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Stocks and precious metals are rising; the yen is on watch
Asia shares and precious metals rose on Tuesday, as investors continued to buy ahead of the upcoming holidays. A reading on U.S. Gross Domestic Product (GDP) is expected later that day. The fragile yen has found a floor as traders remain alert for any indications of Japanese intervention to stop the currency's decline, which?has? picked up speed in the wake of the well-telegraphed Bank of Japan rate hike last Friday. Investors will be able to catch up with a number of U.S. Economic releases that were delayed due to a record-breaking government shutdown in January. The key data for Tuesday will be the third-quarter figures of growth, which are expected to show that the U.S. has continued to grow strongly. The annualised growth is expected to be 3.3%. This is a slight drop from the previous quarter, due to a sharp decline in imports following a surge earlier in the year before the introduction of tariffs. David Doyle, the head of Macquarie Group's economics, said: "Growth is expected to slow in Q4 due to the prolonged government shutdown, and a potential further headwind coming from auto sales." The market was still optimistic ahead of the result. MSCI's broadest Asia-Pacific index outside Japan rose by 0.31% during early trading, while Tokyo Nikkei gained 0.1%. Nasdaq Futures gained 0.11% while S&P 500 futures were barely changed. Shares of Nvidia rose overnight after reports that the company had told Chinese clients they hoped to begin shipping "its second most powerful AI chip to China" before the Lunar New Year holidays in mid-February, next year. The U.S. Food and Drug Administration on Monday approved Novo Nordisk's weight-loss medication, giving the Danish company a competitive advantage in the race for a powerful oral medication to shed pounds. As we near the end of the year, investors are increasing their equity and commodity exposures. This is according to Jose Torres senior economist at Interactive Brokers. "Traders are currently taking their cues from the general feeling amongst participants, that there is little standing in the way of a Santa Claus rally manifesting." Spot gold and silver reached all-time-highs in precious metals. This was driven by the demand for safe-haven assets as geopolitical tensions escalated, with the U.S. attempting to seize more tankers transporting Venezuelan oil. After rising on Monday due to concerns about supply disruption, oil prices have dipped a little. Brent crude futures dipped 0.06% to $62.03 per barrel, while U.S. Crude fell 0.16% at $57.92 a barrel. INTERVENTION - TREASONS KEEP YEN IN CHECK The yen was the main focus on the foreign exchange markets as investors assessed the likelihood of an impending intervention by Japanese authorities to support the currency. Early trade saw the dollar at 156.57, up 0.3%. Satsuki Katayama, Japan's Finance Minister, told Bloomberg News on Monday in an interview that Japan has the freedom to deal with excessive movements in the yen. This was her strongest warning against the currency’s weakness. The BOJ increased rates on Friday at the end of its policy meeting for December. This was widely anticipated and Governor Kazuo ueda gave few hints about the future extent of rate increases. "Their message was so unimpressive... You hike, but it needs to be with conviction. "They didn't walk with conviction," said Alicia Garcia Herrero chief economist of Asia Pacific for Natixis. The yen had also been pinned to a near-record low against the euro and Swiss franc. The dollar is losing ground against other currencies. The euro rose 0.12% to $1.1772 while the pound sterling increased 0.16% at $1.3482.
