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Go slow with MORNING BID AMERICAS
The markets now expect that the Federal Reserve will raise interest rates on Wednesday as another surge in crude oil prices begins the week following more attacks and disruptions in the Middle East. The inflation report last week did not provide much comfort to the central bank's increasingly hawkish stance that its 2% inflation target would be reached any time soon. Energy prices are on the rise, but pressures on prices in other sectors and services are also a concern. The question for markets is not whether the Fed will increase rates this week but how much it will tighten up afterward. This will be influenced by the Fed's quarterly projections of economic growth and interest rates. As of now, futures strips are pricing up to four rate hikes. Brent crude oil surged to $108 per barrel after a weekend filled with fighting in the Middle East. The weekend also saw more ships targeted in the Gulf and the temporary closing of Saudi Arabia's East West pipeline. This could threaten up to 4% of the global crude oil supply. The scheduled Monday talks between Tehran, other Gulf countries and the United States on how to manage the Strait of Hormuz were also postponed. Other headlines this weekend focused on calls to "go slowly" with the rapid pace of AI development, following several apocalyptic statements from industry workers last week about potential threats to humanity. OpenAI's Sam Altman, the company's boss, said that the long-awaited IPO would be delayed to 2027. He called the idea of going public in 2019 "ill-advised". The U.S. president Donald Trump dismissed these warnings as absurd, whereas state-backed Chinese media referred to an article by Dario Amodei of Anthropic, which called for a slowdown in AI, as "Cold War tactics" aimed at China. AI-linked stocks dropped on Monday, amid safety warnings. Nasdaq Futures were in the red even before the bell rang, and Asian shares closed lower. This was mainly due to falls among big chipmakers. Chart of the Day Markets may need to factor in the possibility that a "go slow" push will also result in a slower build-out of AI infrastructure such as data centers, computing equipment, and chips. AI-related indexes are rising twice as fast as global benchmarks. MSCI's AI basket is up 120% or more since the launch in 2022 of OpenAI ChatGPT?model. Watch today's events * Canada August CPI (8:30 a.m. EDT) Listen to the latest episode of Morning Bid's daily podcast before you leave. We discuss AI safety, the surging price of oil and the possibility of a Fed rate increase this week. Subscribe to hear journalists discuss the latest news in markets and finance. Want the Morning Bid delivered to your inbox each weekday morning? Subscribe to the newsletter by clicking here. You can find ROI at the website and follow us on LinkedIn or X. The opinions expressed are solely those of the authors. These opinions do not represent the views of News. News is committed to the Trust Principles and a commitment to independence, integrity and neutrality.
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Yemen's displaced yearn for stability and loved ones as Houthis advance
As Yemen's Iran aligned Houthi militants swept along the country's battered Red Sea coast, thousands of?panicked people fled into makeshift 'camps', adding to a vast 'population' already displaced internally. Aisha Mohammed, like other people who fled coastal areas to reach the province of Taiz in southwest Saudi Arabia, left her two daughters, and three sons trapped in their homes, as fighting transformed a vital trade route into a route for displacement. "They're being shot at and blocked. They cannot reach us right now and we can't?return them. Muhammad said, "This is a test from God", as he boiled water in a black teapot on a rock placed?over an open flame. Tehran is strengthening its hand in the conflict it has with the U.S. by the Houthis' advance, which already controls most of Yemen's north and most populous areas. Another YEMEN CRISIS Yemen is no stranger to hardship. A long civil war between the Houthis and forces of the internationally recognised Saudi-backed government has created one of the worst humanitarian crises in the world. Yemen is mired in conflict ever since the Houthis took over the capital Sanaa, in 2014. This prompted a Saudi-led intervention in the military the following year. The U.N.-brokered 2022 truce largely stopped major fighting despite it expiring six months after its signing. However, efforts to make the truce into a permanent political settlement have stagnated as regional tensions intensified. With their lightning-fast western offensive, the Houthis – mountain fighters in sandals that have become a force of up to tens or thousands of missiles and drones have opened a second theatre of war. They are now in a good position to tighten the grip on the strategic Bab el-Mandeb Strait - a crucial chokepoint for 'global oil and commodity shipping' - six months after Israel and the U.S. attacked?Iran. As fighting continues, the International Organization for Migration (IOM) estimates that 82164 people have been displaced in the poorest Arab country since September began. Some people are leaving the country. Amy Pope, the director general of?IOM, said: "Behind each number is a lost family." Many have been displaced more than once. They are forced to cross the sea without anything because they don't have any other option. Yemen is "a country torn apart by poverty and war,?and it can't carry this crisis on its own." Many, such as?Abdullah Qaiyd an elderly man with a walking stick, long for stability. "Now look at us." We are shook and tormented to the core. "We long for basic livelihood and safety," said he.
