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Morgan Stanley: Venezuelan bond outlook is boosted by US Oil Deal Signal
Morgan Stanley's report on Tuesday stated that the U.S.-Venezuela Oil Agreement strengthens the outlook of?Venezuela?s sovereign debt restructuring, and encourages higher oil production, though key details are still unclear. Last week, the U.S. announced an agreement with?Venezuela under which North American Blue Energy Partners would be granted a concession for 100 years covering 17 oilfields estimated to have 65 billion barrels in reserves. The U.S. government will receive a 35% stake in the parent company, as well as the right to buy 20% of the future output at cost, and the first refusal on the remaining 80%. Morgan Stanley has maintained that it is assuming a production of?about 1,5 million barrels per a day by 2027. This level, according to Morgan Stanley, would allow for a successful restructuring of the massive amount of defaulted government debt. Since the U.S. deal was announced last week, Venezuelan sovereign bonds and those of PDVSA (the state oil company) have gained about 3.5%. This reflects a more positive economic outlook in advance of any restructuring talks. Morgan Stanley analysts say the importance of the oil deal lies less in its specifics and more in the commitment it signals to Venezuela and other countries in the Western Hemisphere. The report stated that "the announcements are positive for sovereign bonds, even though more details are needed. Especially on the fiscal impact." If the plan is implemented, the $100 billion investment in Venezuela's oil infrastructure would be a significant boost to production. However, the report cautioned there were many details about the plan that are still missing. The deal also represents a dramatic expansion of the U.S.'s role in the?Venezuela oil industry. The country has the largest oil reserves in the world, but only produces about 1.25million barrels per day. This is far below their potential, after years of mismanagement, underinvestment and sanctions.
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Braves aim for a split against Nationals as key series approach
Atlanta will split its two-game set against the Washington Nationals this Wednesday. The Braves know that the road trip is heating up in the coming weekend. Atlanta, which leads the National League East (82-57) and lost its second consecutive game on Tuesday (9-5) is heading for a four game showdown with second-place Philadelphia Phillies 79-60 this weekend. The Braves' Grant?Holmes will take the field on Wednesday to face the Nationals'?right-hander _Brad Lord (5-2, 3.75). Holmes is 5-1 and has a 3.33 ERA in his last 10 appearances. Holmes won his last outing against the Colorado Rockies despite allowing three runs and eight hits in five innings. Holmes has a career ERA of 3.18 in three starts and four appearances. Holmes lost despite striking out 10 batters in a season high five innings and allowing only two runs. Lord has been a relief pitcher this season and he's also played the role of opener on a few occasions. His last Saturday outing against the Miami Marlins saw him give up one run on two hits in 2 1/3 innings and be charged with a failed save. Lord has a 2.86 ERA and is 0-2 in seven games against the Braves (two starts). He pitched three innings of scoreless relief on May 23, helping to preserve the Nationals win. Washington's 9-5 victory on Tuesday night featured two new players who made their major league debuts. Jared Simpson, the relief pitcher, threw three scoreless inning to win. Designated hitter Yohandy morales hit a homer, a double and single. Blake Butera, Nationals manager, said that Morales looked ready to go and was not nervous at all. Simpson was the same. He was in a tough spot with men on first and third in a tight match and got nine outs from eight batters. Washington (67-74) won five of their last six games. Morales first big-league hit was a home run, after he struckout in his first at bat against AJ Smith Shawver. The 24-year-old explained, "I had no choice but to go up there." "I missed that first pitch, which was a fastball. Then he left up a splitter, so I got my hands up and as soon as I hit it, it was like 'oh, it's got chance' and began rounding the base." CJ Abrams scored two goals after missing the game on Monday due to back pain. James Wood went 1-for-3 in his second rehab game for the Double-A Harrisburg Senators. He scored a run, walked and struck out. Michael Harris II scored a home run for the Braves for the second consecutive game. He's hit safely for six straight games. Blake Burkhalter is Atlanta's No. 15 prospect. The 15th-ranked prospect in Atlanta, Blake Burkhalter, made his debut on Monday. The 25-year old right-hander gave up?one run in an inning on a single hit, a walk and a strikeout. Walt Weiss, manager of the Braves, said: "Good work by Burky." "Good arm. "Good arm." He only gave up one run but I saw some good stuff. Good fastballs, good breaking balls, hard breaking balls and cutters. "I thought he did a good job of handling himself." Field Level Media
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Dechert, UK fraud watchdog and ENRC resolve criminal probe
