest city and economic hub Karachi is likely to see electricity restored in the next three to four hours, a spokesperson for K-Electric Ltd (KELE.PSX), the southern city’s power provider, said.

[1/5] A man sits outside his shop during a country-wide power breakdown in Karachi, Pakistan January 23, 2023. REUTERS/Akhtar Soomro

Analysts and officials blame the power problems on an ageing electricity network, which like much of the national infrastructure, desperately needs an upgrade that the government says it can ill afford.

The International Monetary Fund has bailed out Pakistan five times in the last two decades. Its latest bailout tranche, however, is stuck due to differences with the government over a programme review that should have been completed in November.

Pakistan has enough installed power capacity to meet demand, but it lacks resources to run its oil-and-gas powered plants. The sector is so heavily in debt that it cannot afford to invest in infrastructure and power lines. China has invested in its power sector as part of a $60 billion infrastructure scheme that feeds into Beijing’s “Belt and Road” initiative.

“We have been adding capacity, but we have been doing so without improving transmission infrastructure,” said Fahad Rauf, head of research at Karachi brokerage Ismail Iqbal Industries.

The outage occurred on a winter’s day where temperatures are forecast to fall to around 4 degrees Celsius (39°F) in Islamabad and 8 degrees Celsius (46°F) in Karachi.

Many people also have no running water due to a lack of power for the pumps.

Earlier, Dastgir told Reuters the grid should be fully functioning by 10:00 p.m. (1700 GMT).

The outage hit Internet and mobile phone services. Several companies and hospitals said they had switched to back-up generators, but disruptions continued across the board.

Reporting by Asif Shahazad, Ariba Shahid and Gibran Naiyyar Peshimam, additional reporting by Jibran Ahmad in Peshawar and Mubasher Bukhari in Lahore and Charlotte Greenfield in Kabul; writing by Shilpa Jamkhandikar, Miral Fahmy and Shivam Patel; editing by Sudipto Ganguly, Simon Cameron-Moore and Bernadette Baum

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World

UK’s National Grid to pay people to use less power amid cold snap

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LONDON, Jan 23 (Reuters) – Britain’s National Grid (NG.L) said it would pay customers to use less power on Monday evening and that it had asked for three coal-powered generators to be warmed up in case they are needed as the country faces a snap of cold weather.

The group said that it would activate a new scheme called the Demand Flexibility Service where customers get incentives if they agree to use less power during crunch periods.

The service, which has been trialled but not run in a live situation before, would run from 5 p.m. to 6 p.m. on Monday, it said, adding that the move did not mean electricity supplies were at risk and advised people not to worry.

The measures were announced in order to “ensure that everyone gets the electricity they need,” Craig Dyke, Head of National Control at National Grid ESO, told BBC Radio on Monday, adding that 26 suppliers had signed up for the scheme.

[1/2] A British government advert offering people help with winter energy bills is seen on the side of a bus in Stockport, Britain, November 16, 2022. REUTERS/Phil Noble

Below freezing temperatures have been recorded across much of the UK in recent days with the national weather service, the Met Office, last week issuing severe weather warnings for snow and ice.

National Grid’s Dyke said consumers could make small changes to make money by reducing their energy usage, such as delaying cooking or putting on the washing machine until after 6 p.m.

National Grid said in December that over a million British households had signed up to the scheme, which is one of its strategies to help prevent power cuts.

The announcement about the coal-powered generators did not mean they would definitely be used, it said in a separate statement.

Coal-powered generators were last put on stand-by in December when temperatures dropped and demand for energy rose, but they were not needed on that occasion.

Reporting by William Schomberg and Muvija M in London, and Sneha Bhowmik in Bengaluru; editing by Tomasz Janowski, Andrew Heavens, Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.

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World

Hundreds evacuated as blaze erupts in slum next to Seoul’s posh Gangnam district

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SEOUL, Jan 20 (Reuters) – Fire swept through part of a shanty town in the South Korean capital, Seoul, on Friday, destroying 60 homes, many constructed from cardboard and wood, and forcing the evacuation of around 500 people.

