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Waiting for PCE to give rate clues
Rae Wee gives us a look at what the European and global markets will be like tomorrow. Investors end a volatile week that was dominated by Federal Reserve drama, Nvidia earnings and Nvidia's quarterly report with the release of an important inflation measure on Friday. This could have a significant impact on the Fed's policy meeting in September. The core price index for personal consumption expenditures, the Fed's preferred inflation measure, is expected to remain unchanged at 0.3% per month. This would put the annual rate of inflation at 2.9%. The data could reveal further evidence that President Donald Trump's tariffs are affecting consumer prices. This is in response to a recent surprise increase in producer inflation. Markets have priced in the Fed's 25 basis-point rate cut in September. However, what will happen after this is still uncertain. Fed Governor Christopher Waller announced on Thursday that he plans to begin cutting rates in the next month. He "fully expects," more rate reductions to follow, to bring the Fed’s policy rate to a neutral level. This is a step up to his call for lower short-term lending costs. The dollar fell by a full percentage point on Friday as the dollar was tipped to fall for the month. Worries about the central banks independence were also contributing factors, especially with Trump's campaign to influence monetary policy. Fed Governor Lisa Cook has filed a lawsuit claiming that Trump does not have the power to remove her after he announced on August 25, an unprecedented move, that he was going to fire her. The French and German preliminary inflation figures are due to be released later that day, ahead of the PCE. ECB accounts on Thursday showed that policymakers at the European Central Bank (ECB), who met in July, were divided over whether inflation would be higher or lower than they expected. This debate is likely to reach a boiling point in the next few months. Sources have said that the ECB kept rates at their current level in July and will likely do so again in August before discussing further rate cuts. This is especially true if European economies are affected by U.S. Tariffs. The following are key developments that may influence the markets on Friday. - U.S. PCE Price Index (July). German preliminary CPI for August France preliminary CPI for August
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NKT Installs Cables for TenneT’s BorWin5 Offshore Grid Connection
Danish power cable maker and services provider NKT has installed the HVDC power cable system for Tennet’s BorWin5 offshore grid connection in Germany.NKT said it completed the installation of the 320 kV HVDC system, completing the pull-in works to the offshore platform with its NKT Victoria cable laying vessel.In 2020, NKT secured a turnkey contract by TenneT to deliver and install a high-voltage DC XLPE power cable system for the BorWin5 project in Northern Germany.The order comprised the manufacturing of approximately 30 km of 320 kV high-voltage DC on-and offshore power cables and accessories as well as offshore installation.It will serve for the transmission of electrical energy between the 960 MW offshore wind farm He Dreiht operated by EnBW in the German North Sea and a grid connection point on land.BorWin5 is TenneT’s fourth offshore wind DC project off the coast of Borkum in northwestern Germany. It connects the offshore converter platform BorWin epsilon in the North Sea to the converter station in Garrel/Ost close to Cloppenburg in Lower Saxony.
