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Today's markets: Russia to the rescue, Shell earnings blown off course & more

Shares in London have staged a solid fightback
Today's markets: Russia to the rescue, Shell earnings blown off course & more
  • Russian intervention cools gas markets
  • Mondi avoids worst of inflationary pressures
  • Shell earnings take hit from Hurricane Ida

Russia to the rescue

Few would have suggested Vladimir Putin as the saviour of the west’s investors but Russia’s intervention in the gas markets yesterday certainly saved a few fingers from getting very burnt. Some may argue that Russia has not been entirely blameless in the whole gas prices farrago of the past few weeks but certainly yesterday’s intervention was welcomed by markets as the gas price stabilised. 

This is what Neil Wilson of Markets.com had to say about it: Natural gas was the big story as prices spiked out of control in Europe/UK. US Henry Hub prices did reach a new multi-year high before reversing, apparently on comments from Vladimir Putin who said Russia would seek to stabilise the market and pump more gas. There is a lot going on there – political machinations aplenty and questions over whether much of the problems in the market have been Russia’s doing in the first place (weaponization of gas), but it did seem to cool the market. Prices are down 15% from yesterday’s $6.46 peak and now testing lowest in a week around $5.50 and possible bearish MACD crossover in the offing could signal a top.

For Neil’s full market outlook, click here. 

High demand helps Mondi sidestep inflationary pressures

For evidence of inflationary pressures, look no further than the third quarter trading update  from Mondi (MNDI). The paper and packaging company is feeling the heat from rising prices for energy, resins, transport and chemicals. Management expects prices to remain high in the final quarter, with the cost of energy forecast to prove especially challenging. 

Good thing that demand for packaging material remains high. In the third quarter underlying earnings before interest tax depreciation and amortisation (EBITDA) rose 27 per cent to €388m. That’s also a 9 per cent improvement on the second quarter, suggesting trends acquired during lockdown remain in full flow. 

Management plans to offset some of the inflationary pressures with price increases in the final quarter, but with demand still strong, the outlook remains encouraging. 

Read more: Materials shortages slow building boom

Another blow for Simec Atlantis Energy 

Hot off a heavily discounted fundraising and disappointing set of financial results, Atlantis Energy’s investors have been dealt another blow, this time by the Welsh Government. The company has learned that the independent organisation Natural Resources Wales has been blocked from making a determination on its Uskmouth green energy project. After more than a year of conversations with the NRW, the final decision is now being left in the hands of the Welsh Government who have indicated that further delays are likely. Atlantis’ share price flopped 30 per cent in early trading in response to the announcement. 

The company’s share price has been under pressure since the collapse of Greensill Capital from whom the owner of the company’s largest shareholder - Sanjeev Gupta’s GFG Alliance - had borrowed money. 

Ida hits Shell Q3 earnings

Royal Dutch Shell (RDSB) said the knock on production from Hurricane Ida in the US would take some of the shine from its September quarter numbers, with a $400m (£295m) impact on adjusted earnings. This will largely be through the upstream division because of a reduction in production, but $100m will come off the chemicals division’s adjusted earnings as well. Hurricane Ida hit the Gulf of Mexico at the end of August, knocking out key energy infrastructure. 

Shell also said in the trading update earnings were “not expected to be significantly impacted by the prevailing strong gas price environment”. In the June quarter, adjusted earnings had largely recovered from the weak 2020 performance, hitting $5.5bn from just $638m the year before. 

Consensus estimates compiled by FactSet see adjusted earnings falling slightly in the September quarter compared to June, to $5.3bn. AH

Read more: 

Shell remains cautious even as returns return