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Business

Chevron Rides High Oil Prices to Record $35.5 Billion Annual Profit

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Chevron Corp.

CVX -4.44%

banked historic profit last year as the pandemic receded and the war in Ukraine pushed oil prices to multiyear highs, with its shares climbing 53% for the year while other sectors tumbled.

The U.S. oil company in its quarterly earnings reported Friday that it collected $35.5 billion in its highest-ever annual profit in 2022, more than double the prior year and about one-third higher than its previous record in 2011. Almost $50 billion in cash streamed in from its oil-leveraged operations, another record that is underpinning plans to pay investors through a new $75 billion share-repurchase program over the next several years.

That payout, announced Wednesday, is roughly equivalent to the stock-market value of companies such as the big-box retailer

Target Corp.

, the pharmaceutical firm

Moderna Inc.

and

Airbnb Inc.

Chevron, the second-largest U.S. oil company after

Exxon Mobil Corp.

, posted revenue of $246.3 billion, up from $162.5 billion the previous year. The San Ramon, Calif., company reported a fourth-quarter profit of $6.4 billion, up from $5.1 billion in the same period the prior year.

The fourth-quarter results came short of analyst expectations, and Chevron shares closed down more than 4% Friday.

For all of its recent winnings, though, Chevron and its rival oil-and-gas producers could face a rockier year in 2023, according to investors and analysts, if an anticipated slowdown in U.S. economic growth dents demand for oil, and if China’s reopening from strict Covid-19 restrictions unfolds slowly.

U.S. oil prices have held steady this year, but are off about 36% from last year’s peak. The industry is proceeding with caution, holding capital expenditures for 2023 below prepandemic levels and saying production will grow only modestly. Chevron has said it plans to spend about $17 billion in capital expenditures this year, up more than 25% from the prior year, but $3 billion less than it planned to spend in 2020 before Covid-19 took root.

Oil companies are still outperforming other sectors such as tech and finance, which have seen widespread job cuts in recent weeks. The energy segment of the S&P 500 index has climbed 43.7% over the past year, compared with a 6.7% drop for the broader index.

Chevron Chief Executive Mike Wirth said the company is unsure of what 2023 will bring after global energy supplies were squeezed because of geopolitical events last year, particularly in Europe following Russia’s invasion of Ukraine. He said markets appeared to be stabilizing.

“We certainly have seen a very unusual and volatile year in 2022,” Mr. Wirth said, noting the European energy crisis has proven less dire than anticipated thanks to milder winter weather, growing natural gas inventories in Europe. “China’s economy has been slow throughout the year, which looks to be turning around. It’s good that markets have calmed.”

Chevron projects its output in the Permian Basin of West Texas and New Mexico to grow at a slower pace this year.



Photo:

David Goldman/Associated Press

Chevron hit a record in U.S. oil-and-gas production in 2022, increasing 4% to about 1.2 million barrels of oil equivalent a day, stemming from its increased focus on capital investments in the Western Hemisphere, particularly in the Permian Basin of West Texas and New Mexico, where it boosted output 16% last year. Worldwide, Chevron’s oil-and-gas production was down 3.2% compared with the prior year, at 2.99 million barrels of oil-equivalent a day.

Its overall return on capital employed came in at 20%, it said.

“There aren’t many sectors generating the type of free cash flow that energy is right now,” said

Jeff Wyll,

an analyst at investment firm Neuberger Berman, which has invested in Chevron. “The sector really can’t be ignored. Given the supply-demand balance, you have to have some things go wrong here to see a pullback in oil prices.”

Even so, institutional investors have shown limited interest so far in returning to the energy sector, after years of poor returns and heightened concerns about their environmental impact prompted large financiers to sell off their stakes in oil-and-gas companies or stop investing in drillers outright.

Pete Bowden,

global head of industrial, energy and infrastructure banking at

Jefferies Financial Group Inc.,

said energy companies in the S&P 500 index are throwing off 12% of the group’s free-cash flow, but only account for about 5% of the index’s weighting—an indication their stock prices are lagging behind.

Investors’ concerns around environmental, social and governance-related issues are a constraint on the share prices of energy companies, “yet the earnings power of these businesses is superior to the earnings power of companies in other sectors,” he said.

Chevron and others have faced criticism from the Biden administration and others that they are giving priority to shareholder returns over pumping oil and gas at a time when global supplies are tight and Americans are feeling pain at the pump. On Thursday, the White House assailed Chevron’s $75 billion buyout program, saying the payout was proof the company could boost production but was choosing to reward investors instead.

Pierre Breber,

Chevron’s finance chief, said the company expects oil prices to be volatile but within a range needed to sustain its dividend and investments. There are some optimistic signs, he added, including that the U.S. economy grew faster than expected in the fourth quarter, at 2.9%.

“Supply is tight. Oil-field services are near capacity, and we continue to have sanctions on Russian production,” Mr. Breber said. “You’re seeing international flights out of China are way up, and low unemployment in the U.S.”

Mr. Breber said Chevron’s output in the Permian this year is expected to grow at a slower pace, around 10%, because it has exhausted much of its inventory of wells that it had drilled but hadn’t brought into production.

Exxon, which has typically posted quarterly earnings on the same day as Chevron, will report Tuesday. Analysts expect it will also post record profit for 2022, according to FactSet.

Both companies expect to slow their output growth this year in the Permian, considered their growth engine. The two U.S. oil majors, which had been growing output faster in the U.S. than most independent shale producers, are beginning to step up their focus on shareholder returns and allow output growth to ease, said Neal Dingmann, an analyst at Truist Securities.

“This has all been driven by investor requirements,” Mr. Dingmann said.

Write to Collin Eaton at collin.eaton@wsj.com

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World

EU Likely to Approve G-7 Cap on Russian Oil Price in Two Steps

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BERLIN—The European Union has advanced work on a price cap for Russian oil under an approach that keeps the U.S.-led effort on track but holds off on final approval.

EU member states have agreed on a two-stage approach to the international price cap on Russian oil, which is being developed within the Group of Seven industrial economies. Member states signed off on the legislation needed to implement the measures on Wednesday morning but will hold off approving it until the rest of the G-7 is ready, diplomats and officials said.

The price-cap decision is part of an eighth package of sanctions against Russia over the invasion of Ukraine. The measures will come into effect Thursday morning.