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BlueScope Australia's appeal against civil cartel cases dismissed
The Australian Competition Regulator said that the appeals of steel producer BlueScope, and its former General Manager against an earlier ruling in a civil anti-cartel proceeding brought by BlueScope were dismissed by a court. The court confirmed its previous findings, that BlueScope's former general manager and BlueScope tried to convince distributors in Australia to enter into agreements containing price-fixing clauses between September 2013 and July 2014. In 2019, Australia's Competition regulator initiated civil cartel actions against the company, and its former employee. The alleged conduct was in the supply flat steel products. Australian Competition & Consumer Commission stated that the decision meant that a penalty for a breach of competition law of A$57.5m ($37.36m) against BlueScope and a fine of A$500,000 on the general manager would remain in effect. BlueScope said in a separate press release that it accepted the court's decision and brought the long-running matter to an end. By 0304 GMT, shares of the company had risen by 0.9%. The benchmark S&P/ASX 200 was mostly flat. $1 = 1.5389 Australian Dollars (Reporting and editing by Mrigank Dahniwala in Bengaluru)
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Gold to gain monthly on US rate cuts and soft dollar
The gold price was on course for a rise of more than a month on Friday, after reaching a peak of over a month in the previous session. This was supported by a softer dollar in general and expectations that the Federal Reserve will cut interest rates in September. As of 0223 GMT, spot gold was unchanged at $3,412.56 an ounce. Bullion is up 3.9% this month, and on Thursday it reached its highest level of $3.423.16 in the last 23 days. U.S. Gold Futures for December Delivery were flat at $3.473.70. Dollars fell 0.4% overnight and were set to drop by a month, making gold priced in greenbacks less expensive for those who hold other currencies. Tim Waterer, chief market analyst at KCM Trade, said that "the precious metal is still a favorite among investors" ahead of the expected loosening of monetary policy beginning next month in the United States. Fed Governor Christopher Waller stepped up on Thursday his call to reduce short-term borrowing costs in the United States. He said he would be supportive of a rate cut next month, and further reductions within the next three-six months. According to CME FedWatch Tool, traders believe there's an 86% likelihood of a rate cut of 25 basis points at the Fed policy meeting next week. Gold that does not yield is usually a good investment in an environment with low interest rates. Investors will now be waiting for the release of the Personal Consumption Expenditures Price Index (PCE), the Fed's preferred measure of inflation, which is due later today, to get more clues about the Fed's rate path. Waterer stated that if core PCE is stable at 0.3% per month, it will help keep the Fed's rate reductions on track. Fed Governor Lisa Cook has filed a lawsuit claiming that President Donald Trump does not have the power to remove her. Spot silver fell 0.3%, to $38.94 an ounce. Platinum dropped 0.6%, to $1,351.21, and palladium remained steady at $1102.21. (Reporting and editing by Sherry Jacobi-Phillips, Harikrishnan Nair and Brijesh Pate in Bengaluru)
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Iron ore prices rise on demand and lower inventories
Iron ore futures prices traded in a narrow band on Friday but were poised for a gain of about 5% this week, thanks to a steady demand from China, the world's largest consumer, and declining inventories. As of 0150 GMT, the most traded January iron ore contract at China's Dalian Commodity Exchange was up 0.51% to 785.5 Yuan ($109.82). The contract is up 2.1% this week. As of 0143 GMT the benchmark October iron ore price on the Singapore Exchange had fallen by 0.58% to $103.5 per ton. However, it has gained nearly 3% this week. The demand for this key ingredient in steelmaking remained strong despite the production restrictions in Tangshan - China's largest steelmaking hub - to improve air quality before the military parade to mark the end of World War Two on September 3. According to Mysteel, the average daily hot metal production, which is a key indicator for iron ore consumption, fell by 0.3% from week to week to 2.4 millions tons on August 28. However, it remained 8.7% above last year's same period. Two analysts warned that the output could fall even more next week, as the effects of the new round of production restrictions take hold. This could put downward pressure on the prices. Mysteel data shows that portside stock levels dropped by 0.4% compared to the previous week. This also helped support ore prices. Coking coal and coke, which are used in the production of steel, have declined by 0.09% and 0.544% respectively. The benchmark steel prices on the Shanghai Futures Exchange are mixed. Rebar dropped 0.22% and wire rod increased 0.18%, while hot-rolled steel coils and stainless steel were unchanged.
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IFC and BTG Pactual invest up to $1 Billion in Latin America Sustainability
BTG Pactual, a Brazilian lender, and International Finance Corporation (the private sector arm of the World Bank) announced Thursday that they would invest up to $1 billion on sustainable development and sustainability initiatives. Why it's important Globally, the private sector has become increasingly involved in sustainability. Private institutions are promoting climate finance as well as development-focused investments. Brazil is the home of much of Amazon Rainforest and is a crucial region for biodiversity and solutions to climate change. BTG Pactual, Latin America's biggest investment bank, is headquartered in Brazil. By the Numbers By the end of 2028, the partnership will mobilize $1 billion through co-financing and equity investments. KEY QUOTES Alfonso Garcia Mora is the regional vice-president of IFC for Europe, Latin America, and the Caribbean. He said, "The private sector must play a major role in driving the climate agenda, and transforming initiatives that will improve lives and promote economic growth." BTG Pactual CEO Roberto Sallouti stated that "the allocation will be done with care, adhering both to financial and technical criteria." ADDITIONAL CONTEXT IFC and BTG stated that the investments were aimed at boosting initiatives in Brazil and Latin America to combat climate change and promote sustainable growth. They also targeted social and environmental development as well as conservation, infrastructure and so-called "bioeconomy". (Reporting and writing by Paula Arend, Editing by Cynthia Osterman).
