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MORNING BID EUROPE-$100 Brent in sight, yen defies gravity
Kevin Buckland gives us a look at what the future holds for European and global markets. Brent crude is on the verge of hitting $100 per barrel. This was a level that was last seen at the end of July as renewed fighting in the Middle East has fuelled fears that the conflict may spiral out into a wider regional war. This backdrop is limiting the risk appetite on Asian equity markets - at least in'stocks' that are not part of the AI trade. The yen has refused to follow its usual pattern. The yen is not following the usual script. It continues to push up to seven-month-highs against the dollar, as bets placed on a faster rate increase by Bank of Japan clear out a short position that was once crowded. The other currencies remain subdued despite the fact that a blockbuster week of policy decisions was made by the European Central Bank (ECB), Federal Reserve (FRB), Bank of England and BOJ. The geopolitical landscape is getting even darker. Iran has targeted a U.S. military base in Jordan as a retaliation to U.S. attacks on its oil tankers. Meanwhile, Houthis backed by Iran have struck several Saudi cities. Brent crude moving back above $100 per barrel would deal a major psychological blow to the markets, which have spent most of this year fretting about global inflation. Even the gravity defying AI market showed cracks in July with a sharp correction. However, some of the exuberance returned to the markets recently. SK Hynix has risen over 4%, helping to lift South Korea's KOSPI by more than 2%. Fujikura Electric and Furukawa Electric, Japanese cable manufacturers, soared after a multibillion dollar deal between Verizon Fiber and Corning to provide high-density fiber rekindled excitement over data centres. This helped to keep the Nikkei Index in positive territory, despite a rising yen that typically hurts Japan’s export-heavy stock market. The yen is regaining ground on Tuesday's high rate of 152.89 to the dollar. After comments by U.S. Treasury Sec. Scott Bessent, and speculation that Japanese investors might repatriate their overseas assets into domestic bonds, the rally gained momentum. Market players claimed that the rally was self-reinforcing, as stop-loss orders were triggered. This unleashed a "wave" of short-covering which was 'amplified' by algorithmic trading. Analysts say the next level to monitor is the high of the year, which is 152. According to some, the yen may have overshot and fundamentals could 'pull it back toward 155 ahead of the BOJ meeting next Thursday and Friday. A quarter-point increase in the rate is already priced in but guidance on how fast it will happen will be important. On Thursday, the ECB will likely raise?rates just before potentially market-moving 'U.S. inflation data on Friday. The Fed will make its decision next week. Markets are divided on whether they will hike rates or not, and the BoE's rate is expected to remain unchanged. This week, key developments that may influence the markets include: ECB policy announcement on Thursday US PPI on Thursday and CPI on Friday The UK GDP will be released on Friday
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Indian sponge iron is at a two-year high due to imports of coal and domestic shortages.
India's benchmark prices for sponge iron surged to a two-year peak in August, as traders and analysts reported that the cost of production increased due to higher import coal prices and tighter domestic fuel supplies. India is the 'world's largest producer of sponge iron, with 336 plants producing about 50 million tons. This material is mainly used by secondary steel producers as a raw materials. Traders say that the steel and sponge-iron sector, which accounts for 40% of India's coal imports, is India's largest consumer. According to iEnergy Natural Resources, a coal dealer based in Gujarat, India's thermal coke imports by steel and sponge iron manufacturers fell 19% in India in July, after falling 11% in June. The Middle East tensions have pushed bunker costs and insurance costs to multi-year heights, increasing landed cost into India, said Vasudev Pamnani, director of the trader. Pamnani said that despite low inventories, higher costs have discouraged sponge iron manufacturers from stockpiling their coal. Since long, the industry has 'preferred' imported coal and uses domestic coal as a replacement. Since May, however, domestic coal supplies have been limited as the priority was given to the power sector due to higher electricity demand in the summer. Fuel inventories in several power generators are at critical low levels due to the seasonal monsoon rains that have caused disruptions to coal supply from mines and railway transport. Rahul Mittal is the chairman of Sponge Iron Manufacturers Association. The sponge iron industry uses coal from South Africa. According to traders, several Asian countries, including Vietnam and South Korea are turning to South African coal in order to meet a higher demand for power. The price of coal has increased across all key markets due to the higher demand. Since May, the price of coal in Indonesia has risen by 18%-20%. Prices for coal in Russia and South Africa have also risen by 14% and 19.9%, respectively. Mittal said Indian coal would be the replacement, but monsoon rainfalls slowed down dispatches and pushed up prices. He added that the demand for sponge iron is still 'robust'. BigMint, a commodities consultancy, says that the benchmark Indian sponge iron price rose to a new two-year high in August of 29,700 rupees (US$313) per ton. Analysts and the industry anticipate that prices will remain high for at least a couple more months.
