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Wall Street to resume record-breaking run after Fed rate reduction
The dollar and Wall Street futures rose slightly on Thursday following the Federal Reserve’s first rate cut for the year. French markets were jittery, and the pound remained steady after UK interest rates remained unchanged. The Fed's quarter point cut and "steady-as she goes" message helped Europe's stock market climb almost 1%, and Wall Street was set for yet another round of records highs despite the somewhat hesitant response from traders on Wednesday. Asia also rallied over night. Chinese stocks reached a decade-high as local chipmakers rejoiced at reports that U.S. giant Nvidia was banned in China. South Korea, Taiwan, and Japan's Nikkei also ended higher than 1%. Donald Trump, the U.S. President and Xi Jinping, the Chinese president are both scheduled to speak Friday. There was also a sense of relief that the dollar held up well after hitting a three-and-a-half-year low earlier this week. This has caused those who export to the U.S. to grind their teeth. The Fed's "dot plot", which is closely monitored, had indicated that two additional rate reductions would be made over the remaining two meetings of this year but only one in 2026. Fed Chair Jerome Powell also moderated expectations by saying that the central bank didn't need to act quickly, though analysts admit this could change. Richard Cochinos, RBC Capital Markets, said: "We look beyond the volatility of one or two days to find underlying trends." In this case, we expect a weaker U.S. Dollar," Cochinos said. He pointed to the expectation of U.S. interest rates falling to 3% in 2013. The gains of the dollar were trimmed by traders in Europe. The euro was largely unchanged at $1.1825 and sterling was just above $1.36. As expected, the Bank of England maintained UK interest rates at 4%. The vote of 7-2 to reduce the annual rate at which the UK government bonds it bought during the financial crisis and COVID crises are sold to 70 billion pounds instead of 100 billion pounds was viewed with slightly more interest. The poll was mostly accurate, but the gilt markets are now nervous about UK government finances this year. A key budget is due in late November. James Rossiter, TD Securities, said that the bond reduction was not a surprise. He now expects another 25-bps rate cut right before the budget in November. FRENCH FOCUS Wall Street futures saw a 30% jump in Intel shares during premarket trading after news that Nvidia would invest $5 billion into the struggling company. The bond markets began to sputter, as the yield on benchmark Treasury notes of 10 years - which moves in the opposite direction to the price - was little changed at 4.08%. And the two-year rate remained unchanged at 3.53%. The benchmark yield for the Euro Zone, Germany's 10-year bond, was also stuck at 2.69%. However, attention was also focused on France's. Political tensions Its bond yields briefly rose above Italy's. Unions claim that hundreds of thousands protested against austerity in France on Thursday. They urged President Emmanuel Macron, and Sebastien Lecornu, his new prime minister, to acknowledge the anger they felt and cancel looming budget reductions. On the currency markets, the Chinese yuan ticked up after its central banks left the borrowing costs of its reverse repurchase agreement for seven days unchanged overnight. Meanwhile, the New Zealand dollar fell after data showed that the economy there shrank much more than was expected. Norwegian crown, which was flying high in the past few months, also softened after its central banks lowered rates by 25 basis points. However it still remained near a three-year-high against the dollar. After weaker than expected labour market data, the Australian dollar has also fallen from a near-year-high. Brent crude rose 0.4% to $68.25 a barrel, despite an initial dip on the commodity markets. Gold, the safe-haven asset, also rose 0.3% to $3670 an ounce.