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Tensions between the US and Venezuela are rising as US warships arrive at the Southern Caribbean
The tensions between the United States of America and Venezuela are increasing amid the large U.S. Naval buildup in the Southern Caribbean, and other nearby waters. U.S. officials claim that this is to combat threats from Latin American Drug cartels. U.S. president Donald Trump made cracking down drug cartels one of the central goals of his administration. This is part of an effort to limit immigration and secure the U.S. south border. The U.S. Coast Guard and Navy regularly deploy ships to the Southern Caribbean. However, this deployment is much larger than normal. An anonymous U.S. official said that on Thursday, seven U.S. Warships and one nuclear-powered Fast Attack Submarine were in the Southern Caribbean or expected to be in the area in the next week. Venezuelan President Nicolas Maduro condemned the move. He said that Venezuela is "threatened by nuclear submarines" in violation of international agreements. The exact mission is not known, but Trump's administration says it will use the military against drug cartels and other criminal groups. It has also directed the Pentagon prepare options. The White House announced on Thursday that Trump is ready to "use every element of American power" to stop the drug invasion into our country. Karoline L. Leavitt, White House Press Secretary, told reporters that "many Caribbean nations as well as many countries in the region" have applauded efforts and operations to combat drug trafficking. In February, the Trump administration declared Mexico's Sinaloa Cartel, other drug gangs and Venezuelan criminal group Tren de Aragua as global terrorist groups. USS San Antonio and USS Fort Lauderdale are part of this buildup. Sources have confirmed that the ships carry 4,500 servicemen, including 2,200 Marines. Officials have confirmed that the U.S. military also flies P-8 spy planes to gather intelligence in the region, even though they operate in international waters. "Our diplomacy doesn't involve cannons or threats because the world is not the same as it was 100 years ago," Maduro said. His government announced last week that 15,000 troops would be sent to the states on its western border to Colombia to fight drug trafficking organizations. Maduro also ordered civil defense groups to be trained every Friday and Saturday. Maduro's administration accuses foreigners and the opposition of conspiring to harm Venezuela with U.S. entities, such as the CIA. The opposition and the U.S. always deny these accusations. The government calls sanctions "economic warfare." Rod Nickel (Editing and Reporting)
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Tensions between the US and Venezuela are rising as US warships arrive at the Southern Caribbean
The tensions between the United States of America and Venezuela are increasing amid the large U.S. Naval buildup in the Southern Caribbean, and other nearby waters. U.S. officials claim that this is to combat threats from Latin American Drug cartels. U.S. president Donald Trump made cracking down drug cartels one of the central goals of his administration. This is part of an effort to limit immigration and secure the U.S. south border. The U.S. Coast Guard and Navy regularly deploy ships to the Southern Caribbean. However, this deployment is much larger than normal. An anonymous U.S. official said that on Thursday, seven U.S. Warships and one nuclear-powered Fast Attack Submarine were in the Southern Caribbean or expected to be in the area in the next week. Venezuelan President Nicolas Maduro condemned the move. He said that Venezuela is "threatened by nuclear submarines" in violation of international agreements. The exact mission is not known, but Trump's administration says it will use the military against drug cartels and other criminal groups. It has also directed the Pentagon prepare options. In February, the Trump administration declared Mexico's Sinaloa Cartel, other drug gangs and Venezuelan criminal group Tren de Aragua as global terrorist groups. USS San Antonio and USS Fort Lauderdale are part of this buildup. Sources have confirmed that the ships carry 4,500 servicemen, including 2,200 Marines. Officials have confirmed that the U.S. military also flies P-8 spy planes to gather intelligence in the region, even though they operate in international waters. "Our diplomacy doesn't involve cannons or threats because the world is not the same as it was 100 years ago," Maduro said. His government announced last week that 15,000 troops would be sent to the states on its western border to Colombia to fight drug trafficking organizations. Maduro also ordered civil defense groups to be trained every Friday and Saturday. Maduro's administration accuses foreigners and the opposition of conspiring to harm Venezuela with U.S. entities, such as the CIA. The opposition and the U.S. always deny these accusations. The government calls sanctions "economic warfare." Rod Nickel (Editing and Reporting)
Dow and S&P 500 close at record highs, but Nvidia shares fall, as dollar weakens
S&P 500, Dow Jones Industrial Average and the Dow Jones Industrial Average closed at record highs on Friday, despite Nvidia's shares falling amid uncertainty about its China business. The dollar also fell against the euro and the yen, as traders awaited a reduction in U.S. rates. Nvidia, the world's leading artificial intelligence chip designer, saw its shares end 0.8% lower on Thursday as concerns over the Sino-U.S. Trade War clouded the company's better-than expected revenue forecast released after the market closed on Wednesday. Investors viewed Nvidia’s report, which included a 56% increase in quarterly revenue as confirmation that AI technology demand remains strong.
