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By Marc Jones

LONDON (Reuters) – Moody’s top European analyst has flagged Oct. 21 as the next crucial date for Britain’s credit rating following the firm’s negative assessment this week of the government’s new debt-fuelled spending plans.

Rating firms set out when they intend to review European governments’ creditworthiness before the start of each year and by coincidence both Moody’s and S&P Global have scheduled Oct. 21 as their next UK dates.

Moody’s described the UK’s plans for sweeping tax cuts this week as “negative” for Britain’s creditworthiness but stopped short of actually changing the rating’s ‘outlook’ to negative as it did with Italy recently, a move that was also taken on the scheduled calendar date.

“In our normal course of business, that (Oct. 21) would be the point at which we would normally expect to update the market,” Moody’s Chief EMEA Credit Officer Colin Ellis told Reuters when asked whether it had considered cutting the UK’s Aa3 rating this week.

“The decision that we will have to take and the discussion we will have… is whether these actions are negative enough to warrant a rating action. And what form, if any, that rating action should take.”

Moody’s already rates the UK one rung lower than France despite a lower debt-to-GDP level. Its UK score is also lower than S&P’s equivalent AA although it is in line with Fitch’s AA-.

It estimates 72 billion pounds of additional spending in the UK’s new plans will keep the budget deficit above 6% of gross domestic product (GDP) over the next two years and lift the debt-to-GDP ratio to 104% from 100% by 2026.

Since it put out that assessment out there has been more drama though with the Bank of England having to intervene in UK bond markets to arrest a sharp rise in longer-term borrowing costs that was causing issues for some pension funds.

That move is also likely to be part next month’s rating discussions, Ellis added. While it is positive that the UK has the BoE to step in, it also raises questions about why it had to do it in the first place.

“Having a lender of last resort, that recognises that (issue) and does it early is a really good thing. That’s a sign of an institution playing its role,” Ellis said.

“Obviously, there’s a counter argument, which is wouldn’t have been lovely if they never had to respond to this event in the first place”.

(Reporting by Marc Jones; Editing by Toby Chopra)

By Tassilo Hummel and Elizabeth Pineau

PARIS (Reuters) – French President Emmanuel Macron has proposed Luc Remont as EDF’s next chief executive and chairman, said the Elysee presidential office, as France works on a full nationalisation of the struggling energy company.

Remont, currently a top executive at Schneider Electric , is set to steer the nuclear energy giant through its full nationalisation as it faces headwinds linked to outages at many of its reactors.

He will now be heard by lawmakers in France’s lower and upper chambers of parliament who still need to clear his nomination. Reports have said the French government was divided on whether or not to split up the roles of chief executive and chairman.

A parliamentary source told Reuters the votes will likely come in October. “It is important that EDF be stabilised quickly to tackle the autumn and winter ahead,” the source added.

Macron’s government this summer announced it would fully nationalise the debt-laden utility, which shoulders most of the country’s power needs and will be the centrepiece of an ambitious reactor construction programme.

EDF is currently rushing to get its fleet of nuclear power stations ready for the winter after it needed to shut down several reactors due to corrosion issues and safety checks.

Earlier this month, EDF also issued a new profit warning.

The pressures on EDF have added to Europe’s energy crisis, caused by Russia’s invasion of Ukraine.

Remont, who turned 53 this month, started his career at France’s defence procurement and technology agency, according to a biography on Schneider’s corporate website.

He was also deputy chief of staff to finance ministers for five years in the early 2000s during Jacques Chirac’s presidency.

(Reporting by Tassilo Hummel and Elizabeth Pineau; Editing by Michel Rose/David Evans/Sudip Kar-Gupta)

MOSCOW (Reuters) -The Bank of Russia on Thursday gave legal entities the green light to buy the securities of “unfriendly” issuers, those from countries that have imposed sanctions against Moscow, without restrictions.

Shares in SPB Exchange, Russia’s second-largest bourse which specialises in foreign shares, leapt on the news, surging more than 30% on rival Moscow Exchange as of 1534 GMT.

SPB resumed full trading in foreign equities in August. The central bank’s move could pave the way for brokerages to purchase shares in foreign companies from retail investors.

“Legal entities, irrespective of having qualified investor status, will be able to buy securities of unfriendly issuers without restrictions,” a central bank statement said.

It comes months after sweeping western sanctions, imposed to punish Moscow for its actions in Ukraine, led to the freezing of some of the foreign securities held by investors in Russia.

The central bank this month said it would gradually limit private investors’ access to foreign shares issued by companies from designated unfriendly countries from October.

Brokerages will be prohibited from executing any orders from non-qualified investors that increase their position in such securities from Jan. 1, 2023.

In a separate statement, the central bank extended restrictions on transfers abroad from the bank accounts of non-residents from unfriendly countries by another six months until April 1, 2023.

(Reporting by Elena Fabrichnaya and Alexander Marrow; editing by David Evans and Philippa Fletcher)

LONDON (Reuters) – The British government’s so-called mini budget was essential in helping reset the debate around growth, finance minister Kwasi Kwarteng said on Thursday, after nearly a week of chaos in financial markets triggered by its huge tax cuts.

