UPDATE 2-Russia, rejecting default, tells investors to go to western financial agents

White House says Russia has defaulted on its external debt

Kremlin, finance ministry deny default, say Euroclear blocked payments

Russia to allow bondholders to convert roubles to forex and transfer abroad, bypassing National Settlement Depository

Bondholders should open a Russian bank account and refuse any claims on Russia

Adds details, quotes, background

June 27 (Reuters) – Russia rejected claims on Monday that is had defaulted on its external debt for the first time in more than a century, telling investors to go to Western financial agents for the cash which was sent but bondholders did not receive.

The White House said on Monday that Russia has defaulted on its international bonds for the first time since the Bolshevik revolution, as sweeping sanctions have effectively cut the country off from the global financial system. nL1N2YE06F

Until last week, Russia kept on paying on its Eurobonds in foreign currency as per issue conditions yet its dollar and euro coupon transfers made in May, ahead of a key U.S. waiver allowing for such transactions expired, did not reach investors.

“Statements of a default are absolutely unjustified,” Kremlin spokesperson Dmitry Peskov told a call with reporters on Monday, pointing to the May forex coupon payment.

“The fact that Euroclear withheld this money and did not bring it to the recipients is not our problem. There are absolutely no grounds to call such situation a default.”

Euroclear did not immediately respond to a request for comment.

On Monday, the finance ministry said that ‘actions of foreign financial intermediaries are beyond of the Russian finance ministry’s control,’ asking foreign bondholders to speak directly to those withholding the payments.

“The non-receipt of money by investors did not occur because of lack of payment but due to the third party actions and which is not directly spelled out as a default situation by issue documentation,” the ministry added.

As the U.S. waiver expired and the European Union sanctioned the National Settlement Depository (NSD), the Russian version of Euroclear and Clearstream western clearing houses, last week Moscow paid its next coupons due in forex in roubles. nL8N2YA2CS nR4N2X5008

President Vladimir Putin ordered last week that debt obligations would be considered fulfilled once a rouble payment equal to the forex amount due was made. Bondholders would need to open an account at a Russian bank to receive the payment.

Moscow would not block the payment’s conversion into forex and its transfer abroad but investors would need to say in writing they don’t have claims against Russia, the ministry has said. The banks are yet to be announced.nL1N2Y91SX

‘FINANCIAL NUCLEAR BOMB’

The Group of Seven major Western powers banned transactions with Russia’s central bank and froze its assets held in their jurisdictions, worth around $300 billion, after Russia launched what it called special military operation in Ukraine in February.

Some western politicians have called to seize the reserves frozen to rebuild Ukraine – the idea two high-ranked Russian financial sources said they believed was behind the announcement of default and which Moscow considers artificial. nL5N2X90YD

“By announcing a default, they can claim that sanctions work. Economically, financially assets could be confiscated legally,” one of the two sources said.

Peskov reiterated on Monday that reserves were blocked ‘unlawfully’ and any attempts to use them would ‘amount to outright theft.’

“I believe that a financial nuclear bomb was used against us, no country in the history of mankind has experienced such sanctions pressure as Russia is now,” Alexei Moiseev, Russian deputy finance minister, said last week.

(Reporting by Reuters; Editing by Frank Jack Daniel)

Oil rises $2/bbl after G7 vows new Russian sanctions

HOUSTON, June 27 (Reuters) – Oil rose USD 2 a barrel on Monday on the prospect of even tighter supplies loomed over the market as the Group of Seven nations promised to tighten the squeeze on Russian President Vladimir Putin’s war chest while actually lowering energy prices.

Brent crude futures settled USD 1.97, or 1.7% higher, at USD 115.09 a barrel, while US West Texas Intermediate crude closed up USD 1.95, or 1.8%, at USD 109.57 a barrel.

The group of wealthy nations vowed to stand with Ukraine “for as long as it takes”, proposing to cap the price of Russian oil as part of new sanctions to hit Moscow’s finances.

