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The Russian rouble is flat against the dollar after a spike in October foreign exchange sales
The Russian rouble is stable against the U.S. Dollar and weaker than the Chinese yuan after the central banks reported an increase in exporters' foreign currency sales last month. Some analysts attribute this to U.S. sanctioned. The rouble traded at 81.20 dollars in the over-the-counter market and at 11.43 yuan at the Moscow Stock Exchange, which was down 0.5% at 0840 GMT. The central bank of Russia announced Monday that foreign currency sales for October were up 68% compared to a month ago, reaching $8.2 billion. The central bank attributed the increase to exporters repaying their foreign debt. In a report published monthly, the central bank stated that "the rouble was stable in October, fluctuating within a range seen over the last six months". Some analysts attribute the increase to new U.S. Sanctions on Russian oil giants Rosneft & Lukoil. Finam, an Russian financial services firm, estimates that up to 35% domestic foreign currency sales are attributed to them. Analysts at Alor, an investment brokerage, stated that "we believe this is due to the U.S. sanctions; exporters are afraid of difficulties making payments and bringing money into Russia. They also try to buy relatively cheap bonds and to invest in deposits with high interest rates." On November 21, the U.S. sanctions against Rosneft, Lukoil and other oil companies will come into effect. Finam analysts predict that foreign currency sales may decline between 10% and 20% by early December. The rouble is supported by high domestic interest rates. Slower imports, and the continued sales of forex by the government. Many analysts expected the rouble to weaken, but its strength has surprised them. Goldman Sachs analysts stated that the rouble was surprisingly strong despite the erosion of the current accounts surplus. They suggested that carry trades were also supporting the currency despite strict currency controls. Goldman stated that "we now believe the rouble will remain well supported and the external funding constraint may be less restrictive than we previously thought." (Reporting and editing by Thomas Derpinghaus; Gleb Bryanski)
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Iron ore prices are on the rise amid new stimulus hopes and a softening of demand
Iron ore futures were traded within a narrow price range on February 2, as investors weighed the prospects of fresh stimulus coming from Beijing in the next month, against signs of a softening in demand in China's top consumer. The day-trading price of the most traded January iron ore contract at China's Dalian Commodity Exchange was 0.2% higher, closing at 763 Yuan ($107.12). Iron ore benchmark on the Singapore Exchange for December fell by 0.56%, to $101.6 per ton at 0813 GMT. Steven Yu, senior analyst at Mysteel, explained that the recent price drop caused a divergence in the market outlook. This led to a consolidation. Yu stated that "bulls" believe the annual decline in crude steel production year-to date has reduced the pressure to cut production in the remainder of the year. Also, they hope for stimulus measures which will be announced at the politburo in December. Official data released last month showed that China's crude-steel output dropped 2.9% on an annual basis in the nine-month period ending September. The October figures will be released on Friday. Beijing announced in March that it would restructure the vast steel industry by cutting output. China has set a cap on the growth of crude steel production annually since 2021 in order to reduce carbon emissions. Mysteel’s Yu stated that bears are betting on a lower demand, as some mills continue reducing production. Steelmakers are cutting back production due to a decline in steel demand, and high raw material costs. Coking coal, coke and other steelmaking components fell by 3.81% and 3.66% respectively. The majority of steel benchmarks traded on the Shanghai Futures Exchange suffered losses. Rebar fell 0.33%, steel prices dropped 0.84% and stainless steel fell 0.84%. Hot-rolled coils rose 0.03%. $1 = 7.1230 Chinese Yuan (Reporting and editing by Amy Lv, Lewis Jackson and Subhranshu Shu).
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The Gulf markets are gaining on US rate cuts
The Gulf's major stock exchanges rose early on Tuesday. This was aided in part by the rising expectations of a Federal Reserve rate cut in December and signs that the U.S. shutdown may be nearing its end. The U.S. economy lost jobs last week. Retail and government sectors were the main culprits. A survey released on Friday showed that the U.S. consumer's sentiment had fallen to its lowest level in 3-1/2 years at the beginning of November, due to concerns about the effects the shutdown would have on the economy. The shutdown has delayed important economic metrics including the non-farm employment report. Saudi Arabia's benchmark stock index rose 0.1%. This was helped by Al Rajhi Bank, which rose 0.7%, and Dar Al Arkan Real Estate Development (which jumped 4.9%). Both are on track to extend their gains after a sharp rise in quarterly earnings. Kingdom Holding, the investment company controlled by billionaire prince Alwaleed Bin Talal, saw its shares jump 3% after a 129% rise in profit for the third quarter. Saudi Aramco, the oil company, fell by 0.2%. In Asian trading, oil prices fell as concerns about oversupply outweighed the uncertainty surrounding U.S. sanctions against Russian oil giants Rosneft & Lukoil. Saudi Advanced Industries fell 6.4%, its largest decline since August. This was after it reported a 99% drop in the third-quarter profits. Dubai's main stock index rose 0.5% with Emaar Properties, a blue-chip developer, rising 1.9%. According to CME Group’s FedWatch tool, traders are pricing in an approximately 64% chance that the Fed will reduce rates by 25 basis point next month. The U.S.'s monetary policy changes have an important impact on Gulf markets where the majority of currencies are pegged with the dollar. Abu Dhabi's Index was flat. The Qatari Index rose 0.4% led by the 1.5% increase in Qatar Islamic Bank. (Reporting from Ateeq Sharif in Bengaluru, Editing by Thomas Derpinghaus.)
