By Kate Abnett

BRUSSELS (Reuters) -The European Union could introduce a gas price cap this winter to limit excessive price spikes, but only if countries give Brussels a mandate to propose the measure, the bloc’s energy chief said on Wednesday.

After months of high gas prices driven by Russia slashing supplies, the 27-country EU is considering whether to cap prices – although with countries still split over the idea after weeks of talks, Brussels has not yet made a formal proposal to make it happen.

The European Commission said last week it could make a legal proposal for a temporary “dynamic” cap on the Dutch Title Transfer Facility (TTF) gas exchange, if EU countries asked for such a proposal.

EU energy commissioner Kadri Simson said it would still be possible to have that cap in time for winter. The Commission has said the price limit would be designed to kick in as a “last resort measure” if prices spike.

“This Dutch TTF gas benchmark cap, we can introduce this winter already if we get the mandate,” Simson told a committee of EU lawmakers.

EU countries could provide that mandate at an emergency meeting of EU energy ministers on Nov. 24, when they will decide whether to ask Brussels to propose the cap.

But a consensus on the idea appeared elusive when energy ministers met on Tuesday, with countries still split.

Germany leads a small group of states opposed to price caps, warning that limiting the price companies can pay for gas could compromise their ability to buy enough fuel as Europe heads into winter with scarce Russian supplies.

Italy, Belgium, Poland and 12 other states want an EU-wide price cap, citing the inflationary pressure that recent gas price spikes have unleashed on their economies.

Uusually, a reinforced majority of 15 ministers from EU countries would be able to pass the measure. But German chancellor Olaf Scholz said last week that the ministers’ decision would be “unanimous” – suggesting one country would be able to block it.

(Reporting by Kate Abnett, Charlotte Van Campenhout; Editing by Emelia Sithole-Matarise)

By Karen Freifeld

(Reuters) -Seagate Technology Holdings said in a filing on Wednesday the U.S. government has warned the company that it may have violated export control laws by providing hard disk drives to a customer that a source familiar with the situation identified as Huawei Technologies.

Reuters was the first to report the disclosure on Wednesday and to identify Huawei as the customer. Huawei is on the U.S. Commerce Department’s entity list and banned from receiving U.S. exports and certain foreign-made items without government approval.

Seagate was warned in a “proposed charging letter” it received from the Commerce Department on Aug. 29, according to the filing with the U.S. Securities and Exchange Commission.

The filing said the company’s position is that the hard disk drives are not subject to the U.S. export regulations, and that it did not engage in prohibited conduct as alleged by the Commerce Department.

Seagate’s filing did not identify the customer. Seagate paused its shipments to Huawei a year ago, said the source familiar with the matter.

The Commerce Department declined comment on any potential pending enforcement matters but a spokesperson said the department is committed to “fully investigating any allegation of violations” of the rule restricting certain foreign-made items, adding that it “aggressively pursues criminal and civil actions related to unauthorized exports to China.”

A spokeswoman for Huawei had no immediate comment. The Chinese telecommunications equipment maker was placed on the entity list in 2019 for activities deemed contrary to U.S. national security.

Seagate, a Dublin-based company that also operates in California, said it was cooperating with the Commerce Department and sought to resolve the matter.

The products at issue were provided to the entity listed customer and its affiliates between August 2020 and September 2021, according to the disclosure.

The company said the timing of any final outcome is unclear, as are the terms. It also could not estimate the range of loss or penalty, although it said a material impact on the business was possible.

The company could face civil penalties of up to $300,000 per violation or twice the value of the transaction, whichever is greater, for administrative charges.

The company hopes to make its case in an upcoming meeting with the Commerce Department, the source said. It sent an initial response to the letter in late September and filed more information this week.

Seagate’s shares were down 11 percent early Wednesday after the company reported financial results and disclosed the warning over the alleged export violations.

At issue is a U.S. regulation that governs the way certain foreign-made items destined for Huawei become subject to U.S. export regulations.

The Foreign Direct Product Rule, as revised in August 2020, restricts companies from shipping items made outside the United States to Huawei if they are the direct product of certain U.S. technology or software, or produced by essential equipment that is the direct product of U.S.-origin software or technology. Such shipments can only be made with a U.S. license.

The rule was designed to cut the global supply of semiconductors to Huawei.

Seagate’s view is that its foreign-made hard drives are not subject to the restriction, the source told Reuters, because they are neither the direct product of any U.S. semiconductor technology or software nor of any equipment that itself is the direct product of any U.S. semiconductor technology or software.

However, the source said, the Commerce Department’s proposed charges are based on an interpretation that foreign-made items are subject to the rule if equipment that is the direct product of U.S. semiconductor technology or software was used to produce any component of the end-item, no matter how far removed in the production process.

The hard disk drives are made in China and Thailand and also do not have enough U.S. content to make them subject to U.S. export rules, the source said.

The company has not applied for U.S. licenses for the hard disk drives but has applied for licenses for other items when it determined they were required, the source added.