“I think if they were to implement a price cap on sale and purchase of Russian oil, it’s difficult for me to imagine how this is going to be implemented, especially when China and India have become Russia’s biggest customers,” said Houston-based oil consultant Andrew Lipow.

Commonwealth Bank of Australia analyst Vivek Dhar noted that there was “nothing stopping Russia from banning oil and refined product exports to G7 economies in response to a price cap, exacerbating shortage conditions in global oil and refined product markets.”

The international community should explore all options to alleviate tight energy supplies, including talks with producing nations like Iran and Venezuela, a French presidency official said. Both OPEC members’ oil exports have been curbed by US sanctions.

Both crude benchmarks closed down for the second week in a row on Friday as interest rate hikes in key economies strengthened the dollar and fanned fears of a global recession.

Recession fears and expectations of more interest rate hikes have caused volatility and risk aversion in the futures markets, with some energy investors and traders paring back, while spot crude prices have remained strong on high demand and a supply crunch.

For now, pressing supply worries outweighed growth concerns.

Members of the Organization of the Petroleum Exporting Countries and their allies including Russia, known as OPEC+, will probably stick to a plan for accelerated oil output increases in August when they meet on Thursday, sources said.

The producer group also trimmed its projected 2022 oil market surplus to 1 million barrels per day (bpd), down from 1.4 million bpd previously, a report seen by Reuters showed.

OPEC member Libya said on Monday it might have to halt exports in the Gulf of Sirte area within 72 hours amid unrest that has restricted production.

Adding to the supply woes, Ecuador also said it could suspend oil production completely within 48 hours amid anti-government protests in which at least six people have died.

Traders also waited for news on when market-moving US government oil inventory and other data would be published after it was not released last week due to server issues.

US crude oil, distillate and gasoline inventories likely fell last week, a preliminary Reuters poll showed on Monday.

(Additional reporting by Ron Bousso in London, Florence Tan in Singapore; Editing by Marguerita Choy, Louise Heavens and Tomasz Janowski)

Oil slides more than $1 as G7 debate Iran nuclear deal, Russia

SINGAPORE, June 27 (Reuters) – Oil prices slipped more than USD 1 a barrel on Monday as global economic concerns depressed the oil demand outlook while investors eyed the G7 meeting this week for possible moves on Russian oil exports and a revival of the Iran nuclear deal.

Brent crude futures slipped USD 1.42, or 1.3%, to USD 111.70 a barrel by 0010 GMT after rebounding 2.8% on Friday. US West Texas Intermediate crude was at USD 106.08 a barrel, down USD 1.54, or 1.4%, following a 3.2% gain in the previous session.

Both contracts posted their second weekly decline last week as interest rate hikes in key economies strengthened the dollar and fanned recession fear. However, oil prices remained well supported above USD 100 a barrel as crude and oil products supplies remained tight after Western sanctions kept Russian oil out of reach for some buyers.

Leaders of the Group of Seven (G7) rich nations are expected to discuss this week options for tackling rising energy prices and replacing Russian oil and gas imports, as well as further sanctions that do not exacerbate inflation.

These measures include a possible price cap on Russian crude and oil products exports aimed at curbing Russia’s revenue while reducing the damage to other economies.

“It’s unclear whether a price cap will achieve this outcome,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note.

“There’s still nothing stopping Russia from banning oil and refined product exports to G7 economies in response to a price cap, exacerbating shortage conditions in global oil and refined product markets.”

G7 will also discuss the prospect of reviving the Iran nuclear talks after the European Union’s foreign policy chief met senior officials in Tehran to try to unblock the stalled negotiations, a French presidency official said on Sunday.

“This week, traders’ focus might be on a potential resumed Iran nuclear talks, which could lead to a revival of Iran’s oil exports,” CMC Markets analyst Tina Teng said.

In addition, some of the G7 leaders are pushing for an acknowledgement of the need for new financing for fossil energies investment, two sources told Reuters on Sunday, as European states scramble to diversify supplies.