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Nigerian billionaire Dangote launches Africa's largest share sale, the IPO of an oil refinery.
Aliko Dangote, a Nigerian billionaire, launched the largest ever share sale in Africa on Monday with his initial public offering (IPO) of oil refinery. This opened up ownership to retail investors while raising funds for the expansion of the refinery. The sale of 4.1 billion ordinary share at 525 Naira each began at 8am local time (0700 GMT), and will close on October 13th. The offer would raise 2,15 trillion naira (about $1.6 billion) if it were fully subscribed. However, this could rise to approximately $2.1 billion if oversubscribed. Chris Chijioke is a businessman based in Lagos, the commercial capital of Nigeria. He said that he will buy 2,000 shares because?the size and track record of Dangote as a successful businessman makes a strong argument. He expressed concern about the price of the shares, however. He said that the price offered would not be justified if the plans to double refinery capacity were delayed. "I personally believe it is overvalued," said he. The war in Iran has benefited refineries The refinery, built on the outskirts Lagos at a cost around $20 billion, has changed the fuel market in Nigeria since it began operations in 2024. The company supplies the majority of Nigeria's gasoline. It has also benefited from supply disruptions caused by the Iran War, which led to an increase in demand for Dangote jet fuel throughout Africa and Europe. Africa's richest person has advertised?the offer? to ordinary Nigerians who can take part by purchasing as little as 10 shares via fintech and digital investment platforms. Ibrahim Abubakar is a journalist who said he would buy approximately 2,850 shares, because he thought the refinery was "too large to fail". The plant currently processes 700,000 crude barrels per day. It hopes to reach 1.4 million barrels by 2029. According to calculations, the offer values the facility at $47 billion. Dangote has said he anticipates the IPO will be 3.7 times more popular than a July private placement that was 3.7-times oversubscribed.
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India approves the export of electricity to Nepal following deadly flood
India has approved the export of electricity to Nepal for 18 hours per day until December 31 after a devastating flood in the Himalayan nation last month destroyed about a 10th of its capacity. The deluge, caused by the collapsed glacier in Nepal and Tibet, killed more than 1,400 people and destroyed over 12 hydroelectric plants?in Nepal. More than?5,300 missing people include 900 workers from power stations. The ministry announced that it had approved the export of up to 654 Megawatts. It added that the amount of power exported from January will be reviewed in December. The approval would help Nepal meet its energy requirements during this difficult time and strengthen the long-standing and close energy cooperation between India & Nepal, it stated. The export of Nepalese hydropower, which provides?almost the entire electricity in Nepal, has been growing rapidly. The 'country' halted its power exports after the floods ravaged the Bagmati Province, which is the main hydropower producing region. It said that it would purchase electricity from India in the coming months to cover any domestic shortages. Last week, Nepali officials announced that they will ask wealthy countries and international agencies for financial assistance. They argued that they should contribute the $5 billion needed to begin the initial reconstruction.