Republicans on the U.S. Senate Commerce Committee issued a report last October that found that Seagate had likely shipped restricted products to Huawei for as long as a year, giving it a competitive advantage over Toshiba and Western Digital, the other primary suppliers of hard disk drives, who said they had ceased shipments to Huawei after the new rule took effect in 2020.

Western Digital told Reuters in May 2021 it had stopped shipping to Huawei in September 2020 and applied for a license, which was pending. The company did not respond to requests for an update and comment.

Toshiba also did not respond to requests for comment.

(Reporting by Karen Freifeld; Editing by Chris Sanders and Howard Goller)

By David Shepardson

(Reuters) -Ford Motor Co said on Wednesday it would exit Russia, the latest automaker to leave in the aftermath of Russia’s invasion of Ukraine.

Mercedes-Benz also on Wednesday said it would withdraw from the Russian market and sell shares in its industrial and financial services subsidiaries to a local investor.

Ford said it has finalized a deal to sell its 49% stake in the Russia-based Sollers Ford joint venture for a “nominal” undisclosed price.

The U.S. automaker took a $122 million writedown connected to its suspension of Russian operations earlier this year but will not take additional writedowns in connection with Wednesday’s announcement, the company said.

“Ford shares will be transferred to the Joint Venture for a nominal value,” the company said, adding that it retains the option to buy them back within a 5-year period “should the global situation change.”

Ford sold around 20,000 vehicles in Russia in 2021, according to analyst estimates. It announced a suspension of its operations in Russia in March.

Ford in 2019 said the joint venture was closing two assembly plants and an engine factory in Russia, exiting the country’s passenger vehicle market. Ford restructured its investment in Russia in 2019 and ceded control the venture to Sollers.

Ford follows U.S. companies including Cisco Systems Inc and Nike Inc in announcing an exit from Russia, after Western countries imposed sanctions on Moscow over its invasion of Ukraine, making it nearly impossible for manufacturers to do business there.

(Reporting by Abhijith Ganapavaram in Bengaluru and David Shepardson in Washington; Editing by Vinay Dwivedi and Bill Berkrot)

By William James and Sachin Ravikumar

LONDON (Reuters) – Britain’s new Prime Minister Rishi Sunak on Wednesday delayed the announcement of a keenly awaited plan for repairing the country’s public finances until Nov. 17, two-and-a-half weeks later than previously planned.

The postponement, Sunak’s first policy decision since taking over from Liz Truss on Tuesday, briefly raised British borrowing costs in financial markets but there was no repeat of the panic bond selling caused by Truss’s September tax-cutting plan.

Sunak takes on an economy facing recession at a time when the Bank of England is raising interest rates to tame double-digit inflation. Low growth and rising borrowing costs have worsened the strain on already-stretched public finances.

The government is drawing up spending cuts and cancelling tax cuts just as the rising cost of mortgages, food, fuel and heating is squeezing many household budgets to their limits.

“I have been honest. We will have to take difficult decisions to restore economic stability and confidence,” Sunak told parliament, promising to protect the most vulnerable.

“The Chancellor (Jeremy Hunt) will set that out in an autumn statement in just a few weeks.”

Finance minister Hunt said more time was needed to ensure the new plan took into account new economic forecasts.

It is expected to set out how the government will plug a budget shortfall of as much as 40 billion pounds ($46 billion). Unlike Truss’s plan last month, it will be fully audited by Britain’s fiscal watchdog.

Asked to confirm the government’s commitment to an expensive inflation-pegged rise in retirement pensions, Sunak’s press secretary said she would not speculate ahead of Nov. 17.

His team gave the same answer on other potentially costly spending decisions on foreign aid, defence and welfare payments.

CREDIBILITY HIT

Britain’s credibility in financial markets was shaken last month when Truss announced her unfunded tax cuts, triggering a bond market rout so severe the BoE had to intervene. Truss was forced into a U-turn and eventually resigned.

Hunt said he wanted to restore confidence “that the United Kingdom is a country that pays its way and for that reason, the medium-term fiscal plan is extremely important. The plan would show falling over the medium term, he added.

The budget plan delay will complicate the BoE’s job next week when it is due to publish forecasts for the economy without knowing the details of the government’s fiscal plans, as well as take its latest monetary policy decision.

The BoE is expected to raise interest rates again on Nov. 3, probably to 3.0% from 2.25% although investors increased their bets on a full percentage-point increase to a more than one-in-three chance after the announcement of the budget plan delay.

Hunt said he had discussed the decision to delay the fiscal statement with BoE Governor Andrew Bailey, and that Bailey had understood.

While finance minister during the COVID-19 pandemic, Sunak oversaw huge expenditure and borrowing to keep the economy going. He resigned in July in protest at then-prime minister Boris Johnson’s leadership and what he saw as a reluctance to take difficult decisions to pay the pandemic bill.

His appointment as Conservative Party leader was broadly welcomed by investors who see him and Hunt as more willing than Truss to tackle the hole in Britain’s public finances.

British government bond prices extended their losses on confirmation of the budget plan delay. Long-dated gilt yields hit new session highs as they rose 12-13 basis points before easing back and being little changed on the day.

Sterling was also little changed by the announcement.