The EU approach reflects concern among some member states about the proposal, which would place a maximum price on what can be paid for Russian seaborne oil. Hesitation is greatest in EU members with large shipping sectors, including Greece, Cyprus and Malta.

The emerging EU approach means the price-cap proposal remains on track to enter into force, but raises fresh questions about how quickly it can be implemented.

Washington has pushed the international oil-price cap as a way of minimizing the Kremlin’s revenue from foreign oil sales without inflating oil prices by preventing oil sales to Asia and Africa. The idea is to set a maximum price at which shippers from G-7 countries may legally transport Russian oil to countries in Asia and Africa. The plan would also permit those companies to buy insurance for Russian oil cargoes, a critical aspect of the shipping industry. The G-7 hopes other countries will join the system.

The G-7 still must agree on the details of the price cap, including the price at which to set the cap, its precise implementation methods and how many other countries they need to join the G-7 in launching the cap. U.S. lawmakers are advocating increasing penalties for foreign buyers who don’t abide by the price cap.

U.S. officials have been flexible about how the other G-7 countries decide to implement the cap.

The EU formally backed the measure at the G-7, but European officials have repeatedly raised concerns about how the mechanism would function and its effectiveness in crimping Russia’s oil revenues.

Greece, Malta and Cyprus have raised concerns that banning EU companies from carrying Russian oil that is sold at rates above the price cap could hurt their economies. They fear losing business to countries that stay outside the mechanism, and they have also raised concerns that some G-7 countries may not enforce the price cap as rigorously as the EU, diplomats said.

At a meeting Tuesday evening, EU ambassadors agreed on a proposal under which they could agree on the legislation, but only formally approve the mechanism at a later date if the other G-7 countries have cleared the way to implement the cap system.

That means the 27 EU member states will need to revisit the three central elements of the price cap proposal. First they would need to sign off an exemption into the June sanctions package that banned EU companies from providing insurance on Russian oil transport after Dec. 5. They would also need to implement a ban on EU shippers transporting Russian oil priced above the cap, and then they would need to sign off on the G-7’s price cap.

The European Union proposed a ban on Russian crude within six months; Moscow and Kyiv accused each other of breaking a cease-fire in Mariupol. Photo: Julien Warnand/Shutterstock

To assuage the concerns of Malta, the ambassadors agreed Tuesday to carry out an impact assessment of the oil price cap mechanism when it enters into force. That will take into account the price cap’s “expected results, international adherence to and informal alignment with the price cap scheme” of non-G-7 countries, according to diplomats. It would also assess its potential impact on the EU.

The European Commission, the EU’s executive body, last week proposed to lay the legal basis for the price cap mechanism as part of a new package of sanctions it was placing on Russia in response to the Kremlin’s claim that it was annexing four regions of Ukraine.

Those sanctions would place an import ban on €7 billion, equivalent to about $7 billion, of Russian sales to the EU and would ban the export to Russia of a number of goods that can be used by its military in the war in Ukraine.

It will also target around three dozen people and companies involved in the latest annexations by Russia of Ukrainian regions.

The EU’s backing for the price cap is critical because the bloc plays a critical role in both the shipping industry and in shipping insurance sector. Sanctions must be approved by all 27 member states.

Under a sanctions package passed in June, the EU agreed to place an oil embargo on Russian seaborne oil by Dec. 5 and, on the same date, ban the provision of services, including shipping insurance, for Russian oil sold outside the bloc. The insurance measure could have choked off oil supplies to Asia and Africa, pushing oil prices higher.

EU diplomats have said that if the G-7 price cap is fully ready and detailed well in advance of Dec. 5, then they can come back and sign off the measures. If the G-7 mechanism is only finalized a few days before the December deadline—or isn’t in place until after it—some member states may demand a transition period to fully implement the measure.

Only Australia has pledged to join the G-7 system. European and U.S. officials say it is unlikely that India, China and some other top buyers of Russian oil will formally participate. Still, U.S. officials hope that by agreeing the price cap, they will at least drive down the price that other countries are willing to pay for Russian oil.

—Andrew Duehren contributed to this article.

Write to Laurence Norman at laurence.norman@wsj.com

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Business

Stocks Head for Fifth Straight Day of Declines

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U.S. stocks fell, putting indexes on course to fall for a fifth consecutive day, as investors continued to brace for higher-for-longer interest rates. 

The S&P 500 shed 1% Thursday, while the Nasdaq Composite dropped 2.1% and the Dow Jones Industrial Average lost 0.4%. The major indexes suffered their fourth day of losses Wednesday, continuing a selloff that saw them end August with declines of between 4% and 5%.

The first trading day of a new month often sees stocks rise as investment plans inject new money into the market. But right now the market is looking at relatively strong economic reports, like this morning’s jobless-claims data, and expecting they will compel the Federal Reserve to keep raising rates aggressively, said Thomas Hayes, chairman of Great Hill Capital.

“The bears are going to be in control until the 13th,” he said, referring the date of the next inflation report.

Comments from Federal Reserve Chairman

Jerome Powell

last week that doubled down on his message that interest rates must continue rising to tame inflation—even if the economy suffers—have sent stocks tumbling. The declines have reversed much of the gains made during a summer rally that had lifted stocks and bonds from their lows. 

The fall has come as investors reassessed hopes that the Fed could soon ease off from its campaign of interest-rate increases. Instead, many are girding for a lengthier period of higher interest rates, though expectations of when the Fed will start cutting interest rates are likely still too hopeful, said

David Donabedian,

chief investment officer of CIBC Private Wealth US.

“There was too much Fed optimism. The idea that the Fed was getting close to the end of tightening and would begin cutting rates next spring never really made sense to us,” he said.

“I feel a bit more optimistic about the market now over the next three to six months. There has been a reality check and a reassessment of expectations, and I prefer it when the market is in a sober mood rather than a euphoric one,” he said. 

Yields on benchmark U.S. government bonds climbed to their highest levels since June. The yield on the 10-year Treasury note rose to 3.264% from 3.131% on Wednesday. 

Thursday’s data provided new clues on the health of the economy and the employment market ahead of Friday’s highly-anticipated jobs report. U.S. workers’ filings for unemployment benefits fell last week, suggesting layoffs are holding at a low level in a tight job market.

And a survey of U.S. manufacturing activity for August came in stronger than expected. The ISM Manufacturing PMI came in at 52.8, even with July and above expectations of 51.8.

