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Stocks rise on Fed rate-cut bets; gold is on a tear
The global stock market was on course for a weekly increase on Friday, as the expectation of rapid U.S. interest rate cuts led to a reduction in borrowing costs worldwide. This would be a relief for stressed bond markets, and drag on dollar. European shares fell 0.2% at the opening of trading, while Nasdaq futures and S&P500 futures dropped 0.1-0.2% after hitting new highs overnight. The MSCI All Country World Index remained on course for a weekly gain of 1.7%. Gold was also on course for its fourth consecutive weekly gain and traded at near-record levels as investor concerns over global economic uncertainty persist. Stock markets in Asia have made significant gains. Chinese stocks reached a three-and-a half year high due to expectations of AI related earnings growth. While the U.S. Consumer Price Report showed a rise in prices, the markets were still focused on the weak job numbers from the previous week. Amelie Derambure is a senior portfolio manager of Amundi. She said, "Even though we may have weaker job numbers, the markets really focus on the Fed's impact, which will give growth a boost in the future." Veronica Clark, a Citi economist, said that the bank continues to expect 125 basis point Fed rate cuts in the next five meetings. The futures market shows a 93% probability of a quarter point cut to 4.00%-4.25 next week and a 77% likelihood of a half point cut. The yield on the benchmark 10-year Treasury note rose by 3 basis points to 4,043%. It had fallen below 4% on Thursday for the first since April. ECB - "IN A GOOD PLACE" The dollar index, which measures the greenback versus six other currencies, edged up 0.2% to 97.757. The dollar rose 0.5% against the yen, to 147.89. This was after Japanese and U.S. Finance Ministers released a joint statement on Friday reaffirming their commitment not to target currency levels. The euro fell 0.1%, to $1.171725. It had received a modest boost on Thursday after the European Central Bank left rates unchanged and indicated that it was "in a good place" with its policy. Greg Fuzesi is an economist with JPMorgan. He said, "This indicates the Governing council is not inclined towards easing in the absence a significant growth shock." "We have therefore pushed back our call for the final rate cut to December from October." ECB sources said that the December meeting was the most realistic date to discuss whether another cut is needed to cushion the economy. The markets indicate that there is only a 1 in 6 chance of an easing in December. Britain's economy records Zero monthly growth In July, the data was in line with expectations, but showed a sharp decline in factory production, which weighed on sterling, which fell 0.3% to $1.3536. Gold prices rose 0.3% on the commodity markets to $3,644 per ounce. This is just a little bit below the previous record high of 3,673.95 set early in the week. The International Energy Agency forecast a record oil surplus for next year, as OPEC pumps more product. Brent crude was essentially flat at $66.38 per barrel. U.S. crude fell 0.1% to a price of $62.31 a barrel.
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Norway sovereign wealth fund excludes Eramet on ethical grounds
A spokesperson from Norges Bank Investment Management, the fund's operator said that Eramet, a French mining company, was excluded from its portfolio due to ethical reasons. According to data from the fund, as of 30 June, it held a stake in Eramet valued at $6.8 millions. Eramet didn't immediately respond to a comment request. The Council on Ethics of the fund, which is its ethics watchdog, recommended the divestment due to Eramet’s participation in Indonesia’s PT Weda Bay Nickel, where Eramet is the operator of mine. The Council on Ethics recommended that Eramet SA should be excluded. "There is an unacceptable risk the company may contribute to or be responsible for severe environmental damage, and serious violations of human rights by uncontacted indigenous people," it said in a press release. Separately, Indonesian authorities said that on Friday a special task force had seized hundreds of acres of land from the miner PT Weda Bay Nickel due to a lack of relevant forestry licenses. Indonesia has been cracking down against illegal mining in the country. Last week, President Prabowo said that over 1,000 such operations had already been identified. (Reporting and editing by Louise Rasmussen. Additional reporting by Guz Trmpiz, in Paris.
