Business

FRANKFURT AM MAIN — German industrial giant Siemens on Monday spun off its energy division, with a below-expectations valuation of 16 billion euros, in one of the largest stock market debuts in Europe this year.

Shares in Siemens Energy traded at 22.01 euros ($23.27) at open, before sliding back to 21.68 euros at 08:34 GMT.

The valuation lagged expectations, with analysts having predicted the new company's market cap to reach between 17 billion and 24 billion euros. In March, Siemens said the energy unit had equity of about 17.3 billion euros.

"As an independent company, we now have the entrepreneurial flexibility we need to help shape the global transformation of the energy markets in a sustainable and economically successful manner," said Siemens Energy's Chief Executive Christian Bruch.

Despite the coronavirus pandemic upending business plans worldwide, Siemens pressed ahead with the spinoff first announced in May 2019.

Siemens Energy, with its oil and gas, turbines, power transmission and related services businesses, joins medical devices arm Healthineers and lightbulb unit Osram on the stock market, which debuted in 2018 and 2013 respectively, as Siemens slims down to become more agile.

Fleet of ships 

In 2017, Siemens Chief Executive Joe Kaeser said he wanted the company to become a "fleet of ships" rather than an awkward tanker, as it seeks to chart a course through a more challenging time for industrial companies. 

Other sprawling German conglomerates such as Thyssenkrupp, Bayer and Continental have similarly spun off units to face a fast-changing trade climate, digitalisation, and cheaper metal imports from China.

The energy unit, which employs 91,000 people, has struggled in recent years and last year announced 2,700 job cuts worldwide. It generated revenue of 28.8 billion euros in fiscal year 2019. 

The conglomerate has, however, proved broadly resilient to the coronavirus pandemic, beating expectations with net profit of 539 million euros in the three months to the end of June. 

As part of the spinoff, Siemens will give 55 per cent of shares in Siemens Energy to its current shareholders at a ratio of one Siemens Energy share for every two shares in the main company.

The company's pension fund will get 9.9 per cent, with the parent company holding on to 35.1 per cent. 

After anticipating the share price to suffer a little at first, "in two to three weeks we will see the share price stabilise and towards December we will see the first fair valuation", Siemens chief financial officer Ralf Thomas indicated.

The shares had a "bumpy start" to trading, but the industry had "a promising future", Comdirect analyst Andreas Lipkow said.

Siemens intends to reduce its shareholding significantly within 12 to 18 months after the completion of the spinoff, it said. 

Siemens Energy will own two-thirds of Spanish-based renewables arm Siemens Gamesa, as the company also pivots to more sustainable energy sources.

However, Siemens Group, which aims to be carbon neutral by 2030, recently come under fire for signing a contract in December to provide rail signalling services for the Carmichael coal mine project in Australia.

Luisa Neubauer, Germany's answer to Greta Thunberg and the leader of the country's Fridays for Future environmental protest, had turned down an offer to sit on the board of Siemens Energy after calling the Australia decision "disastrous".

In a peculiar quirk, the spinoff will temporarily raise Germany's blue-chip stock index to 31 names from its normal 30. Siemens Energy will drop off the DAX after close.

NEW YORK — US stocks finished a choppy week solidly higher as tech stocks outperformed, though the cheer did not extend to Europe where investors were spooked by surging virus infections.

After a see-saw of a week in which indices repeatedly closed sessions in the red, the Dow finished up 1.3 per cent on Friday while tech stocks, which had a banner August but have struggled for much of this month, pushed the Nasdaq to close 2.3 per cent higher.

The dollar climbed against its main rivals, while oil prices dropped.

However, both the Dow and S&P were lower for the week overall, and Art Hogan, chief market strategist at National Securities, said the day's gains were not indicative of broader momentum.

"The market has been under pressure for a while and is just catching a bit of a bargain-hunting Friday," said Art Hogan, chief market strategist at National Securities.

Investors remain disquieted by the continued failure of Washington lawmakers to agree on more stimulus for the battered US economy.

The side effect of that deadlock were felt in European trading, where Frankfurt and Paris ended lower though London eked out a small gain.

"The same old issues are holding these markets back, considerable economic and political uncertainty — particularly in the US — worrying COVID trends in Europe and a lack of new fiscal and monetary support measures in Washington," said Oanda analyst Craig Erlam.

The need for a new stimulus deal was highlighted by data that showed jobless claims rising rather than falling last week in the United States, perhaps indicative of a stumbling recovery as the November presidential election nears.

US durable goods orders posted tepid growth of 0.4 per cent in August, according to data released Friday, well below the revised level in July of 11.7 per cent.

Aneta Markowska at Jefferies LLC said it was "a close call" on whether new stimulus would be agreed, adding: "While still possible, there is a high risk that it does not happen this year. “

"Without it, we would expect the economy to hit a major speed bump in the fourth quarter."

Europe is in the midst of a surge in coronavirus infections that has resulted in governments imposing partial lockdowns and social restrictions.

