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MORNING BID EUROPE-One last summer hurrah?
Gregor Stuart Hunter gives us a look at what's ahead for the European and Global markets. It may be that Jerome Powell is the cure to those summertime blues. As the Federal Reserve chairman prepares to speak at the annual symposium of the central bank in Jackson Hole (Wyoming), lethargic traders still needed a boost. The financial markets continued to drift as they waited for Fed officials' clues about the direction of monetary policies and the likelihood that a rate cut in September would be implemented after recent signs of weakness on the job market. S&P futures are flat. They show little interest in breaking the cash index's five-day loss streak on Wall Street. This has put it on course for its largest one-week drop this month. After a disappointing payroll report earlier this month and consumer price data showing limited upward pressure due to tariffs, traders had increased their bets on a September reduction. The market's pricing has retreated slightly since the minutes of the Fed meeting in July were released. According to CME Group’s FedWatch, traders now price in a probability of 75.3% for a September cut, down from an 82.4% estimate on Thursday. The euro fell 0.2% to $1.1589 after the EU and U.S. released details of the framework trade agreement they struck in July. The yen also weakened. The greenback gained 0.2%, to 148.45 dollars per yen. This was after data revealed that Japan's core consumer price in July exceeded both analysts' expectations and the Bank of Japan inflation target. This weekend, Governor Ueda is also scheduled to speak at the Jackson Hole Forum. MSCI's broadest Asia-Pacific index outside Japan was flat as well, supported by a gain of 1.2% for China's blue-chip CSI 300 Index. It is on course for its third day in a row of gains. Brent crude oil prices fell, last trading at $67.54 a barrel after strong gains Thursday, as Russia and Ukraine blamed one another for the stalled peace, while U.S. statistics showed strong demand in America, the world's largest oil consumer. The following are key developments that may influence the markets on Friday. Germany Q2 GDP Business Climate Indicator (août) UK: Government debt auctions for 1-month, 3-month, and 6-month terms
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As peace in Ukraine continues to elude, oil prices are set to snap a two-week losing streak
The oil prices did not change much on Friday, as the hope of an immediate peace between Russia & Ukraine dwindled. This increased the risk premium that oil sellers demanded and put prices on course to end a two-week loss streak. Brent crude futures dropped 12 cents, to $67.55 per barrel at 0415 GMT. West Texas Intermediate crude futures also fell 10 cents, to $63.42. Both contracts rose more than 1% the previous session. Brent has risen by 2.7% in the past week, and WTI is up 1.1%. As traders lose hope that U.S. president Donald Trump will be able to broker a quick deal to end Russia-Ukraine conflict, which sparked a drop in oil prices over the past two weeks, they are now pricing in more risks. In a Friday client note, analysts at ING stated that it was difficult to organize a Putin-Zelenskiy meeting. Discussions about potential security guarantees also face obstacles. The risk of more severe sanctions (by the U.S.) against Russia increases the less likely it looks that a ceasefire will occur. The three-and-a-half-year war continued unabated on Thursday as Russia launched an air attack near Ukraine's border with the European Union and Ukraine said it hit a Russian oil refinery. While U.S. planners and European planners have said that they have developed military alternatives by allied national-security advisers. The first talks between U.S. leaders and Russians since Russia invaded Ukraine took place at the weekend. However, they have made little progress in bringing about peace. Sources say that Vladimir Putin, the Russian president, demanded Ukraine to give up the entire eastern Donbas region and renounce NATO aspirations, while also keeping Western troops out. Trump has pledged to protect Ukraine in any deal that ends the war. The Ukrainian President Volodymyr Zelenskiy has dismissed the idea that Ukraine could withdraw from its internationally recognized land. The oil prices were also supported last week by the fact that U.S. crude stocks had been reduced more than expected, which indicates strong demand. The U.S. Energy Information Administration reported on Wednesday that stocks fell by 6 million barrels during the week ending August 15. Analysts expected 1.8million barrels. Investors also waited for signs of a Federal Reserve rate cut at the Jackson Hole Economic Conference in Wyoming. The annual meeting of central bankers starts on Thursday. Fed Chair Jerome Powell will speak on Friday. Lower interest rates could stimulate the economy and increase oil consumption, which would lead to a possible rise in prices. (Reporting and editing by Christopher Cushing; Sudarshan Varadhan)
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US Opens National Security Investigation into the Import of Wind Turbines