In corporate news, shares of

Okta

fell 35% after the company disclosed some merger integration issues after its acquisition of Auth0, including a higher rate of employee attrition.

Nvidia

fell 12% after the company said it could lose as much as $400 million in quarterly sales after the U.S. imposed new licensing requirements on shipments of some of its most advanced chips to China.

Bed Bath & Beyond

lost 8% after the company said it would close roughly 20% of its namesake stores, cut its workforce and sell stock to raise money to stabilize the business.

In commodity markets, oil extended a streak of declines, falling for a third consecutive day, as worries about global demand mount. U.S. crude futures fell 3% to $86.88. 

Fresh Covid-19 lockdowns in China are threatening to weaken oil demand, adding to jitters about flagging global growth. China’s city of Chengdu with a population of 21 million became the latest to impose restrictions, ordering residents to stay at home from Thursday afternoon, with citywide Covid testing planned through Sunday. 

In foreign exchange, the WSJ Dollar Index was up 0.8% at 101.01. That put the index on course for its highest end-of-day reading since April 2002, according to Dow Jones Market Data. Concurrently, the yen fell to 140.19 against the dollar, its weakest level against the dollar since 1998.

Metals prices are also slumping, dragged down by the stronger dollar—which makes dollar-denominated metals more expensive for holders of other currencies—and rising real yields. As August ended, gold reached its longest monthly losing streak since 2018, while copper hit its longest monthly losing streak since 2008. Both metals fell Thursday by 1% or more. 

Major U.S. stock indexes closed out August with losses of 4% or more.



Photo:

Michael M. Santiago/Getty Images

Overseas, major indexes fell across the board. In Europe, the pan-continental Stoxx Europe 600 retreated 1.8%, led by losses among mining and resource stocks.

In Asia, stocks closed lower, with Japan’s Nikkei 225 shedding 1.5% and the Hang Seng in Hong Kong dropping 1.8%. In mainland China, the Shanghai Composite lost 0.5%.

—Raffaele Huang contributed to this article.

Write to Will Horner at william.horner@wsj.com

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Business

Stocks Open Mixed, Oil Falls on Growth Concerns

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U.S. stock indexes were mixed shortly after the opening bell, continuing a volatile stretch for global markets.

The S&P 500 slid 0.3% Tuesday, a day after the benchmark stocks gauge skidded  1.2%. The Dow Jones Industrial Average added 0.2%. The technology-focused Nasdaq Composite fell 0.6%.

Oil prices and bond yields fell, dragged lower by worries that major economies are headed toward a recession. Brent-crude futures, the benchmark in international energy markets, fell 4.9% to $102.26 a barrel a barrel.

In the bond market, the yield on 10-year Treasurys slipped to 2.906% from 2.990% Monday. Yields, which move inversely to prices, have drifted lower since late June on expectations that an economic slowdown would prod the Federal Reserve to pull interest rates back down in 2023.

For now, though, the Fed is intent on pushing rates up in an attempt to tame decades-high inflation. Investors say that campaign, coupled with signs that the U.S. economy is losing momentum, could spell more pain for markets after a rough first half of the year. Adding to the challenges for money managers are China’s struggle to contain Covid-19 and the war in Ukraine.

“There is going to be a recession, but we’re not there yet,” said Philip Saunders, co-head of multiasset growth at

Ninety One,

an asset manager based in the U.K. and South Africa. “The key thing that is going on is that financial liquidity is retracting.”

A look at the markets shows asset managers are moving money around in ways that suggest they see a recession coming. WSJ’s Dion Rabouin explains what to look for and why they tell us investors are increasingly pricing in a recession. Illustration: David Fang

Meanwhile, data from the National Federation of Independent Business showed confidence among small-business owners fell to its lowest level in almost a decade in June.

Among individual stocks,

PepsiCo

rose 0.1% after the drinks company said second-quarter profits and revenue beat analysts’ forecasts.

Earnings season among major U.S. companies will pick up speed later in the week with results due from major financial institutions. Investors will pay particular attention to comments by bank executives on the trajectory of the economy, and to the effects of higher input costs on profit margins.

Elsewhere in commodities, copper forwards on the London Metal Exchange fell 2.6% to just over $7,400 a metric ton. The industrial metal, a barometer for the world economy because of its use in construction and heavy industry, has slumped by over a fifth over the past month and is more than 30% below the all-time high of over $10,000 a metric ton recorded in March.

One factor that has weighed on commodities in recent weeks has been a stronger dollar. The greenback’s rally stalled Tuesday, pushing the WSJ Dollar Index down 0.1%. On Monday it rose 1.1%, lifting the dollar to its highest level against a basket of other currencies since 2002.

Traders worked on the floor of the New York Stock Exchange on Monday.



Photo:

Michael M. Santiago/Getty Images

International stocks retreated. The Stoxx Europe 600 lost 0.1%. China’s Shanghai Composite Index lost 1%, Hong Kong’s Hang Seng fell 1.3% and Japan’s Nikkei 225 dropped 1.8%.

-Gunjan Banerji contributed to this article.

Write to Joe Wallace at joe.wallace@wsj.com.

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Business

Saudi Aramco Posts Record Quarterly Profit on Surging Oil Prices

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DUBAI—Saudi Arabia’s national oil company said Sunday that its net income rose more than 80% to record highs in the first quarter of the year, a surge that shows how some of the world’s biggest state-owned energy producers are benefitting from a price boom accelerated by Russia’s invasion of Ukraine.

Saudi Arabian Oil Co., known as Aramco, said its quarterly profit swelled to $39.5 billion in the quarter, a period during which Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, continued to rebuff U.S. requests to pump more oil to help tame surging crude prices, instead sticking by an agreement with Russia to only marginally increase output.

The agreement with Russia allows for production increases of around 400,000 barrels a day each month, but it has done little to stem the rise in oil prices, and the Saudis have pumped less than their share, according to the International Energy Agency.

Western countries including the U.S. have responded to Russia’s invasion of Ukraine by sanctioning exports of Russian oil, leading to fears of less oil in the market and higher prices. Some of Europe’s biggest economies are scrambling to find new sources of natural gas to replace Russian fuel on which they remain highly dependent.

The result has been a boon for traditional fossil-fuel producers in the Middle East. With oil prices rising as high as $139 a barrel in recent months and consistently above $100, Saudi Arabia has seen its fastest economic growth in a decade.

Last week, Saudi Aramco overtook

Apple Inc.

as the world’s most valuable company, with its market value rising to $2.4 trillion.