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Oil prices drop as the market considers Venezuela and Russia supply risks
The oil prices fell in early trading on Tuesday, after rising by more than 2% the previous day. This was due to the U.S. saying it may'sell Venezuelan crude that it has seized. Meanwhile, Ukraine's attacks against Russian vessels and piers increased supply disruption concerns. Brent crude futures dropped 11 cents or 0.18% to $61.96 a barrel at 0100 GMT. U.S. West Texas Intermediate crude (WTI), which is a blend of U.S. West Texas Intermediate and Brent crude, fell 13 cents or 0.22% to $57.88. Brent posted its best performance in over two months, while WTI climbed the most since November 14, Donald Trump, U.S. President, said on Monday that the U.S. could keep or sell oil that it has seized in recent weeks off the coast of Venezuela as part of his pressure campaign on the country. Trump added that it could be used as a strategic reserve or to sell. He said that it would be smart for Venezuelan president Nicolas Maduro to step down. Barclays stated in a Monday note that oil markets would likely be well-supplied in H1 26 even if Venezuelan exports fell to zero in the near future. Barclays, however, estimates that the global oil surplus is expected to shrink by 700,000 barrels a day in the?fourth quarter of 2026. A prolonged disruption may further tighten the market, reducing recent inventories. In the meantime, Russia and Ukraine launched attacks on each other's facilities in the Black Sea. This is a crucial export route for both nations. Russian forces attacked Ukraine's Black Sea port of Odesa on Monday night, damaging port facilities and a vessel. This was the second attack in less than 24 hours. Authorities in the region of Krasnodar, Russia, said that a Ukrainian drone attacked two vessels and two?piers, causing a fire to spread in a village. Ukraine has also targeted Russia’s maritime logistics, focusing on the shadow fleet oil tankers which attempt to bypass Russia’s sanctions over the nearly 4-year war. Market participants remain cautious, weighing geopolitical risk against the forecasts for ample supply by early 2026. This leaves prices vulnerable to prolonged disruptions.
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Trump: It would be a'smart move' for Venezuelan Maduro's Maduro leave power
Donald Trump, the U.S. president, said that it would be a good idea for Venezuelan President Nicolas Maduro if he left power. The United States can 'keep or sell' the oil they have seized in recent weeks off the coast of Venezuela. Trump's campaign of pressure on Maduro includes a stepped-up military presence and over two dozen military attacks on vessels suspected of trafficking drugs near Venezuela in the Pacific Ocean or Caribbean Sea. The?attacks have killed at least 100 people. When asked if his goal was to remove Maduro from the presidency, Trump replied to reporters: "Well I think it would probably... It's up him what he decides to do. I think he'd be wise to do that. We're going to find out." He said, "If he does something, and he is tough, that will be the last time?he can ever play tough." Trump, during the press conference also "took aim" at Colombian president Gustavo Petro, with whom he had also been feuding throughout the entire year. "He is not a friend of the United States." He is very bad. He's a very bad guy. "He's got to watch his ars because he's making cocaine and they're sending it into the U.S.," Trump replied when asked about Petro’s criticisms of the Trump administration’s handling the tensions with Venezuela. Trump announced earlier that in addition to the strikes, he would "blockade all oil tankers subject to sanctions from entering or leaving Venezuela." On Sunday, the U.S. Coast Guard began pursuing an oil-tanker in international waters near Venezuela. This would be the second operation of this weekend and the third within two weeks. Trump said, "Maybe we'll sell it, or maybe we'll keep it," when asked about what would happen to the oil seized. He added that it could?also be used?to replenish the United States strategic reserves. Maduro, without directly referring Trump's remarks, said that every leader should?attend to the internal affairs of his or her own country. "If I talk to him again, then I'll tell him that each country should take care of its own internal matters," Maduro said in reference to a first phone call made between the two leaders a month ago. Steve Holland reported the story. Idrees Al-Ali (Writing) and Chris Reese, Stephen Coates and Stephen Coates (Editing).
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Australia shares reach a new high on the back of mining boom; RBA Minutes in Focus
Australian shares rose Tuesday, with mining stocks leading the way, as commodity prices firmed. Investors awaited minutes of the December meeting, due later that day, for clues about the monetary policy position next year. By 2325 GMT, the?S&P/ASX 200?index had gained 0.4% and reached 8,735.9. The benchmark index reached its highest level in more than five weeks during this session. The miners' index rose by 0.4% after briefly reaching another record high. Iron ore prices increased?on the tight supply of BHP Jimblebar and Jingbao Fines, while copper traded at a?record level. BHP shares rose 1.3% while Rio Tinto, a rival Anglo-Australian company, gained up to 1.4% and reached a new high. The mining subindex, which lagged the benchmark index in 2024, will?now add almost 40% to its value this year. The sub-index?received?support from its gold producing?constituents during a bullion rallie that helped to more than double the value of local gold stocks this year. Investors will closely examine the minutes of the Reserve Bank of Australia’s December policy meeting to determine the direction of the bank's policy in the coming year. The minutes will be released around 0030 GMT. The markets are pricing in a nearly 30% chance that the Fed will raise rates by a quarter point at its meeting in February. Shares of the data center landlord,?Goodman Group, rose 6.9%, reaching their highest level since November. The data centre owner signed a partnership worth A$14 billion (9.32 billion dollars) with the Canada Pension Plan Investment Board for the development of data centres in Europe. Goodman's actions pushed the sub-index for real estate up by?2.4%. Financials heavyweights rose 0.2% and are on course for their fourth session of gains. Commonwealth Bank of Australia, Australia's largest lender, rose by 0.6%. The benchmark S&P/NZX 50 Index in New Zealand gained 0.2%, reaching 13,530.44.
