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The following is a summary of top news stories Wednesday.
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COMPANIES
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Renewable energy generators and nuclear power plants could have their revenue capped under a new UK government plan to ensure they are not benefiting from record-high energy prices. Without releasing much detail, the government said it would try to break the link between high gas prices and the amount made by electricity producers. The government said the price of gas determines the price of electricity, so as gas prices soared over the last year, many of Britain's wind farms and solar farms were paid a lot more than normal for their products, even though their costs had not increased very much. The government said it planned to introduce a ‘cost-plus revenue limit’, but provided little detail about how this would work. It also did not say whether cheaper gas generators and coal power plants, which also benefited from the current set up, would be impacted by the new rules.
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Yorkshire-based power generator Drax early Wednesday said it would work with the government on the plan before the measures are put in place in 2023. However, German utility RWE said it is concerned by the new UK measures. The company warned the move could have ‘negative consequences’ for renewables investment. ‘RWE continues to believe that voluntary CfDs are the most efficient and investor-friendly mechanism to 'de-link' the electricity price from the marginal gas price, and that these could be implemented relatively quickly. We therefore welcome that the government will legislate for powers that allow them to consider this further,’ the company said.
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A year after it rebranded itself in the name of building a metaverse, Meta Platforms unveiled a new version of its virtual reality headset tailored for working professionals. The $1,500 Meta Quest Pro features a number of new features that are meant to improve users' perception of truly being in the presence of other people. The headset makes it possible to view not only virtual worlds but also the real environment of the user, thanks to high-resolution outward-facing cameras.
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Shares in gig economy companies took a beating on Wall Street on Tuesday, as the US Department of Labor gave notice of a proposed change in rules over the classification of independent contractors. The Department of Labor said it will publish a Notice of Proposed Rulemaking on Thursday, to help companies and workers determine ‘whether a worker is an employee or an independent contractor under the Fair Labor Standards Act’. Uber Technologies shares slumped 10%.
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A Rio Tinto plant in Quebec will receive a $535 million upgrade, as the miner seeks to boost output of critical metals used in electric vehicles, Bloomberg reported. The Canadian government has also agreed an investment of up to C$222 million for the project, which will boost scandium and titanium. The firm is targeting a global market share of 20% of scandium oxide, with production capacity planned to reach up to 12 metric tons per year.
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The French government announced it was ordering some refinery workers back to their posts for the first time in an attempt to break a strike and blockade that has lead to petrol and diesel shortages. The energy transition ministry on Wednesday said the requisitioning of workers at a Esso-ExxonMobil fuel depot at a refinery at Gravenchon-Port-Jerome in northern France ‘will begin today’.
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MARKETS
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Share prices in Europe were rebounding in late-morning trade on Wednesday, having opened in the red. Wall Street also was called for a positive open, having closed mostly lower on Tuesday.
The pound continued to suffer against a rampant dollar, briefly sinking again below $1.10 before recovering. Meanwhile, the US currency rose to a level against the yen that had triggered Japanese government intervention last month. The dollar is near its 1998 high of $147.65. Brown Brothers Harriman noted that US Treasury Secretary Janet Yellen in recent comments suggested little concern about the dollar being too strong. ‘Bottom line: we are nowhere near any type of Plaza-style accord to arrest the dollar's ascent,’ BBH said.
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CAC 40: up 0.3% at 5,852.67
DAX 40: up 0.2% at 12,248.72
FTSE 100: up 0.4% at 6,912.91
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Hang Seng: closed down 0.8% at 16,701.03
Nikkei 225: closed flat at 26,396.83
S&P/ASX 200: closed flat at 6,647.50
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DJIA: called up 0.5%
S&P 500: called up 0.7%
Nasdaq Composite: called up 0.8%
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EUR: down at $0.9704 ($0.9719)
GBP: down at $1.1027 ($1.1097)
USD: up at JP¥146.30 (JP¥145.70)
GOLD: down at $1,669.87 per ounce ($1,671.20)
OIL (Brent): soft at $94.32 a barrel ($94.62)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Industrial production across the eurozone returned to growth in August, data from eurostat showed. Industrial production was up 1.5% in the euro area compared to July. In July, production was down 2.3% from June. The highest monthly increase was recorded in Ireland, where production increased by 17% on the previous month. Eurostat noted that Ireland is ‘carrying out a review of the seasonal adjustment methodology for industrial production’. Compared with a year before, industrial production rose 2.5%
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The head of the UN's nuclear watchdog has said that a Ukrainian nuclear plant surrounded by Russian troops has lost all external power needed for vital safety systems for the second time in five days. International Atomic Energy Agency Director-General Rafael Grossi said agency monitors at the Zaporizhzhia nuclear power plant reported the interruption, adding that back-up diesel generators are keeping nuclear safety and security equipment operational. Grossi tweeted: ‘This repeated loss of #ZNPP's off-site power is a deeply worrying development and it underlines the urgent need for a nuclear safety & security protection zone around the site.’
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Ukrainian forces have recaptured five settlements in the southern Kherson region, military officials said. The villages of Novovasylivka, Novohryhorivka, Nova Kamianka, Tryfonivka and Chervone in the Beryslav district were retaken as of October 11, according to southern Operational Command spokesman Vladislav Nazarov. The settlements are in one of the four regions recently annexed by Russia.
