Monday, May 2, 2011

impact Osama bin Laden's death on stock markets, Oil and gas

impact Osama bin Laden's death on stock markets, Oil and gas - news of bin Laden's death, Market reaction : The death of al-Qaida leader Osama bin Laden has helped lift the mood in the markets all around the world Monday at the start of an extremely busy week of economic news.

President Barack Obama's announcement that the man who inspired the deadly Sept. 11, 2001, terror attacks in the United States had been killed in an operation by special forces in Pakistan, prompted an increase in investors' appetite for risk. That usually benefits assets like stocks but dents widely-considered financial safe havens, such as gold.

"The immediate impact of Osama's death has been a boost to risk appetite although the U.S. has also issued a travel alert because of 'enhanced potential for anti-American violence,'" said Philip Marey, an analyst at Rabobank International.

However, due to holidays in Britain, China, Hong Kong, Malaysia, Singapore and Thailand, the reaction hasn't been too substantial.

In Europe, the CAC-40 in France was 0.4 percent higher at 4,122 while Germany's DAX rose 0.8 percent to 7,574, with airlines, such as Air France-KLM SA and Lufthansa AG, doing particularly well.

Wall Street was poised for a bright opening too later — Dow futures were up 0.7 percent at 12,842 while the broader Standard & Poor's 500 futures rose 0.7 percent to 1,368.

Despite the knee-jerk response to news of bin Laden's death, analysts said the markets will soon turn towards more fundamental matters for their direction, such as the state of the global economic recovery and how central banks respond to the threat of higher inflation.

Though bin Laden's death may have a beneficial short-term impact on U.S. consumer confidence, Rabobank's Marey said the main reasons for low confidence have not disappeared — unemployment is still high and so are gasoline prices

The coming week is awash with key economic developments that could have a huge bearing on all types of markets in the run-up to summer.

In the U.S., a run of economic data, which begins later with the monthly manufacturing survey from the Institute for Supply Management, culminates on Friday with the April nonfarm payrolls data from the U.S. government. That often sets the tone in markets for a week or two after their release.

In Europe, investors will be keeping a close watch on interest rate decisions from the European Central Bank and the Bank of England. Neither is expected to change interest rates though the ECB is tipped to indicate that it will follow up April's first interest rate increase in nearly three years with another rise in June.

Figures earlier reinforced market expectations that the ECB will sound a hawkish tone on Thursday.

The monthly manufacturing purchasing managers' index — a broad gauge of activity — for the 17 countries that use the euro was revised up to 58 in April from the initial estimate of 57.7 — April's reading indicated that the sector was enjoying its second-strongest monthly pace of expansion since August 2000.

"The survey reinforces belief that the ECB will pull the interest rate trigger sooner rather than later," said Howard Archer, chief European economist at IHS Global Insight.

That belief has helped bolster the euro currency over the past couple of months despite ongoing debt problems across the eurozone, most notably in Greece, Ireland and Portugal.

It has also helped shore up the currency against the dollar Monday, even though the U.S. currency has been supported elsewhere by the news of bin Laden's death. By mid morning London time, the euro was 0.2 percent higher at $1.4827 while the dollar was 0.4 percent firmer at 81.55 yen.

Elsewhere, oil prices eased off 2 1/2-year highs to below $113 a barrel. Benchmark crude for June delivery was down $1.40 at $112.53 a barrel in electronic trading on the New York Mercantile Exchange. Meanwhile, an ounce of gold was down 0.3 percent at $1,551, down from an earlier record of just above $1,575 an ounce.

impact Osama bin Laden's death Oil and gas tax hike rethink urged

The Government was today urged to rethink its oil and gas tax hike amid concerns that the move could hasten the demise of UK production.

Energy company Centrica warned that it may shut down one of its major gas fields permanently because of the tax hike, while industry body Oil & Gas UK said North Sea oil platforms could be taken out of service prematurely because of fears over the cost of decommissioning them.

Centrica, which owns British Gas, has warned that it may not reopen one of three fields in Morecambe Bay which it is closing for maintenance, after Chancellor George Osborne increased the supplementary tax on oil and gas production from 20% to 32% in this year's Budget.

The group warned that UK oil and gas producers now faced some of the highest taxes in the world, making profits on the sites marginal.

The tax increase, which will raise the Chancellor an additional £1.8 billion, is particularly significant for mature fields, as profits on these will be taxed at 81%.

Centrica has closed the Morecambe Bay North and Rivers gas fields for about four weeks' planned maintenance.

The South Morecambe field has also been shut for an unspecified period of work, and it is this field which may not be reopened.

Instead, Centrica said it may look to buy gas for its customers on the wholesale markets, which could work out cheaper than re-starting the field.

A Centrica spokesman said: "Following the increase in supplementary corporation tax in the Budget, UK oil and gas producing fields are now subject to some of the highest levels of tax in the world - our South Morecambe field is now taxed at 81%.

"At these higher tax rates, Morecambe's profitability can be marginal.

"Accordingly, we may choose to buy gas for our customers in the wholesale markets in preference to restarting the field after planned maintenance."

Morecambe Bay produces around 6% of the UK's annual gas requirements, and 12% of residential gas demand.

The company uses the field to ensure the UK has gas when it needs it, such as during the winter, when imported gas is very expensive.

Meanwhile, Oil & Gas UK warned that North Sea oil platforms could be taken out of service prematurely because of fears over how much it will cost the industry to decommission them.

Decommissioning the platforms costs companies around £29 billion, but they have previously been able to re-claim some of the cost as tax relief.

However, firms will not be able to claim back the recent increase in the supplementary tax against these decommissioning costs.

Malcolm Webb, chief executive of UK Oil & Gas, said oil companies may begin to decommission their platforms sooner than previously planned in case tax relief falls further.

Mr Webb, who is due to appear before the Treasury Select Committee this week, added that companies feared that there could be a repeat of the windfall tax, given the level of profits they are making from surging oil prices.

He told the Times newspaper: "There must be a danger that the uncertainty as to what's going to be covered by this relief may persuade some people to decommission rigs now."
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