Alphabet and Broadcom, two other AI giants, also gained. Alphabet rose 2% while Broadcom rose 2.8%. The Nasdaq also rose, while the S&P 500 closed at a record-high for a second consecutive day.
Peter Tuz of Chase Investment Counsel, Charlottesville, Virginia, said that while there's some confusion about what China will do, Nvidia has "not said anything that indicated a significant... slowdown, so this removed a major overhang or risk today." Nvidia CEO Jensen Huang dismissed concerns over an end to the spending boom on AI chip and said that opportunities would expand in the next five year.
Tuz says that economic data is another positive for stocks. Tuz said that the day's data revealed the U.S. economic growth was faster than originally thought in the second-quarter, driven in part by business investments in intellectual property like AI.
The Dow Jones Industrial Average rose by 71.67, or 0.16 percent, to 45.636.90. The S&P 500 gained 20.46, or 0.32 percent, to 6,501.86. And the Nasdaq Composite gained 115.02, or 0.53 percent, to 21,705.16.
The MSCI index of global stocks rose by 3.30 points or 0.35 percent to 956.34. The pan-European STOXX 600 fell by 0.2%. The European markets are likely to remain focused on France's fiscal trajectory following Francois Bayrou’s gamble to win support for his deeply unpopular plan to reduce debt via a vote of confidence next month.
The euro rose 0.35% to $1.1678. The dollar fell 0.28% against the Japanese yen to 146.97.
Investors want to know more about the prospects of interest rate reductions ahead of Federal Reserve's policy meeting on September 16-17.
John Williams, the New York Fed president, said on Wednesday that it is possible for interest rates to fall at some point. However, policymakers must wait to see how the economy develops in the coming months before deciding whether it's time to cut the rate at the September meeting.
According to CME's FedWatch, traders are currently pricing in approximately 84% of the odds that a rate reduction will occur in September. They see 138 basis point cuts in total by the end 2026.
This week, the Fed will also be reporting on personal consumption expenditures in the United States on Friday. Investors are still digesting the news about Federal Reserve Governor Lisa Cook. Cook filed a suit on Thursday, claiming that U.S. president Donald Trump does not have the power to remove Cook from her office. This could set up a legal fight which could change long-established norms regarding the independence of the U.S. Central Bank. U.S. Treasury rates were mixed as some investors took profits after a recent rally of two-year notes.
Last week, the yield on the two-year interest-sensitive note rose 1.6 basis points to 3.639%. It had fallen to 3.611% the previous day. This is the lowest level since May 1. The benchmark 10-year bond fell 2.7 basis point to 4.211%, and reached the lowest level since August 5.
The Fed is the main driver. Padhraic garvey, regional director of research for the Americas at ING, said that bond markets love rate reductions. Gold and oil prices reached a five-week high. Gold spot prices rose 0.6%, to $3,416.14 an ounce. This is the highest price since July 23.
Brent crude futures gained 0.8% or 57 cents to settle at $68.62 per barrel. U.S. West Texas intermediate crude futures climbed 0.7% or 45 cents to settle at $64.60 per barrel.
(source: Reuters)