The Ukraine invasion and rising global oil prices have benefited Saudi Arabia. A gasoline station in Kenya.



Photo:

simon maina/Agence France-Presse/Getty Images

Soaring energy prices have also showered Western oil producers such as

Shell

PLC and

Exxon

Mobil Corp. with cash. But the companies are largely using the cash to reduce debt, accelerate share buybacks and otherwise reward investors, rather than increase exploration and other capital spending. Some have also suffered multibillion-dollar write-downs from their withdrawal from Russia.

For many members of OPEC and a coalition of Russia-led oil producers, known as OPEC+, high oil prices have been a windfall, providing a vital boost to their economies after years of slow growth due to relatively low prices, some OPEC delegates and analysts say.

Though the kingdom is trying to diversify away from oil, Aramco remains the engine of the Saudi economy. The company pumped an average of 10.2 million barrels a day between January and March, the most of any company in the world.

Crown Prince Mohammed bin Salman is seeking to restructure the Saudi economy by 2030.



Photo:

SAUDI PRESS AGENCY/REUTERS

Aramco is spending billions of dollars to up its oil production capacity from 12 million barrels a day to 13 million by 2027 and plans to increase its gas output by more than 50% by 2030.

Aramco is also looking to develop opportunities in refining and petrochemicals, known in the industry as the downstream sector. In recent months it bought a stake in a Polish refinery and said it would invest in a 300,000-barrel-a-day refining and petrochemicals complex in China.

Other Middle East energy producers are profiting from the energy-price boom.

Qatar, one of the world’s biggest natural-gas producers, is in talks to supply Germany, France and other European countries with long-term supplies of liquefied natural gas. In Iraq, one of the world’s biggest oil producers, officials say a windfall of more than $20 billion in oil revenues is putting the country on its strongest financial footing in years. Even Iran, where U.S. sanctions have crippled the oil industry, has ramped up exports in recent months.

In Saudi Arabia, gross domestic product in the first quarter expanded 9.6% from a year earlier, according to the kingdom’s statistics authority. London-based consulting firm Capital Economics estimates the Saudi economy will grow around 10% this year. That is far stronger than the 6.3% growth currently expected by most analysts, it said.

Saudi Arabia recorded a budget surplus equivalent to $15.3 billion for the first three months of 2022, the finance ministry said Sunday, bolstered by a 58% increase in oil revenues compared with the same period last year. It is the biggest surplus since the government began announcing budget figures on a quarterly basis six years ago.

Saudi Aramco’s first-quarter capital expenditure stood at $7.6 billion. The firm has previously set its full-year capital expenditure guidance at $40 billion to $50 billion, with further growth expected until around the middle of the decade.

Despite its free cash flow rising 68% to $30.6 billion, Aramco kept its quarterly dividend, a vital revenue source for the Saudi government, unchanged at $18.8 billion and approved the distribution of one bonus share for every 10 shares held in the company. That allowed the firm to reduce its gearing—a measure of debt as a percentage of equity—from 14% at the end of December to 8% at the end of March.

In March last year, Aramco’s gearing rose to 23%, above the company’s self-imposed cap of 15%, forcing Aramco to return to the debt market to meet its dividend commitment.

The Saudi government, with a stake of more than 94% in Aramco, has sought to monetize the country’s massive oil assets and use the proceeds to invest in industries outside of oil as part of Crown Prince

Mohammed bin Salman’s

plan to restructure the economy by 2030.

To help meet that goal, Prince Mohammed has tasked the Public Investment Fund to invest in companies and industries untethered to hydrocarbons. The government also transferred the $29.4 billion it raised from Aramco’s initial public offering on the Saudi stock exchange in 2019 to the PIF to deploy.

Earlier this year, the Saudi government said it transferred Aramco shares worth about $80 billion to the PIF as part of efforts to diversify the kingdom’s hydrocarbon-dependent economy.

—Ghassan Adnan and Stephen Kalin contributed to this article.

Write to Summer Said at summer.said@wsj.com

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World

Germany Drops Opposition to Embargo on Russian Oil

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BERLIN—Germany is now ready to stop buying Russian oil, clearing the way for a European Union ban on crude imports from Russia, government officials said.

Berlin had been one of the main opponents of sanctioning the EU’s oil-and-gas trade with Moscow.

However on Wednesday, German representatives to EU institutions lifted the country’s objection to a full Russian oil embargo provided Berlin was given sufficient time to secure alternative supplies, two officials said.

The German shift increases the likelihood that EU countries will agree on a phased-in embargo on Russian oil, with a decision possible as soon as next week, diplomats and officials say. However, how quickly the bloc ends its Russian oil purchases, and whether it also uses measures such as price caps or tariffs, is still being negotiated. The U.S. is pressing its European allies to avoid steps that could lead to a protracted increase in oil prices.

Europe’s debate on banning Russian oil has shifted decisively in recent days with Germany and some other countries taking practical steps to replace Russia with other suppliers. Some member states remain cautious about the economic impact of an oil embargo, including Hungary, Italy, Austria and Greece, diplomats say. All 27 EU governments must approve an oil ban.

The oil moves come as EU nations scramble to help member states Poland and Bulgaria make up for a natural gas shortfall after Russia stopped deliveries this week in reaction to what it said was the two countries’ refusal to pay for imports in rubles. The Kremlin demands EU buyers pay into special bank accounts where deposits would be converted from euros and dollars into rubles.

The EU pays state-controlled Russian firms around €1 billion, equivalent to $1.05 billion, a day for energy, according to estimates by Bruegel, a Brussels-based think tank. Critics have said that these funds are bankrolling Russian President

Vladimir Putin’s

regime and its war in Ukraine.

The consequences of harsh economic sanctions against Russia are already being felt across the globe. WSJ’s Greg Ip joins other experts to explain the significance of what has happened so far and how the conflict might transform the global economy. Photo Illustration: Alexander Hotz

On Thursday, Gazprom PJSC, Russia’s biggest gas producer, said profit soared in 2021 on the back of higher gas and oil prices.

Senior officials from EU member states discussed oil sanctions at length on Wednesday and the European Commission, the EU’s executive body, will hold further discussions with EU countries in coming days before presenting a proposal probably early next week, officials and diplomats say.