Two British supermarket chains are also now rationing certain products to avoid the panic-buying seen earlier this year.

"At this point in the recovery, a return to the COVID-19 abyss due to stricter lockdown measures is quite frankly something the global economy cannot afford," said Stephen Innes at AxiCorp.

LONDON — The Organisation of the Petroleum Exporting Countries (OPEC) faces a critical moment in its 60-year history with the coronavirus crushing crude demand and prices, discord among its members, and threats from a world seeking cleaner fuel.

Founded on September 14, 1960, by Iraq, Iran, Kuwait, Saudi Arabia and Venezuela who sought to control crude oil output, OPEC currently comprises 13 members, including countries from Africa and Latin America.

The 60th anniversary "comes at a critical moment in its history", UniCredit analyst Edoardo Campanella said in reference to the OPEC.

"Its ability to steer the oil market in its favour has never been put in question to the extent it is now," he noted.

 'Relevant role' 

The Vienna-based institution convenes for regular meetings to assess the state of supply and demand in the marketplace and its pronouncements can still spark major price swings.

That ability has dimmed in recent years however, prompting it to join forces with ten non-OPEC producers, including Russia to curb their collective output.

OPEC+ essentially wanted to counter surging energy supplies from shale rock in the United States and help clear a stubborn supply glut on world markets.

Today, the OPEC pumps about one third of global oil — but the OPEC+ accounts for almost 50 per cent, giving it greater clout.

Carlo Alberto de Casa, trader at Activtrades, insisted that the cartel retains a "relevant" function in the market, dismissing talk the organisation was a "has-been".

"They are slightly less influential compared to the past, also due to production of non-OPEC countries and new extraction techniques. But I still see a role for the OPEC," he told AFP.

This despite the larger OPEC+ in March failing to agree on a new strategy — with Russia refusing cartel kingpin Saudi Arabia's request to cut their collective output and combat a virus-fuelled slump in crude demand.

In response, top global exporter Saudi Arabia slashed its prices and raised output to preserve market share in the face of Russian opposition.

The Saudi-Russian price war, in tandem with the worsening Covid-19 pandemic, sent oil prices off a cliff — and even caused New York's light sweet crude contract to briefly turn negative in April — meaning producers paid buyers to take the oil off their hands.

After the unprecedented market crash, OPEC+ in May slashed up to a fifth of its output — a move that triggered a sharp rebound in crude prices to current levels around $40 per barrel.

Added to the supply backdrop, the United States, now the world's biggest oil producer, curbed the pace of costly shale extraction.

Rystad Energy analyst Paola Rodriguez-Masiu, while noting that OPEC has lost market share in recent years, said the cartel still has an important role to play because it possesses the largest amount of accessible crude.

This meant that extracting its oil resulted in fewer carbon emissions, she said.

"I would argue that OPEC would become more and more important" in the future, she concluded.

LONDON — Two major British supermarkets said this week that they are rationing some products after new coronavirus restrictions to avoid panic buying seen at the start of the pandemic.

The country's biggest retailer Tesco revealed on Friday that is limiting certain items — including anti-bacterial wipes, baby wipes, flour, dried pasta and toilet roll — to three purchases per person. Online customers also face limits on rice and canned vegetables.

"We have good availability, with plenty of stock to go round, and we would encourage our customers to shop as normal," a Tesco spokesperson said.

"To ensure that everyone can keep buying what they need, we have introduced bulk-buy limits on a small number of products."

Rival supermarket Morrisons had also decided to introduce similar curbs on Thursday.

"We are introducing a limit on a small number of key products, such as toilet roll and disinfectant. Our stock levels of these products are good but we want to ensure that they are available for everyone," a Morrisons spokesperson said.

Industry body the British Retail Consortium (BRC) has meanwhile urged consumers to be considerate of others when shopping for food and other essential items.

"Supply chains are stronger than ever before and we do not anticipate any issues in the availability of food or other goods under a future lockdown," said Andrew Opie, BRC director of food and sustainability.

"Nonetheless, we urge consumers to be considerate of others and shop as they normally would."

Prime Minister Boris Johnson on Tuesday tightened restrictions to stem a surge of coronavirus cases, ordering pubs to close early and advising people to go back to working from home to prevent a second national lockdown.

LONDON — European and Asian stock markets tumbled on Thursday following another sharp sell-off overnight on Wall Street as investors reacted to rising virus infections, new lockdowns, a slowing economic recovery, stalled US stimulus talks and American election uncertainty.

Months of mind-boggling gains in global equities have come to a juddering halt this month, and expectations are fading that a wall of cash from governments and central banks will jump-start a rebound.

"Markets are digesting and grappling with this idea that the growth expectations that investors have might not materialise," said Lauren Goodwin, at New York Life Investments.

"As the fiscal impulse in the US starts to wane, some of these expectations for a slow and steady recovery are shaken."