The Serious Fraud Office of Britain has settled with a Kazakh mining company ENRC that accused the agency and law firm Dechert for causing them huge losses during an important criminal investigation. The settlement announced on Wednesday by ENRC and Dechert appears to bring to an end the more than 10 year legal saga that began when the SFO began investigating allegations of bribery committed by ENRC between 2009-2012 to secure mining contracts for the Democratic Republic of Congo, which the company denies. The London High Court previously ruled that the SFO wouldn't have opened an investigation into the alleged bribery if it hadn't first persuaded Neil Gerrard's former lawyer at Dechert for ENRC to act against the miner’s interests. In 2023, the SFO dropped their investigation and did not file criminal charges. They said at that time that "insufficient admissible proof to prosecute" was available. ENRC, an ex-FTSE 100 company, sought around $76m?in "unnecessary expenses" that it claimed it incurred during the SFO probe and approximately $90m in increased borrowing costs, after the investigation became public. Plus interest. The SFO, Dechert and the ENRC were all fighting for damages. A trial was held earlier this year in order to determine what, if any, ENRC would receive. EnRC and Dechert announced on Wednesday, before the High Court's ruling, that the case had been settled, but without disclosing any terms. In separate, but identical, statements, an 'ENRC spokesperson, Dechert LLP, and David Neil Gerrard said that they had concluded their 'proceedings on terms of confidentiality. SFO and Gerrard’s lawyer didn't immediately respond to comments. ENRC had sued separately the SFO, the former case controller of the ENRC investigation and a former employee over alleged leaks to journalists. This case was settled by 2024.
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Abel, Berkshire CEO, sees energy as a business opportunity
Greg Abel, Berkshire Hathaway's Chief Executive said on Wednesday that he saw significant opportunities for its energy business from the construction of a?AI data center. This comes after Berkshire had made Alphabet the third largest common stock holding. Abel, speaking on CNBC, said that he considered Google to be a "significant" player in AI. This was the reason he and Berkshire Chairman Warren Buffett authorized an additional $10 billion investment three months ago. Abel stated that "we are all feeling and seeing the impact" of AI. Buffett initiated Berkshire's investment into Alphabet last year. Abel, however, took credit for the investment. Abel stated that Berkshire Hathaway's Energy business could also "benefit" from AI growth due to the amount of energy needed to run data centres. He estimated that in Iowa where 'Berkshire Hathaway Energy' is located, around 8% of the load was from data centers last year. Abel stated, "I have always been of the opinion that energy will be the constraint." "We still see it as a significant opportunity" for Berkshire Hathaway Energy and Berkshire.
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As tensions in the Middle East escalate, copper is leading base metals to fall.
Copper and zinc were the two base metals that fell the most on Wednesday, as the conflict in the Middle East intensified. U.S. troops struck Iran, while Iranian forces fired at American bases throughout the region. This stoked fears of inflation due to higher oil prices. Benchmark three-month Copper on the London Metal Exchange fell by 1% to $14,133 per metric ton at 1007 GMT after reaching $14,092, which was its lowest level since August 21. Metal also fell below the support of the 21-day average price of $14,162. John Meyer, analyst at SP Angel, said that "all the base metals have weakened due to the higher oil prices resulting from the renewed conflict between Iran and the U.S." The dollar reached a new two-week high after the largest exchange of fire between Washington and Tehran since July plunged Iran and its Arab neighbours back into war. The copper price fell for the second time after hitting a seven-month record high of $14441.50 on February 2. This was due to the strengthening dollar and the increasing bets placed that the U.S. Federal Reserve would raise interest rates by September. Meyer stated that it is "more likely than not" that the Fed will raise interest rates. The dollar value of metals increases when the U.S. dollar is stronger. This makes them more expensive to buyers who use other currencies. Higher borrowing costs affect the outlook for future metals demand, which is directly related to 'the pace of economic growth. Zinc dropped 1.7% to $3856. On Tuesday, the metal reached a record high of $3.990 due to speculative purchases and low inventories outside China. The daily LME data showed that supplies were less tight, indicating a small inflow of copper and zinc to LME-registered storage facilities. Additional stocks have helped to reduce premiums on cash metals over?three month contracts in both markets. LME tin fell 0.9% to $54,090 after hitting a low of $53,850. Nickel, meanwhile, dipped by 0.4% to $16,595, reversing some of its losses following a drop to $16,500. Aluminium dropped 0.7% at $3,256.50, and lead fell 0.9% to $1,901.50.
