Germany Launches €10 Billion Bailout for Gazprom’s Local Unit
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Germany moved to stabilize its energy supply Tuesday, injecting about €10 billion into the German subsidiary of Gazprom PJSC as the Russian gas giant said it would nearly halve the flow of fuel through a major pipeline connecting the two countries. Berlin said the loan, equivalent to approximately $10.4 billion, from German state development bank KfW had become necessary to shield the business from the fallout of the sanctions war between the West and Moscow after its forces invaded Ukraine. On Tuesday, Berlin said it would extend its stewardship of the company, initially limited to six months, indefinitely. The bailout is the latest step in Berlin’s two-pronged effort to wean its energy-hungry economy off its heavy reliance on Russian fossil fuels by 2024 while ensuring Moscow’s supplies continue to flow in the short term. The short-term supplies are in doubt, however, after Gazprom said Tuesday that it would slash natural-gas exports to Europe, signaling a ratcheting up in the energy conflict that has accompanied the war in Ukraine.
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The slide on the Swiss stock market continued for the fifth consecutive day on Tuesday. Following the interest rate decisions or announcements by the Fed and the ECB, the Swiss National Bank (SNB) is also likely to consider ending its negative interest rates soon, it was said. Investors are expecting hints on the SNB's future interest rate path as early as Thursday when a statement on monetary policy is due. The SMI shed another 1.8 per cent to 10,699 points. Among the 20 SMI stocks, there were 17 price losers and three price gainers. 45.27 (previously: 47.15) million shares were traded. Across Europe, insurance and banking stocks recovered, with Zurich Insurance (+0.5%), Swiss Life (+0.3%) and Swiss Re (+0.2%) up slightly in Switzerland. UBS performed relatively well with a discount of 0.4 per cent. Credit Suisse (-1.1%), on the other hand, slipped to another all-time low in the face of recent negative headlines. The three defensive heavyweights Novartis (-2.5%), Roche (-1.1%) and Nestle (-1.9%) also closed with losses. As on the previous day, Partners Group (-5.1%) was very weak. The rise in interest rates is taking its toll on the investment company. Among the second-line stocks, Dufry rose by 1.8 per cent. The travel retailer extended contracts for the airport in Kuwait by four years. After a weak outlook issued by the asset manager Bellevue, the corresponding share price declined by 4.3 per cent.
European stock markets steadied following their bruising selloff Monday, as investors fear the Federal Reserve will raise rates quicker and faster than previously expected-opting for the first three-quarter-point increase in the fed-funds rate since 1994. The Stoxx Europe 600 index fell 1.3% to 407.3 points. In Paris, the CAC 40 and SBF 120 lost 1.2% and 1.3%, respectively. In Frankfurt, the DAX 40 was down 0.9%, and the FTSE 100 in London declined by 0.3%. Atos shares fell 23.4% and slipped 45% over the past five sessions. The digital services company unveiled plans on Tuesday to split into two separate companies which will lead to the departure of its chief executive, Rodolphe Belmer, by the end of September. Atos also sold its entire stake in Worldline (-7.3%) and implemented a derivative transaction related to bonds maturing in 2024, with net proceeds of around €220m. Air France-KLM (-13.1%) has completed its capital increase of EUR 2.256 billion to turn the page on the health crisis. The net proceeds of this operation will be used to reimburse part of the French government's aid, up to 1.7 billion euros, and for the balance, i.e. approximately 600 million euros, to reduce the group's net debt. Michelin fell by 3%. Ipsos (+1.5%) delivered its medium-term objectives expecting organic growth of between 5% and 7% per year over the period 2023-2025 and revenues of €3 billion by 2025, including acquisitions. Media and communications group Vivendi (+0.3%) holds 57.35% of Lagardère's capital and 47.33% of its voting rights (-1.8%) at the end of the reopening period of its takeover bid, which ended on 9 June, according to a statement to the Autorité des Marchés Financiers released on Tuesday.
The S&P 500 continued its slide on Tuesday, a day after it closed in a bear market for the first time since 2020. The broad market index fell 14.15 points, or 0.4%, to 3735.48, ending the session lower after it seesawed between gains and losses for much of the day. The Dow Jones Industrial Average dropped 151.91, or 0.5%, to 30364.83. The Nasdaq Composite rose 19.12, or 0.2%, to 10828.35. The producer-price index, a measure of inflation for domestic producers, rose 10.8% on a 12-month basis last month. May marked the sixth consecutive month of double-digit annual gains for producer prices. Shares of business-software firm Oracle jumped $6.67, or 10%, to $70.72 after it reported a rise in quarterly sales that beat analysts’ expectations, driven by its cloud-computing division. Shares of oil producer Continental Resources surged $9.72, or 15%, to $74.22 after billionaire Harold Hamm offered to buy the shares his family doesn’t already own for around $4.3 billion. The courier group FedEx (+14.4%) announced on Tuesday a 53% increase in its quarterly dividend. The new dividend is $1.15 per share, up from 75 cents. Elon Musk will meet with Twitter (+0.7%) employees on Thursday for the first time since the billionaire made a bid for the social network in April. Amazon (-1.3%) announced that it will start making deliveries using drones later this year in a small California town. Coca-Cola (-2.7%) announced the postponement of the planned IPO of its subsidiary Coca-Cola Beverages Africa. Cryptocurrency exchange Coinbase fell 43 cents, or 0.8%, to $51.58 a share after it said it would reduce its workforce by nearly one-fifth. JPMorgan cut its price target for the stock. Bitcoin remained under pressure after selling off sharply in recent days. It traded at about $21,992 at 5 p.m. ET on Tuesday, losing 5.4% over the previous 24 hours. It is down about two-thirds from its record high from November.
In Asia, major indexes broadly closed mixed. In Tokyo, the Nikkei index fell by 0.8 per cent to 26,418 points, in Seoul by as much as 1.7 per cent. The Chinese stock markets provide a ray of hope. In Shanghai, the Composite gained 1.4 per cent, as did Hong Kong’s Hang Seng. Support is provided by the fact that the industrial production in China rose by 0.7 per cent in May compared to the same month last year, after a decline of 2.9 per cent in April. Among individual stocks, Hyundai Motor in Seoul rallied a good 1 per cent against the weak market after ending a truck drivers' strike that had particularly hurt the carmaker.
Yields on 2-, 10- and 30-year Treasurys soared to their highest levels in years on Tuesday, as the Federal Reserve kicked off its two-day policy meeting and expectations grew for policy makers to lift interest rates by three-quarters of a percentage point. Meanwhile, economic data released on Tuesday pointed to still-intense U.S. inflation and the Treasury curve continued to flatten. The 10-year Treasury note was yielding 3.469%, up 10 basis points. The 2-year bond jumped 14 basis points to 3.42%. This is the biggest two-day increase since the week following the collapse of Lehman Brothers in 2008, according to an analysis by Deutsche Bank.
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