Emergency services took five hours to put out the blaze, which erupted before daybreak in Guryong Village, a slum that lies just across a highway from Seoul’s affluent Gangnam district. Officials said no casualties were reported so far.

Home to around 1,000 people, Guryong is one of the last remaining shanty towns in the capital and has become a symbol of inequality in Asia’s fourth largest economy.

Ten helicopters and hundreds of firefighters, police and troops joined the effort to put out the blaze which, according to officials, razed almost one in ten of the 600-plus homes in Guryong.

“I saw a flash from the kitchen and opened the door, and flames were shooting from the houses next door,” said Shin, a 72-year-old woman whose home was completely burned in the inferno.

“So I knocked every door nearby and shouted ‘fire!’ and then called 119,” she said, giving only her surname.

[1/4] Smoke rises from a fire at Guryong village, the last slum in the glitzy Gangnam district, in Seoul, South Korea, January 20, 2023. Yonhap via REUTERS

Kim Doo-chun, 60, said his family was unaffected by the fire but he told Reuters that the village was constantly at risk of disaster due partly to its cardboard homes and narrow alleys.

“If a fire breaks out in this neighbourhood, the entire village could be in danger if we don’t respond quickly. So we’ve been responding together for decades,” said Kim, who has lived in the area for 30 years.

The slum has long been prone to fires and flooding, and safety and health issues abound.

The government had unveiled plans for redevelopment and relocation after a huge fire in late 2014, but those efforts have made little progress amid a decades-long tug of war between landowners, residents and authorities.

The civic authorities for Seoul and Gangnam district, and state-run developers have been at odds over how to compensate private landowners in Guryong and have yet to agree whether residents, most of whom are squatters, are entitled to government support for relocation and housing.

Informed about the fire while in Switzerland for the World Economic Forum, President Yoon Suk-yeol ordered all-out efforts to prevent a bigger disaster, his spokeswoman Kim Eun-hye said.

Seoul Mayor Oh Se-hoon visited the still smouldering village and asked officials to prepare to relocate affected families.

Reporting by Hyonhee Shin; Editing by Christian Schmollinger, Gerry Doyle & Simon Cameron-Moore

Our Standards: The Thomson Reuters Trust Principles.

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World

Davos 2023: Greta Thunberg accuses energy firms of throwing people ‘under the bus’

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DAVOS, Switzerland, Jan 19 (Reuters) – Greta Thunberg called on the global energy industry and its financiers to end all fossil fuel investments on Thursday at a high-profile meeting in Davos with the head of the International Energy Agency (IEA).

During a round-table discussion with Fatih Birol on the sidelines of the World Economic Forum (WEF) annual meeting, activists said they had presented a “cease and desist” letter to CEOs calling for a stop to new oil, gas and coal extraction.

“As long as they can get away with it they will continue to invest in fossil fuels, they will continue to throw people under the bus,” Thunberg warned.

The oil and gas industry, which has been accused by activists of hijacking the climate change debate in the Swiss ski resort, has said that it needs to be part of the energy transition as fossil fuels will continue to play a major role in the energy mix as the world shift to a low-carbon economy.

Thunberg, who was detained by police in Germany earlier this week during a demonstration at a coal mine, joined with fellow activists Helena Gualinga from Ecuador, Vanessa Nakate from Uganda and Luisa Neubauer from Germany to discuss the tackle the big issues with Birol.

Birol, whose agency makes policy recommendations on energy, thanked the activists for meeting him, but insisted that the transition had to include a mix of stakeholders, especially in the face of the global energy security crisis.

The IEA chief, who earlier on Thursday met with some of the biggest names in the oil and gas industry in Davos, said there was no reason to justify investments in new oil fields because of the energy crunch, saying by the time these became operational the climate crisis would be worse.

He also said he was less pessimistic than the climate activists about the shift to clean energy.

“We can have slight legitimate optimism,” he said, adding: “Last year the amount of renewables coming to the market was record high.”

But he admitted that the transition was not happening fast enough and warned that emerging and developing countries risked being left behind if advanced economies did not support the transition.