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UK fines Citibank London 6 million pounds for Russia sanctions violations
The 'U.S. The 'CBNA London' unit of the bank made money available to those who were affected by sanctions. The Office of Financial Sanctions Implementation in Britain said that the majority of breaches took place between February and November 2022 and CBNA London voluntarily reported the majority of breaches to the regulator. Since the Russian invasion of Ukraine, in February 2022, Britain and the United States have imposed sanctions against thousands of individuals, entities, and ships. OFSI stated that many breaches occurred after sanctions were initially imposed, which they said placed "significant stress on the alert handling and investigative processes of the bank". "OFSI doesn't consider that CBNA London had any intention to violate sanctions. The 'errors and failures' referred to were material and significant in aggregate and occurred in a wide range of areas and systems in the bank, according to the regulator. Citi did not respond immediately to a comment request.
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As US and Iran trade wars intensify, stocks fall and bond routs deepen.
The world stock market fell on Wednesday as fresh U.S. strikes on Iran pushed oil prices up to a five-week high, fueling inflation fears and extending the global bond saleoff. The U.S. attacked Iranian military targets near Strait of Hormuz while Tehran claimed it had targeted U.S. resources across the region. This was the largest exchange of fire for weeks. Brent crude futures rose 0.1% to $94.87 per barrel on fears of further disruptions in energy supplies. Kiran Ganesh is a multi-assets strategist at UBS Global Wealth Management. She said that the recent rise in energy prices had put further upward pressure on bond rates, which were already on the increase due to some fiscal concerns. The yield on the benchmark 10-year U.S. Treasury bond reached an intraday peak of 4.8122%. This is its highest level in nearly three years. Meanwhile, the yield on the 10-year Japanese Government bond held at above 3% for the second consecutive session, after reaching a three-decades high earlier this week. The?U.S. dollar tends to be supported by rising yields, which make it more attractive as a safe-haven asset. Dollars are viewed as safe haven assets, which increases their appeal. The U.S. dollar index, which measures greenbacks against a basket of six currencies was up 0.05% to 99.734, its highest level since August 17. Ganesh stated that the dollar is more susceptible to a downward surprise than other currencies, because the market has already priced in a fairly hawkish Fed outlook. MSCI's global stock index fell by 0.2%, and was hovering near its one-month low. STOXX 600 in Europe fell by 0.3% after Asia's sharp losses following Wall Street’s overnight sell-off. South Korea's KOSPI fell almost 4% while Nikkei was down by 2.9%. Futures for the U.S. stock index pointed to a muted opening. DATA DEPENDENT Investors boosted their bets after Kevin Warsh's hawkish remarks prompted them to increase bets for another U.S. rate hike. Investors are awaiting the upcoming U.S. Economic data to determine if the economy is strong enough to warrant another rate hike. ADP private payrolls is due Wednesday, and the nonfarm employment report is on Friday. FedWatch, a tool of CME Group, shows that Fed funds futures indicate a 68% probability of a rate hike this month by 25 basis points, compared to 37% last week. As expected, the New Zealand dollar fell 1.2% to $0.58220 following the Reserve Bank of New Zealand's hike in interest rates. The currency was impacted by the central bank's hawkish statement. Gold fell 0.1% to $4,322.24 per ounce. Bitcoin dropped 0.6% to $76,951.01 while ether fell 1% to $2,394.57.