(Reporting by Florence Tan; Editing by Christopher Cushing)

Wall Street mints big gains to end strong week

June 24 (Reuters) – Wall Street’s main indexes soared on Friday in a broad rally as signs of slowing economic growth and a recent pullback in commodity prices tempered expectations for the Federal Reserve’s rate-hike plans.

The S&P 500 rose over 3% for its biggest one-day percentage rise since May 2020. All 11 of the benchmark index’s sectors ended at least 1.5% higher.

Stocks rebounded this week as financial markets have been roiled over worries that rapid rate hikes by the Fed to rein in 40-year-high inflation could cause a recession.

Still, investors have been gauging when the market might hit its bottom after the benchmark S&P 500 earlier this month recorded a 20% drop from its January closing peak, confirming the common definition of a bear market.

“Some of the moves, the sellers just get exhausted so you don’t have as much capital moving out,” said Shawn Cruz, head trading strategist at TD Ameritrade.

“This might be a little bit of a relief rally,” Cruz said. “But I think I would not encourage anyone to start going in with both hands at the moment, because we have seen this repeatedly where these things can reverse themselves pretty quickly.”

The Dow Jones Industrial Average rose 823.32 points, or 2.68%, to 31,500.68, the S&P 500 gained 116.01 points, or 3.06%, to 3,911.74 and the Nasdaq Composite added 375.43 points, or 3.34%, to 11,607.62.

For the week, the S&P 500 rose 6.4%, the Dow added 5.4%, the Nasdaq gained 7.5%.

Volume surged towards the end of the session as the close of trading marked the completion of FTSE Russell’s reconstitution of its indexes that are tracked by trillions of dollars in investor funds.

US consumer sentiment fell to a record low in June, but Americans saw a marginal improvement in the outlook for inflation, a survey showed on Friday. Data on Thursday pointed to slowing US business activity in June.

Helping ease inflation fears was a sharp drop in commodity prices this week. The Refinitiv/CoreCommodity Index, which measures prices for energy, agriculture, metals and other commodities, fell to a roughly two-month low on Thursday after hitting a multi-year peak earlier in June.

Fed funds futures traders are now pricing for the benchmark rate to rise to about 3.5% by March, down from expectations last week that it would increase to around 4%.

“The expectation of future rate hikes coming down is part of the equation that makes today’s equity market so strong,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Bank stocks rallied, with the S&P 500 banks index rising 3.7%, after the Fed’s annual “stress test” exercise showed that the lenders have enough capital to weather a severe economic downturn.

In company news, FedEx Corp. (FDX) shares jumped 7.2% after the parcel delivery company issued a stronger-than-expected full-year profit forecast.

Advancing issues outnumbered declining ones on the NYSE by a 4.66-to-1 ratio; on Nasdaq, a 2.15-to-1 ratio favored advancers.

The S&P 500 posted 1 new 52-week high and 29 new lows; the Nasdaq Composite recorded 34 new highs and 86 new lows.

More than 19 billion shares changed hands in US exchanges, compared with the 12.9 billion daily average over the last 20 sessions.

(Reporting by Lewis Krauskopf and Chuck Mikolajczak in New York, Sruthi Shankar and Anisha Sircar in Bengaluru; Editing by Sriraj Kalluvila and Grant McCool)

Oil settles up but posts weekly decline on recession fears

June 24 (Reuters) – Oil prices settled up by more than USD 3 a barrel on Friday, supported by tight supply, but they notched their second weekly decline on concern that rising interest rates could push the world economy into recession.

Brent crude settled up USD 3.07, or 2.8%, at USD 113.12 a barrel by 12:10 p.m. EDT (1610 GMT). US West Texas Intermediate (WTI) crude settled up USD 3.35, or 3.2%, at USD 107.62.

The US Federal Reserve “was talking very hawkish which was undermining the oil rally, but sentiment is changing a little especially on strong economic data,” said John Kilduff, partner at Again Capital LLC in New York.