Youth climate activist Greta Thunberg takes part in a discussion on “Treating the climate crisis like a crisis” with International Energy Agency head Fatih Birol (not pictured) on the sidelines of the World Economic Forum in Davos (WEF) in Davos, Switzerland January 19, 2023. REUTERS/Arnd Wiegmann

‘REAL MONEY’

The United Nation’s climate conference, held in Egypt last year, established a loss and damage fund to compensate countries most impacted by climate change events.

Nakate, who held a solitary protest outside the Ugandan parliament for several months in 2019, said the fund “is still an empty bucket with no money at all.”

“There is a need for real money for loss and damage”.

In 2019, the then 16-year-old Thunberg took part in the main WEF meeting, famously telling leaders that “our house is on fire”. She returned to Davos the following year.

But she refused to participate as an official delegate this year as the event returned to its usual January slot.

Asked why she did not want to advocate for change from the inside, Thunberg said there were already activists doing that.

“I think it should be people on the frontlines and not privileged people like me,” she said. “I don’t think the changes we need are very likely to come from the inside. They are more likely to come from the bottom up.”

The activists later walked together through the snowy streets of Davos, where many of the shops have temporarily been turned into “pavilions” sponsored by companies or countries.

For daily Davos updates in your inbox sign up for the Reuters Daily Briefing here.

Writing by Leela de Kretser; Editing by Alexander Smith

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Business

Shares slip as China data stokes economic slowdown fears

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  • Euro STOXX 600 down 0.2%
  • China reports weak Q4 data
  • Asia shares slip 0.4%
  • Yen close to 7-month highs

LONDON/HONG KONG, Jan 17 (Reuters) – European shares paused their new year rally and Asian equities slipped after China reported weak fourth-quarter economic data on Tuesday, keeping investors on edge over the prospects of a global recession.

The Euro STOXX 600 (.STOXX) lost 0.2%, slipping from its nine-month high hit on Monday. Global equities have enjoyed a rally so far in 2022, spurred by hopes of a rebound in China’s economy and an easing of prices pressures in the United States and Europe.

But the Chinese data showed that the world’s second-biggest economy grew 2.9% in the fourth quarter of last year, beating expectations but underscoring the toll exacted by Beijing’s stringent “zero-COVID” policy.

China’s growth for 2022 of 3% was far below the official target of about 5.5%. Excluding a 2.2% expansion after COVID-19 first hit in 2020, it was the worst showing in nearly half a century.

Asia Pacific shares outside Japan (.MIAPJ0000PUS) widened losses in response, and were last down 0.4%. Shares in Hong Kong’s (.HSI) dropped 0.8% and China’s benchmark CSI300 Index (.CSI300) clawed back losses to close flat.

In Europe, China-exposed financials HSBC (HSBA.L) and Prudential (PRU.L) fell 1% and 0.4% respectively. Economy-sensitive consumer staples such as Unilever and Danone (DANO.PA) also fell more than 1% each.

Market players said investors were taking stock of how economies would expand as inflation peaks and central bank tightening of monetary policy slows, with the China data underscoring doubts over whether it could act as a spur.

“What will be the thing that reinvigorates growth?” said Gaël Combes, head of fundamental research at Unigestion. “China is probably unlikely to provide the lift is has provided in the past, like during the global financial crisis.”

Wall Street was set to open slightly lower after a public holiday on Monday, with E-mini futures for the S&P 500 down 0.3%.

BOJ UNDER PRESSURE

The dollar index bounced from a seven-month low of 101.77 made a day ago, holding at 102.30, while the Japanese yen stayed close to seven-month highs as investors held their breath for a potential policy shift at the Bank of Japan (BOJ).

The yen steadied around 128.51 on Tuesday after hitting a top of 127.22 per dollar on Monday, with traders braced for sharp moves when the Bank of Japan (BOJ) concludes a two-day meeting on Wednesday.

The BOJ is under pressure to change its interest rate policy as soon as Wednesday, after its attempt to buy itself breathing room backfired, emboldening bond investors to test its resolve.

Euro zone bond yields inched up from month lows hit late last week, but trading in bonds globally was cautious ahead of the result of the BOJ meeting.

Across the world, the R-word continues to loom large.