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Trump: It would be a'smart move' for Venezuelan Maduro's Maduro leave power
Donald Trump, the U.S. president, said that it would be wise for Venezuelan president Nicolas Maduro if he left power. The United States can keep or sell the oil it has seized in recent weeks off the coasts of Venezuela. Trump's campaign of pressure on Maduro includes a stepped-up military presence and over two dozen strikes against vessels suspected of trafficking drugs near Venezuela in the Pacific Ocean and Caribbean Sea. The attacks have killed at least 100 people. When asked if the aim was to remove?Maduro, Trump replied: "Well I think it would probably... It's up to him to do what he wants to do. I think he'd be wise to do that. But, again, "we're going to find out." He said, "If he does something, and he is tough, that will be the last time ever for him to be tough." "He is not a friend of the United States." He is very bad. He's a bad guy. He has to watch his ass, because he is making cocaine and sending it into the U.S." Trump also announced that he would "blockade", all oil tankers entering or leaving Venezuela under sanctions. The U.S. Coast Guard began pursuing an offshore oil tanker near Venezuela, on Sunday. This would be the second operation of the weekend and the third within two weeks. When asked what would become of the oil, Trump replied, "Maybe we'll sell it, or maybe?we'll keep it." He added that it could also be used to replenish United States strategic reserves.
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Gold, silver, and oil surge amid US-Venezuela conflict
The majority of major stock indices rose on Monday at the beginning of a holiday-shortened week. Shares of Nvidia were up, and the yen was stronger versus the U.S. Dollar after Japanese officials warned of "one-sided, sharp" currency movements. Gold and silver prices soared to new records, and oil prices rose as well after the U.S. Coast Guard started pursuing an oil-tanker near Venezuela in international waters a day before. Nvidia gained 1.3%. The company told Chinese clients that it plans to begin shipping its second most powerful artificial intelligence chip to China before mid-February's Lunar New Year holiday. The financials also increased. TRADING VOLUMES ARE EXPECTED BE LIGHT Trading volumes may be low through the end week, as the U.S. stock and bond markets are closed for Christmas on Thursday. The late November downdraft is the intermediate bottom which has brought many technology, AI and Data-center names down. Bruce Zaro of Granite Wealth Management in Plymouth Massachusetts said, "I do believe that's the bottom." He said that the market was "entering Santa Claus period", which is a time when stocks are typically strong. The Dow Jones Industrial Average gained 233.48, or 0.48 %, to 48 367.72. The S&P 500 rose 41.16, or 0.60 %, to 6,875.66. And the Nasdaq Composite gained 128.10 points, 0.55% to 23,435.00. European stocks closed down 0.1%. Japan's Nikkei finished up 1.8%, extending Friday's bounce. Atsushi?Mimura, Japan’s top currency diplomat, said to reporters that recent FX movements were unbalanced and abrupt, adding that government will take appropriate actions against excessive moves. Minoru Kihara, the Chief Cabinet Secretary, also warned about yen's continuing weakness. Investors interpreted the comments as an indication of Tokyo's intervention. The dollar fell as low as 156.88 yen last week, or about 0.5%. The minutes of the Bank of Japan's meeting will be released on Wednesday. On Christmas Day, the head of central bank will speak to a Japanese business lobby. Benchmark U.S. Treasury yields increased with the yield of 10-year Treasury Notes last up 1.2 basis point at 4.162%. Gold spot was up 2.3% to $4,436.29 an ounce, after reaching a new high of $4440.21. Spot silver rose 2.1% to $68.55 per ounce after reaching a new record of $69.44. Brent crude settled at $62.07 per barrel, up $1.60. (Reporting from Caroline Valetkevitch, New York, and Nell Mackenzie, London; additional reporting provided by Wayne Cole; editing by Stephen Coates; Toby Chopra; Rod Nickel).