“The mini budget was absolutely essential in resetting the debate around growth and focusing us on delivering much better growth outcomes,” he told reporters while on a visit to a local business in northern England, when asked if it had been an economic disaster.

(Reporting by Sachin Ravikumar, Editing by Kylie MacLellan)

By Francesco Canepa and Balazs Koranyi

VILNIUS/FRANKFURT (Reuters) – European Central Bank policymakers continued to line up behind another big interest rate hike as inflation is set to hit a new record high, but differed on whether it was time to think about mopping up cash from the economy.

The ECB has raised rates by a combined 125 basis points over its past two meetings and promised further increases as inflation rises towards 10% and longer-term expectations edge above its 2% target.

Strengthening the case for another 75-basis-point increase, regional inflation data across Germany on Thursday pointed to another surge in prices, suggesting that double digit inflation, the highest in around a half a century, is within reach for the currency bloc’s biggest economy.

“My choice would be 75 (basis points),” ECB policymaker Gediminas Simkus told Bloomberg TV on the sidelines of a conference in Vilnius. “I understand a couple of options may be on the table but 50 is the minimum.”

The Lithuanian governor also said the ECB should also start talks “as soon as possible” on reducing its balance sheet, a view echoed by his Estonian peer Madis Müller at the same event.

This would probably be done by not replacing some of the trillion euros’ worth of bonds the ECB bought over the past decade – when it was trying to raise price growth that was too low – as they mature.

But Portugal’s Mario Centeno and Spain’s Pablo Hernandez de Cos pushed back on that idea, fearing it would destabilise the bond market.

“Quantitative tightening could potentially cause market turmoil,” de Cos said in a speech in Bilbao. “This could imperil the policy normalisation path at a time in which all our efforts should be focused on it.”

While few governors ventured to estimate where interest rate hikes could end, de Cos said that models suggest a significantly lower terminal rate than markets now expect.

“On the basis of current information, the median terminal rate value across models is at 2.25%- 2.50%,” de Cos said.

Markets currently expect rates to hit 2% by the end of the year then rise to around 3% next spring.

De Cos also said that if the ECB started to run down its balance sheet sooner than markets now expect, that would lower the terminal rate, which suggests a trade off between rate hikes and balance sheet operations.

Rate hike talk is intensifying even as recession fears rise. The European Commission’s economic sentiment indicator out on Thursday fell more sharply than feared, reinforcing expectations that the bloc could be in recession by the fourth quarter.

Although the euro zone central bank’s next policy meeting is almost a month away, ECB policymakers Peter Kazimir and Robert Holzmann have both come out in favour of a 75 bps rate increase. Finland’s Olli Rehn listed 75 bps as one of the acceptable options and Estonia Madis Müller said that a significant step in the “same ballpark” as the previous two moves was needed.

The ECB has said it will keep on raising its 0.75% deposit rate at least until it hits the neutral or natural level, an undefined rate that no longer stimulates growth but does not restrict it.

While the neutral level is most often referred to as a range rather than an exact level, most economists and policymakers appear to put it in the 1.5% to 2% range.

(Additional reporting by Jesus Aguado and Emma Pinedo Gonzalez; Editing by Christian Schmollinger, Mark Potter, Catherine Evans, William Maclean)

By Huw Jones

LONDON (Reuters) – Britain’s Financial Conduct Authority (FCA) told banks and insurers on Thursday to do more to help customers struggling with a cost of living crisis as it investigates 40 banks for dragging their feet.

Interest rates are increasing to quell decades high inflation, with energy, mortgage and food bills also rising faster than wages.

Sheldon Mills, the watchdog’s head of competition and consumers, said that in May over nine million people had too much debt, up by two million since 2020.

“We’ve told lenders that we expect them to support struggling customers, particularly as they have the data to spot the warning signs first,” Mills told a City & Financial conference.

“We have identified 30 firms that need to do more to help struggling customers and will investigate the activities of 40 more,” Mills said.

“While we will intervene where we see bad practice, I know that the majority are doing the right thing.”

There was also a risk of people not renewing insurance policies to save money, leaving themselves unprotected.

“The last thing you want is your roof leaking or a flood and you have no insurance during a cost of living crisis when your mortgage is going up,” Mills said.

The FCA on Thursday wrote to heads of insurers, saying they should help to avoid policy cancellations or consider waiving policy cancellation fees.

Mills said the watchdog was holding weekly discussions internally on fallout from the cost of living crisis given that over two million people on variable rate mortgages are seeing immediate increases to their borrowing costs.

Over three million customers have fixed rate deals that are due to expire in the next two years, meaning they face a big hike in monthly payments.

“We are monitoring developments closely and will be working with industry to ensure that consumers are treated fairly during this period,” Mills said.

People with savings should see greater nominal returns due to higher rates.

Mills said the FCA expected banks to explain clearly to the watchdog how they decide on the pace at which they pass on rate increases to savers.