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Kazimir, ECB's Kazimir, shifts his focus on gas prices and sees inflation risks rising
Peter Kazimir, a policymaker at the European Central Bank, said that euro zone inflation could be higher than projected and the growth of power and natural gas prices is a growing concern. The ECB increased interest rates on Thursday for a second time this year and also raised its inflation forecasts. This has fueled market speculation that there could be up to three rate increases in the next year. Kazimir is a policy hawk who has been outspoken in his calls for higher interest rates. However, unlike other colleagues, he did not call for a rate increase. He said policymakers should be open to new ideas and that the bank would act decisively when the evidence warranted it. Kazimir, Slovakia’s central bank head, said in a recent blog that his attention was now focused less on fuel and oil prices and more on the prices of gas and electricity. Food inflation, which is so important to perceptions and expectations of the future, is also expected to increase. Gas prices have reached a record high of four years, as European nations waited to fill their gas storages in the summer months hoping that the conflict with Iran would end. Gas storage is now being rushed to fill the gap left by historic levels. Prices are soaring, which will likely increase heating and electricity prices and cause inflation. The growth in food prices is unexpectedly low, but a "perfect storm" of factors including the European drought, El Nino weather phenomenon, and the soaring prices for diesel and fertiliser, which are key inputs to agriculture, will likely push prices up in the next few months. Kazimir stated that "the inflation risks are clearly skewed to the upside." The 'energy shock' has already lasted much longer than expected. But its full effects haven't yet filtered through to the economy. Financial markets expect a rate increase by the end the year, but the ECB's next meeting is on October 29.
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Solar Industries of India to purchase Omnia from South Africa for $1.36 Billion
India's?Solar Industries announced on Monday that its unit would acquire South Africa's?Omnia Holdings for?about $1.36billion in a?all cash?deal. The explosives and ammunition manufacturer is looking to expand their global mining business. Solar SA Investments is an indirect wholly owned subsidiary of Solar Industries. It will acquire all the outstanding shares of Johannesburg listed Omnia. This acquisition is subject to regulatory approvals and Omnia shareholders' approvals. African countries are stepping up their efforts to increase output and attract?investment in critical minerals. Zambia, a country rich in copper, is aiming to triple its production at a time when metal prices are rising. Solar expects that the expansion of its footprint will increase Africa's mining revenues by multiples from fiscal 2028. Solar Industries, based in Western India, manufactures industrial explosives, initiating systems, and other products for mining, construction, defence, and space industries. It operates more than?40 production facilities worldwide. Omnia is a company that provides services and products to the mining and agriculture industries. It operates in 23 countries, and has customers in over 40 other countries. The company reported revenue of $1.41 billion for the year ending March 31.
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European shares tempered as oil surge, tech slide weighs
On Monday,?European stocks were?subdued? as?technology shares fell? after executives from leading AI companies called on a slowdown in development? while another rise in oil prices? dampened the broader risk appetite? As of 0810 GMT the pan-European STOXX 600 was little changed, at 638.95, in choppy trading, with most major regional exchanges trading lower. Anthropic CEO Dario Amedei called for 'AI companies to slow down the rate at which model capabilities are advanced due to concerns of misuse. Shares in technology firms fell 1.4% in line with weakness among Asian peers. Infineon, a German company, lost 5.8% of its value, while ASML, a Dutch firm, and ASMI, based in the Netherlands, each suffered losses of 4.4% and 5%. Oil prices were up more than 2% as a result of the Houthi attacks on Saudi Arabia, and Iranian attacks against ships in the Gulf. This exacerbated supply concerns after the closure of an important Saudi oil pipeline. With a 0.4% increase, the European energy sector was one of the brightest spots. The focus now shifts to the U.S. Federal Reserve and its upcoming?policies decision. Traders are increasingly betting on a rate increase of 25 basis points. Last week, the European Central Bank raised interest rates.
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What role does Aliko Dangote’s oil refinery play in his conglomerate business?