On Thursday, Fed Chair Jerome Powell said the central bank’s focus on curbing inflation was “unconditional”, adding to fears about more interest rate hikes.

A survey on Friday showed US consumer sentiment hit a record low in June even as the outlook for inflation improved slightly.

Russia’s invasion of Ukraine exacerbated tight supplies this year just as demand has been recovering from the COVID pandemic, and oil came close to an all-time high of USD 147 reached in 2008.

Crude has gained support from the almost total shutdown of output in OPEC member Libya due to unrest. On Thursday, the Libyan oil minister said the National Oil Corporation chairman was withholding production data from him, raising doubts over figures issued last week.

Stephen Brennock of oil broker PVM said recession fears dominated sentiment, yet “the consensus remains that the oil market will see high demand and tight supply over the summer months, thereby limiting the downside.”

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, meet on June 30 and are expected to stick to a plan to only slightly accelerate hikes in oil production in July and August.

US energy firms this week added oil and natural gas rigs for a second week in a row in a record 23-month streak of increases, as high crude prices and prodding by the government prompted drillers to return to the wellpad, energy services firm Baker Hughes Co BKR.N said in its closely followed report on Friday.

The latest weekly US oil inventory figures, which will give a snapshot of supply tightness in the top consumer, have been delayed to next week due to technical issues.

(Additional reporting by Alex Lawler in London, Jeslyn Lerh in Singapore; Editing by Marguerita Choy, Jason Neely and David Gregorio)

Wall Street posts solid gains, as defensives, tech shine

June 23 (Reuters) – Wall Street’s main indexes posted solid gains on Thursday, fueled by strong performance from defensive and tech shares that outweighed declines for economically sensitive groups as worries persisted about a potential recession.

The benchmark S&P 500 swung between positive and negative during the session, but stocks picked up steam heading into the market’s close. Benchmark US Treasury yields fell to two-week lows, supporting tech and other rate-sensitive growth stocks.

Trading has remained volatile in the wake of the S&P 500 last week logging its biggest weekly percentage drop since March 2020. Investors are weighing how far stocks could fall after the index earlier this month fell over 20% from its January all-time high, confirming the common definition of a bear market.

“There is a tremendous amount of uncertainty about the outlook and so the market is confused,” said Walter Todd, chief investment officer at Greenwood Capital in South Carolina.

The Dow Jones Industrial Average rose 194.23 points, or 0.64%, to 30,677.36, the S&P 500 gained 35.84 points, or 0.95%, to 3,795.73 and the Nasdaq Composite added 179.11 points, or 1.62%, to 11,232.19.

In his second day of testifying before Congress, US central bank chief Jerome Powell said the Fed’s commitment to reining in 40-year-high inflation is “unconditional” but also comes with the risk of higher unemployment.

US business activity slowed considerably in June as high inflation and declining consumer confidence dampened demand across the board, a survey on Thursday showed.

“The Fed wants to see things start to slow and the data is starting to reflect that,” said James Ragan, director of wealth management research at D.A. Davidson.

Citigroup analysts are forecasting a near 50% probability of a global recession.

“Economic growth is slowing. Is it going to slow enough to go into a recession, that’s the big question,” Ragan said.

Defensive groups considered safer bets in rocky economic times were the top-performing S&P 500 sectors. Among them, utilities gained 2.4%, healthcare rose 2.2% and real estate added 2%.

The heavyweight tech sector rose 1.4%, with Microsoft (MSFT) gaining 2.3% and Apple (AAPL) up 2.2%.

The energy sector slumped 3.8%, continuing its recent pullback after soundly outperforming the market for most of 2022. Declines in Exxon Mobil XOM.N and Chevron (CVX) were the biggest individual drags on the S&P 500, with Exxon dropping 3% and Chevron falling 3.7%.

Other economically sensitive sectors also fell. Materials lost 1.4%, while industrials and financials dipped about 0.5% each.

Advancing issues outnumbered declining ones on the NYSE by a 1.41-to-1 ratio; on Nasdaq, a 1.67-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and 40 new lows; the Nasdaq Composite recorded 32 new highs and 194 new lows.