The U.S. Commerce Department said on Thursday it has opened a national security investigation into the import of wind turbines and components.Earlier this week, the department said it was adding wind turbines to a list of products that will face 50% tariffs on the aluminum and steel content. The "Section 232" investigation, which was opened on August 13 but not made public until now, could be used as a basis for even higher tariffs on imported wind turbines.Energy research firm Wood Mackenzie said approximately two-thirds of the value of a typical U.S. wind turbine is imported.U.S. imports of 2023 wind-related imported equipment were valued at $1.7 billion, the lowest volumes since 2013, the firm added, with Europe being the biggest exporter (41%), followed by Mexico (34%), and India (around 15%), the firm added, saying Chinese imports have diminished due to increased trade tensions.Since taking office in January, President Donald Trump has repeatedly sought to stall development of wind and solar energy, calling them unreliable, expensive and overly dependent on Chinese supply chains.The Commerce Department is seeking comments on the role of foreign supply chains in meeting U.S. demand for wind turbines and on "the impact of foreign government subsidies and predatory trade practices on the competitiveness of the wind turbines and their parts and components industry."The United States is self-sufficient for nacelle assembly and tower supply, while maintaining limited blade manufacturing capacity. However, the majority of blades, all drivetrains and other electrical components are imported, Wood Mackenzie analyst Endri Lico said.The department has opened numerous probes into the national security ramifications of imports of airplanes, semiconductors, pharmaceuticals, heavy trucks, copper, timber and lumber, critical minerals and drones.The offshore wind industry has struggled in recent years with soaring inflation and logistical problems that have raised costs. It faced a further setback when Trump suspended licensing on his first day back in office in January.(Reuters)
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China Steel Production Rises Despite Weak Demand, Iron Ore Set to Lose Weekly
The price of iron ore futures eased on Friday and was set to fall by a significant amount on a weekly basis as the rising steel production and sluggish steel demand in China put pressure on steel costs and iron ore inputs. As of 0257 GMT, the most-traded contract for January iron ore on China's Dalian Commodity Exchange was trading 0.71% lower. It was 770 yuan (US$107.21) per metric ton. This week, the contract has fallen by 0.84%. The benchmark September ore price on the Singapore Exchange is down 0.32% at $100.85 per ton and has fallen 1.03% this week. Atilla Winnel, Navigate Commodities' managing director in Singapore, stated that the latest weekly data onshore released on Thursday showed that certain steel mills had begun to increase production of certain products. This is consistent with trends we observed over two weeks using daily satellite thermal imagery and readings. Atilla said that the higher steel production in an environment of weak demand is putting downward pressure on steel costs and margins, including iron ore. According to Mysteel, the total stockpiles of iron ore across Chinese ports increased by 0.2% in a week to 138.5 millions tons on August 21. This added further pressure to the prices. China also requested consultations with the World Trade Organisation regarding Canada's steel and aluminum quotas and surtaxes. The announcement follows that of Canadian Prime Minister Mark Carney, who announced last month a 25% duty on imports of steel from any country which contains steel melted and cast in China prior to the end of July. This was part of an effort to protect Canada's domestic industry. Coking coal and coke, which are used to make steel, also fell on the DCE, by 1.72% each and 0.8% respectively. All steel benchmarks at the Shanghai Futures Exchange have lost ground. The price of rebar fell by 0.32%. Hot-rolled coil dropped 1%. Wire rod was down 0.21%. Stainless steel was down 0.62%. ($1 = 7,1821 Chinese yuan). (Reporting and editing by Rashmi Liew)
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Aluminium prices continue to rise on the back of stronger China demand
Aluminum prices rose for a second consecutive session on Friday, helped by the prospect of improved demand in China, which is the world's largest consumer. Investors remained focused on U.S. Federal Reserve Chairman Jerome Powell’s speech at a later time for policy outlook. The Shanghai Futures Exchange's most traded aluminium contract increased 0.24%, to 20,685 Yuan ($2,879.72), per metric ton. Earlier in the session, the contract reached its highest level since August 15, at 20730 Yuan per ton. The benchmark three-month aluminum on the London Metal Exchange increased 0.15%, to $2,589 per ton. It had previously reached its highest level since August 18, at $2,595. Analysts at Guosen Futures stated on Friday that the anticipation of demand seasonalizing next month could have helped to boost aluminium prices. In the first half of this week, the hopes that the Ukraine war would end had led to an increase in supply from Russia. This had affected aluminium prices. A peace agreement between Ukraine and Russia has remained elusive. ANZ analysts stated in a report that the aluminium market will tighten up in 2026 as supply growth slows down. The current production of aluminium in China has reached the maximum permissible capacity, and there is little room for growth. The base metals complex was hammered to a tight range as investors focused on the Fed's annual Jackson Hole symposium and Powell's Friday speech for U.S. policy. Lead and Nickel on the LME dipped 0.06%. Tin ticked higher by 0.09%. Zinc advanced by 0.05%. SHFE copper increased by 0.09%. Nickel fell by 0.6%. Lead slipped 0.06%. Tin dropped 0.69%. Zinc declined 0.18%. ($1 = 7,1830 Chinese Yuan) (Reporting and editing by Amy Lv, Lewis Jackson)
