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Stocks rise on Fed rate-cut bets; gold is on a tear
The global stock market was on course for a weekly increase on Friday, as the expectation of rapid U.S. interest rate cuts led to a reduction in borrowing costs worldwide. This would be a relief for stressed bond markets, and drag on dollar. European shares fell 0.2% at the opening of trading, while Nasdaq futures and S&P500 futures dropped 0.1-0.2% after hitting new highs overnight. The MSCI All Country World Index remained on course for a weekly gain of 1.7%. Gold was also on course for its fourth consecutive weekly gain and traded at near-record levels as investor concerns over global economic uncertainty persist. Stock markets in Asia have made significant gains. Chinese stocks reached a three-and-a half year high due to expectations of AI related earnings growth. While the U.S. Consumer Price Report showed a rise in prices, the markets were still focused on the weak job numbers from the previous week. Amelie Derambure is a senior portfolio manager of Amundi. She said, "Even though we may have weaker job numbers, the markets really focus on the Fed's impact, which will give growth a boost in the future." Veronica Clark, a Citi economist, said that the bank continues to expect 125 basis point Fed rate cuts in the next five meetings. The futures market shows a 93% probability of a quarter point cut to 4.00%-4.25 next week and a 77% likelihood of a half point cut. The yield on the benchmark 10-year Treasury note rose by 3 basis points to 4,043%. It had fallen below 4% on Thursday for the first since April. ECB - "IN A GOOD PLACE" The dollar index, which measures the greenback versus six other currencies, edged up 0.2% to 97.757. The dollar rose 0.5% against the yen, to 147.89. This was after Japanese and U.S. Finance Ministers released a joint statement on Friday reaffirming their commitment not to target currency levels. The euro fell 0.1%, to $1.171725. It had received a modest boost on Thursday after the European Central Bank left rates unchanged and indicated that it was "in a good place" with its policy. Greg Fuzesi is an economist with JPMorgan. He said, "This indicates the Governing council is not inclined towards easing in the absence a significant growth shock." "We have therefore pushed back our call for the final rate cut to December from October." ECB sources said that the December meeting was the most realistic date to discuss whether another cut is needed to cushion the economy. The markets indicate that there is only a 1 in 6 chance of an easing in December. Britain's economy records Zero monthly growth In July, the data was in line with expectations, but showed a sharp decline in factory production, which weighed on sterling, which fell 0.3% to $1.3536. Gold prices rose 0.3% on the commodity markets to $3,644 per ounce. This is just a little bit below the previous record high of 3,673.95 set early in the week. The International Energy Agency forecast a record oil surplus for next year, as OPEC pumps more product. Brent crude was essentially flat at $66.38 per barrel. U.S. crude fell 0.1% to a price of $62.31 a barrel.
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Norway sovereign wealth fund excludes Eramet on ethical grounds
A spokesperson from Norges Bank Investment Management, the fund's operator said that Eramet, a French mining company, was excluded from its portfolio due to ethical reasons. According to data from the fund, as of 30 June, it held a stake in Eramet valued at $6.8 millions. Eramet didn't immediately respond to a comment request. The Council on Ethics of the fund, which is its ethics watchdog, recommended the divestment due to Eramet’s participation in Indonesia’s PT Weda Bay Nickel, where Eramet is the operator of mine. The Council on Ethics recommended that Eramet SA should be excluded. "There is an unacceptable risk the company may contribute to or be responsible for severe environmental damage, and serious violations of human rights by uncontacted indigenous people," it said in a press release. Separately, Indonesian authorities said that on Friday a special task force had seized hundreds of acres of land from the miner PT Weda Bay Nickel due to a lack of relevant forestry licenses. Indonesia has been cracking down against illegal mining in the country. Last week, President Prabowo said that over 1,000 such operations had already been identified. (Reporting and editing by Louise Rasmussen. Additional reporting by Guz Trmpiz, in Paris.
