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Gold reaches record highs on U.S. Government shutdown and Fed rate cuts
Gold prices hit a record high on Tuesday, supported by demand for safe-haven metals as the U.S. Government shut down its operations. Growing expectations of a Federal Reserve interest rate cut in this month also added to gold's appeal. As of 0844 GMT spot gold was up 0.9% to $3,891.96 an ounce after reaching a session high of $3.895.09 earlier. U.S. Gold Futures for December Delivery gained 1.2% to $ 3,918.60. Dollar-priced greenback gold is now more affordable to overseas buyers as the dollar index has fallen by 0.2%, its lowest level for over a week. The dollar is weakening due to expectations of a Fed that has become more dovish. This dynamic has accelerated since a failed effort to pass a budget bill triggered a shutdown of the government which could have a negative impact on economic output", said Ricardo Evangelista senior analyst at ActivTrades. Deep partisan divides between Congress and the White House prevented them from reaching an agreement on funding. The shutdown may delay the release key economic data such as the Non-Farm Payrolls (NFP), due Friday. Gold, which is viewed as a safe haven in times of geopolitical and economic uncertainty, flourishes in an environment with low interest rates. Carsten Menke is an analyst with Julius Baer. He said that the Fed does not need the NFP report because U.S. rates are above neutral. If the economy is slowing down, it is important to move towards neutral. According to the CME FedWatch Tool, investors are pricing in 95% of a rate reduction this month. ADP's national employment report is due to be released later today and should provide additional insights into the labour market. Silver spot gained 1.5%, reaching $47.39 an ounce, which is a record high. Palladium rose 0.5% to $1,263.44, while platinum rose 0.6% at $1,583.75. (Reporting by Ishaan Arora in Bengaluru; Editing by Ed Osmond)
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Gold hits record price as US Government Shuts Down
Wall Street futures dropped, gold reached a new record high, and the dollar weakened on Wednesday, as the U.S. Government shut down most of its operations. This could delay the release of important jobs data, which may muddy interest rate forecasts. The government shutdown is not expected to end soon, as there's no way out of the funding impasse. Furloughs of 750,000 federal employees at $400 million per day are also likely. S&P 500 and Nasdaq Futures both fell by about 0.6% on Wednesday. Gold prices rose to $3,895 per ounce in a third consecutive session, reaching a new record. The STOXX pan-continental index rose 0.4%. The FTSE 100 in Britain and the SMI in Switzerland outperformed. Healthcare stocks boosted their performance, as they hoped to avoid high U.S. tariffs on imports following President Donald Trump's agreement with Pfizer regarding prescription drug prices. SLOW DOWN TO Delay Data Investors may give greater weight to the ADP National Employment Report, due later today. Forecasts predict a modest increase of 50,000 jobs in the private sector. Lars Skovgaard is a senior investment strategist with Danske Bank. He said that the shutdown should not have a major impact on the markets. "I wouldn’t rule it out that it could add some jitters, but you shouldn’t be concerned about it. We're not," Skovgaard added. The Federal Reserve is now expected to cut rates by 95% in October. This is up from 90% a day ago. There's also a 75% chance that they will do so again in December. Anthony Saglimbene is the chief market strategist for Ameriprise. He said that if shutdown continues, inflation reports from September could be affected by mid-October. He said that a prolonged period in which the U.S. Bureau of Labor Statistics was not fully operational could impact data collection efforts and the quality of data for other reports. The Nikkei index of Japan fell 0.9% on Wednesday after a 11% increase in the previous quarter. South Korean shares increased by 0.9% to add to their 11.5% gains in the previous quarter. This was after data revealed that its exports had risen at the fastest rate in 14 months during September. Taiwan's stocks gained 0.6%. The island's chief tariff negotiator stated on Wednesday that Taiwan would not accept a deal to have half of all semiconductor production take place in Washington. Hong Kong and all Chinese markets were closed on a public holiday. DOLLAR FALLS The dollar index fell for the fourth consecutive day on foreign exchange markets. It was down last by 0.2% at 97.59. The euro increased by 0.2%, to $1.1756. Sterling was up by 0.2%, at $1.3474. The dollar fell 0.6% to 147.06 Japanese yen after a Bank of Japan report showed that confidence among large Japanese manufacturers had improved in the second quarter. This increased the likelihood of a rate hike this month. The yields on the Treasuries were unchanged in European morning trading. The benchmark 10-year Treasury yield in the U.S. was unchanged at 4.156% after rising 1 basis point on Tuesday. After two days of declines, oil prices were stable as investors weighed the possibility of OPEC+ plans to increase output next month with the shrinking U.S. inventories. U.S. crude fell about 0.1% to $62.28 per barrel. Brent, however, was only 0.1% lower.