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EU Aluminium Producers Push for 30% Scrap Export Levy
The European Union’s aluminium industry is calling on the European Commission (EC) to impose a duty of about 30% on scrap metal exports to prevent it from flooding out of Europe and leaving local producers short. According to the industry group European Aluminium, EU aluminum scrap exports will reach a record 1,26 million metric tonnes in 2024. This is around 50% more than it was five years ago. The majority of these scraps are headed to Asia. According to the EU industry, since then, the situation has worsened because of President Donald Trump’s import tariffs. These were set at a 50% rate for aluminum but only a 15% rate for scrap. This has led to a rise in scrap imports from the United States, and a decrease in exports. Asian buyers are now more focused on EU supplies. Paul Voss, director general of European Aluminium, said that European companies are unable to compete with Asian buyers who can pay more due to lower standards in terms of labour and environment and subsidies. He said: "It is perfectly understandable for scrap traders to prefer selling to the highest bidder. But it is the role of the public policy to correct this kind of market failure in order to protect Europe’s strategic interests." European Aluminium and Eurofer (which represents the steel industry) have met with the Commission in order to press for the export tax. The EU executive started monitoring exports in early July, and will decide if any action is needed by the end third quarter. Recycling aluminium is 95% more energy efficient than mining bauxite to produce metal. European Aluminium reported that European companies invested 800 million euros (821 million dollars) to increase the recycling furnace's capacity to 12 millions tons. Several countries outside the EU limit exports of metal scrap. According to GMK Center, 48 countries, including India, China and South Korea, restrict the export of ferrous scrap. Steel sector says that it is important to keep scrap within Europe, but it also has immediate concerns. These include a new system of curbing finished steel imports which the Commission will announce soon. However, scrap dealers in Europe oppose export restrictions. The recycling industry group EuRIC has said that scrap exports are a result of low demand at home and an insufficient capacity for mixed scrap, such as scrap from shredded cars. Reporting by Philip Blenkinsop, Editing by Joe Bavier.
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Iron ore to gain for the third week in a row on better China demand and supply problems
Iron ore futures were in a range on Friday and expected to rise for the third week running, helped by an improving demand from China, the top consumer, and concerns about supply over Guinean projects. However, higher ore and metal inventories limited gains. The day-traded contract for January iron ore on China's Dalian Commodity Exchange closed 0.06% lower, at 799.5 Yuan ($112.29 per metric ton). The contract showed a weekly increase of 1.6%. As of 0810 GMT the benchmark October iron ore traded on Singapore Exchange had risen 0.54%, to $106.05 per ton. However, this is only a 0.54 percent increase from last week. After the end of the military parade on September 3, steelmakers began to resume production, which boosted iron ore prices. The average daily hot metal production, which is a measure of ore consumption, increased 5% from week to week, reaching a record high of 2,41 million tons on September 11th, according to data provided by consultancy Mysteel. Prices rose earlier this week as fears about the supply of oil from the Simandou project in Guinea grew after local reports that Rio Tinto wanted to build refineries locally. This could limit the amount of ore that can be exported. The sharp decline in shipments by Brazil, a major supplier in the first weeks of September, also helped boost bullish sentiment. Prices fell from their highs of Thursday due to the rising stocks of steel during the peak season for demand in September. According to Mysteel, this, along with an increase of 0.2% in iron ore portside inventories from week-to-week, limited the weekly price increases. Coking coal and coke both saw increases of 0.88% and 0.43 %, respectively. The benchmarks for steel on the Shanghai Futures Exchange have gained ground. Hot-rolled coils rose by 0.66%. Wire rods increased by 0.06%. Stainless steels climbed by 0.43%.