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Volkswagen looks to partner with JSW Group for India's key market
Volkswagen is exploring a partnership with the Indian conglomerate JSW Group in order to increase 'competitiveness' and profitability?in -the?third largest?car market?in the world. A company spokesperson stated on Wednesday that the partnership aims to expand Volkswagen's India portfolio, strengthen local sourcing, and increase manufacturing. The Economic Times newspaper was the first to report on this move. The proposed deal is timely as 'Volkswagen' has been struggling to expand its presence in India. India is a critical?market for the German automaker to?expand outside Europe. It also highlights the challenges that global automakers have to overcome in order to remain competitive on India's fast-growing market. The proposed collaboration is likely to be structured as a partnership between two parties with a joint?control and defined operational roles, along with governance mechanisms that will enable faster decision-making. The companies will also explore ways to?increase local procurement, share vehicle platforms, and expand production capability. Skoda Auto is the leader of Volkswagen's operations in India. Volkswagen has been in the market for over two decades and its market share is still around 2%.
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Oil nears $100 after new Middle East attacks raise supply risk
The oil price rose for the 4th straight session, with a gain of more than $1 on early Wednesday trade. Brent crude futures were up 1.4% to $99.33 per barrel at 0212 GMT. U.S. West Texas intermediate crude was $94.34 per barrel, an increase of 1.4%. Brent crude prices jumped by 25% since early August, as the hopes of a permanent solution to the six-month old war faded and fighting flared up again. Prices are now fast approaching $100 per barrel. The 'Middle East War' intensified Tuesday as Iranian-backed Houthis launched strikes against several Saudi cities, further entangling a U.S. ally in the conflict. The?U.S. The?U.S. Recent developments have only reinforced the idea that (peace) negotiations are still a long way off. The market will likely continue to price a significant risk premium in the interim," ING analysts wrote in a report. The latest attacks could further disrupt?Middle East Oil Supplies, already stressed by strikes against?regional infrastructure? and key shipping lanes. Analysts said that while Saudi Arabia has diverted exports from the Strait?Hormuz to other ports, sustained attacks against the kingdom would complicate efforts to keep crude flowing into global markets. OCBC analysts in a recent note expressed concern about a possible prolonged oil supply disruption due to Iran's attack on Saudi energy facilities and the destruction of five Iranian tankers.
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Oil prices to hit $100; Asia stock markets fall as Middle East tensions increase
Brent crude climbed to $100 per barrel Wednesday, keeping Asian stock markets calm as the attacks intensified in the Middle East. This stoked inflation fears ahead of closely-watched U.S. consumer price indices. As traders exited their short positions, the yen rose to a near seven-month high against the dollar. This was due to expectations of faster Bank of Japan rate hikes as well as a possible rush of Japanese capital repatriation. The euro climbed ahead of Thursday's European Central Bank policy announcement, as markets were expecting an increase amid inflationary pressures due to the Iran War. Iranian-backed Houthis launched attacks on Saudi cities?on Tuesday. Meanwhile, U.S. forces struck multiple Iranian oil tanks and Iran attacked a U.S. military base in Jordan. Prices of oil jumped by more than $1 for the fourth consecutive session on Wednesday. Brent crude futures rose by $1.57 a barrel to $99.49, their highest level since June. ?U.S. West Texas Intermediate crude oil was $94.63 per barrel, an increase of $1.60. The Hang Seng in Hong Kong fell 0.6%, and blue chips on the mainland of China edged up by 0.2%. The rebound in chip and AI stocks has helped other regional benchmarks, however. Japan's Nikkei is up 0.6% after Tuesday's 1.7% drop. South Korea's KOSPI jumped a?1.6%, while Taiwan's TAIEX grew 0.6%. Japanese cable manufacturers?surged following Verizon and Corning signing a deal on high density optical fibre. Overnight, the Philadelphia SE Semiconductor index rose 1.3% despite declines in Wall Street's main three indexes. U.S. S&P futures rose 0.1% after the cash index fell 0.6% on Wednesday. "Across several of the major macro markets, we see indecision in the price action -- tight ranges and a general holding/consolidation pattern," Chris Weston, head of research at Pepperstone, wrote in a client note. Brent crude is "one of most clear real-time signals" for sentiment for the entire market. $100 "now seems like an extremely achievable level," said he. Recent weeks have seen a rise in bond yields due to inflation fears. Traders are pricing higher odds of central bank tightening. The U.S. CPI is due Friday. The odds of the U.S. Federal Reserve raising interest