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EU Aluminium Producers Push for 30% Scrap Export Levy
The European Union’s aluminium industry is calling on the European Commission (EC) to impose a duty of about 30% on scrap metal exports to prevent it from flooding out of Europe and leaving local producers short. According to the industry group European Aluminium, EU aluminum scrap exports will reach a record 1,26 million metric tonnes in 2024. This is around 50% more than it was five years ago. The majority of these scraps are headed to Asia. According to the EU industry, since then, the situation has worsened because of President Donald Trump’s import tariffs. These were set at a 50% rate for aluminum but only a 15% rate for scrap. This has led to a rise in scrap imports from the United States, and a decrease in exports. Asian buyers are now more focused on EU supplies. Paul Voss, director general of European Aluminium, said that European companies are unable to compete with Asian buyers who can pay more due to lower standards in terms of labour and environment and subsidies. He said: "It is perfectly understandable for scrap traders to prefer selling to the highest bidder. But it is the role of the public policy to correct this kind of market failure in order to protect Europe’s strategic interests." European Aluminium and Eurofer (which represents the steel industry) have met with the Commission in order to press for the export tax. The EU executive started monitoring exports in early July, and will decide if any action is needed by the end third quarter. Recycling aluminium is 95% more energy efficient than mining bauxite to produce metal. European Aluminium reported that European companies invested 800 million euros (821 million dollars) to increase the recycling furnace's capacity to 12 millions tons. Several countries outside the EU limit exports of metal scrap. According to GMK Center, 48 countries, including India, China and South Korea, restrict the export of ferrous scrap. Steel sector says that it is important to keep scrap within Europe, but it also has immediate concerns. These include a new system of curbing finished steel imports which the Commission will announce soon. However, scrap dealers in Europe oppose export restrictions. The recycling industry group EuRIC has said that scrap exports are a result of low demand at home and an insufficient capacity for mixed scrap, such as scrap from shredded cars. Reporting by Philip Blenkinsop, Editing by Joe Bavier.
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Iron ore to gain for the third week in a row on better China demand and supply problems
Iron ore futures were in a range on Friday and expected to rise for the third week running, helped by an improving demand from China, the top consumer, and concerns about supply over Guinean projects. However, higher ore and metal inventories limited gains. The day-traded contract for January iron ore on China's Dalian Commodity Exchange closed 0.06% lower, at 799.5 Yuan ($112.29 per metric ton). The contract showed a weekly increase of 1.6%. As of 0810 GMT the benchmark October iron ore traded on Singapore Exchange had risen 0.54%, to $106.05 per ton. However, this is only a 0.54 percent increase from last week. After the end of the military parade on September 3, steelmakers began to resume production, which boosted iron ore prices. The average daily hot metal production, which is a measure of ore consumption, increased 5% from week to week, reaching a record high of 2,41 million tons on September 11th, according to data provided by consultancy Mysteel. Prices rose earlier this week as fears about the supply of oil from the Simandou project in Guinea grew after local reports that Rio Tinto wanted to build refineries locally. This could limit the amount of ore that can be exported. The sharp decline in shipments by Brazil, a major supplier in the first weeks of September, also helped boost bullish sentiment. Prices fell from their highs of Thursday due to the rising stocks of steel during the peak season for demand in September. According to Mysteel, this, along with an increase of 0.2% in iron ore portside inventories from week-to-week, limited the weekly price increases. Coking coal and coke both saw increases of 0.88% and 0.43 %, respectively. The benchmarks for steel on the Shanghai Futures Exchange have gained ground. Hot-rolled coils rose by 0.66%. Wire rods increased by 0.06%. Stainless steels climbed by 0.43%.
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South Sudan opposition claims government is trying to enforce the "one tribe rule"
South Sudan's Opposition has accused the Government of trying to enforce a "authoritarian Control and One-Tribe Rule" after First Vice president Riek Machar, who was suspended for orchestrating militia attacks, was charged. Machar's SPLM -IO party has rejected the charges brought against him, along with 20 other individuals. These included murder, treason, and crimes against humanity. They were accused of participating in raids in the northeast by the White Army militia. Machar’s house arrest under the order of March has sparked international concerns about a possible resurgence of the devastating civil war that raged between his Nuer ethnic forces and Dinka fighters loyal his long-time rival, President Salva Kiir. Kiir served as a member of the unity government that was formed to end that war. However, their relationship remained strained. The charges were fabricated in order to undermine the (peace accord), marginalize Dr. Machar, and the SPLM-IO and establish total government control," Machar’s SPLM-IO said late Thursday night shortly after the Justice Ministry announced the charges. Analysts say that Kiir is trying to replace Machar, his closest ally, with Second Vice President Benjamin Bol Mel. He was sanctioned in the U.S. because of suspicions he had received preferential treatment when securing contracts. Joseph Szlavik told the Washington Post last month that South Sudanese officials had asked for the lifting of these sanctions in recent bilateral talks. Szlavik stated that these conversations also included the possibility of sending more deportees from the United States to South Sudan, following the arrival last July of eight men - including seven from a third country. Nairobi Newsroom, Hereward Holland and William Maclean (Reporting)
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Bali flood waters recede after 16 deaths and two missing
Officials said that two people are still missing in Bali, Indonesia, a resort island. At least 16 people have been killed by flooding this week. Torrential Rains On Tuesday and Wednesday, the rapid rise of floods caused by the rains blocked major roads in Denpasar as well as six out of Bali's eight districts. Some areas also experienced landslides. I Nyoman Maha Putra, an architect and planning expert from the Warmadewa University, Denpasar, stated that the rapid development of the island had not taken into consideration the need for adequate drainage infrastructure. He said, "City planning does not take into account disasters." "All infrastructure construction is designed to make Bali more attractive for tourists and investors." Local media reported that Bali's Governor, Wayan Koster said, "Conversion of land use is not the cause for this week’s flooding in Denpasar." The Bali government's regional planning and development body did not respond immediately to a comment request. Bali's primary source of income is tourism. Last year, more than 6.3 millions international tourists arrived on the island. This was higher than the number of arrivals in 2019, the year prior to the COVID-19 pandemic that brought ground tourism to an end. Bali was the destination of choice for over 40% of Indonesian tourists last year. I Nyoman, head of Bali's search-and-rescue body, stated that the search for two missing persons was still continuing on Friday.