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Gold rises on weaker dollar following Fed rate cut
Gold prices rose Thursday on a soft dollar after the U.S. Federal Reserve lowered interest rates by 25 basis point and announced a gradual ease for the remainder of the year. This boosted the metal's appeal. As of 1144 GMT, spot gold rose 0.2% to $3,667.12 an ounce. On Wednesday, prices reached a new record of $3 707.40. U.S. Gold Futures for December Delivery fell by 0.5% to $3701.00. Dollar pared its recent gains, and the dollar hovered around a two-month high. This made gold cheaper for holders of other currencies. The yields on the benchmark 10-year Treasury notes also dropped. The dollar's weakness has returned, and this has supported gold prices. However, the rate decision was on the dovish end, as the statement or dot plots indicated that two rate cuts would be coming in the next year, according to Fawad Rasaqzada. The Fed cut rates by 25 basis point on Wednesday, and said it would continue to lower borrowing costs throughout the remainder of this year. Fed Chair Jerome Powell described the action as risk-management in response to the weakening of the labor market. He said that the Fed is in a situation where it has "meetings by meetings" in regards to the interest rate outlook. In a low-interest rate environment, non-yielding gold bullion is a good investment. It's a safe haven during times of geopolitical or economic uncertainty. Independent analyst Ross Norman stated that "the bull run in gold is still very much present and we are likely to see record highs persist." According to CME Group’s FedWatch tool, traders are pricing in a 90 percent chance that the Fed will cut rates again by 25 basis points at its next meeting in November. ANZ said that it expects gold will outperform the early stages of the easing cycle. The bank said that the demand for safe haven assets in a geopolitical environment of uncertainty is likely to increase investor demand. The price of spot silver was up 0.5% at $41.84 an ounce. Platinum gained 1.9%, to $1,390.43, while palladium fell 1% to $1,142.19/oz. (Reporting from Ishaan Mukherjee, Anmol Choubey and Anushree mukherjee in Bengaluru, and editing by Jan Harvey Frances Kerry, and Bernadette baum)
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Exxon asks for political support from the US to overturn EU climate law
Exxon Mobil has intensified its attacks on a European Union law on corporate sustainability and taken their concerns directly to U.S. president Donald Trump. They warned that the regulation would lead to more companies leaving Europe. Last year, the EU adopted its corporate sustainability due diligence (CSDD) directive. This mandates that companies fix any human rights or environmental issues in their supply chains or risk a base fine of 5% on global turnover. The European Commission, in response to the criticism of businesses and German and French leaders that the law will harm the competitiveness of the EU, proposed a series of changes to the law earlier this year. In an interview, Exxon CEO Darren Woods said that it would not be enough and called for the law to completely be revoked. Woods stated that he had spoken to Trump, and other members of Trump's administration who are involved in trade and EU policy. The administration also expressed concerns over CSDDD during trade negotiations. Washington and Brussels are still at odds over the simmering dispute, which has recently led to the US considering sanctions against EU officials for separate tech legislation. Woods noted that Woods' oil company has closed, sold or exited 19 of its operations because, according to him, red tape was impeding the business. This is yet another piece of legislation which would either accelerate this incentive or cause businesses to reduce their activities in Europe. The European Commission didn't immediately respond to an inquiry for comment. Woods added that an exorbitant fine of 5% on global sales would "break the bones" of Exxon. Last year, the top U.S. oil producers' sales totaled $339 billion. U.S. legislators are also doing their part to help. In March, Senator Bill Hagerty of Tennessee introduced a bill to protect American companies against being forced to comply to CSDDD. Next month, EU legislators and countries will begin negotiations to change the policy. Environmental activists are appalled by the move to weaken corporate accountability. Exxon announced on Thursday that it will also be pausing its investment of 100 millions euros ($118) in European Plastic Recycling due to separate EU draft rules. Woods expressed his hope that U.S. legislators would make progress in addressing CSDDD. However, he has been disappointed with the response from EU regulators so far. He said, "There's some movement but we need resolution sooner than later." Sheila Dang reported from Houston, Kate Abnett contributed additional reporting and Nathan Crooks edited the story.