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Gold nears three-week high after bill to end US Shutdown passes Senate
The gold price rose on Tuesday, reaching its highest level in almost three weeks. This was due to expectations that a possible reopening of the U.S. federal government could restore economic data flow ahead of a Federal Reserve rate reduction expected next month. As of 0816 GMT spot gold had increased 0.5% to $4,137.06 an ounce, after hitting its highest level since October 23, at $4148.75. It is still below the record high of $4381.21 reached on October 20, however. U.S. Gold Futures for December Delivery rose by 0.5%, to $4.143.80 an ounce. Ole Hansen is the head of commodity strategy for Saxo Bank. He said that gold has gained traction due to "a renewed focus on U.S. financial concerns" as a reopening of government would allow new spending, financed by additional borrowing. The U.S. Senate passed a compromise Monday that will end the longest shutdown of the U.S. government in history. This had delayed the release of critical economic data, including the non-farm payrolls key report. It next heads to the Republican-controlled House of Representatives, where Speaker Mike Johnson has said he would like to pass it as soon as Wednesday. Hansen stated that a reopening could also re-start the flow of economic data, possibly boosting expectations for a rate cut in December. The U.S. Federal Reserve's policymakers are divided over the direction of monetary policy. This complicates Jerome Powell’s attempts to negotiate differing opinions following two rate reductions earlier this year. Fed Governor Stephen Miran suggested on Monday that a cut of 50 basis points might be appropriate in December. Data released last week showed that the economy is in a state of stress. The U.S. lost jobs in October, and consumer confidence fell to a three-and-a half year low by early November. Traders have priced in a probability of 64% for a rate cut by a quarter point next month. Carsten Menke, an analyst at Julius Baer, reiterated his positive outlook for gold and silver. He added that "the fear to miss out" still exists despite the favorable fundamentals for these metals. Gold that does not yield a return is usually more profitable in periods of low interest rates and economic uncertainty. The price of spot silver rose 0.5%, to $50.81 an ounce. Platinum increased 1%, to $1.593.11, and palladium gained 1.3%, to $1.433.36. (Reporting from Anmol Choubey, Bengaluru. Editing by Jan Harvey.)
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Sources say that Saudi Arabia and Iraq allocated full-term crude volumes to Indian refiners by December.
Sources at three Indian refiners reported on Tuesday that Saudi Arabia and Iraq, producers from the Middle East, have allotted full-term crude volumes for Indian refiners in December while also offering additional quantities under optional contracts. After halting their Russian oil purchases due to the tightening of Western sanctions, Indian suppliers have increased demand for Middle East crude. Last month, the United States, Britain and European Union designated Russian Top oil producers Rosneft, and Lukoil caused immediate disruptions in trade as fears of sanctions drove away buyers from India and China. Sources said that the Indian refiners received their full allocation from OPEC's two biggest producers. The sources said that at least one refiner would receive a larger monthly supply of oil from Iraq than the previous month. Saudi Aramco, and Iraq's State Oil Marketer SOMO, did not respond immediately to requests for comment. Two other sources confirmed that Kuwait Petroleum will also supply more crude oil to Indian refiners between November and December. According to one of the sources, Middle Eastern oil suppliers have a surplus and are willing to share it. Indian refiners also seek more supplies after Saudi Aramco Official selling prices are lowered. Indian refiners have been buying crude oil from the Middle East and Iraq since the latest round sanctions. Spot market
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Lebanon's historical pines are dying one cone at atime