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EUROPE GAS-Prices rangebound amid strong supply, cooler weather
The Dutch and British wholesale prices of gas continued to trade within a narrow band on Wednesday morning as the demand for gas for electricity declined while heating demand increased due to the cooler weather. LSEG data shows that the benchmark Dutch front-month contract was 31.30 euros per Megawatt Hour (MWh) or $10.78/mmBtu at 0859 GMT. This is a decrease of 0.08 Euro. The Dutch December contract fell by 0.37 euros to 31.55 Euro/MWh. The British November gas prices was lower by 0.65 pence, at 80.00 pence a therm. In a daily note, LSEG analyst Ulrich Weber stated that the demand for heating in local distribution zones (LDZs) is expected to increase by 191 gigawatt hours per day, as temperatures will remain below normal. He added, "On the contrary, we see a similar decline from non-LDZ sources of power, mainly gas, as wind energy generation is improving slightly." LSEG data revealed that the non-LDZ forecast was down 171 GWh/d to 2438 GWh/d for the day ahead. Elexon data shows that the peak wind power forecast for Britain is 11.13 gigawatts (GW) on Wednesday, rising to 19.15 GW by Thursday. After the completion of work on the Troll gas field and the end of outages at Njord's gas platform, total Norwegian exports rose by 34 mcm/day to 318 mcm/day. Sergei Tsivilev, Russian Energy Minister, said that his country intends to increase LNG exports from its Arctic LNG 2 and Sakhalin 2 project to China. Analysts from Engie's EnergyScan have said that it could help to keep European gas prices down. The benchmark contract on the European carbon markets was down by 0.95 euros at 74.77 euro per metric ton.
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Gulf markets are mixed early in the trading as US shutdown raises concern
The major Gulf stock markets opened mixed on Wednesday as the U.S. shutdown caused concern about the delayed release of vital jobs data and future interest rate trends. Deep partisan divides between Congress and the White House prevented them from reaching an agreement on funding. This could have led to a long, painful standoff, which could result in the loss of thousands federal jobs. The shutdown may delay the release key economic data such as the non-farm payrolls reports due on Friday. The U.S. monetary policy changes have a major impact on Gulf markets where the majority of currencies are pegged with the dollar. Saudi Arabian Mining Company gained 1.1% and the benchmark index in Saudi Arabia increased by 0.1%. ADNOC Distribution, which traded ex-dividend, was responsible for a 2.9% drop in the Abu Dhabi index. After two days of declines, oil prices - a key catalyst for Gulf financial markets – have stabilized as investors weigh OPEC+'s plans for a higher output next month against the impact of a U.S. Government shutdown on economic activity and fuel consumption. Dubai's benchmark DFM General Index grew 0.5% on the back of gains in major stocks. Blue-chip real estate developer Emaar Properties climbed 1.9%. Spinneys, a supermarket operator in the Philippines, saw its shares rise 2.6% after the announcement that it would be launching premium grocery stores with Ayala Corp. The benchmark for Qatar fell by 0.8% as the largest lender in the Gulf, Qatar National Bank, saw its share price fall by 1.2%.
