The U.S. Wants Answers on Russian Lab Death

[MUSIC PLAYING] Washington demands answers from Moscow about a mysterious laboratory death in Siberia. Plus, Shell's refining margin hits a new record as the closure of Middle Eastern refineries boosts its bottom line. And we'll look at how rising rates are scuttling a rising number of commercial real estate deals. What we're seeing broadly is a reduction in value of commercial property. And that's for the bad for a wide range of businesses and governments. It's Wednesday, October 7. I'm Luke Farkis for the Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today. The US is dialing up the pressure on Russia to share more details about the death of a lab worker at a plague research center in Siberia. We report that Russia has thus far provided the US with little information about the episode, stirring fears that an infectious disease could spread inside Russia and beyond its borders. Here was Secretary of State Marco Rubio yesterday. And more we can learn about what happened. Then the better all of us can be in a position of responding. And maybe there's nothing there. And maybe it's bigger than we thought we don't know. But I think it would be reckless at this moment, given the limit information we still have, to speculate about what this might or might not be or what this is or what this isn't. The journals, Russia, Bureau Chief Thomas Grove told me what we know and don't know at this point about the incident. So what the authorities have said so far is that a lab worker in Siberia died of pneumonia from an unknown cause. They don't know exactly what pathogen it was that infected her. And the governor of the region has also said that in the laboratory analysis of the woman's body, they didn't find any microorganisms, quote unquote, connected to her professional activities. Now she did work in an anti-plague research institute. And I think they're trying to calm people's nerves that it's not the plague. Because people's nerves had risen quite a lot earlier, due to unconferring media reports saying that it was indeed the plague that had killed this woman, that there had been government warnings not to travel into the area where she'd been hospitalized because of that very reason. Those statements have been since been retracted and taken down online. And so there's a real sense of confusion right now. Thomas, President Trump has told reporters that he has a call scheduled with Vladimir Putin soon and that he should be able to share more information today. I'm curious, what should we be watching for in the coming days, specifically around this question of whether this lab worker may have been killed by the pneumonic plague? - First and foremost, pneumatic plague is extremely serious. And it's almost always fatal. The treatment isn't administered within the first 24 hours of the first symptoms. It's a very scary disease. And it really is catching people's attention around the world right now. On the other hand, however, silver lining is that it has a very short incubation period. And that means that within one to three days of catching the plague, that person will fall ill. They can't run around for a week. They did with coronavirus and infect other people. So if we're not seeing other people coming down with the same illness and or dying in the next several days, that most likely means that we've avoided an epidemic in Russia or a potential pandemic. - It was a journal's Thomas Grove. - Turning to Tennessee now, death row inmate Christa Pike is conscious in speaking after surviving a botched execution attempt last week. According to her attorney's Pike is shackled and handcuffed to the bed at the hospital where she's being treated, and her prognosis is unclear. After Pike was given two sedative doses, that at least 17 states use for capital punishment. Officers called off the execution and sent Pike to the hospital because she was still alive. As pharmaceutical companies no longer provide drugs for executions, US states are turning to loosely regulated alternatives and experts warn these unverified sources make lethal injection far less reliable. The Tennessee Department of Correction said they followed established protocol but declined to answer questions on where the drug was sourced. Tennessee Governor Bill Lee has halted executions in the state in order to third party review to determine what happened. And returning overseas again, France's government is preparing to bypass parliament using special constitutional powers to force through nearly $50 billion in spending cuts that have sparked violent protests nationwide. Our Paris Bureau chief, Stacey Mitrie, spoke to finance minister Roland Lesquieu. - If you use that clause, then lawmakers have the option of calling a no confidence vote that if it passes, what else the government and effectively kill the bill. So that approach carries some risks. But the finance minister told us there's also sort of a plan B and passed the budget measures, the cuts using executive orders essentially. I mean, now what we're gonna see is all the different parties making demands. And so the bill could change shape, but as far as the finance minister's concern, I mean, the one thing that he refuses to negotiate over is its target. You know, the 5% budget deficit target is intended to prove to markets or at least signal to markets that France is finally getting serious about raining and it's spending. And if it doesn't, what we're gonna see over the next few years is, you know, really like a takeoff in France's debt levels. The country has a mountain of debt to refinance over the next few years, a trillion euros by the end of the decade. And if they're refinancing that debt at current borrowing costs, that's just gonna be a huge financial burden on the French government, no matter who's elected in the spring. - US stock futures are hovering near all time highs. A day after an AI rally powered the S&P 500 and the NASDAQ to record closes. Meanwhile, Treasury yields are inching higher this morning as investors await the 2 p.m. Eastern release of minutes from the Fed's most recent meeting. Investors will be looking for signs about how the central bank is thinking about the risk of inflation and the need for further interest rate hikes. Speaking of which, India's central bank today raised rates by 25 basis points to 5.5% for the first time in four years. That comes as the surge in energy prices caused by fighting in the Middle East is putting pressure on India's economy after a period of strong growth. The Reserve Bank of India said that the outlook for more hikes will depend on economic growth and inflation. Today's move echoes, hikes in Australia, Japan and the US in recent months as central bankers look to rein in, runaway inflation. And while high energy prices are bad news for consumers, for some businesses, they're proving to be a real boon. Case in point, oil major Shell said today that it expects its third quarter refining margins to hit a record of $42 a barrel from just $24 in Q2. Adam Whitaker covers energy companies for the journal and Dow Jones newswires. The projection for Shell's third quarter refining margin far exceeds its previous record. And it's been fueled by soaring demand for diesel and jet fuel despite way of comparison after Russia invaded Ukraine, the margin and the record margin price today was $28 a barrel. So this is a