A quiet crisis is unfolding in the southern Lebanon heartland, where once there were many and tall pine trees. The trees are shriveled and the cones have dried up. A forest that once provided a vital lifeline to entire communities is now under siege. Since years, farmers in Bkassine Forest have seen their pine yields decline. Initially, farmers blamed the seasonal weather change. In 2015, scientists confirmed that many had feared: that an invasive insect was destroying the pine cones, which produce Lebanon's prized Pine Nuts. "It is not only the nuts," Dr. Nabil Nmer, a forest-health expert at Holy Spirit University of Kalik (USEK), said. This insect attacks cones for three years. It does not just reduce productivity; it destroys it. According to Nemer, in some cases up to 82% (or more) of the cone's seeds pods can be left as empty shells. The trees that have been weakened by climate change are especially vulnerable. Leptoglossus westernis is a North American insect that likely came to Lebanon on untreated wooden pallets. According to his research, it has spread from the Mediterranean to Turkey as well as other areas. The livelihoods of the Bkassine Reserve, the Middle East’s largest productive forest, are threatened. Other parts of Lebanon have the trees, but they are not grown commercially. The family of Miled Hareb has survived for decades on the bounty of the forest. This is no longer true. This work has been passed on to me. "This work was passed down to me. I built my home with it and raised a family with it." "But then, the trees died and our way of living also," Hareb said. The harvesting of pine cones can be a difficult task. Workers balance on thin branches and climb tall trees without safety equipment, using narrow ladders. Injury is common, and wages have decreased along with the harvest. Nabil Assad is a Syrian worker who has been harvesting pine cones in Lebanon since more than a decade. He still remembers the days when 250 pine-pickers were working simultaneously in Bkassine. Now there are only 20-30 people. He said, "There's no more work." A DWINDLING Ecosystem The majority of Lebanon's forests of pine trees were planted more than 100 years ago. The older trees still have a productive lifespan, but climate change has made them more susceptible to pests. Nemer stated that "a healthy tree is able to fight back." "But when it is thirsty and hungry, it has no defense." U.N. officials have stressed the importance to protect forests from pests, diseases, and other threats, describing them as "the planet’s most powerful natural defense". According to the U.N. Development Programme, Bkassine Forest was once home around 100,000 productive pin trees. Nemer explained that the number of trees has fluctuated over time. Pest infestations and years of climate stress have reduced them, and efforts to replant were made to compensate for those losses. However, no new studies provide accurate figures. Wood-boring beetles also kill pines, in addition to the cone eating insect. The forest floor is littered with dead trees, which attracts pests and accelerates the decline. The political and economic turmoil that has characterized Lebanon for decades also took its toll. State-run forest management was abandoned after the brutal civil war that ravaged the country from 1975 to 1990. Since the economic collapse of 2019, illegal logging has increased. Market prices are rising as productivity falls, but very few Lebanese have the money to pay for them. Five years ago, a kilogram of pinenuts cost around $65; today it costs nearly $100. Families, restaurants and even supermarkets have switched out pine nuts with cheaper sliced almonds to add crunchiness to Lebanese dishes. The efforts to fight back were slow. The Lebanese Army controls helicopters that spray pesticides. The delays in the logistics mean that treatments are often missed during the crucial window when insects lay eggs. The agriculture ministry of Lebanon announced a nationwide spraying campaign in August. Nemer warns, however, that it will not be enough without a wider strategy that includes farmers themselves. Through training programs run by USEK and FAO, as well as the Lebanese Ministry of Agriculture and United Nations Environment Programme, farmers in Bkassine are learning how to identify pests, manage forests and report outbreaks. Nemer stated, "We must manage the forest in its entirety." "This isn’t a vegetable garden. This is not a garden. "It's not a farm. It's an ecosystem that is alive." (Editing by Maya Gebeily & Andrew Heavens).
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Sources say that Kuwait's KPC has offered more heavy crude in December due to refinery shutdown.