rates by a quarter point or holding them steady on Wednesday next week are almost equal, while the BOJ is all but certain to increase the rate by a quarter point two days later. The yen increased by 0.2%, to 153.66 dollars per yen. This is a slight increase from its previous high of 152.89. Market players say that it 'had surged about 4% in the last five sessions. Hawkish comments by BOJ officials were ostensibly what triggered a move which then snowballed when breaks of key levels led to additional buying. Thursday, the ECB will almost certainly raise rates in the euro zone by a quarter-point. The euro added 0.1% to $1.1629 and is now in the middle of its range for the last three weeks. The pound was little changed at $1.3545. The Bank of England is due to announce their latest policy decision next Thursday. Economists predict that the key rate for the rest of the year will remain unchanged. The Australian dollar rose by 0.1% to $0.7222. Bitcoin climbed to $78,680.60. Gold rose 0.3% to $4,368 per ounce.
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Early trade: Oil prices jump $1 after Iran launches missiles against Jordan
The oil prices rose for the fourth consecutive session on Wednesday, rising'more than $1' in the early trade after Iran launched new attacks on U.S. assets - in the Gulf as the war between Washington and Tehran continues to spread across the region. Brent crude futures were up $1.57 or 1.6% to $99.49 per barrel at 0001 GMT. U.S. West Texas Intermediate Crude was $94.63 per barrel, up $1.60 or 1.72 %. Brent crude prices have increased by 25% since early August, as the hopes of a 'permanent resolution' to a six-month old war faded. In retaliation to a 'U.S. attack on Iranian oil tankers,' Iran's Revolutionary Guards claimed that they had launched ballistic missiles against two U.S. destroyers in Jordan's Al Azraq and what they called 'a U.S. 'base in Jordan's Al Azraq. Attacks on Iranian oil tanks. The state news agency quoted the military as saying that Jordan's air defence systems destroyed 18 out of 20 ballistic missiles launched from Iranian territory. Two missiles fell into unpopulated areas, and no one was injured. Marco Rubio, the U.S. Secretary for State, warned Iran of a retaliatory strike against?Iranian tankers for attempting to attack U.S. warships. Rubio said during a trip to Colombia that Iran continues to try to strike U.S. navy ships. "For every time they try this, they will lose tankers," Rubio informed reporters. The U.S. Central Command announced?on?Tuesday that its forces destroyed five Iranian crude?oil?carriers?on September 8 following two failed missile attacks against a U.S. Navy Warship.
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Oil prices rise as Middle East inflation worries persist
On Tuesday, stocks fell and oil prices soared to $100 per barrel as investors fretted about inflation and the ongoing conflict in Middle East. The three main U.S. indexes all fell on Tuesday, starting off the holiday-shortened work week in a negative note. The Dow Jones Industrial Average ended down 1.18%. Meanwhile, the S&P 500 fell 0.58%. And the Nasdaq Composite dropped 0.32%. The MSCI index of global stocks was down by 0.55% last week. Oil prices rose after the?Houthis, backed by Iran, attacked Saudi energy installations in Yemen. Brent crude oil rose 2.13% to $99,07 per barrel while U.S. crude increased 2.82% to $94,05 per barrel. Inflation has risen in recent weeks and this is partly due to the rise in bond yields which have reached multi-year highs. This puts pressure on central banks to increase interest rates. The European Central Bank will almost certainly raise the euro zone rates by a quarter-point on Thursday of this week. Meanwhile, the Bank of Tokyo is likely to do the same thing next week. This has put the yen in a position for its biggest rally in the past two years. Federal Reserve will also be reviewing its rates on September 16, issuing a statement. The U.S. data on inflation released by the Federal Reserve this Friday may be decisive for setting expectations about the outcome of its upcoming meeting. Money markets indicate that traders currently attach a 58% chance to a rate increase. The yen's rise is a major concern for the global markets. Oil was the main theme on Tuesday. Due to its low yield, traders borrowed yen to buy higher-yielding assets, including currencies, bonds, and equities. This strategy is known as carry trading. The yen gained nearly 4% in the past week, its biggest week-on week increase since July 2024. On Tuesday it was around 153.97 and the dollar was slightly lower for the day. The dollar index, which measures greenbacks against a basket currencies including the yen, the euro and other major currencies, increased by 0.02% at 98.86. Copper, a commodity other than oil, hit a new record on Tuesday as the global supply was tightened. The metal continued to flow into the U.S. in anticipation of possible tariffs. The price of three-month copper at the London Metal Exchange was up 1.5% to $14,728 per ton. On the bond market, U.S. benchmark 10-year Treasury bills yielded 4.8%. This was not far from their highest since November 20,23.