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South Sudan opposition claims government is trying to enforce the "one tribe rule"
South Sudan's Opposition has accused the Government of trying to enforce a "authoritarian Control and One-Tribe Rule" after First Vice president Riek Machar, who was suspended for orchestrating militia attacks, was charged. Machar's SPLM -IO party has rejected the charges brought against him, along with 20 other individuals. These included murder, treason, and crimes against humanity. They were accused of participating in raids in the northeast by the White Army militia. Machar’s house arrest under the order of March has sparked international concerns about a possible resurgence of the devastating civil war that raged between his Nuer ethnic forces and Dinka fighters loyal his long-time rival, President Salva Kiir. Kiir served as a member of the unity government that was formed to end that war. However, their relationship remained strained. The charges were fabricated in order to undermine the (peace accord), marginalize Dr. Machar, and the SPLM-IO and establish total government control," Machar’s SPLM-IO said late Thursday night shortly after the Justice Ministry announced the charges. Analysts say that Kiir is trying to replace Machar, his closest ally, with Second Vice President Benjamin Bol Mel. He was sanctioned in the U.S. because of suspicions he had received preferential treatment when securing contracts. Joseph Szlavik told the Washington Post last month that South Sudanese officials had asked for the lifting of these sanctions in recent bilateral talks. Szlavik stated that these conversations also included the possibility of sending more deportees from the United States to South Sudan, following the arrival last July of eight men - including seven from a third country. Nairobi Newsroom, Hereward Holland and William Maclean (Reporting)
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Bali flood waters recede after 16 deaths and two missing
Officials said that two people are still missing in Bali, Indonesia, a resort island. At least 16 people have been killed by flooding this week. Torrential Rains On Tuesday and Wednesday, the rapid rise of floods caused by the rains blocked major roads in Denpasar as well as six out of Bali's eight districts. Some areas also experienced landslides. I Nyoman Maha Putra, an architect and planning expert from the Warmadewa University, Denpasar, stated that the rapid development of the island had not taken into consideration the need for adequate drainage infrastructure. He said, "City planning does not take into account disasters." "All infrastructure construction is designed to make Bali more attractive for tourists and investors." Local media reported that Bali's Governor, Wayan Koster said, "Conversion of land use is not the cause for this week’s flooding in Denpasar." The Bali government's regional planning and development body did not respond immediately to a comment request. Bali's primary source of income is tourism. Last year, more than 6.3 millions international tourists arrived on the island. This was higher than the number of arrivals in 2019, the year prior to the COVID-19 pandemic that brought ground tourism to an end. Bali was the destination of choice for over 40% of Indonesian tourists last year. I Nyoman, head of Bali's search-and-rescue body, stated that the search for two missing persons was still continuing on Friday.
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Australian critical mineral companies head to Washington
Four sources familiar with the matter said that more than 20 Australian companies, including Trafigura's Nyrstar unit, will be heading to the U.S. to explore possible areas of collaboration next week. The Australian Trade and Investment Commission will lead a delegation to Washington and New York for meetings with senior officials of the Trump administration. The trip was described as routine by sources, but the companies are expected to arrive soon after the Australian Prime Minister Anthony Albanese spoke with President Donald Trump about the opportunities for the critical minerals companies of both countries in the last week. Albanese, the Australian ambassador to New York for the United Nations General Assembly later this month, has asked to meet with Trump. No meetings have yet been announced. Australia is trying to establish itself as a major supplier of Western allies, as they develop an alternative supply network to China. Meanwhile, the U.S. prepares to invest in its battery and defense industries. Reports last month indicated that the Trump Administration was considering reallocating at least $2 billion of the CHIPS Act funds, which support semiconductor research and chip plant construction, for critical minerals projects. Last month, Nyrstar won the support of the Australian government to evaluate whether it is possible to produce four essential minerals in two aging smelters. This includes antimony that is used for ammunition and whose exports from China are limited. Nyrstar will need additional funds to put this plan into motion. Some attendees were looking for funding opportunities. The meetings are described as an opportunity to understand the priorities of the Trump Administration, as well as meeting administration officials and building relationships. Other miners include Australia's leading lithium producer Pilbara Minerals, which supplies lithium primarily to China and South Korea. International Graphite, which has a graphite mining operation in Western Australia, is expanding its processing capabilities. Representatives from Pilbara Minerals International Graphite, and Cobalt Blue have confirmed that they will be attending next week. The delegation will be without Australia's Trade and Resources Minister Madeleine King. Requests for comments on the prospects of major announcements were not immediately responded to by the ministers' offices. Australia and the United States have a vital minerals partnership. Under legislation passed late in 2023, Australian deposits will qualify as domestic supplies for U.S. defense procurement. (Reporting and editing by Lincoln Feast; Melanie Burton).