Kuwait Petroleum Corp. has offered heavy crude to be loaded in December through a spot bid, according to sources within the industry and the tender document. This is because it sells extra oil that Al-Zour Refinery cannot process. The producer offered to load 500,000 barrels Kuwait Heavy Crude on December 6 and 7, as well as the same amount of Eocene Crude on December 8 and 9. The bids will be valid until Thursday. KPC now has a total of 3.9 million barrels in heavy crude spot sales. Kuwait Integrated Petroleum Industries Company (KIPIC) has announced that on October 21 its affiliate Kuwait Integrated Petroleum Industries Company was incorporated. shut down A fire has destroyed parts of a refinery that produces 615,000 barrels per day. Two trade sources stated that the refiner plans to restart one of its three crude distillation units (CDUs), which was affected by the fire in the first half December. KPC did respond immediately to a comment request. Reporting by Florence Tan and Trixie Yap; Editing by Christian Schmollinger
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Thyssenkrupp to help Nigeria's Dangote Fertiliser expand its urea production
The companies announced on Monday that Nigeria's Dangote Fertiliser will use technology provided by a German subsidiary of Thyssenkrupp in order to build four urea granulation plants. The unit can produce 4,235 metric tonnes of urea per day. This will increase Dangote’s annual production to over 8 million tons. The new units are being built next to Dangote Fertilizer Complex in Lekki Lagos which is currently operating with Thyssenkrupp UFT technology. The expansion will be using the German firm's UFT Fluid Bed Granulation Technology. This technology is used for more than 70% global urea production. The agreement also includes proprietary equipment such as granulators, scrubbers and process design packages. The ammonia conversion technology will be used to incorporate the ammonium-sulfate waste into granules. This will eliminate waste and improve logistics. Nadja haakansson CEO of Thyssenkrupp said, "This partnership highlights our shared vision for sustainable development industrial and global food security." Aliko Dangote, President of the Dangote Group, said that the expansion was a reflection of the company's commitment towards agricultural self-sufficiency. It also positions Nigeria as the world's leading fertilizer manufacturer. (Reporting and editing by Thomas Derpinghaus; Isaac Anyaogu)
Dollars slide on trade and tax concerns
As June began, the U.S. Dollar plunged to its lowest level since six weeks. Concerns about U.S. Tariffs were back in the spotlight after the legal confusion of last week and rising military tensions around the world.
The euro was the leader, unfazed by the prospect that the European Central Bank would cut interest rates again on Thursday. The new German chancellor Friedrich Merz will visit Washington on Thursday to meet U.S. president Donald Trump as trade negotiations between Europe and America continue to be closely watched.
The dollar is susceptible to fears of foreign capital flight as markets are still concerned about the U.S. Fiscal Bill that is currently being debated in the Senate. This bill gives the administration the ability to tax companies and investors who come from countries with 'unfair' foreign taxes.
On Monday, the focus was back on tariffs. It seemed that President Donald Trump would push for levies in some way despite last week's legal opposition.
After the weekend, Trump's plan of doubling duties on import steel and aluminum from Wednesday to 50% hit the greenback as Beijing retaliated against allegations that it had violated an agreement regarding critical minerals shipments.
The weekend was marked by geopolitical tensions of great importance and bellicose threats. Gold rose.
Pete Hegseth, the U.S. Secretary of Defense, warned his Indo-Pacific allies on Saturday to increase their spending on defence. Ukraine-Russian war continues to rage. Ukrainian drones continue to strike dozens of Russian aircraft deep within Russian territory. Gaza's conflict is not ending.
The major countries are building weapons at a rapid pace. Britain is expanding its fleet of nuclear-powered attack subs as part a review of defence, aimed at preparing the country for modern warfare and countering the Russian threat.
The oil price rose by about 3% Monday, after the producer group OPEC+ maintained its output increase in July at the level of the previous two month.
There was some good news on the interest rates front in a week that saw a lot of data from the U.S. Labor Market.
Federal Reserve Governor Christopher Waller stated on Monday that further rate cuts are possible in the second part of the year. Waller said that since the rise in inflation pressures linked to Trump's increased import taxes is unlikely to persist, he supports looking past any tariff effects to near-term-inflation in setting policy rates.
As expected, China's manufacturing sector shrank in May for the second consecutive month.
After Karol Nawrocki, the nationalist candidate of the opposition won the second round in the presidential elections, stocks in Poland fell by 1.4%.
Before Monday's bell rang, U.S. stocks futures were down by about half a percentage, and so too were stocks in Europe, Japan, and other parts of the world. The yields on U.S. Treasury bonds have risen again.
The column today looks at this week's major monetary decision made in Europe. It is widely expected that the European Central Bank will lower rates for an eighth time during the cycle, but the euro has risen regardless.
EURO CONUNDRUM: ECB FACES SURGING EURO DISCONNORDRUM
The euro continues to rise while the European Central Bank is cutting rates. This is because a capital reversal in the US has thrown off the relative rate shifts, and could force the ECB to further ease.
It is expected that the ECB will lower its main lending rate to 2% on Thursday, which would be half of what it was a year ago at its highest point and less than half of the Federal Reserve's equivalent. The central bank has also returned to a level it considers to be 'neutral,' meaning that the rate does not either stimulate or rein in the economy.
For the first time since almost two years, real, or inflation adjusted, ECB interest rates will return to zero.