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Gold prices remain stable as traders wait for Powell's Jackson Hole address
Investors held back from placing large bets in anticipation of the speech by U.S. Federal Reserve chair Jerome Powell at the annual Jackson Hole Symposium, which could provide new clues about the future direction of monetary policy. By 0210 GMT, spot gold was down 0.1% at $3,335.22 an ounce. U.S. Gold Futures for December Delivery fell 0.1% to 3,378.70. The U.S. Dollar Index hovered around a two-week peak, making gold less appealing to overseas buyers. Fed officials were lukewarm about the possibility of a rate reduction next month, as investors prepared for Powell's Friday 1400 GMT speech. Tim Waterer, chief market analyst at KCM Trade, said that gold was facing headwinds due to the possibility of a Russia-Ukraine agreement and because some USD buyers are interested in buying it. If Powell's message was interpreted as a dovish change, the USD may have been undone and gold could be moving higher again. According to CME's FedWatch, futures markets show a 75% probability of a rate cut next month by a quarter point. Recent data on labor shows that U.S. unemployment claims increased last week to the highest level in almost three months. The previous week, claims had reached a four-year high. Fed policymakers face a challenge because, despite signs of a weakening labor market, inflation is still above the central bank’s 2% target. It could also go higher as a result of the Trump administration’s aggressive hike in tariffs on imported goods. Three sources familiar with the Kremlin's thinking said that Russian President Vladimir Putin wants Ukraine to give up the entire eastern Donbass region, renounce its ambitions to join NATO and remain neutral, as well as keep Western troops away from the country. Silver spot fell 0.1% at $38.14 an ounce. Platinum dropped 0.6% to 1,345.53 while palladium increased 0.1% to $1,000. (Reporting and editing by Subhranshu sahu in Bengaluru.
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Official: Trump administration not interested in Micron or TSMC equity
A White House official said that the Trump administration was considering buying equity in companies receiving funds under the 2022 CHIPS Act, but had no plans to do so for larger firms boosting U.S. investment, such as TSMC or Micron. Officials confirmed a Wall Street Journal article that the administration will not be seeking equity stakes in companies such as Micron or TSMC that are planning to increase investment. The U.S. Department of Commerce's Howard Lutnick stated on Tuesday that the government was still working to determine the feasibility of acquiring a 10% stake at the troubled chipmaker Intel. He also suggested the government would look for other grant recipients in order to acquire additional stakes. Lutnick said to CNBC: "If we give you money, we would like a share of the profits for the American taxpayer." He said that while the Biden administration gave "free money" to companies like Intel and TSMC he explained, "Donald Trump changed it by saying, hey, we want equity in return for the money." TSMC announced its plans to invest $100 billion in the U.S. at an event held with President Donald Trump in March. This is in addition of the $65 billion that was committed for the construction of three manufacturing plants in Arizona. Micron increased its U.S. investment plans in the month of June. The Wall Street Journal reported that TSMC executives had already discussed returning their subsidies if an administration asked to become a shareholder. Both the White House and TSMC declined comment. Micron didn't immediately respond to an inquiry for comment. The U.S. Commerce Department overseeing the $52.7 billion CHIPS and Science Act finalized subsidies for TSMC of $6.6 billion in late 2012 to allow them to manufacture semiconductors in the United States. The Commerce Department did not comment immediately. Besides Intel and Micron, TSMC, Samsung, and TSMC were among the largest recipients of CHIPS Act funds, but nearly all of it is yet to be distributed. Trump said previously that he wanted the CHIPS Act to be killed. The U.S. Government has in the past taken stakes into companies during times of economic uncertainty as a way to restore confidence and provide financial support. (Reporting and editing by Clarence Fernandez in Mexico City, with Juby Babu reporting from Mexico City)
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As peace in Ukraine continues to elude, oil prices are set to snap a two-week losing streak