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UBS increases gold price target to 3,800 oz by the end of 2025
UBS increased its gold price forecast on Friday by $300 per ounce to $3800 by the end 2025 and by $200 per ounce to $3900 by mid-2026. It cited anticipated Federal Reserve easing, U.S. Dollar weakness linked to rate reductions and geopolitical risk. The Swiss bank revised its estimate of gold exchange-traded funds (ETFs) holdings. It now projects levels to surpass 3,900 metric tonnes by the end 2025. This is close to the previous record set in October of 2020 of 3,915 metric tons. We maintain an attractive view on gold, and remain long the metal as part of our global asset allocation. UBS stated that a percentage of gold in the mid-single digits is optimal. Bank of America highlighted geopolitical issues and differences in policy between the U.S. Administration and the Federal Reserve, as well as U.S. president Donald Trump's preference for lower interest rates. UBS anticipates that central bank gold purchases will remain strong at around 900 to 950 tons in this year. This is slightly less than last year's record-breaking purchases just over 1,000 tons. UBS said that the Fed could be forced to increase rates if inflation surprises lead to higher interest rates. The price of non-yielding gold, which is often viewed as a safe haven during times of economic and political uncertainty, and also known to perform well when interest rates are low, reached a new record of $3,673.95 Tuesday, and has gained over 39% in the past year. (Reporting and editing by Jacqueline Wong, Rashmi aich and Anmol Choubey from Bengaluru)
Asian shares increase on global tech rise, yen rallies
Asian shares rallied on Thursday, tracking a substantial revival in tech stocks helped by Meta and Nvidia, while potential customers of imminent policy alleviating in the United States increased international bonds and products.
The Federal Reserve held rate of interest steady overnight however unlocked to a cut in September. That had traders betting that the Bank of England may cut later in the day, with the possibility of a move at 60%.
European futures are likewise set for a higher open, with EUROSTOXX 50 futures up 0.2% and FTSE futures increasing 0.3%. Nasdaq futures acquired 0.9% as shares of Facebook-parent Meta Platforms surged 7% after the bell on strong incomes.
The Japanese yen rallied to as much as 148.48 per dollar before encountering resistance.
It was last up 0.2% at 149.77, having surged 1.8% overnight after the Bank of Japan raised rate of interest for the 2nd time in 17 years and signalled more tightening to come.
MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.7%, after ending July mostly flat. A. regional MSCI IT index leapt 2.0% and Taiwan's. shares surged 1.8%.
Japan's Nikkei, nevertheless, toppled 2.7% as the sharp. dive in the yen clouded the outlook for exporters.
Chinese blue chips turned 0.3% lower after a. private survey revealed China's production sector suddenly. diminished in July, boding ill for economic growth momentum.
On Wall Street, tech stocks are making an extraordinary. comeback after the current sell-off. AI darling Nvidia. rallied 13%, including about $330 billion in stock market worth on. Wednesday.
Tech giants Apple and Amazon.com will. report their profits in the future Thursday.
Also helping the global risk rally is dovish remarks from. Fed Chair Jerome Powell that policymakers had a real. discussion about cutting at the July conference. The central bank. also stated the dangers to work were now on a par with those. of increasing rates.
As an outcome markets, which have already bet on a September. cut, are betting on a 10% opportunity that the Fed might choose a 50. basis points reducing in September. For all of 2024, they have. priced in an overall easing of 72 basis points.
We have actually got this September cut more than fully priced in. which is frankly ludicrous since there's no chance they're going. to start off with 50, said Rob Carnell, ING's local head of. research for Asia Pacific.
The market has actually got a bit ahead of itself ... With 3. nearly completely priced by the year end, it feels like 2 seems. about right.
Treasuries held onto the majority of their over night gains. The. yield on 10-year Treasuries rose 3 basis points to. 4.06%, having actually dropped 11 bps overnight to the lowest considering that. March.
The dollar's slump against a rampant yen dragged down its. wider worth versus a variety of currencies. The dollar index. stood at 104.04 on Thursday versus its major peers,. having fallen 0.4% overnight.
In commodity markets, oil rates extended their surge. overnight after the killing of a Hamas leader in Iran raised the. danger of a wider Middle East conflict.
Brent crude futures rose 0.8% to $81.48 per barrel,. while U.S. West Texas Intermediate unrefined futures. increased 0.9% to $78.61 per barrel.
They both jumped about 4% in the previous session.
Gold was stable at $2,446.68 an ounce.
(source: Reuters)