It's amazing that the euro, after eight consecutive ECB rate cuts and the prospect of zero real rates or even negative ones in the future, has risen more than 10% against a dollar basket and 5% against a currency basket based on the major trading partners of the Euro Zone.
The nominal effective euro index has reached record levels, while the "real" version is at its highest level in over 10 years.
The euro/dollar rate has risen despite no change in the difference between the yields of two-year government bonds on either side. This is usually a reliable indicator for changes in the exchange rate. This trend is largely due to Donald Trump's trade wars, the fear of capital flight out of dollar assets because of a variety of concerns regarding U.S. institutions and policies, and Germany's historical fiscal boost.
The ECB is in a quandary if, as many believe, even a fraction (or fractions) of the trillions dollars of European capital invested in the United States are indeed returning home. How can it manage both the deflationary and domestic demand effects of a currency increase that is so rapid? The euro is not affected by the possibility of future rate cuts. The majority of ECB observers expect one or even two more rate cuts after Thursday, while money markets are predicting a 'terminal' rate of around 1.75%. This is the low end in the ECB range estimated as 'neutral. If the majority of capital repatriation is from equity investments in the U.S., lower ECB interest rates could even increase the outflows by boosting growth prospects for cheaper European stocks. Higher borrowing in Germany and across Europe should also sustain fixed income returns over the long term, increasing the pool of "safe" investments.
'GLOBAL EUROMOMENT'
The ECB may protest about 'excessive gains' in the euro, but the impact could be limited unless they are prepared to back up their words with actions. There is also a chance that it could backfire because of the reasons mentioned above.
The ECB is encouraging investment and the euro as a currency of reserve, in part, to meet the massive capital requirements for retooling the military, digital, and energy sectors.
Christine Lagarde, ECB head, said in a speech last week in Berlin that there is an opportunity for a global euro moment, where the single currency can be a viable alternative to dollars, bringing immense benefits to the region if the governments are able strengthen the financial and security infrastructure of the bloc.
A soaring currency rate during a trade conflict may seem like a good thing, but it will cause some concern among the major exporting countries in the region.
ECB hawks, doves, and others will have to decide whether the continued easing of monetary policy to counter disinflationary risks is only stoking domestic inflation in the long run. Not to mention the fiscal boost that's coming next year.
It is clear that the ECB will take into account in its new economic projections, due to be released on Thursday, the 7% increase in the euro/dollar rate and the near 10% decline in the global oil price since the last set of forecasts made in early March.
Morgan Stanley economists believe that even if central bank raises core inflation forecasts, headline inflation could still fall short of the 2% target between mid-2025 and early 2027. This is even though the GDP growth outlook for 2025 has been revised upwards.
At this point, it is impossible to make any predictions. Few central banks or major traders have any idea where the U.S. trade war or tariffs will lead.
The ECB is unlikely to be able to cap the Euro, as global trade and investments are a source of anxiety. The ECB is faced with a big dilemma: whether to maintain the status quo or ease up even further.
The chart of the day shows how tariff-related import distortions have distorted U.S. Gross Domestic Product readings this year. Last week, models that track GDP inputs were again jarred when a sharp contraction of the goods trade deficit in April occurred as the front-running imports to beat the tariffs in the 1st quarter faded. According to the Census Bureau of the Commerce Department, with many tariffs in effect, imports plummeted, helping to reduce the goods trade surplus by 46%, to $88 billion. Imports dropped $68 billion, to $276 billion. Exports rose $6.3 to $188.5. If the goods deficit shrinks, the net trade component in GDP calculations could spur significant growth in this quarter. It is similar to how it reduced Q1 GDP by a record-breaking 4.9 percentage points. The Atlanta Federal Reserve’s ‘GDPNow’ tracker is now boosted by the trade figures. It sees an impressive 3.8% real GDP increase in Q2. There is still caution. There is caution. Businesses don't appear to be restocking. Wholesale inventories were unchanged last month, and retail stocks fell by 0.1%. Stockpiles are expected to drop dramatically over the rest of the quarter.
Watch today's events
* US manufacturing surveys for May from S&P Global and ISM (0930EDT), as well as April construction spending (1000EDT).
* Federal Reserve chair Jerome Powell opens Fed event in Washington. Fed Board Governor Christopher Waller and Dallas Fed President Lorie Log speak. Chicago Fed President Austan Gollisbee also speaks. Bank of England policymaker Catherine Mann also speaks.
* US corporate earnings: Campbell's
The opinions expressed are solely those of the authors. These opinions do not represent the views of News. News is committed to the Trust Principles and therefore, integrity, independence and freedom from bias.
(source: Reuters)