Two-thirds of private and public sector chief economists surveyed by the World Economic Forum in Davos expected a global recession this year, with some 18% considering it “extremely likely” – more than twice as many as in the previous survey conducted in September 2022.

As equities rallied this year, other riskier assets also gained. The No.1 cryptocurrency bitcoin has clocked a gain of about a quarter in January, leaping over 20% in the past week alone, putting in on course for its best month since October 2021. It was last trading flat at $21,208.

Spot gold was down 0.5% at $1909.23 per ounce.

Reporting by Tom Wilson in London and Kane Wu in Hong Kong; Editing by Gerry Doyle, Neil Fullick and Alex Richardson

Our Standards: The Thomson Reuters Trust Principles.

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US

California rainstorm death toll reaches 20, Biden plans visit

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Jan 16 (Reuters) – The parade of atmospheric rivers that pounded California for three weeks finally faded on Monday, enabling the state to begin lengthy repairs to roads and levees as the White House announced President Joe Biden planned to survey the damage.

The nine consecutive rainstorms that inundated California in succession since Dec. 26 killed at least 20 people while tens of thousands remained under evacuation orders as of Monday, Governor Gavin Newsom said in an executive order that reinforced the state’s response to storm damage.

“The last of the heavier rain in California is slowly fading. After midnight it shouldn’t be heavy anymore,” said meteorologist David Roth of the National Weather Service’s Weather Prediction Center.

Biden will travel to areas of the central coast on Thursday to meet first responders, visit affected towns, and “assess what additional federal support is needed,” the White House said.

The president had already issued an emergency declaration on Jan. 8 to free up federal aid and then on Saturday authorized disaster assistance for Merced, Sacramento and Santa Cruz counties.

The White House has yet to reveal the areas Biden will visit.

Among the more dramatic images of storm damage were those of Highway 1, the scenic coastal highway near Big Sur, which was closed at several points due to mudslides and falling boulders strewn across the road.

While damaging, the storms also helped mitigate a historic drought, as much of the state has already received half or more its average annual rainfall.

The Russian River, swollen with floodwater following a chain of winter storms, flows past the town of Guerneville, California, U.S. January 15, 2023. REUTERS/Fred Greaves/File Photo

But with more than two months to go in the rainy season, officials are urging Californians to continue conserving water. The U.S. Drought Monitor still shows almost the entire state under moderate or severe drought conditions. Reservoir levels were still below average for this time of year, officials said.

Moreover, the atmospheric rivers largely failed to reach the Colorado River basin, a critical source of southern California’s water.

“If you rely on the Colorado River basin as a part of your water supply, then there will be continuing drought problems due to the extreme drought in that part of the world,” Michael Anderson, California’s state climatologist, told reporters.

The Colorado’s two major reservoirs, Lake Mead and Lake Powell, were at 28.5% and 22.6% of capacity, respectively, and still below levels from this time a year ago according to Water-Data.com.

The ninth consecutive atmospheric river fizzled out on Monday, its remnants soaking the southernmost part of the state, Arizona and northern Mexico, Roth said.

The storms are akin to rivers in the sky that carry moisture from the Earth’s tropics to higher latitudes, dumping massive amounts of rain.

Another storm was coming that could bring moderate rain on Tuesday and Wednesday. The U.S. National Weather Service said it lacked the volume to be classified as an atmospheric river, while the state Department of Water Resources said it may briefly qualify as one.

California can otherwise expect dry conditions for the remainder of January, state officials said.

Reporting by Daniel Trotta in Carlsbad, Calif., and Rich McKay in Atlanta; Editing by Josie Kao, Grant McCool and Jamie Freed

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Business

Shares rise, yen climbs as BOJ battles bond bears

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  • BOJ under intense pressure as it defends yield policy
  • Yen hits 7-mth high, yuan climbs as dollar eases
  • More earnings ahead, many central bank speakers
  • Britain’s FTSE flirts with record high

SYDNEY/LONDON, Jan 16 (Reuters) – Shares firmed on Monday as optimism over corporate earnings and China’s reopening offset concerns the Bank of Japan (BOJ) might temper its super-sized stimulus policy at a pivotal meeting this week, while a holiday in U.S. markets made for thin trading.