U.S. Treasury Secretary

Janet Yellen

said last week that a full European oil embargo on Russia would push up international oil prices, hurting a fragile global economy, and might “actually have very little negative impact on Russia,” which would benefit from higher oil prices on its remaining exports. She suggested Europe could keep buying oil while restricting Russia’s access to payments, echoing talk in Europe of making payments into an escrow account.

The EU imports between 3 million and 3.5 million barrels of oil a day from Russia, sending just under $400 million in payments daily, according to Bruegel. That amounts to some 27% of EU oil imports. Oil and gas revenues accounted for 45% of Russia’s federal budget in 2021, according to the International Energy Agency.

Many companies have been self-sanctioning, according to analysts and traders, avoiding trade in Russian oil over reputational concerns and the risk that the Western pressure campaign could soon encompass Moscow’s energy exports. That is already contributing to a sharp fall in Russian oil exports, according to the IEA.

EU officials designing the next sanctions proposals have to factor in that it will take some European oil refineries time to adapt to receive non-Russian crude. They also acknowledge that for countries such as landlocked Hungary, which receives its Russian oil through pipelines, adjusting to a Russian oil embargo will be complex.

The bloc is considering the option of combining a gradual phaseout of oil purchases with more immediate measures to reduce demand or cut payments to Moscow, such as a price cap or a tariff on oil imports. Another possibility is to phase out shipped oil purchases quickly and pipeline deliveries more slowly.

“There are all sorts of things that we’re running through,” said a senior EU official. “The aim is to hit the Russians as hard as possible while at the same time minimizing” the cost.

While Germany has swung behind the idea of phasing out Russian oil purchases, Berlin remains skeptical of price caps, tariffs and proposals to put Russia’s oil payments into escrow accounts.

German officials doubt that Mr. Putin would maintain oil deliveries if the EU unilaterally cut the price it pays, and they caution that Russia could easily sell its oil to other customers such as India and China instead of accepting a lower European price.

Berlin’s change of mind on oil came after it struck a deal with Poland that will enable Germany to import oil from global exporters via the Baltic Sea port of Gdansk, officials said Wednesday.

The Polish port is located close to the PCK oil refinery in Schwedt, Germany, which is controlled by the Russian oil giant

Rosneft

and receives crude via a Russian pipeline known as Druzhba, Russian for friendship.

The Gdansk port infrastructure, which is equipped to receive oil supertankers, is connected to the Russian pipeline with a separate link operated by Poland. This means oil imports to Gdansk could be immediately channeled through the pipeline to the Schwedt refinery, replacing Russian supplies, government officials said.

Oil imports to Gdansk, Poland, could be channeled to the Schwedt refinery, replacing Russian supplies.



Photo:

Michal Fludra/Zuma Press

The Schwedt refinery was the biggest obstacle to Germany accepting a ban on Russian oil imports because thousands of jobs in the region depend on it and there was no alternative supply to feed it until now, the officials said.

The Polish deal was necessary because the German port closest to the refinery, Rostock, doesn’t have the capacity to receive supertankers. In addition, Germany’s railways no longer operate oil wagons. The landmark deal was announced on Wednesday by German Economy Minister

Robert Habeck

during a visit to Poland.

Some 12% of Germany’s oil consumption relies on Russian imports, down from 35% before the war, Mr. Habeck said in a video statement posted on his ministry’s social media. He said Germany was now ready for the possibility that Rosneft would stop channeling oil, a scenario he said would no longer spell disaster for the German economy.

“Rosneft is a Russian state company and they have no interest in processing non-Russian oil,” Mr. Habeck said.

Should Rosneft refuse to process non-Russian oil imports, Germany could put the refinery under state management under laws protecting strategic assets. Berlin has already assumed stewardship of the main Russian gas-trading hub in Germany, a subsidiary of Russia’s state-controlled Gazprom.

Write to Bojan Pancevski at bojan.pancevski@wsj.com, Laurence Norman at laurence.norman@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com

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World

U.S. Stocks Decline, Oil Prices Jump

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U.S. stocks fell and oil prices jumped, as concerns about rising energy prices, supply shortages and inflation rattled investors once again.

The S&P 500 ticked down 0.5% in morning trading Wednesday, while the Dow Jones Industrial Average fell 0.4%. The tech-focused Nasdaq Composite Index lost 1%. Major U.S. stock indexes jumped Tuesday, as investors shrugged off worries that inflation will push the nation’s economy into a recession.

On Wednesday, however, some of that confidence faded after Brent crude, the international benchmark, moved higher again. Futures on Brent crude recently traded at $121.60 a barrel, up 5.3%. In trading before the opening bell, futures for U.S. stock indexes wavered and then ticked lower, with losses deepening as oil prices jumped. 

Oil prices rose after Russia said on Tuesday that oil exports via a pipeline from Kazakhstan to the Black Sea may temporarily fall by around 1 million barrels a day—representing about 1% of global oil demand—citing storm damage. Repairs could take up to two months, Russian officials said.

“Things will stay highly sensitive to the events unfolding in Ukraine,” said

Susannah Streeter,

senior investment and markets analyst at Hargreaves Lansdown, noting that sharp moves in energy prices will continue to weigh heavily on indexes. “There is still real pressure on oil prices that is adding to inflationary concerns.”

Commodities were snapping higher across the board on a range of issues that threatened to pinch supply chains. Aluminum, nickel and steel prices rose on concerns ranging from the war in Ukraine to Covid-19 lockdowns in China. Tangshan, the biggest steelmaking city in China, told residents to stay home due to a Covid-19 surge, according to Reuters. The city accounts for 58% of China’s strip-steel output, SP Angel said in a Wednesday note.

A sharp rally in U.S. government bond yields slowed. The yield on the 10-year U.S. Treasury note edged lower to 2.357% in recent trading, from 2.375% the day before. Yields on U.S. government bonds zoomed higher this week after Federal Reserve Chairman

Jerome Powell

said the central bank was prepared to raise interest rates in half-percentage-point steps if needed to tame inflation. Yields climb when bond prices fall.

Russia’s stock market is set to have a partial reopening Thursday, almost a month after it closed trading following the country’s invasion of Ukraine. Investors and analysts expect that the reopening could send Russian stocks into free fall.

In recent days, global markets seemed to have turned a corner, despite anxieties about mounting inflation and the war in Ukraine. The S&P 500 on Tuesday rose above its 200-day moving average after falling below it on Feb. 17, The benchmark index has advanced 1% or more in five of the last six sessions, bringing it up 8.1% over that period and erasing all of the losses seen since Russia invaded Ukraine.