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The UK economy registered a surprise decline in August, during what was a poor month for the consumer-facing sector, according to the Office for National Statistics. The UK economy shrank by 0.3% in August from July, following a downwardly revised 0.1% climb in July from June. Month-on-month growth in July was initially forecast at 0.2%. August's gross domestic product was expected to have remained unchanged from July. ‘There has been a continued slowing in the underlying three-month on three-month growth, where GDP also fell by 0.3% in the three months to August compared with the three months to May 2022,’ the ONS noted. In August alone, output in consumer-facing services fell 1.8%, having risen 0.7% in July.
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The Bank of England has privately signalled that it may be willing to extend an emergency UK government bond buying programme beyond this week, the Financial Times reported. The newspaper, citing people briefed on the talks, said some bankers have been told officials are closely watching pension funds and their managers. Specifically, they are eyeing whether some liability-driven investment managers have amassed enough liquidity to meet margin calls. One banker quoted by the FT said: ‘They told us they were watching the LDI managers closely to see whether they had managed to generate enough liquidity for their clients to cope with margin calls and would decide whether to extend the facility on Thursday or Friday.’ The FT reported the talks took place before BoE Governor Andrew Bailey spoke in Washington. The BoE on Tuesday had affirmed its emergency gilt buying will end on Friday. Governor Andrew Bailey in Washington said: ‘My message to the [pension] funds involved you've got three days left now. You have got to get this done. Part of the essence of a financial stability intervention is that it is clearly temporary.’
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UK Prime Minister Liz Truss faces members of Parliament on Wednesday for the first time since Chancellor Kwasi Kwarteng's £43 billion mini-budget tax giveaway unleashed chaos in the financial markets. Tories have returned to Westminster in a restive mood following the break for the party conferences, with their ratings tanking in opinion polls and economists questioning whether Kwarteng's plans are sustainable. Kwarteng had to endure a further dose of criticism from the International Monetary Fund, which warned his package of unfunded tax cuts was making it harder for the central bank to get soaring inflation rates under control. With the Institute for Fiscal Studies warning he will have to find £60 billion in public spending cuts if he persists with his tax plans, Tory MPs fear the government's reputation on the economy is suffering grievous damage among voters and markets alike.
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US President Joe Biden conceded that a ‘slight’ recession was a possibility following a downcast IMF economic forecast, amid rising inflation and uncertainty after the Russian invasion of Ukraine. ‘I don't think there will be a recession,’ Biden told CNN. ‘If it is, it'll be a very slight recession. That is, we'll move down slightly.’
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Biden is to ‘re-evaluate’ the US relationship with Riyadh, the White House said, after a Saudi-led coalition of oil-producing nations sided with Russia to slash output. The 13-nation OPEC cartel and its 10 allies headed by Moscow angered the White House last week with its decision to reduce output by two million barrels a day from November raising fears that oil prices could soar. ‘I think the president's been very clear that this is a relationship that we need to continue to re-evaluate, that we need to be willing to revisit,’ National Security Council spokesman John Kirby told CNN.
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Biden said he believes his Russian President Vladimir Putin is normally a rational actor who badly misjudged his prospects of occupying Ukraine. ‘I think he is a rational actor who has miscalculated significantly,’ Biden told CNN after Moscow's shelling of civilian targets across its neighbour marked an escalation in the seven-month conflict.
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The G7 leading industrialized nations vowed at a meeting with Ukrainian President Volodymyr Zelensky to hold Putin to account after recent Russian attacks on civilian infrastructure in Ukraine. ‘We condemn these attacks in the strongest possible terms and recall that indiscriminate attacks on innocent civilian populations constitute a war crime. We will hold President Putin and those responsible to account.’
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Zelensky called for wealthy Western nations to help Kyiv create an ‘air shield’ after a rash of deadly Russian aerial attacks. Zelensky, who told the G7 club of rich nations ‘millions of people would be grateful’ for help fending off attacks from the sky, warned Russia ‘still has room for further escalation’ after Monday's bloody missile salvoes across Ukraine. Following the attacks, Washington pledged to up shipments of air defences to Ukraine, while Germany promised delivery ‘in the coming days’ of the first Iris-T missile shield reportedly capable of protecting a city.
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EU energy ministers meet in Prague on Wednesday to find common ground in tackling high energy prices. Calls for an EU-wide solution intensified after Germany was criticized for announcing a gas subsidy package worth up to €200 billion, but ideas for limiting prices differ strongly across the bloc. Approaches tabled in the past weeks include buying gas together to reduce prices, capping the price of Russian gas imports, limiting the price of gas transactions within the bloc, and putting a ceiling on the price of gas used for electricity generation.
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The Spanish government has adopted a package of measures to reduce gas consumption by up to 14% for the period running from August 2022 to March 2023. The ‘More Energy Security Plan’ provides, among other things, for tax support for private households and companies, the promotion of renewable energies and the strengthening of industrial capacities, the government announced on Tuesday after a Cabinet meeting.
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