The yen climbed to its highest since May after rumours swirled the BOJ might hold an emergency meeting on Monday as it struggles to defend its new yield ceiling in the face of massive selling. read more

That had local markets in an anxious mood, and Japan’s Nikkei (.N225) slipped 1.3% to a two-week low.

Yet MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.27%, with hopes for a speedy Chinese reopening giving it a gain of 4.2% last week.

And European shares opened positively with the STOXX 600 (.STOXX) up 0.1% by 0850 GMT driven by healthcare stocks (.SXDP) which gained 0.6%.

Britain’s benchmark FTSE index (.FTSE) edged close to the record high of 7903.50 it hit in 2018, with banks and life insurance companies among the top gainers.

Earnings season gathers steam this week with Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Netflix (NFLX.O) among those reporting.

World leaders, policy makers and top corporate chiefs will be attending the World Economic Forum in Davos, and there are a host of central bankers speaking, including no fewer than nine members of the U.S. Federal Reserve.

The BOJ’s official two-day meeting ends on Wednesday and speculation is rife it will make changes to its yield curve control (YCC) policy given the market has pushed 10-year yields above its new ceiling of 0.5%. read more

The BOJ bought almost 5 trillion yen ($39.12 billion) of bonds on Friday in its largest daily operation on record, yet 10-year yields still ended the session up at 0.51%.

Early on Monday, the bank offered to buy another 1.3 trillion yen of JGBs, but the yield stuck at 0.51%.

“There is still some possibility that market pressure will force the BOJ to further adjust or exit the YCC,” JPMorgan analysts said in a note. “We can’t ignore this possibility, but at this stage we do not consider it a main scenario.”

“Although domestic demand has started to recover and inflation continues to rise, the economy is not heating up to the extent that a sharp rise in interest rates and potential risk of large yen appreciation can be tolerated,” they added.

THE YEN UN-ANCHORED

The BOJ’s uber-easy policy has acted as a sort of anchor for yields globally, while dragging down the yen. Were it to abandon the policy, it would put upward pressure on yields across developed markets and most likely see the yen surge.

The dollar has been undermined by falling U.S. bond yields as investors wager the Federal Reserve can be less aggressive in raising rates given inflation has clearly turned the corner.

The Japanese yen rose to a more than seven-month peak against the dollar on Monday, as market sentiment was dominated by expectations that the BOJ would make further tweaks to, or fully abandon, its yield control policy.

The yen jumped roughly 0.5% to a high of 127.215 per dollar, before easing to 128.6 by 0915 GMT.

The dollar index, which measures the U.S. unit against a basket of major currencies, recovered from a 7-month low touched earlier in the session to be at 102.6 .

Futures now imply almost no chance the Fed will raise rates by half a point in February, with a quarter-point move seen as a 94% probability.

Yields on 10-year Treasuries are down at 3.498%, having fallen 6 basis points last week, close to its December trough, and major chart target of 3.402%.

Alan Ruskin, global head of G10 FX Strategy at Deutsche Securities, said the loosening of global supply bottlenecks in recent months was proving to be a disinflationary shock, which increases the chance of a soft landing for the U.S. economy.

“The lower inflation itself encourages a soft landing through real wage gains, by allowing the Fed to more readily pause and encouraging a better behaved bond market, with favourable spillovers to financial conditions,” Ruskin said.

“A soft landing also reduces the tail risk of much higher U.S. rates, and this reduced risk premia helps global risk appetite,” Ruskin added.

Commodities prices which had rallied last week, dipped on Monday.

The drop in yields and the dollar had benefited the gold price, which jumped 2.9% last week, but the precious metal slipped 0.4% to $1,911 an ounce in early trading on Monday .

Oil prices slid as a rise in COVID cases clouded the prospects for a surge in demand as China reopens its economy.

Brent crude fell 73 cents, or 0.83%, to $84.57 a barrel by 0857 GMT, while U.S. West Texas Intermediate crude CLc1 was down 61 cents, or 0.6%, at $79.24 a barrel.

($1 = 127.8000 yen)

Reporting by Wayne Cole and Lawrence White;
Editing by Shri Navaratnam and Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.

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