The oil prices were essentially unchanged on Friday, but they were on course to end a two-week losing run as the hope of immediate peace between Russia & Ukraine dimmed. This increased the risk premium that oil sellers demanded. Brent crude futures dropped 4 cents at $67.63 per barrel by 0052 GMT. West Texas Intermediate crude futures also fell 1 cent, to $63.51. Both contracts rose more than 1% the previous session. Brent has gained 2.7% in the past week while WTI is up 1.1%. As traders lose hope that U.S. president Donald Trump will quickly broker a peace deal, the oil price has fallen. The three-and-a-half-year war continued unabated on Thursday as Russia launched an air attack near Ukraine's border with the European Union and Ukraine said it hit a Russian oil refinery. While U.S. planners and European planners have said that they have developed military alternatives by allied advisers on national security. The first talks between U.S. leaders and Russians since Russia invaded Ukraine took place at the weekend. However, they have made little progress in achieving peace. Sources say that Vladimir Putin, the Russian president, demanded Ukraine to give up the entire eastern Donbas region and renounce NATO aspirations, while also keeping Western troops out. Trump has pledged to protect Ukraine in any deal that ends the war. The Ukrainian President Volodymyr Zelenskiy has dismissed the idea that Ukraine could withdraw from its internationally recognized land. The oil prices were also supported last week by the fact that U.S. crude stocks had been reduced more than expected, which indicates strong demand. The U.S. Energy Information Administration reported on Wednesday that stocks fell by 6 million barrels during the week ending August 15. Analysts expected 1.8 millions barrels. Investors also waited for signs of a Federal Reserve rate cut at the Jackson Hole Economic Conference in Wyoming. The annual meeting of central bankers starts on Thursday. Fed Chair Jerome Powell will speak on Friday. Lower interest rates may stimulate the economy and increase oil consumption, which could lead to a rise in prices. (Reporting and editing by Christopher Cushing; Sudarshan Varadhan)
Asian shares fluctuating, Dollar steady as traders wait for Powell's speech
The Asian stock market started the day on a cautious note as traders anxiously awaited Jerome Powell's speech at the annual Jackson Hole Symposium.
The financial markets are waiting for Powell to give clues on the likely likelihood of a rate cut for September, in light of recent signs of weakness in the job market and the outlook for the policy near term.
Carol Kong, economist and currency analyst at Commonwealth Bank of Australia Sydney, said that markets are on edge before the Jackson Hole Speech.
MSCI's broadest Asia-Pacific share index outside Japan rose 0.2% to bring its month-to-date gain up to 1.6%. South Korea's Kospi Index led the charge with a 1% rise, while China’s blue-chip CSI 300 Index is on track to have a third straight day of gains.
The Nikkei was fluctuating between gains and losses and lastly gained 0.1%.
The yen remained at 148.45 per dollar, after data revealed that Japan's core consumer price index in July was higher than analysts' expectations and exceeded the Bank of Japan inflation target.
The U.S. Dollar Index, which tracks greenbacks against currencies of major trading partners was stable at 98.60, after four days of gains. Traders were analyzing speeches by Fed officials, who seemed lukewarm about the idea of a rate cut next week.
S&P futures rose 0.1%. Cash gauge on Wall Street has been on a losing streak for five days, which puts it on course to have its largest one-week drop this month.
After a weaker-than-expected payrolls report earlier this month and consumer price data showing limited upward pressure due to tariffs, traders had increased their bets on a September reduction.
The market's pricing has retreated slightly since the minutes of the Fed meeting in July were released. According to CME Group’s FedWatch tool, traders now price in a 75% chance of a September cut, down from an 82.4% probability on Thursday.
Kong says that the most likely scenario for Powell is to not provide "any definitive hints" about what the Fed's next move will be ahead of crucial non-farm payrolls data and CPI figures.
"Given the current state of the market, the risk is that the U.S. Dollar will strengthen, especially if the challenge the current pricing on the market for a 25 basis-point reduction."
The PMI data released by S&P Global shows the fastest growth in manufacturing orders for 18 months.
The labour market has also revealed pockets of weakness. Last week, the number Americans who applied for unemployment benefits increased by the largest amount in three months and the number receiving unemployment benefits in the previous week reached the highest level since nearly four years.
The dollar held steady at $1.1607 against the euro as the EU and U.S. revealed details of the framework trade agreement struck in July.
Brent crude prices fell, last trading at $67.45 a barrel after strong gains Thursday, as Russia and Ukraine attributed each other's blame for the stalled peace processes, and U.S. statistics showed strong demand in America, the largest oil consumer.
Gold spot was down 0.1% to $3334.20 an ounce.
(source: Reuters)