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US Interior Dept. weakens protection for sage-grouse to allow more oil and minerals development
The Trump administration rolled back protections on Monday for the greater Sage-grouse in 8 western states of?U.S. The Trump administration has opened up more federal land for energy and mineral development. The Bureau of Land Management (BLM) said that proposed changes would allow more development space than was allowed in 2015 plans while still protecting some important habitats for endangered birds across 65 million acres of sagebrush land. The agency said that the changes made to sage grouse protections are in accordance with two executive orders signed by Donald Trump earlier this year, which were intended to unleash U.S. production of energy and energy independence. Bill Groffy, Acting Director of the Bureau of Land Management, said: "We're strengthening American energy security while ensuring that the sage grouse continues its flourishing." In early 2010, the Endangered Species Act was amended to include greater sage grouse as a protected species. This was due to the rapid decline of the population. The Trump proposal would eliminate an annual warning system which aimed to flag declining populations of the ground-dwelling birds, as well as removing protections from more than 4 million acres sage grouse habitat in Utah. Idaho, Montana and North and South Dakota are also affected, as well as Nevada, Wyoming and California. Environmentalists have warned that opening up more federal land for energy extraction will push bird species into extinction, and harm other species. Randi Spivak is the public lands director for the Center for Biological Diversity. She said that Trump's reckless actions would speed up the extinction rate of the greater sage grouse if he allowed unrestricted fossil fuel extraction on tens and millions of acres of federal lands.
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Mercedes settles with US States for $150 Million over Diesel Scandal
Mercedes-Benz reached a settlement of $149.6 Million with U.S. States to end a??long-running probe into allegations that the German automaker had cheated on diesel emissions, New York Attorney-General Letitia Jim said Monday. The automaker said that the deal effectively ended its legal issues in America over Dieselgate - first discovered at Volkswagen in September 2015 - and the emissions scandal. Mercedes has agreed to pay $149.6 millions and provide $2,000 in payments for eligible owners and lessors of vehicles that have received the required emission repairs. Mercedes agreed to take a number of 'actions' to avoid future misconduct, and to comply with the oversight requirements. According to the states, Mercedes had installed illegal software that was not disclosed in its diesel vehicles, which hid true pollution levels and incorrectly reduced emissions during government tests. However, in normal driving conditions the vehicles emit up to 30 or 40% more than the legal limit. MERCEDES SAYS THE BOTTOM LINE OF THE GROUP WILL NOT BE AFFECTED Virginia Attorney General Jason Miyares stated that?the settlement includes the estimated?39.565 U.S. cars that have not been repaired or removed permanently from the road by the end of August 2023. Mercedes must cover the cost of installing the approved software for emission modification on all affected vehicles, provide consumers with an expanded warranty and pay them $2,000 each. Mercedes' spokesperson stated that the bottom line earnings of the group would not be affected, and "sufficient provisions have been made for the cost of the overall settlement". In a press release, the company stated that final court approval is required for these settlements. Mercedes-Benz has agreed to pay $2.2billion in 2020 to settle a U.S. Government investigation into diesel emissions cheating and to settle claims from 250,000 U.S. car owners. The automaker is required to pay $120 million immediately as part of the settlement announced Monday. The suspension of $29.6 millions will result in a reduction by $750 per affected Mercedes vehicle that is repaired, taken off the market or bought back. In 2020, the states will launch an investigation into Mercedes-Benz following Volkswagen's diesel emission scandal. VW paid more than $20 billion to settle fines and penalties after admitting in 2015 that it had installed "defeat devices", sophisticated software and other methods of cheating emissions tests in almost 11 million cars worldwide. Some of the biggest automakers in the world continue to be sued over the scandal. Mercedes could face further payouts in England where it's one of many companies, including Ford, Nissan, and Renault, facing a mass suit launched in October. Reporting by David Shepardson in Washington and Valerie Volcovici and Rachel More from Berlin, with editing by Barbara Lewis.