Major indexes in Europe and Asia have seen similar moves. 

The recent rally has come even as Russia’s attacks on Ukraine intensify, Western countries continue to pile on sanctions and pricing pressures show no signs of abating. On Wednesday, fresh data on inflation showed that consumer prices in the U.K. rose 6.2% in February compared with a year earlier, up from 5.5% in January, marking the highest rate since March 1992. 

In European markets, the Stoxx Europe 600 lost 1.1%, erasing earlier gains once oil prices moved solidly higher. London’s FTSE 100 nudged down 0.1%. European oil giants

Shell

and

BP

each rose 3.3% or more.

The consequences of harsh economic sanctions against Russia are already being felt across the globe. WSJ’s Greg Ip joins other experts to explain the significance of what has happened so far and how the conflict might transform the global economy. Photo Illustration: Alexander Hotz

In early trading in New York, shares of energy companies also moved higher.

Occidental Petroleum,

Exxon Mobil

and

Chevron

each gained nearly 2% or more.

Meanwhile, shares of meme stocks—which have largely slumped this year—enjoyed a resurgence. Shares of

GameStop

climbed 10% after the company’s chairman,

Ryan Cohen,

disclosed his firm bought 100,000 shares of the company’s stock on Tuesday. Shares of

AMC Entertainment Holdings,

which tend to move in correlation with GameStop, climbed 4.9%.

Shares of

Adobe

slumped 8.1%. The software company reported higher profit and better-than-expected revenue growth Tuesday, but said it expects a hit to annual revenue from the war in Ukraine.

Traders worked on the floor of the New York Stock Exchange on Tuesday.



Photo:

BRENDAN MCDERMID/REUTERS

In European bond markets, the yield on the benchmark 10-year German bund traded around 0.497% after topping 0.5% this week. The last time it traded around that level was the fall of 2018.

Other signs emerged Wednesday that investors were eyeing assets they perceive as safer. The ICE U.S. Dollar index, which tracks the currency against a basket of others, rose 0.2% in recent trading. Gold prices advanced 0.4%. 

In Asia, major indexes finished higher. Hong Kong’s Hang Seng gained 1.2%, while Japan’s Nikkei 225 jumped 3%. China’s Shanghai Composite advanced 0.3%.

—Georgi Kantchev contributed to this article.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Scott Patterson at scott.patterson@wsj.com

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US

Saudi Arabia Considers Accepting Yuan Instead of Dollars for Chinese Oil Sales

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Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan, people familiar with the matter said, a move that would dent the U.S. dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.

The talks with China over yuan-priced oil contracts have been off and on for six years but have accelerated this year as the Saudis have grown increasingly unhappy with decades-old U.S. security commitments to defend the kingdom, the people said.

The Saudis are angry over the U.S.’s lack of support for their intervention in the Yemen civil war, and over the Biden administration’s attempt to strike a deal with Iran over its nuclear program. Saudi officials have said they were shocked by the precipitous U.S. withdrawal from Afghanistan last year.

China buys more than 25% of the oil that Saudi Arabia exports. If priced in yuan, those sales would boost the standing of China’s currency. The Saudis are also considering including yuan-denominated futures contracts, known as the petroyuan, in the pricing model of

Saudi Arabian Oil Co.

, known as Aramco.

Russia’s attack on Ukraine helped push the price of oil to over $100 a barrel for the first time since 2014. Here’s how rising oil costs could further boost inflation across the U.S. economy. Photo illustration: Todd Johnson

It would be a profound shift for Saudi Arabia to price even some of its roughly 6.2 million barrels of day of crude exports in anything other than dollars. The majority of global oil sales—around 80%—are done in dollars, and the Saudis have traded oil exclusively in dollars since 1974, in a deal with the Nixon administration that included security guarantees for the kingdom.

China introduced yuan-priced oil contracts in 2018 as part of its efforts to make its currency tradable across the world, but they haven’t made a dent in the dollar’s dominance of the oil market. For China, using dollars has become a hazard highlighted by U.S. sanctions on Iran over its nuclear program and on Russia in response to the Ukraine invasion.

China has stepped up its courtship of the Saudi kingdom. In recent years, China has helped Saudi Arabia build its own ballistic missiles, consulted on a nuclear program and begun investing in Crown Prince

Mohammed bin Salman’s

pet projects, such as Neom, a futuristic new city. Saudi Arabia has invited Chinese President

Xi Jinping

to visit later this year.

Saudi Foreign Minister Faisal bin Farhan met Chinese Foreign Minister Wang Yi in China in January.



Photo:

Anonymous/Associated Press

Meanwhile the Saudi relationship with the U.S. has deteriorated under President Biden, who said in the 2020 campaign that the kingdom should be a “pariah” for the killing of Saudi journalist Jamal Khashoggi in 2018. Prince Mohammed, who U.S. intelligence authorities say ordered Mr. Khashoggi’s killing, refused to sit in on a call between Mr. Biden and the Saudi ruler, King Salman, last month.

It also comes as the U.S. economic relationship with the Saudis is diminishing. The U.S. is now among the top oil producers in the world. It once imported 2 million barrels of Saudi crude a day in the early 1990s but those numbers have fallen to less than 500,000 barrels a day in December 2021, according to the U.S. Energy Information Administration.

By contrast, China’s oil imports have swelled over the last three decades, in line with its expanding economy. Saudi Arabia was China’s top crude supplier in 2021, selling at 1.76 million barrels a day, followed by Russia at 1.6 million barrels a day, according to data from China’s General Administration of Customs.

“The dynamics have dramatically changed. The U.S. relationship with the Saudis has changed, China is the world’s biggest crude importer and they are offering many lucrative incentives to the kingdom,” said a Saudi official familiar with the talks.

“China has been offering everything you could possibly imagine to the kingdom,” the official said.

More on Relations Between the U.S., Saudi Arabia and China

A senior U.S. official called the idea of the Saudis selling oil to China in yuan “highly volatile and aggressive” and “not very likely.” The official said the Saudis had floated the idea in the past when there was tension between Washington and Riyadh.

It is possible the Saudis could back off. Switching millions of barrels of oil trades from dollars to yuan every day could rattle the Saudi economy, which has a currency, the riyal, pegged to the dollar. Prince Mohammed’s aides have been warning him of unpredictable economic damage if he moves ahead with the plan hastily.