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Kuwait Oil Minister expects demand to increase after US rate reduction
Kuwait's oil minister Tariq al-Roumi stated on Thursday that he expected higher demand for oil following the U.S. rate cut this week, especially from Asian markets. On Wednesday, the U.S. Federal Reserve lowered interest rates for the first since December. He also said that he expects new sanctions against Russia to have a positive effect on the oil price. Donald Trump announced on Saturday that the U.S. is prepared to impose new energy sanctions against Russia, provided all NATO countries stop purchasing Russian oil. Eight OPEC+ member countries agreed on September 7, to increase output by 137,000 bpd for October. This is a continuation of the policy of the group since April, which has been to increase production after years of cutting to support the oil markets. Al-Roumi stated that despite the agreement to increase output, "prices were more than satisfactory". He added, "We expected the worst, but everything is fine." The oil market is confusing and difficult to predict. The Minister made these remarks at an event marking the start of oil production at Kuwait Oil Company's Mutriba Field, which is targeting a light oil output between 80,000 to 120,000 bpd. At the event, KOC CEO Ahmad Al-Aidan said: "This step will help Kuwait achieve its strategy of reaching a production capacity for oil of 4 million barrels per day by 2035." The current production capacity is less than 3 million bpd. Reporting by Ahmed Hagagy, Writing by Tala RAMAdan and Ahmed Elimam, Editing by Bernadette BAUCH and Jan Harvey
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Dollar firms after Fed lowers rates and copper falls
The copper price fell on Thursday, as traders took profits after the U.S. Federal Reserve cut rates. Meanwhile, the dollar strengthened after Fed Chairman Jerome Powell said that there would be no further aggressive easing. The benchmark three-month price of copper at the London Metal Exchange fell 0.4% to $9,960.50 a tonne as of 0940 GMT after hitting a low for a week on Wednesday, $9,925. Powell, in his press conference, reacted against the idea of larger cuts. Dollar index rose by 0.1%, to 96.98, on the back of Mr. Trump's remarks. However, it is still down 10.6% for this year. The dollar index is still down around 10.6% this year. Dan Smith, managing Director at Commodity Market Analytics said that the rate decision made on Wednesday was a key driver behind copper's drop. He also pointed out a technical charting pattern called a "triple-top". Smith stated that there has been a significant amount of resistance in the copper market around $10,160. Smith said that the price has turned three times at this point in recent months, which indicates the current momentum will be to the downside. The rest of the base-metals complex was mostly in the red. Aluminium fell as much as 0.6%, to $2,665.50 per ton. This is a new low for the week. It was also down 0.2% at 0940 GMT. The cash aluminum contract premium is added to the contract for three months On Thursday, the price of a ton had dropped to $4 from $16 on Tuesday. Lead was unchanged at $2,012 a ton. Nickel and tin also fell. (Reporting and editing by Rashmi, Harikrishnan Nair, Ed Osmond and Harikrishnan Nair; Additional reporting and editing by Amy Lv & Lewis Jackson)
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Central bank of UAE says that the UAE economy will grow by 4.9% in 2025 due to higher oil production.