Yellen faces difficult road on China's huge overproduction issue
U.S. Treasury Secretary Janet Yellen arrived in China's southern factory center of Guangzhou on Thursday with a hard message to Chinese authorities: you're producing too much of whatever, particularly clean energy items, and the world can't absorb it.
China is letting loose a flood of electric vehicles (EVs),. batteries, solar panels, semiconductors and other manufactured. products into worldwide markets, the result of years of huge. federal government subsidies and weak need in the house. Worldwide costs for. many items are tanking, pushing producers in other nations.
We see a growing threat of money-losing firms that are. going to need to sell their production somewhere, a senior. U.S. Treasury official stated of overproduction in essential Chinese. sectors.
In a series of meetings with leading Chinese financial authorities. from Friday through Monday, Yellen will seek to communicate her view. that the excess production is unhealthy for China and that there. is a growing drumbeat of issue about it in the U.S., Europe,. Japan, Mexico and other significant economies.
The official, who spoke on condition of privacy, likewise stated. Yellen would explain: If there are trade actions around the. world, it's not an anti-China thing, it's a reaction to their. policies.
But Beijing appears to be doubling down on purchasing more. producing capacity in preferred high-technology sectors, a. stance that is likewise significantly at odds with Europe.
I do think the phase is set for renewed tensions with. China, stated Brad Setser, a previous U.S. trade and Treasury. authorities.
Setser added that Yellen's warnings about Chinese. overproduction may be an initial step by the Biden. administration towards brand-new tariffs or other trade barriers on. Chinese EVs, batteries and other items.
En path to Guangzhou, Yellen decreased to state whether she. would raise the threat of new tariffs in her meetings in. Guangzhou and Beijing with Chinese Vice Premier He Lifeng and. Guangdong Province Guv Wang Weizhong, who has likewise presided. over numerous billions of dollars worth of current new. jobs.
However she said the Biden administration was identified to. establish American supply chains in EVs, solar energy and other. tidy energy products with investment tax credits and would not. dismiss other possible ways in which we would safeguard them.
In March, China's leadership vowed to follow through on. President Xi Jinping's brand-new mantra of releasing brand-new efficient. forces in China by investing in developing technology. markets consisting of EVs, brand-new products, commercial spaceflight. and life sciences - locations where many U.S. companies hold benefits.
Yellen will likewise argue that China would be much better off. focusing spending on supporting households and boosting. chronically weak consumer spending.
FACTORY FIRST
The results of China's previous financial investment binges are. staggering.
Including EVs and combustion-engine vehicles, China by the end. of 2022 had the capacity to produce 43 million cars. yearly, but its plant utilisation rate - a procedure closely. linked to success - was just under 55%, according to data. from the China Automobile Association.
Costs Russo, the Shanghai-based founder and CEO of advisory. company Automobility, estimated that this equates to excess auto. production capacity of about 10 million lorries a year, or. approximately two-thirds of North American car output in 2022.
And brand-new entrants are still coming into a progressively. cut-throat Chinese EV market. Mobile phone maker Xiaomi on. Tuesday introduced sales of its stylish Speed Ultra 7 EV, drawing. a price quote from Citi analysts that each unit offered would lose. $ 10,000.
SOLAR SUPREMACY
The circumstance in China's solar panel sector may be even worse,. where overproduction pressed costs down 42% in 2015 to levels. 60% below the cost of similar U.S.-made items. Major. Chinese manufacturers are continuing to construct factories, backed by. provincial and regional aids.
At the end of 2023, China had the capacity to build 861. gigawatts of solar modules per year, more than double the global. overall installed capacity of 390 million gigawatts. Another. 500-600 gigawatts of yearly capacity is anticipated to come online. this year-- adequate to supply all worldwide demand through 2032,. according to energy research study company Wood Mackenzie.
Chinese authorities are expected to push back and argue that. the excess capability arises from an unexpected decline in. demand following a home crisis and a rocky exit from. COVID-19, said Scott Kennedy, a China economics specialist at the. Center for Strategic and International Studies in Washington.
I can predict a conversation that walks around in circles,. he included.
(source: Reuters)