Doing more sales in yuan would more closely connect Saudi Arabia to China’s currency, which hasn’t caught on with international investors because of the tight controls Beijing keeps on it. Contracting oil sales in a less stable currency could also undermine the Saudi government’s fiscal outlook.

Some officials have cautioned Prince Mohammed that accepting payments for oil in yuan would pose risks to Saudi revenues tied in U.S. Treasury bonds abroad and the limited availability of the yuan outside China.

The impact on the Saudi economy would likely depend on the quantity of oil sales involved and the price of oil. Some economists said moving away from dollar-denominated oil sales would diversify the kingdom’s revenue base and could eventually lead it to repeg the riyal to a basket of currencies, similar to Kuwait’s dinar.

“If it is (done) now at a time of strong oil prices, it would not be seen negatively. It would be more seen as deepening ties with China,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

The Saudis still plan to do most oil transactions in dollars, the people familiar with their talks say. But the move could tempt other producers to price their Chinese exports in yuan as well. China’s other big sources of oil are Russia, Angola and Iraq.

The Saudi move could chip away at the supremacy of the U.S. dollar in the international financial system, which Washington has relied on for decades to print Treasury bills it uses to finance its budget deficit.

“The oil market, and by extension the entire global commodities market, is the insurance policy of the status of the dollar as reserve currency,” said economist Gal Luft, co-director of the Washington-based Institute for the Analysis of Global Security who co-wrote a book about de-dollarization. “If that block is taken out of the wall, the wall will begin to collapse.”

Talks with China over pricing oil in yuan started before Prince Mohammed, the de facto leader of the kingdom, made his first official visit to China in 2016, people familiar with the matter said. The crown prince asked the kingdom’s then-energy minister

Khalid al-Falih

to study the proposal, the people said.

Mr. Falih instructed Aramco to prepare a memo that heavily focuses on the economic challenges of switching to the yuan pricing.

“He really did not think that was a good idea but he could not stop the talks as the ship had already sailed,” said another person familiar with the meetings.

Saudi officials in favor of the shift have argued the kingdom could use part of yuan revenues to pay Chinese contractors involved in mega projects domestically, which would help mitigate some of the risks associated with the capital controls over the currency. China could also offer incentives such as multibillion-dollar investments in the kingdom.

Another official familiar with the talks said yuan pricing could give the Saudis more influence with the Chinese and help convince Beijing to reduce support for Iran.

Ali Shihabi, who sits on the board of Neom and formerly ran a pro-Saudi think tank in Washington, said the kingdom can’t ignore China’s desire to pay for oil imports in its own currency, particularly after the U.S. and EU blocked the Russian central bank from selling foreign currencies in its reserves stockpile.

“Any doubts countries had about the need to diversify into Yuan and other currencies/geographies would have ended with that huge step,” Mr. Shihabi tweeted in response to this article.

—David S. Cloud contributed to this article.

Write to Summer Said at summer.said@wsj.com and Stephen Kalin at stephen.kalin@wsj.com

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Business

Oil Slides Below $100, Stock Futures Edge Up

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Oil prices and Chinese stocks slumped after Beijing imposed sweeping Covid-19 lockdowns, while U.S. stock futures edged higher ahead of the start of a cycle of interest-rate rises from the Federal Reserve.

Futures tied to the S&P 500 and the Dow Jones Industrial Average each gained 0.2% Tuesday while technology-heavy Nasdaq-100 futures rose 0.4%. The S&P 500 began the week with modest losses Monday. 

Oil prices dropped back below $100 a barrel, undoing much of the price surge since Russia invaded Ukraine. West Texas Intermediate, the U.S. benchmark, dropped over 8% to $94.69 a barrel. Brent crude, the international benchmark, declined over 7% to $98.59 a barrel. 

Chinese indexes slid further, extending a recent rout fueled by the country’s rising Covid-19 case load, renewed regulatory pressure from Beijing and the threat of U.S. delistings. China’s daily cases more than doubled, the government said Tuesday, in an outbreak that has prompted lockdowns in major cities and an entire province.

The mainland Chinese CSI 300 index of blue-chip stocks fell 4.6% to register its lowest close since June 2020. In Hong Kong, the

Hang Seng

sank 5.7%, ending at a six-year closing low, as large technology and financial stocks cratered. 

A clampdown in travel and retail spending in China, coupled with supply-chain disruptions, adds yet another complication to a global economy already dealing with the war in Ukraine and the highest inflation in a generation.

“The headlines that Covid is swirling throughout China is something else that stokes uncertainty in global markets because it adds to concerns about supply chain disruptions,” said

David Donabedian,

chief investment officer at CIBC Private Wealth.

Ahead of the opening bell,

Coupa Software

slumped over 30% after giving revenue forecasts that were below analysts’ expectations. Energy companies were also under pressure as oil prices dropped.

Occidental Petroleum,

Marathon Oil

and

Halliburton

all fell at least 4%.

Fed officials are set to meet Tuesday, the beginning of a two-day policy meeting that comes against a backdrop of 40-year-high inflation and concerns that Russia’s invasion of Ukraine could hurt global economic growth. While the Fed is expected to stick to its plans for a cycle of rate rises beginning with a quarter-percentage-point increase Wednesday, investors are looking for clarity on how the war in Ukraine might affect the pace of future tightening. 

The Federal Reserve’s main tool for managing the economy is to change the federal funds rate, which can affect not only borrowing costs for consumers but also shape broader decisions by companies like how many people to hire. WSJ explains how the Fed manipulates this one rate to guide the entire economy. Illustration: Jacob Reynolds

U.S. Treasury yields pulled back ahead of the meeting after rising to their highest level in over 2½ years on Monday. The yield on the benchmark 10-year note fell to 2.135% from 2.139% on Monday. Bond yields and prices move in opposite directions.

Investors are concerned the conflict threatens to push inflation even higher, by cutting off Russia’s sizable supplies of oil and gas and snarling shipments of key metals and grains. Investors worry the shock could crimp the growth of the global economy just as it gets over the impact of Covid-19 lockdowns.  

Traders work on the floor of the New York Stock Exchange.



Photo:

BRENDAN MCDERMID/REUTERS

“The fundamental challenge for investors is that the invasion of Ukraine stokes inflation which was already an issue of concern, but also injects doubt into the outlook for economic growth,” said Mr. Donabedian. “It’s a one-two punch in terms of elevating uncertainty.”