Central bank of the United Arab Emirates said that the economy will grow by 4.9% in 2025 compared to an earlier forecast. This is due to increased oil production and growth in non-hydrocarbon sectors. In a quarterly report, the bank stated that it expects hydrocarbon production to increase in accordance with OPEC+ quotas by 5.8% by 2025 and 6.5% by next year. The report stated that "this real adjustment in hydrocarbon production is expected to offset the negative impact on government revenue of the decline in crude oil prices, creating a ripple effect for non-hydrocarbon sector." The UAE is a major oil exporter and has intensified plans to diversify their economy. In the first quarter, the non-hydrocarbons sector accounted for 77.1% total GDP. The central bank projects that the non-hydrocarbon GNP will grow by 4.5% and 4.8% respectively in 2025, and 2026. This growth is likely to be boosted indirectly by the higher hydrocarbon growth through increased investment, government expenditure and confidence. The UAE economy grew by 3.9% in the first three months of the year, led by a non-hydrocarbon expansion of 5.3%. This was driven by manufacturing, financial services and construction sectors. Reporting by Rachna uppal; editing by Andrew Cawthorne
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Stocks and the dollar rise after Fed cuts, but now focus is on BoE
The dollar and stocks both rose on Thursday, after the U.S. Federal Reserve cut its interest rates for the first time this year. Meanwhile, French politics kept the markets in France jittery. And the pound remained steady ahead of the Bank of England's rate announcement. The Fed's steady-as-she-goes-message from what had been a politically charged meeting lifted both the pan-European STOXX 600 and Wall Street futures 0.5%, despite an initially mixed reaction from U.S. traders on Wednesday. Asia also rallied over night. Chinese stocks reached a decade-high as local chipmakers rejoiced at reports that U.S. giant Nvidia was banned in China. South Korea, Taiwan, and Japan's Nikkei ended all more than 1% higher. The dollar's rise to nearly 0.2% on the currency market may also have been a relief for firms that export to countries other than the United States after a recent plunge to its lowest level in three-and-a-half years. The Fed's "dot plot", which is closely monitored, had indicated that two additional rate reductions would be made over the remaining two meetings of this year but only one in 2026. Fed Chair Jerome Powell also moderated expectations by saying that the central bank didn't need to act quickly, though analysts admit this could change. Richard Cochinos, RBC Capital Markets, said: "We look beyond the volatility of one or two days to find underlying trends." In this case, we expect a weaker U.S. Dollar," Cochinos said. He pointed to the expectation of U.S. interest rates falling to 3% in 2013. The euro was largely unchanged at $1.1825, and the sterling was at $1.36. It is widely expected that the BoE will keep UK interest rates at 4% in the future. The main focus will be whether the British central banks slows down the pace of its 100 billion pounds a year reduction in government bond holdings in response to the recent volatility on UK bond markets. The BoE poll conducted in August showed that economists expected the Monetary Policy Committee (MPC) to reduce the pace of monetary policy to 67.5 billion pounds (92.2 billion dollars). This is a larger drop than the 72 billion pounds predicted by the BoE poll. In response to a 25 basis point rate reduction announced by its central bank earlier, the Norwegian crown softened just a little. The Norwegian crown was close to its three-year high against the dollar, and was at a two-month high when compared with the euro. New Zealand's Dollar fell after the data showed that the economy of the country shrank much more than expected. FRENCH FOCUS After the release of August's weaker than expected labour market data, the Australian dollar fell 0.4%. The bond markets are still on the rise, with the yield of the benchmark 10-year Treasury note dropping to 4.06%, and the two-year rate, which is rising with traders' expectation of higher Fed Funds rates, at 3.53 %. The benchmark yield for the Euro Zone, Germany's 10-year bond, fell by 0.5 basis points, to 2.67%. However, attention was again focused on France, as its bond yields moved above Italy's. Brent crude oil fell 0.2% to $67.87 a barrel. Gold, a safe haven, rose 0.2% to $3,665 an ounce.
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Russia announces changes to its budget aimed at decreasing oil revenue dependence
The Russian Finance Ministry announced on Thursday a new measure that it claimed was designed to shield the state budget against oil price fluctuations as well as Western sanctions targeted at Russian energy exports. The government is lowering the price cutoff for oil that oil revenues are deposited into the fiscal reserves fund. This will ensure the fund has enough money to replenish it. At a public meeting, Finance Minister Anton Siluanov stated that "to make our finances more robust, we propose a reduction of dependence on different constraints, whether they are price-related or volume related, in the budget’s reliance on revenues from oil and gas". Siluanov's new measure, which he sought to reinstate the budget rule, after it had been abandoned following the beginning of the conflict in Ukraine, is a victory. However, Russian media claimed that he wanted a larger reduction. The budget is more vulnerable to a drop in oil prices if the rule isn't in place. Siluanov stated that the price cutoff would be reduced by $1 per year, bringing it down to $55 a barrel in 2030. Currently, the cut-off price for barrels is $60. The draft budget will be presented to the parliament on 29 September. Currently, the fiscal reserve fund has approximately 4 trillion roubles (48.25 billion dollars) available. The government plans to use 447 billion roubles (5.39 billion dollars) of the fund to cover a part of the deficit expected to exceed 1.7% GDP. Siluanov stated that the new measures will allow the state budget to reduce the share of revenues from energy to around 22% in the first eight month of 2025, down from 25%. ($1 = 82,9000 roubles). (Reporting and editing by Andrew Osborn. Darya Corsunskaya.