With the northern hemisphere now moving into autumn and winter, there are worries that a second wave of coronavirus will see the reimposition of strict, economically devastating containment measures.

France became the latest European country to act, shutting bars and restaurants in the second-biggest city Marseille and putting it on "maximum alert", while several others, including Paris, will see new restrictions, including limitations on public gatherings and earlier closing hours.

Britain's government has also shortened opening hours and has warned of other measures, while the Madrid region has locked down roughly 850,000 people and plans to extend its curbs.

The International Labour Organisation found that by mid-year, global working hours had declined 17.3 per cent from December -- equivalent to nearly 500 million full-time jobs, which its chief Guy Ryder called "catastrophic".

US traders are now growing concerned that rising infections at home could see similar moves, and several Federal Reserve officials including boss Jerome Powell have called for a new stimulus package to mitigate the impact.

But with politicians on Capitol Hill still at a standstill, hope for a deal is waning, particularly with a presidential election just around the corner.

"A procession of US Federal Reserve speakers voiced more concerns about the ongoing impasse on additional fiscal stimulus," said AxiCorp's Stephen Innes.

Economy in 'deep hole' 

But he said Fed vice chair Richard Clarida's warning that while the economy was seeing improvement, it was still in a "deep hole", would strike fear into traders.

"Clarida's messaging provides the most distinct read on the global economy. Inferring the world has probably just seen the bounce from a sudden stop, not a cyclical recovery but merely a restart," Innes added.

Michael Hewson at CMC Markets said: "The main problem the Fed has is that US politicians appear more interested in fighting an election campaign than helping to pass a new stimulus plan which would help the American people."

All three main indices in New York saw steep losses on Wednesday, resuming a retreat that has characterised September.

The tech-heavy Nasdaq led the way, tanking more than three per cent after the Trump administration unveiled legislation aimed at limiting the liability shield of online services for content they host. 

The Justice Department said the proposal was aimed at reforming a law that protects internet services from liability from third-party content.

The losses flowed through to Asia again.

Market unease was increased by fears of an extended battle over the US presidential election result, with Donald Trump refusing to guarantee a peaceful transfer of power should he lose to Joe Biden.

"Well, we're going to have to see what happens," he said in response to a reporter's question. 

Trump, who is behind in the polls against Democrat Biden, has frequently claimed mail-in ballots are vulnerable to mass fraud and that election officials are being encouraged by Democrats to rig the election, though there is no evidence postal voting has ever led to significant fraud in the past.

JAKARTA — Indonesia is developing vast farm estates across the archipelago — an area 10 times the size of neighbouring Singapore — to counter the country’s reliance on imported food, President Joko Widodo said on Wednesday.

The project, which eventually will span nearly 800,000 hectares, is preparing land to grow rice, cassava and corn for the world's fourth-most populous country, Widodo told a televised Cabinet meeting. 

The announcement will anger environmental groups, who have warned such projects mostly exploit peatland areas and encourage forest fires blamed for the seasonal haze that has choked much of the region for the past two decades.

Widodo said the project would "anticipate the world's food crisis due to the Covid-19 pandemic... also to anticipate climate change as well as to curb our reliance to imported food".

The early phase has already started in North Sumatra, as well as central Kalimantan, on the Indonesian part of the island of Borneo.

Eventually it may be extended to three more regions on the world's biggest archipelago — South Sumatra, Papua and East Nusa Tenggara. 

The project has its critics, however.

Earlier this month Greenpeace Indonesia warned that converting carbon-rich peatland into giant farmlands could cause an environmental catastrophe. 

"Since 2015, over a quarter of a million hectares of peatland forest have burned in Central Kalimantan," it said.

"While the scientific community is urging us to protect all peatland to halt climate change, the government instead is backing a plan that looks set to turn this land into another carbon bomb."

SAINT PETERSBURG — Russia's nuclear-powered icebreaker Arktika, touted as the most powerful of its kind and a symbol of Moscow's Arctic ambitions, set off on its maiden voyage on Tuesday.

Designed to transport liquefied natural gas from the Arctic, the giant vessel is 173 metres  long and 15 metres high.

"The unique domestically-built vessel will for the first time find itself in the extreme conditions of Arctic ice where it will have to confirm its status as the flagship of Russia's icebreaker fleet," said its constructors, the Baltic Shipyard in Saint Petersburg.

The Arktika is expected to arrive at its future home port of Murmansk in northwestern Russia in two weeks after undergoing tests of its performance en route.

Launched in 2016, it is part of a planned fleet of nuclear icebreakers aimed at significantly boosting freight traffic along Russia's Arctic coast, making the passage between the Pacific and Atlantic Oceans navigable all year round.

According to its constructors, the Arktika can cut through ice that is 2.8 metres thick.

Economic development of the Arctic is one of President Vladimir Putin's key goals.

The Arctic holds huge oil and gas reserves that are being eyed by Russia and other countries including the United States, Canada and Norway.