Heightening that uncertainty is the threat of an escalation in Ukraine, where the latest diplomatic efforts to end the fighting have shown little signs of progress. Investors are growing increasingly concerned that a conflict that many people just weeks ago thought wouldn’t happen could now spill beyond Ukraine’s borders, said Mr. Donabedian. Also, reports that China is considering supplying military aid to Moscow raise the threat that Western sanctions could be targeted at Beijing, he said. 

“That would open up a whole new Pandora’s box,” he said.

Investors are also looking ahead to data on producer prices due at 8:30 a.m. ET., which should offer some clues as to whether manufacturers are absorbing or passing on higher input costs. Economists surveyed by The Wall Street Journal expect that producer prices continued to rise in February but at a moderating pace. 

Elsewhere, the Stoxx Europe 600 dropped 0.8%, led by its raw-materials and energy sectors. In Japan, the Nikkei 225 eked out a 0.2% gain.

—Quentin Webb contributed to this article.

Write to Will Horner at william.horner@wsj.com

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Business

U.S. Stocks Mixed After Putin Claims Progress in Ukraine Talks

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U.S. stocks wobbled Friday and oil prices advanced, extending a volatile stretch for markets as investors assessed developments from the war in Ukraine. 

The blue-chip Dow Jones Industrial Average rose 205 points, or 0.6%, in morning trading. The S&P 500 was up about 0.1%, while the Nasdaq Composite fell 0.6%. Stock futures had turned solidly higher after Russian President

Vladimir Putin

said in televised remarks that there had been positive developments during talks with Ukraine, even as Russian forces continue to pound Ukrainian cities.

Major indexes are on track to close the week lower, as volatility reigned and inflation fears heightened. The Dow industrials were recently down 0.7% for the week, which would mark its fifth consecutive weekly loss. The S&P 500 and Nasdaq Composite are on pace to lose 1.4% and 1.6%, respectively, for the week, which would cap the fourth weekly loss in the past five weeks for both indexes.

Big swings are now commonplace for major stock indexes, yet even by those standards this week’s jumps and falls have been extreme, some investors and traders said. On Monday, soaring oil prices sent stocks tumbling, with the S&P 500 posting its worst day in over a year. Two days later, the benchmark index jumped 2.6%, its biggest gain since 2020.

Among the worst performers this week: Technology companies. The tech-heavy Nasdaq Composite entered bear market territory on Monday, defined as falling 20% from its recent high. Rising inflation has pressured tech stocks, traders said.

“Earnings growth expectations are slowing dramatically, and at the same time inflation is rampant. That means tech stocks that depend on big earnings growth are getting hit hard,” said

Dan Morgan,

a senior portfolio manager at Synovus Trust Co., which owns shares of several tech heavyweights.

On Friday, Brent crude futures, the international oil benchmark, were up 1.1% at $110.52, having pared some gains after Mr. Putin’s comments. Oil prices are hovering near their highest level in years, despite retreating in recent days. Earlier this week, the United Arab Emirates said it would push the Organization of the Petroleum Exporting Countries to pump more oil, helping assuage some fears about a supply crunch.

In morning trading in New York, shares of

DocuSign

tumbled 20% after the software maker released softer-than-expected guidance. Shares of energy companies fell, with

Halliburton,

Chevron

and

Exxon Mobil

all trading lower. 

In Europe, the pan-continental Stoxx Europe 600 added 1.8%, putting it on track for a weekly gain. Germany’s DAX index jumped 3.4%. Shares of Italian aerospace manufacturer

Leonardo

and sportswear company Adidas were among the largest gainers in Europe, climbing 11% and 6.3%, respectively.

Pearson

jumped 21% after Apollo Global Management said it was evaluating a possible cash offer for the textbook publisher.

Investors chalked the advance in stock markets up to a relief rally, noting that Mr. Putin’s comments contained few details. For the rebound to be sustained, “you need something quite meaningful that suggests there is genuinely a positive direction to this,” said

Seema Shah,

chief strategist at Principal Global Investors. “There is going to be a ton of volatility going forward.” 

Commodity prices are hot right now. But the prices investors are paying in the open market for commodities like coffee, copper or corn can have little to do with the price customers pay at the store. WSJ’s Dion Rabouin explains. Illustration: Adele Morgan

The stock market in Russia remained closed Friday. In offshore trading, the ruble advanced against the greenback to trade at about 114 rubles per dollar. Assessing the price of the ruble has grown difficult since Russia imposed measures to stem the currency’s selloff and as Western banks have shunned Russian assets. 

Investors are closely tracking the conflict. Meanwhile, fast-changing sanctions imposed on Russia by the West have clouded traders’ ability to forecast how trade and supply chains might be disrupted. President Biden said Friday that the U.S. will join major allies and the European Union in moving to revoke normal trade relations with Russia.

The conflict has kept global markets swinging wildly. Investors have grown increasingly fearful that the war will stunt global economic growth and keep inflation at multidecade highs. Thursday’s consumer-price index data in the U.S. showed that inflation last month was largely driven by an increase in energy prices. The data didn’t account for March, when oil prices jumped. 

Global stock markets have swung wildly this week.



Photo:

Allie Joseph/Associated Press

The volatility has sent investors scrambling to rebalance portfolios. Investors in recent weeks have moved in and out of safer assets as news reports about the conflict have quickly changed. The ICE U.S. Dollar index, for example, which measures the greenback against a basket of other currencies, lost 0.1% after Mr. Putin’s comments, erasing gains from earlier in the day.  

Meanwhile, the yield on the benchmark 10-year Treasury note also reversed course, rising to 2.015% Friday, from 2.008% Thursday. Yields climb when bond prices fall.

In Asia, stock markets were mixed, with Japan’s Nikkei 225 down about 2.1%, while Hong Kong’s Hang Seng Index fell 1.6% to close at its lowest level since July 2016. The Shanghai Composite, in contrast, added 0.4%. All three indexes ended lower on a weekly basis.

This came after the Securities and Exchange Commission provisionally named on Thursday five New York-listed Chinese companies, including Yum China Holdings and BeiGene, as firms whose audit working papers couldn’t be inspected by U.S. regulators. That prompted a sharp selloff in U.S.-listed Chinese stocks, with the Nasdaq Golden Dragon China Index tumbling 10%. 

—Alexander Osipovich contributed to this article.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Corrie Driebusch at corrie.driebusch@dowjones.com

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