China's quick electrification is catching out oil manufacturers: Russell
O verestimating China's cravings for crude has actually been a factor in oil markets this year, especially by OPEC, and it's a theme that looks likely to continue in coming years.
The increasing shift to electrical energy in transport from fossil fuels and what it termed electrical movement is wrong-footing. oil manufacturers, according to the International Energy Company's. latest World Energy Outlook, released on Wednesday.
It's China, the world's biggest oil importer, that is. leading the drive to electrical vehicles, with 50% market share in. brand-new sales already achieved, a level the remainder of the world is. likely to reach by 2030, according to the IEA.
Under this forecast, which is the IEA's base case it calls. the Stated Policies Situation (STEPS), the increase of EVs displaces. around 6 million barrels per day of global crude oil need.
The primary risk for the long-lasting bullish oil need outlook. that oil producers such as the Company of the Petroleum. Exporting Countries remain committed, is that China ends up being the. design template for renewable resource use and electrification, rather. than the outlier it presently is.
China was responsible for two-thirds of worldwide oil demand. growth in the decade to 2023 and one-third of natural gas need. growth.
It is likewise the world's greatest manufacturer and importer of. coal, and while coal's share in the total energy mix is. decreasing, it appears Beijing is prepared to utilize the dirtier. fossil fuel to help fulfill its electrification drive.
China added 50 gigawatts of new coal-fired capability in 2023,. however likewise a record 260 GW of solar and 75 GW of wind, the IEA. report said.
The IEA said it anticipates China's use of coal for electrical power. generation to peak in the next couple of years, although overall. electricity demand will continue to grow.
Electricity need in China utilized to grow in line with gross. domestic item, however given that 2019 the IEA said electricity demand. has risen almost 50% faster than GDP.
This means that China's electrical power consumption per capita. will surpass that of innovative economies as a group by 2030,. driven by economic development, increasing incomes and policies to enhance. electrification.
The share of electrical energy in last consumption in China. went beyond that of oil in 2023, the report stated.
By 2030 in the STEPS, almost one-third of its last energy. usage is from electrical power, and China overtakes Japan to. end up being the most energized major economy worldwide, the IEA. said.
In contrast, the IEA expects that China's oil demand per. capita will peak at around half that of advanced economies.
POWER SWITCH
It's clear that China is pressing electrification hard, and. it now dominates the manufacturing of photovoltaic panels, batteries. and EVs.
It is utilizing this competitive advantage to cut its dependence. on costly imported fossil fuels.
But it is likewise prepared to use its vast domestic coal. reserves, and inexpensive coal imports, to assist drive electrification.
The main difficulty for China will be incorporating the enormous. amounts of eco-friendly generation it still prepares to set up into. its electrical energy grid.
One method to level the variability of renewables is through. storage and China included 23 GW of what it termed brand-new energy. storage in 2023, which consisted primarily of batteries, as well. as 6 GW of pumped hydro.
It's likely that the pace of storage capability additions will. have to be accelerated as more renewables enter the grid, and. this has implications for China's demand for battery metals,. such as lithium, copper and nickel.
Nevertheless, it's crude oil that is likely to be the product. most affected by China's rapid electrification.
While China's overall oil need will peak in the next few. years, it's also likely that the mix of products it will need. will move.
China will use less fuel and diesel, however likely requirement. more naphtha to satisfy rising petrochemical need, as well as. more jet kerosene as air travel broadens.
The viewpoints expressed here are those of the author, a writer. .
(source: Reuters)