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Nine people are killed by flash floods in Odesa following torrential rainfall in southern Ukraine
Emergency services reported that flash floods had killed nine people, including five members of a family, in Odesa, Ukraine, following a torrential day of rain. The service posted images of cars being pulled out of the water and pictures showing passengers being lifted off a bus that was flooded. The service reported that "nine people, including an infant, have been confirmed dead". Maryna Averina, spokesperson of the Odesa emergency services for the region, told Ukrainian TV that a family of five living in a lower ground-floor flat were unable to leave the building. Averina said that three more women were killed while walking on a road. Hennadiy Trunkanov, the Mayor of Odesa, said earlier on Telegram that "in just seven hours Odesa received almost two months worth of rain." "No stormwater system can handle such a load." Governor Oleh Kiper stated that torrential rains had now been falling for the second day in the region. This has caused flooding, power outages, damage to property, and trees to fall. He said that over 500 workers had been involved in the rescue efforts. He said that 42,000 customers from 32 villages and towns were still without power. Reporting by Lidia Kelley and Anna Pruchnicka, Editing by Kim Coghill Clarence Fernandez Alexandra Hudson
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Scientists say that Swiss glaciers have melted rapidly after a heatwave and light snowfall.
Monitoring body GLAMOS reported on Wednesday that Switzerland's glaciers have melted significantly over the last 12 months, resulting in their fourth largest reduction in ice volumes on record. According to the report of GLAMOS, the Swiss Commission for Cryosphere Observation, a winter with little or no snow, particularly in the northeastern part, and heatwaves in June caused the glaciers' ice mass to decrease by 3%. Matthias Huss, director of GLAMOS whose reports cover October-September's hydrological year, said: "This is a lot." The trend is clear, even though the ice loss was less than in 2022 or 2023 when the glaciers fell by 5.9% and 4.4%, respectively. Huss, who spoke with a group of Valais residents during a trip to the Rhone glacier, said that Switzerland had experienced its worst decade in terms of ice melting. A quarter of the volume of glaciers has been lost since 2015. The Rhone Glacier, which was Europe's largest glacier during the Ice Age has shrunk rapidly, losing an average of 1.5 meters this year. According to GLAMOS about 100 glaciers have disappeared in Switzerland between 2016 and 2022. It is predicted that the majority could disappear before the end of this century. "Unfortunately, we cannot do much to save the glaciers... "They will retreat regardless, even if today's climate stabilizes," said Huss. If carbon dioxide emissions fell to zero worldwide in the next 30 year, up to 200 Swiss high-altitude glaciers could be saved. This year, Swiss glaciers under 3,000 metres were particularly affected. Silvretta Glacier, a once healthy glacier in northern Switzerland, experienced a massive ice melt after the lowest snowfall since the measurements began 100 years ago. Huss warned that shrinking glaciers also contributes to destabilisation of mountain ranges. This can cause avalanches, including those of ice and rock. For example, the glacier collapse in Valais that wiped out the village of Blatten this May. Reporting by Cecile and Denis Balibouse, Writing by Olivia Le Poidevin at Geneva; Editing done by Edwina.