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Alberta landowners sue regulator over oil well cleanup
Alberta landowners have filed a lawsuit to argue that the energy regulator of the province has knowingly and chronically underfunded a program designed to protect the public against the costs of cleaning abandoned oil and natural gas wells. The legal action is a culmination of years' simmering tensions between farmers, ranchers, and oil and natural gas producers in Canada’s largest energy-producing province. This province has struggled with thousands of "orphan" or "wild" wells which dot the rural landscape of Alberta. The Alberta Energy Regulator is being questioned about its willingness to enforce environmental rules at a moment when the Canadian and Alberta government are eager to increase domestic oil production due to the escalating U.S. trade war. Alberta has about 7,300 oil and gas inactive wells that were left in many cases due to company bankruptcy. The Orphan Well Association, a group funded by the industry and responsible for cleaning these sites and reclaiming them, has decommissioned 8,900 wells in Alberta since 2002. The cost to remediate the remaining backlog has been estimated at C$1.66 Billion. Two landowners, the Alberta Surface Rights Federation, and the Polluter Pay Federation filed an application in an Alberta courtroom Tuesday asking for a judicial review to determine the legal responsibility of the Alberta Energy Regulator. They wanted the Alberta Energy Regulator to make sure that the burden of cleaning orphan wells falls on industry, and not the taxpayers. The lawyer who represents landowners, Susanne Calabrese, told reporters on Tuesday that the Alberta Energy Regulator had consistently set the amount oil and gas companies have to pay in order to fund the work of the Orphan Well Association at a too low level. The levy for this year was approximately C$154,000,000, which represents only 11% of the estimated total cost to close wells. Calabrese stated that the funding for cleaning up abandoned sites does not keep pace with the growing pile-up, which poses a 'health and safety risk to landowners -- many of whom have wells on their properties -- as wells as financial risks to tax payers. She said, "The safety net falls further and further behind." The Alberta Energy Regulator refused to comment on this legal proceeding. Dwight Popowich is a landowner who has been fighting for years to clean up an inactive oil well on his property. He said that most rural Albertans are in favor of oil and gas development as long as the companies "clean up after themselves". Popowich stated that "that promise has been broken repeatedly, both to me and to?thousands other Albertans." Abandoned oil and gas wells are associated with many risks including methane leakage and soil and ground contamination. They also pose a financial burden for cleanup.
'Amazonia' bonds in 2024 seen a tough cost some
A political push to raise the firstever Amazonia Bond has actually increase throughout talk with agree a roadmap, yet the possibility of an offer this year faces technical hurdles and scepticism amongst some of those entrusted with handling the financial obligation, sources informed .
Brazil, Colombia, and Ecuador are amongst a group of countries in talks with advancement banks to launch a specifically supported structure to raise billions of dollars of low-priced financing to protect the world's greatest rainforest.
Proposed by the Inter-American Advancement Bank and World Bank in 2015, is for the first time reporting the progress being made, the bond structures and timings being gone over, but likewise some of the push-back from officials in two of the region's biggest nations.
Covering more than 6 million square kilometers, the Amazon absorbs large amounts of climate-warming greenhouse gases and is home to more than 10% of all known animals and plants, the highest density of types anywhere in the world.
It would be a significant landmark transaction for nature-linked securities, stated Arend Kulenkampff, director of the Sustainability-linked Sovereign Debt Center, a non-profit effort to coordinate green financing, describing the effort's capacity effect.