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Lynas Rare Earths claims it was involved in takeover discussions earlier this year
A spokesperson for Australia's Lynas Rare Earths said that the company was involved in takeover talks earlier this year, but they did not proceed. Three people said that the talks led Lynas, through Chairman John Humphrey, to suspend its search to find a new CEO for Amanda Lacaze, who retired from her position in June. Lynas plays a major role in developing a Western supply network for metals that are crucial to electric cars, wind turbines and defence systems. It's also a big draw for?Australia. The country has committed to being a key mineral supplier to its allies. Any acquisition by a foreign company must be approved by the regulators of that country. The spokesperson responded in a written statement to a question regarding the takeover discussions that took place earlier this year. Lynas held post-results discussion with investors in Sydney, Melbourne and Brisbane this week. Lacaze left the company on January 13. Humphrey explained to investors why the CEO search took so long. The investors spoke on condition of anonymity due to the sensitive nature of the matter. Humphrey, according to one investor, told him that the CEO search was suspended for 4 1/2 months. How could they not disclose? Another investor agreed. "It is not a short time." Lynas didn't mention in its statement whether the CEO search was suspended. Because the search process had not been completed before Lacaze's retirement, Lynas appointed Pol Le Roux as interim CEO. It said that the CEO search is still ongoing. DIFFERENTIATING SUPPLY CHAINS Lynas had previously been in merger talks with MP Materials, based in the United States. The talks ended in 2024 when the companies couldn't agree on an appropriate valuation. It wasn't immediately clear which company had been involved in the discussions this year. The Australian takeover laws stipulate that an 'listed company' is not required to reveal that the CEO search was suspended. The company is required to disclose the suspension only if it constitutes "market-sensitive information." The news of the talks came as top-developed economies around the world scrambled to support the development and diversification of supply chains away from China, the dominant producer. Lacaze's shoes are likely to be hard to replace. Over her 12-year tenure, she oversaw the 12-fold increase in the?share prices of the company as it grew to a $16-billion company. Lynas reported last week a significant increase in its annual profit. This was aided by a record-high average selling price for?rare earth oxide and a strong demand. However, it fell short of?market expectations. The company also stated that it would expand its global supply chain. It is currently in discussions with mine suppliers from around the globe and will support the development of an American magnet supply chain.
As US and Iran trade wars intensify, stocks fall, bond routs deepen.
The world stock market fell Wednesday, as U.S. strikes on Iran drove oil prices to five week highs. This stoked inflation concerns and extended a global bond selloff.
Tehran claimed that it had targeted U.S. assets in the entire region while Washington said that they struck Iranian military targets close to the Strait of Hormuz. This was the largest exchange of fire between the two countries since July.
Brent crude futures rose 0.6% to $95.18 per barrel on fears of further disruptions in energy supplies.
Wall Street futures predicted another slow start for Wall Street after the previous session, when it hit a one-month low. After sharper losses in Asia, the pan-European STOXX 600 dropped 0.3%. South Korea's KOSPI fell almost 4% while the Nikkei was down 2.9%.
The recent rise in energy prices has added upward pressure to bond yields that were already on the increase due to fiscal concerns, said?Kiran Ganesh. Multi-assets strategist at UBS Global Wealth Management.
Stocks have been resilient to the rise in yields, but the increased rate will eventually put pressure on the equity markets.
The yield on the benchmark U.S. Treasury 10-year bond increased to a near three-year-high of 4.8182%. Meanwhile, the yield on a 10-year Japanese government bonds?held at above 3% for the second consecutive session after reaching a three decade high earlier in the week.
The increase in borrowing costs across the major economies has?deepened fears about tighter monetary policies and deteriorating fiscal dynamics.
The U.S. Dollar Index, which measures greenbacks against a basket six currencies, rose 0.1% to 99.734, close to its highest level since August 17. The rise in bets on a U.S. rate hike also helped.
The U.S. Dollar's appeal as a safe haven was bolstered by rising yields and increasing geopolitical tensions, while demand for stocks and other riskier investments decreased.
Ganesh stated that the market has already priced in a fairly hawkish Fed outlook, so there is more room for a dollar decline than for other currencies.
DATA-DEPENDENT
Investors increased their bets after Kevin Warsh's hawkish remarks prompted them to raise the odds on an interest rate increase in the U.S.
According to CME Group’s FedWatch tool, traders now give a two-in three chance that the Fed would deliver a 25 basis-point rate increase this month. This is up from 37% a week earlier.
Investors are looking at upcoming U.S. data to determine if the economy is strong enough to justify tightening monetary policy. ADP's private payrolls are due on Wednesday. The nonfarm payrolls will be released on Friday, and the consumer inflation data on September 11.
Markets will be watching closely the policy meetings of the European Central Bank (ECB) and the Bank of Japan to see how much they are willing to tighten their policies in response to persistent inflation risks.
Matthew Ryan, director of Ebury's market strategy department said that September will test how far central banks will go to control inflation.
Gold fell 0.1% to $4,322.24 per ounce. Bitcoin dropped 0.6% to $76,951.01 while ether dropped 1% to $2,394.57.
(source: Reuters)