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Kuwait raised over $11 billion in bond sales as investors pile into Gulf debt
Kuwait, the world's largest oil producer, has raised $11.25bn from a three part bond issue, which attracted a large number of investors for its first U.S. Dollar issue since 2017. This marks a strong return on global debt markets following years of political gridlock in Kuwait. The Gulf State was the last sovereign in the region to tap into the bond market. Strong global appetite for bonds and low borrowing costs enable governments to diversify their funding sources and plug budget deficits, as well as invest in economic diversification. Kuwait sold $3.25bn in a portion of three years at 40 basis points over U.S. Treasuries. $3bn in a portion of five years at 40 bps and $5bn in a portion for ten years at 50bps. Fixed-income news service IFR reported that the order books at launch were more than $23 billion, which allowed prices to be tightened from initial guidance. Investors were reassured by the low level of debt in Kuwait, despite concerns over its governance, public finances and oil dependency. Justin Alexander, Gulf analyst at GlobalSource Partners and director at Khalij Economics, confirmed this. Kuwait's estimated sovereign wealth assets are more than $1 trillion. Kuwait does not reveal exact figures. In March, it passed a new law on public debt after the old one had expired. The borrowing limit was raised to 30 billion dinars (98.24 billion dollars) from the previous 10 billion dinars and the option of longer terms for borrowing was also included. Kuwait's directly-elected parliament and appointed governments have been in conflict for years, preventing the passage of this law as well as other reforms. Last year, the emir disbanded parliament for up to 4 years. This allowed the government to implement reforms. Oil revenue was almost 90% of the government's revenue last year, despite plans to diversify away from hydrocarbons. (Reporting and editing by Jamie Freed; Rachna uppal)
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On Independence Day, Nigeria's President says that the worst is over amid increasing hardship
Bola Tinubu, the Nigerian president, declared on Wednesday that "the worst is over", following a painful series of economic reforms which have left millions with rising costs and a deepening in poverty. Tinubu, in a speech marking Nigeria's 65th Independence Day defended the decision of his administration to eliminate fuel subsidies and to unify the foreign currency rate. These moves sparked inflation and anger among the public, but he claimed that they were necessary to "reset the economy". Tinubu stated that "less than three years after those difficult, but necessary decisions were made, they are now bearing fruit." He noted that the second quarter GDP growth was 4.23%, the fastest in the last four years. In addition, inflation in August fell to 20.12% - the lowest level in the past three years. Tinubu also cited five consecutive quarters with trade surpluses. He also cited a rebound in the oil production, which has risen to 1,68 million barrels a day. Tinubu also cited a growth in external reserves, which have risen to $42,03 billion, their highest level since 2019. The President said that the government has disbursed 330 Billion Naira ($222.90 Million) to 8 million households in need under its Social Investment Programme and is expanding infrastructure on rail, roads and airports. Critics questioned, however, the transparency of this cash transfer scheme. The disbursement was announced by the Finance Minister two weeks ago. This prompted calls for the creation of a public list of recipients. Tinubu may have a positive tone, but the IMF's latest Article IV assessment warns of persistently high prices and increasing poverty. World Food Programme has been forced to close 150 nutrition centers in the northeast due to funding cuts from international donors. Tinubu stated that "we are racing against the clock" despite the fact that critics, including Peter Obi of the opposition party, claim his spending priorities do not match the magnitude of the country's economic and humanitarian challenges. The speech comes at a time of growing unrest in the labour movement over the recent dismissal 800 workers from the Dangote Oil Refinery, a privately owned company, for having unionized. Tinubu's claims of increased oil production could be threatened by the dispute. Reporting by Isaac Anyaogu, Editor Neil Fullick.
Bahrain taps debt markets with two-part US Dollar issue
Bahrain will tap the global debt markets with a 2-part issuance on Wednesday, becoming the latest Gulf sovereign capitalising on investor appetite to regional debt.
Saudi Arabia, Abu Dhabi, and Kuwait all raised debts in the last few weeks due to attractive borrowing rates and high demand. This allowed governments to diversify their funding sources in order to plug budget deficits and pay down debt and invest in economic diversification.
Bahrain is looking to issue an Islamic bond or sukuk with a term of a little over eight years, as well as a conventional bond for a period of 12 years. The fixed-income news agency IFR said that Bahrain has set early price guidance around 6.25% and 7.0% respectively.
S&P Global, the ratings agency, revised Bahrain's outlook from "stable" to "negative" in April. It cited ongoing market volatility and a high debt level, as well as a growing deficit, weaker financing conditions, which could increase interest costs for the government.
Bahrain, one of the Gulf's smaller producers of oil, has intensified its efforts to diversify away from hydrocarbons and into sectors like tourism, financial services, and logistics.
In the first half of this year, it raised $2.5 billion through a combined sukuk-conventional issue. Reporting by Rachna uppal Mark Potter (Editing)
(source: Reuters)