COST OF STEWARDSHIP Politically, Amazonia bonds line up with the call from the presidents of Brazil, Colombia and others in the Amazon basin for abundant countries to contribute more to jungle's. security.
A member of Brazil's environment delegation told that. increasing multilateral advancement bank (MDB) financing is a. leading need of it G20 presidency this year and ahead of the U.N. climate summits in Azerbaijan in November and its Amazonian city. of Belem in 2025.
Just MDBs can rally climate funding on the scale that is. needed in big establishing nations like Brazil, Mexico and. India, the individual stated. 'Credit assurances' for instance can. greatly lower loaning costs that can normally be in the. double-digits for nations.
How much money MDBs can supply and how fast is an open. concern, as authorities state there is no time to lose in. attending to environment modification.
However while politically Brazil, and Colombia which hosts the. COP16 U.N. biodiversity talks in October, are both eager to have. a landmark deal to reveal for their efforts, some authorities are. sceptical of the requirement to hurry a new financial obligation instrument.
Colombia, like the other 8 Amazon countries, could. introduce an 'Amazon bond,' but it has actually insisted on thinking about the. Amazon not as a source of financial obligation however as a source of income, said. Jose Roberto Acosta, Colombia's director of public credit at the. finance ministry.
Emerging economies are significantly pushing for the world to. help put a value on their stewardship of such shared resources,. for example by generating biodiversity credits that might be. offered to other nations or companies to raise cash.
For this factor, it is not likely that it will be. accomplished before COP16, Acosta stated.
2 sources with direct knowledge of the matter told . that conversations were still in preliminary phases within. Brazil's federal government and that any development, if verified, would. not come this year.
Brazil's Finance Ministry, stated it was up until now unaware of. any conversations and had not yet received a formal proposition for. an Amazonia bond.
The ministry likewise indicated last year's strong demand for. Brazil's very first international green bond that raised $2 billion. and was offered with lower-than-normal 6% rates of interest. It prepares. to issue more in the future it added, although banking sources. suggested an MDB-guaranteed Amazonia bond may just require half. that interest rate.
And there is requirement to keep interest rate as low as. possible. The expense of hitting Brazil's self-set climate targets. - it is intending to more than halve its greenhouse gas emissions. by 2030 and be 'net absolutely no' by 2050 - has actually been estimated at $100. billion a year, or 7% of its financial output.
Other nations and the advancement banks associated with the. strategies did not comment on the status of talks when asked by. .
MARCH TALKS
The March talks went over a variety of concerns that will need. to be concurred before the first bond is launched.
Amongst them was what to consist of on the menu of bond options. open to countries issuing under the framework, with an aim of. introducing both usage of profits bonds - where money is. earmarked for specific projects - and sustainability-linked. bonds (SLBs), connected to more general objectives like minimizing. deforestation rates.
With many nations in the region yet to write SLB. structures into national guidelines, an use of proceeds bond is. a most likely alternative for the first issuance, three sources stated. Companies and regional development banks might also release in future.
International interest is strong, with person. governments including Sweden, Italy and Spain already offering. assistance, 3 sources said. Moving forward, other multilaterals. such as the Development Bank of Latin America and the Caribbean. ( CAF) are most likely to end up being involved, one source included.
Among other problems to solve is defining what must be. considered a genuine use of the brand-new bonds' proceeds,. including whether to enable spending in cities, provided 80% of. those residing in the Amazon are in urbanised environments.
While the very first bonds are likely to be provided by nations. separately, the hope is they could eventually be done jointly. under the IDB's 'Amazonia Forever' framework to make big scale. and reliable cross-border conservation efforts possible.
The goal of the program is to fund sustainable development. and help reduce logging, with the equivalent of about four. soccer pitches being reduced every minute, according to EU. data.
While Brazil, Colombia, Ecuador, Guyana, Peru, Bolivia and. Suriname have currently signed up, providing bonds collectively is no. easy accomplishment offered the differing financial health of each state.
It follows a drive by Brazil's left-wing President Luiz. Inacio Lula da Silva to unite his neighbours in pressing richer. nations to help pay to protect the forest. Because 1970, Latin. America has lost 94% of its monitored populations of mammals,. birds, fish, reptiles and amphibians, a WWF and ZSL analysis. showed.
(source: Reuters)