(Reporting by Huw Jones; Editing by Alison Williams and Mark Potter)

By Anna Ringstrom

STOCKHOLM (Reuters) – H&M, the world’s No.2 fashion retailer, launched a 2 billion Swedish crown ($177 million) cost savings drive on Thursday after reporting weaker-than-expected profits due to soaring input costs, slowing consumer spending and its exit from Russia.

In Europe, where H&M does the bulk of its business, the Ukraine conflict, record energy prices and high inflation are weighing on consumer confidence, and households are cutting back on spending as they brace for tougher times.

Pretax profit in the June-August period, the Swedish group’s fiscal third quarter, fell to 689 million crowns ($60.9 million) from 6.09 billion a year-earlier. Five analysts polled by Refinitiv had on average forecast a 2.98 billion crown profit.

The company did not give details of where it hoped to make cost savings, but said the benefits should be felt in the second half of 2023.

Its shares were down 3% in mid-morning trading, taking a year-to-date drop to 43%.

H&M said a 2.1 billion crown one-off cost for winding down its business in Russia, announced in July, accounted for only about half of the profit drop.

Earlier this month, the group reported lower-than-expected sales for the period as shoppers reined in spending in the face of soaring energy and other living costs, but said demand had improved late in the quarter.

The retailer said on Thursday a heatwave in many European markets in the summer and delays in the supply chain also weighed on sales.

Meanwhile, increased raw materials and freight prices, and a stronger U.S. dollar, resulted in substantial cost increases for purchases of goods.

“Overall, these factors had a substantial negative impact on profit for the quarter,” CEO Helena Helmersson said. “We have chosen not to fully compensate for the increased costs, which is reflected in the gross margin.”

Graphic: H&M vs rivals- https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnqonepq/Hennes.PNG

SEPTEMBER DEMAND PICKUP

“We note significant margin headwinds to come, particularly given the stronger USD relative to EUR, as well as higher energy costs and a loss of high margin Russian business,” Royal Bank of Canada analyst Richard Chamberlain said in a note to clients.

Market leader Inditex, the owner of Zara, which has been weathering the tough market conditions better than H&M, increased sales in its May-July quarter. The Spanish group’s growth, however, slowed in the Aug.1-Sept. 11 period.

H&M said its autumn collections had been well received, with sales up 7% year-on-year in local currencies from Sept. 1–27 – the start of its fiscal fourth quarter, against a 4% drop in the third quarter.

Helmersson told analysts markets that had been weak in the quarter, such as central Europe, had picked up in September.

Analysts at Credit Suisse said: “Despite modest expectations, profitability in 3Q was significantly worse than expected and the outlook for margins over the next year continues to deteriorate,” they said, adding that they expect demand to soften in the rest of the year from the first half as inflationary pressures squeeze shoppers.

($1 = 11.3104 Swedish crowns)

(Reporting by Marie Mannes in Gdansk, Anna Ringstrom in Stockholm; Editing by Terje Solsvik, Mark Potter and Jane Merriman)

FRANKFURT (Reuters) – Porsche AG Chief Executive Oliver Blume rang the bell and hugged colleagues on what he called the “historic moment” of the luxury car brand listing on Thursday after Germany’s biggest initial public offering (IPO) in more than 25 years.

Porsche Chief Financial Officer Lutz Meschke added that the company had proven it could succeed in challenging market circumstances.

(Reporting by Victoria Waldersee; writing by Matthias Williams; Editing by Miranda Murray)

By Anna Pruchnicka

(Reuters) – Poland’s biggest e-commerce company Allegro trimmed its full-year guidance on Thursday for the second time this year, as it anticipates high inflation could lower demand.

The wider retail sector had warned of a decline in discretionary purchases as consumers save for essentials and inflation surges across Europe, reaching a 25-year-high in Poland.

Allegro also put its mid-term expectations under review pending analysis of the impact of the current performance and said there was a risk high prices would reduce consumer spending over the peak Christmas period.

“With the prospect of a significantly more challenging environment driven by high inflation and the rising costs of living, we are putting increasingly more focus on cost efficiency on our side,” Roy Perticucci, who took over from Francois Nuyts as Allegro’s CEO, said in a statement.

Allegro expects year-on-year revenue growth for its core Polish market of 23%-26% compared to 25%-30% previously, and that adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) will rise by 10%-12% versus a previous range of 10%-15%.

Including Mall group, which it acquired in April, Allegro sees adjusted EBITDA rising 2%-6% compared to its earlier guidance of 4%-11%.

Polish inflation was 16.1% in August, statistics office data showed and some economists say the combination of high prices and economic slowdown could tip the country into recession.

Allegro’s second-quarter revenue and adjusted EBITDA was in line with preliminary results announced last month at 2.21 billion zlotys ($445.03 million) and 484.1 million zlotys, respectively.

Allegro said weaker than expected consumer demand reduced gross merchandise value (GMV) and margins at Mall Group.

It said it was working to stabilize margins at Mall’s loss-making first-party business, while preparing its third-party marketplace for commercial roll-out in the Czech Republic.

Allegro expects Mall’s adjusted EBITDA loss to be 120-160 million zlotys this year.

($1 = 4.9660 zlotys)

(Reporting by Anna Pruchnicka; editing by Barbara Lewis)