About 12.4 billion shares changed hands in US exchanges, compared with the 12.5 billion daily average over the last 20 sessions.

(Reporting by Lewis Krauskopf in New York, Devik Jain and Sruthi Shankar in Bengaluru and Boleslaw Lasocki in Gdansk; Editing by Arun Koyyur and Cynthia Osterman)

European stocks skid on gloomy business activity data, German energy troubles

June 23 (Reuters) – European shares hit more than one-year lows on Thursday as slowing euro zone business activity heightened growth worries, while German shares dropped 1.8% after the country triggered the “alarm stage” of its emergency gas plan.

The continent-wide STOXX 600 index dropped 0.8%, with euro zone banks shedding 4.5%. Euro zone bond yields also slid as did the euro.

The German DAX slid to over three-month lows as falling Russian supplies prompted Thursday’s move – the latest escalation in a standoff between Europe and Moscow since the Russian invasion of Ukraine that has exposed the bloc’s dependence on Russian gas supplies.

A S&P Global survey showed euro zone business growth significantly slowed this month, and by much more than expected, as consumers concerned about soaring bills opted to stay at home and defer purchases to save money. A PMI covering the bloc’s dominant services industry sank to 52.8 from 56.1.

“There was this underlying expectation that services are still doing well. The PMI’s poured some cold water on that belief,” said Andrea Cicione, head of strategy at TS Lombard.

Other economically sensitive sectors including automakers, miners and oil & gas stocks slipped between 2% and 3.6%.

Healthcare, utilities, and some luxury names were the only gainers on Thursday.

“Until central banks get some signal to pivot towards a more dovish stance, the market will continue to focus on downside risks to growth,” Ciicone said.

The European Central Bank is set to raise its deposit rate above zero next month, while US Federal Reserve Chair Jerome Powell reiterated the US central bank’s commitment to control inflation even at the risk of an economic downturn.

Norway’s central bank raised its benchmark interest rate by 50 basis points on Thursday, its largest single hike since 2002.

But traders are scaling back their bets on how far central banks will be able to lift interest rates this cycle, as recession fears grip.

European shares had briefly cut session losses to edge up tracking a rally in US stock futures before moving back into the red even after a strong open on Wall Street.

The benchmark STOXX 600 has shed nearly 19% since hitting a record closing high on Jan. 5, and if losses continue, the index could confirm a bear market, or 20%, decline from a recent peak.

In company news, Valneva VLS.PA surged 19.6% after its COVID-19 vaccine was endorsed by the European Medicines Agency on Thursday.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Rashmi Aich and Alison Williams)

Foreigners big sellers in Japanese stocks in the week to June 17

June 23 (Reuters) – Japanese stocks faced massive foreign outflows in the week ending June 17 on rising worries over a recession, with global central banks adopting aggressive monetary tightening measures to fight against inflation.

Foreigners sold Japanese stocks worth a net 1.72 trillion yen ($12.67 billion), which was their biggest disposal since Oct. 1, data from exchanges showed.

They offloaded derivatives worth 913.67 billion yen and 804.5 billion yen in cash equities.

Last week, the U.S. Federal Reserve raised interest rates by 75 basis points in its biggest increase since 1994.

The Nikkei share average .N225 plunged 6.7% last week, which marked its steepest decline since early-April 2020, while the Topix index saw a 5.5% fall.

Meanwhile, cross-border investors disposed of Japanese bonds worth a net 3.51 trillion yen, which marked their biggest net selling in 12 weeks, finance ministry data showed.

Domestic investors also withdrew 497.8 billion yen out of overseas bonds in a fourth consecutive week of net selling, but they had minute purchases in foreign equities, amounting 9.7 billion yen.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Tomasz Janowski)

Oil prices slump as investors fear Fed rate hikes will hurt demand

NEW YORK, June 23 (Reuters) – Oil prices dropped by nearly USD 2 a barrel on Thursday after another round of remarks from Federal Reserve Chair Jerome Powell fanned worries US interest rate hikes would slow economic growth.