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Australian critical mineral companies head to Washington
Four sources familiar with the matter said that more than 20 Australian companies, including Trafigura's Nyrstar unit, will be heading to the U.S. to explore possible areas of collaboration next week. The Australian Trade and Investment Commission will lead a delegation to Washington and New York for meetings with senior officials of the Trump administration. The trip was described as routine by sources, but the companies are expected to arrive soon after the Australian Prime Minister Anthony Albanese spoke with President Donald Trump about the opportunities for the critical minerals companies of both countries in the last week. Albanese, the Australian ambassador to New York for the United Nations General Assembly later this month, has asked to meet with Trump. No meetings have yet been announced. Australia is trying to establish itself as a major supplier of Western allies, as they develop an alternative supply network to China. Meanwhile, the U.S. prepares to invest in its battery and defense industries. Reports last month indicated that the Trump Administration was considering reallocating at least $2 billion of the CHIPS Act funds, which support semiconductor research and chip plant construction, for critical minerals projects. Last month, Nyrstar won the support of the Australian government to evaluate whether it is possible to produce four essential minerals in two aging smelters. This includes antimony that is used for ammunition and whose exports from China are limited. Nyrstar will need additional funds to put this plan into motion. Some attendees were looking for funding opportunities. The meetings are described as an opportunity to understand the priorities of the Trump Administration, as well as meeting administration officials and building relationships. Other miners include Australia's leading lithium producer Pilbara Minerals, which supplies lithium primarily to China and South Korea. International Graphite, which has a graphite mining operation in Western Australia, is expanding its processing capabilities. Representatives from Pilbara Minerals International Graphite, and Cobalt Blue have confirmed that they will be attending next week. The delegation will be without Australia's Trade and Resources Minister Madeleine King. Requests for comments on the prospects of major announcements were not immediately responded to by the ministers' offices. Australia and the United States have a vital minerals partnership. Under legislation passed late in 2023, Australian deposits will qualify as domestic supplies for U.S. defense procurement. (Reporting and editing by Lincoln Feast; Melanie Burton).
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UBS increases gold price target to 3,800 oz by the end of 2025
UBS increased its gold price forecast on Friday by $300 per ounce to $3800 by the end 2025 and by $200 per ounce to $3900 by mid-2026. It cited anticipated Federal Reserve easing, U.S. Dollar weakness linked to rate reductions and geopolitical risk. The Swiss bank revised its estimate of gold exchange-traded funds (ETFs) holdings. It now projects levels to surpass 3,900 metric tonnes by the end 2025. This is close to the previous record set in October of 2020 of 3,915 metric tons. We maintain an attractive view on gold, and remain long the metal as part of our global asset allocation. UBS stated that a percentage of gold in the mid-single digits is optimal. Bank of America highlighted geopolitical issues and differences in policy between the U.S. Administration and the Federal Reserve, as well as U.S. president Donald Trump's preference for lower interest rates. UBS anticipates that central bank gold purchases will remain strong at around 900 to 950 tons in this year. This is slightly less than last year's record-breaking purchases just over 1,000 tons. UBS said that the Fed could be forced to increase rates if inflation surprises lead to higher interest rates. The price of non-yielding gold, which is often viewed as a safe haven during times of economic and political uncertainty, and also known to perform well when interest rates are low, reached a new record of $3,673.95 Tuesday, and has gained over 39% in the past year. (Reporting and editing by Jacqueline Wong, Rashmi aich and Anmol Choubey from Bengaluru)
What is USAID, and why have Trump and Musk made it a target?