huge jump. The conflicts in the Middle East has wiped out several large refineries. Before the conflict began, 20% of the cargo so were exiting the straight up for moves were refined products like jet fuel and diesel. And while crude oil has returned the market from the region, the refined products haven. So for those that are able to continue producing outside the Middle East, this is producing huge profits that are flowing through to the bottom line of the company. Shell is one of the first majors to give a trading update for the third quarter, so we'd expect these numbers to be replicated across the energy sector for those that do have the refining capacity. Coming up how higher mortgage rates are impacting commercial real estate, and we'll look at a cohort of influencers on a mission to stop people paying their medical bills after the break. Just as high rates are straining many residential mortgages, they're now blowing up a number of commercial real estate deals as well as our Peter Grant reports. Peter, will the financial struggles that you've been reporting on in commercial real estate look familiar to individual homeowners or are there some specifics of what's going on in the CRA world that make what's happening there that unique? Well, it's really a little bit of both. On one hand, the deals evolve in similar ways. You agree with a seller on a price, you go out and try to figure out how much it's going to cost you in terms of financing, and then you move along to a closing. What happens with both residential and commercial is the buyer of these properties is realizing when they go to the closing that rates are a lot higher than they were when they initially agreed on the price. But lots of times it plays out differently. One of the reasons it plays out differently in the residential is usually when you agree on a price, you put down hard money. And if you want to change in price, the seller isn't going to do it. They're just going to say, okay, why have your deposit goodbye? In commercial, it's more of a business. It's more of a negotiation. Yes, sometimes the buyer does put down hard money when they sign the contract, but by the time they reach a closing, the seller is very motivated to sell and might even negotiate reducing the deposit or saying, yes, we can talk about reducing the price because we really want to sell this because we can see what's happening with interest rates too. Yeah, I bet so take us into a few details if you could about where you're seeing this play out most vividly. Right, this due diligence period typically lasts a lot longer in commercial because you have to do a deeper dive into the property. And during these periods interest rates can go up. And earlier this year, interest rates really weren't that much of a concern because they were headed south. But now they've gone up and they might go up further. And so it is much more of a factor in these negotiations. For example, there's a company called Eastham Capital. They were about to pay $20 million for this 200-unit apartment property in the Midwest. They agreed to the price. And then six weeks later, the rates were up. And the numbers just didn't work for them. Fortunately, for Eastham, they didn't have any hard money down. So they went to the seller and said, "Look, we're going to walk away unless he gives us a reduction on price." And they were able to get a reduction of price of about $600,000. And then Peter, when one of these deals starts to break down as you report, it has a quite wide ripple effect across other sectors beyond just the properties involved. Absolutely. And that's sort of bad for a wide range of businesses and governments that go far beyond commercial real estate. And think about it. A lot of cities depend highly on commercial property values for their tax collections. And if the values go down, the collections go down. Also, developers look very closely at interest rates when they're trying to determine whether or not to build or not. And obviously, when you develop that benefits architects, of benefits, construction companies, it benefits a wide range of businesses. And the developers are looking at these numbers a lot more closely. So we could see us slow down in development. And that could have a ripple effect through the entire economy. Is that the consensus? Peter, I'm curious about the outlook here, because if we are just in the early innings of a pronounced slowdown for this sector, that would be quite a reversal because things have been recovering pretty nicely in recent years. That's absolutely true. Office, which was just completely clobbered by the pandemic, is beginning to come back. More people are going to work. People had sort of written off the entire retail sector because of online shopping, but actually malls are doing pretty well. And the most positive sign of all in commercial real estate is the decline in rates, because commercial property is so interest rate sensitive. So for all those reasons, people weren't necessarily opening up the champagne, but they were beginning to put it on ice. But now these headwinds of higher rates have begun to hit. And they're hitting on a wide range of levels. And I think one of the levels of most concern is the fact that there has been a lot of troubled debt that lenders have been keeping on their books in hopes that rates would go down. Because a lot of loans were made when rates were way, way, way low. And they're coming up for refinancing. And it's really tough to do to refinance property at a higher interest rate. So the lenders have been doing a little game, which has been called extended pretend. In other words, they keep extending these loans. But there's a point at which they just can't keep extending them. And we are beginning to see to link when fees and the faults go up. And that's a really concerning sign. And that could be a bigger problem than the kind that we're seeing right now with just people walking away from deals. Peter Grant is a commercial real estate reporter for the journal based in New York, Peter Fascinating Stuff. Thanks for bringing us this story. My pleasure. And finally, as medical costs continue to explode in the US, so too have posts from influencers sharing tips on how to cut your bill and even encouraging people to think twice before paying. My hospital bill is $20,000. I got four stitches. Yeah, it is. Welcome to America, babe. Health care is pricey here. Wait, stop. You know, you don't have to actually pay that, right? What do you mean? They could take 25% off my bill and then it would be gone. So I guess the moral of the story is let your medical bills go to a debt collector because then they'll just cut it down. We recently gave birth at a hospital like I did and started to get all the bills in the mail during the op-panion until you've done this. The social media trend comes as millions of Americans have dropped their affordable care act plans after the end of subsidies sharply drove up costs. And as those with insurance opt for plans with higher deductibles in response to rising patient debt and more unpaid bills, hospitals are increasingly asking patients to foot the bill ahead of medical procedures. And that's it for what's news for this Wednesday morning. Today's show was produced by Hattie Moyer and Daniel Bach. Our supervising producer is Sandra Killhoff and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.