Brent crude futures settled at USD 110.05 a barrel, falling USD 1.69, or 1.5%. US West Texas Intermediate (WTI) crude futures settled at USD 104.27 a barrel, down USD 1.92, or 1.8%.

Powell said the Fed’s focus on curbing inflation was “unconditional” and the labor market was unsustainably strong, comments that stoked fears of more rate hikes.

Investors have been paring positions in risky assets as they assess whether inflation-fighting central banks could push the world economy into recession with higher interest rates.

“If the US, and the rest of the world goes into a recession, you can significantly impact demand,” said Houston oil consultant Andrew Lipow.

Also, high gasoline prices could be starting to slow demand, said Robert Yawger, director of energy futures at Mizuho in New York.

“That’s definitely worked its way into the conversation,” said Yawger, adding he thought gasoline still had room to rise. US retail prices are currently averaging USD 4.94 a gallon, down about 10 cents from the peak, according to AAA.

Major US oil refiners and Energy Secretary Jennifer Granholm emerged from an emergency meeting over the issue with no concrete solutions to lower prices, according to a source familiar with the discussions, but the two sides agreed to work together.

The most recent estimates by the American Petroleum Institute, according to market sources, showed US crude and gasoline inventories rising last week, which also weighed on prices, Yawger said.

Official weekly estimates for US oil inventories were scheduled to be released on Thursday but technical problems will delay those figures until next week, the US Energy Information Administration said, without giving a specific timeline.

OPEC and allied producing countries including Russia will likely stick to a plan for accelerated output increases in August in hopes of easing crude prices and inflation as US President Joe Biden plans to visit Saudi Arabia, sources said.

The group known as OPEC+ agreed at its last meeting on June 2 to boost output by 648,000 barrels a day in July, or 7% of global demand, and by the same amount in August, up from the initial plan to add 432,000 bpd a month over three months until September.

(By Laila Kearney. Additional reporting by Ahmad Ghaddar in London, Yuka Obayashi in Tokyo and Muyu Xu in Singapore; Editing by David Goodman, Barbara Lewis and David Gregorio)

Oil extends losses as recession fears mount

TOKYO, June 23 (Reuters) – Oil prices fell 2% in early trade on Thursday, extending losses from the previous day, as investors worried that aggressive US interest rate hikes could trigger a recession and dent fuel demand.

US West Texas Intermediate (WTI) crude futures fell USD 2.39, or 2.3%, to USD 103.80 a barrel by 0031 GMT. Brent crude futures dropped USD 2.24, or 2.0%, to USD 109.50 a barrel.

Both benchmarks tumbled around 3% on Wednesday to hit their lowest levels since mid-May.

Investors are continuing to assess how worried they need to be about central banks potentially pushing the world economy into recession as they attempt to curb inflation with interest rate increases.

“Oil markets remained under pressure as investors were concerned that US rate hikes would stall an economic recovery and dampen fuel demand,” said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.

“The US and European hedge funds have been selling off their positions ahead of the end of the second quarter, which is also cooling investor sentiment,” he said, predicting the WTI could fall below USD 100 a barrel before the July 4 holiday in the United States.

The Federal Reserve is not trying to engineer a recession to stop inflation but is fully committed to bringing prices under control even if doing so risks an economic downturn, US central bank chief Jerome Powell said on Wednesday.

US President Joe Biden, meanwhile, called on Congress to pass a three-month suspension of the federal gasoline tax to help combat record pump prices and provide temporary relief for American families this summer.

“The news temporarily boosted the oil product prices, but it was later viewed that even if the gasoline tax was suspended, retail prices would remain high, making it difficult to stimulate demand,” Fujitomi’s Saito said.

The US Energy Information Administration said its weekly oil data, which was scheduled for release on Thursday, will be delayed due to systems issues until at least next week.

(Reporting by Yuka Obayashi; editing by Richard Pullin)

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