U.S. President
Donald Trump's
administration is considering
merging the U.S. international aid agency (USAID) into the State Department
in a major revamp that would shrink its workforce and align its spending with Trump's "America First" policy. Trump has entrusted Elon Musk, the billionaire heading his drive to shrink the federal government, to oversee the project. On Sunday, Trump said USAID had "been run by a bunch of radical lunatics, and we're getting them out," while Musk called it "a criminal organization" without providing any evidence and said it was "time for it to die."
What is USAID and how is it funded? USAID was established in 1961 by Democratic President John F. Kennedy at the height of the Cold War with the aim of better coordinating foreign assistance, already a key platform of U.S. foreign policy in countering Soviet influence. It now administers some 60% of U.S. foreign assistance and disbursed $43.79 billion in fiscal 2023. According to a Congressional Research Service report this month, its workforce of 10,000, about two-thirds serving overseas, assisted about 130 countries. USAID is funded by Congress, based on administration requests.
CRS said USAID helps "strategically important countries and countries in conflict; leads U.S. efforts to alleviate poverty, disease, and humanitarian need; and assists U.S. commercial interests by supporting developing countries' economic growth and building countries' capacity to participate in world trade."
Its top aid recipients in 2023 were Ukraine, Ethiopia, Jordan, Democratic Republic of Congo, Somalia, Yemen, Afghanistan, Nigeria, South Sudan, and Syria.
How much does the US spend on aid and how does it compare?
In fiscal 2023, the United States disbursed a total of $72 billion in assistance worldwide and about 42% of all humanitarian aid tracked by the United Nations in 2024. The funds covered everything from women's health in conflict zones to access to clean water, HIV/AIDS treatments, energy security and anti-corruption work.
In recent years, according to a Brookings Institution report from September, U.S. aid spending has been around 0.33% of GDP. It peaked at 3% of GDP in the 1950s with the Marshall Plan program to rebuild Europe after World War Two. During the Cold War, it ranged from 1% to a little less than 0.5%.
While the United States gives more official government aid than any other country, its contribution as a percentage of national income is at the bottom of the list for wealthy countries in 2020, according to figures from the Organization for Economic Co-operation and Development.
In 2023, Norway topped the list at 1.09 percent of gross national income, while the United States lagged at 0.24 percent, along with Slovenia, the Czech Republic and Spain.
Is support for foreign aid bipartisan?
According to Brookings, Democratic administrations and lawmakers have historically been more supportive than Republicans, but every post-war president, whether Democrat or Republican, has been a strong proponent of foreign aid - apart from Trump. It noted that proposals by the first Trump administration to cut the U.S. international affairs budget by one-third were rejected, as were attempts to delay congressional consideration of supplemental foreign aid legislation in 2024. And in a bipartisan vote in June, 80% of the members of the Republican-led House of Representatives rejected an amendment to eliminate foreign assistance from the fiscal 2025 budget.
Who has been running USAID? Under former President Joe Biden, USAID was run by Irish-American diplomat Samantha Power, a self-professed idealist who served as U.N. ambassador under Barack Obama.
Its top priorities under its March 2023 Policy Framework were the climate crisis, stemming the tide of authoritarianism, and promoting inclusive economic growth and equal opportunities. In an interview this month, Power highlighted the role of USAID in projecting U.S. soft power.
"The best testament to USAID's contribution is the surge in PRC-backed and Russian-backed propaganda maligning USAID and our work around the world," she said, using the initials of China's official name, the People's Republic of China.
Trump opposition and impact In a Jan. 20 executive order announcing a 90-day pause in most of foreign aid, Trump said the U.S. "foreign aid industry and bureaucracy are not aligned with American interests and in many cases antithetical to American values."
"They serve to destabilize world peace by promoting ideas in foreign countries that are directly inverse to harmonious and stable relations internal to and among countries," it said.
In a memo, the administration urged USAID workers to join the effort to transform how Washington allocates aid in line with Trump's "America First" policy and threatened disciplinary action for ignoring the orders. The actions rang alarm bells from refugee camps in Thailand to Ukraine war zones with humanitarian organizations and U.N. agencies saying they could face drastic curbs on their ability to distribute food, shelter and healthcare.
A source with knowledge of USAID's workings said folding it into the State Department would be a big departure. USAID has in the past been able to provide humanitarian assistance to countries with which Washington has no diplomatic relations, including Iran and North Korea. This has sometimes helped build bridges, the source said, and the benefit could be lost if its operations were purely tied to political objectives. (Reporting by David Brunnstrom; Editing by Mark Porter)
(source: Reuters)