Speaking earlier on Wednesday, International Monetary Fund chief Kristalina Georgieva told Reuters she expected Sunak to steer Britain towards fiscal sustainability and said he was right to warn of hard decisions ahead.

“I listened carefully to him talking to the British people, and this is a message that should resonate across the world. These are tough times, and tough times require tough decisions,” Georgieva said.

(Reporting by William James, Sachin Ravikumar, Andy Bruce and Alistair Smout, additional reporting by Christian Kraemer in Berlin; Editing by William Schomberg and Hugh Lawson)

By Gwladys Fouche

OSLO (Reuters) -Norwegian Air shares rose on Wednesday after reporting an increase in third-quarter net profit boosted by recovery from the pandemic and a pilot strike at rival SAS, but said it would reduce capacity by a quarter during winter.

Norwegian, which came close to collapse when the pandemic broke out in 2020, posted quarterly revenue of 7.1 billion crowns ($688 million), the highest of any quarter since the final three months of 2019, according to Refinitiv Eikon data.

Net profit for the three-months ending Sept. 30 rose to 910 million crowns ($87.57 million) from a year-ago profit of 169 million, Norwegian said.

Norwegian Air shares were up 8.5% at 0912 GMT, beating a flat Oslo benchmark index, though share are still down 17% over the past year, lagging a benchmark down by 6% over the same period.

The airline will reduce its capacity by a quarter in winter, when demand is usually lower, by not using the planes it is leasing, and will closely follow how cash-strapped consumers behave in the first quarter.

“We have a flexibility with our fleet that means we can reduce our capacity by up to 30%,” Chief Executive Officer Geir Karlsen told Reuters. “We can leave planes on the ground, we can make them fly less.”

Smaller Norway-based rival Flyr on Oct. 4 said it would implement heavy spending cuts to preserve cash during the winter season, reducing the number of flights due to weak demand.

Pilots at main Nordic rival SAS went on a two-week strike in July, boosting Norwegian’s bookings at the height of the region’s summer travel.

While booking levels were so far “good”, said Karlsen, consumers tended to book closer to the time of their departure than they used to in the past, making it harder to anticipate demand.

To cope, Norwegian was putting more cash aside and had 8.2 billion crowns available at the end of the third quarter, up from 7.5 billion at the end of the second.

Cost-wise, Norwegian said it was adversely impacted by the strong US dollar, affecting services it buys such as technical maintenance.

To counter rising fuel costs, Norwegian has started to hedge up to 5% of its 2023 expected costs, and planned to do more, Chief Financial Officer Hans-Joergen Wibstad told the presentation.

($1 = 10.3139 Norwegian crowns)

(Reporting by Gwladys Fouche; Editing by Terje Solsvik and Mike Harrison)

By Julie Gordon and David Ljunggren

OTTAWA (Reuters) -The Bank of Canada announced a smaller-than-expected interest rate hike on Wednesday and said it was getting closer to the point where rate hikes could end, as it forecast the economy could possibly slip into a slight recession.

The central bank increased its policy rate by half a percentage point to 3.75%, coming up short on calls for another 75 basis points move. It has lifted rates by 350 basis points since March, one of its fastest tightening cycles ever.

“This tightening phase will draw to a close. We are getting closer, but we are not there yet,” Governor Tiff Macklem said in prepared remarks ahead of a news conference.

How much higher rates need to go “will depend on how monetary policy is working to slow demand, how supply challenges are resolving and how inflation and inflation expectations are responding,” he said.

Macklem added that the central bank was still far from its goal of low, stable and predictable inflation at 2%, but was trying to balance the risks of under- and over-tightening.

Canada’s economic growth will stall later this year and early next year, the bank said earlier as it updated its quarterly forecasts, which “suggests that a couple of quarters with growth slightly below zero is just as likely as a couple of quarters with small positive growth.”

A technical recession, two consecutive quarters of negative growth, is possible between the fourth quarter of 2022 and the end of the second quarter of 2023, the forecasts show.

That darkening outlook likely guided the decision to challenge market pricing with a smaller move, said analysts, noting that while warnings of future hikes take the edge off the surprise, the Bank of Canada may be getting more cautious.

“We have several indicators suggesting that we’re playing with fire if we think we can follow the (U.S. Federal Reserve) all the way up to 5% or so,” said Jimmy Jean, chief economist at Desjardins Group.

Inflation in Canada has slowed to 6.9% in September from a peak of 8.1% in June, but core measures remain broad-based and persistent. The central bank revised downward its inflation outlook a touch on lower commodity prices and easing supply chain disruptions.

“Inflation is expected to return to the top of the 1%-3% control range by the end of 2023 and to the 2% target by the end of 2024,” it said.

The Canadian dollar was trading 0.3% higher at 1.3560 to the greenback, or 73.75 U.S. cents.

Money markets now see interest rates peaking between 4.0% and 4.25% in the coming months, down from nearly 4.5% before the announcement.

(Additional reporting by Ismail Shakil in Ottawa and Fergal Smith in Toronto; Editing by Nick Zieminski and Jonathan Oatis)