Nigeria's Dangote Group sells a 3,3% stake in the 700,000 barrels per day?oil refining plant to the public in what will be the largest such transaction on the continent. Answers and questions regarding the business conglomerate owned by Africa’s richest man, Aliko?Dangote. What is the size of Dangotes' business group? The 69-year-old entrepreneur is the owner of Dangote Industries Limited. This industrial group, which produces cement, sugar, and salt, is one of Africa's biggest. The company is also involved in the refining of crude oil, as well as other activities such as the production and distribution of petrochemicals, fertilisers, and power. Dangote Industries is his primary holding vehicle for the majority of operating companies which are privately owned. This changes with the listing the "refinery complex" located near Lagos. Which parts of the group are most important? Dangote Cement, Africa's leading cement manufacturer, has a capacity of 51.8 millions metric tons per year. Nigeria is responsible for 35.3 millions tons of this capacity. The company is also active in Cameroon and other countries such as the Congo Republic, Ivory Coast (Ivory Coast), Ethiopia, Ghana Senegal Sierra Leone South Africa Tanzania Zambia. It aims to increase total?capacity by 2030 to 80 million tons. The group's most ambitious expansion is in its refining division, the newest business. The refinery started processing crude oil in 2024. It produces petrol, jet fuel and liquefied petroleum gases, as well as by-products of chemicals such polypropylene. An adjacent plant, which produces fertiliser, has a capacity of 3,000,000 tons per year of urea and ammonia. It supplies Nigeria as well as export markets such Brazil, India Mexico and the United States. Sugar, salt seasonings, and other food items are among the group's consumer products. These activities are supported by the Dangote Group's storage facilities, pipelines, power plants and marine terminals. How did Dangote build the group? Dangote’s strategy is based on the import substitution, which means offering locally produced goods for Nigerians to replace those they have traditionally purchased from overseas. Cement was Nigeria's first big success. The investments in plants, quarries, and logistics have helped Nigeria to become a regional supplier. Dangote then applied the same strategy in his latest ventures in?refining, petrochemicals and fertilisers to reduce reliance on imports and serve the domestic and international markets. The group's investments are aimed at controlling costs and ensuring supplies. However, these investments come with a large capital expenditure and risks, such as construction delays and significant debt costs.
European shares fall as AI slowdown calls hits tech and oil surge weighs
European shares dropped on Monday, as technology stocks fell after leaders of top AI firms urged a'slower pace of development.' Meanwhile, another surge in oil prices dampened risk appetite.
As of 0840 GMT the pan-European STOXX 600 index was down 0.3%, at 637.5, in choppy trade, with many major regional bourses trading downward.
Technology shares were among the worst performers, with a 2% decline in line with their Asian and U.S. counterparts.
Dario Amodei, CEO of Anthropic, called on AI companies on Saturday to slow down?the pace at which they advance their model capabilities because of fears about misuse.
Benjamin Picton is a senior market strategist with Rabobank. He said: "That's an opinion that many of his tech peers?apparently hold. This puts founders in a unique position, not only agreeing but also favoring tighter regulations for their own businesses. Future growth will be throttled."
Soitec, a French semiconductor company, was the biggest decliner in the STOXX with a 12.6% drop. Infineon, a German company, fell 7.6%. ASML, a Dutch firm, and ASMI, based in the Netherlands, both lost 5.2%.
European miners declined 2.1% as they followed the weakness in commodity prices. London-listed Antofagasta fell 4%, while Germany's Aurubis dropped 3.2%.
Healthcare stocks rose 2.2%, bucking the trend. GSK jumped 3.6% following the positive results of two lung cancer drugs. This added to the momentum in this sector.
Oil stocks were not affected by the latest Houthi attacks in Saudi Arabia or Iranian attacks against ships in the Gulf, which compounded concerns about supply arising from a closed Saudi pipeline.
Recent oil price spikes have brought inflation concerns to the forefront, further confirming expectations that central bankers?worldwide may increase interest rates in this year. The European economies are especially vulnerable to rising oil prices, as they rely heavily upon imports.
The U.S. Federal Reserve will likely raise its main lending rate this week by at least 25 basis point -- a marked change from the split chance of a hike or a pause that was seen a week earlier.
Last week, the European Central Bank raised rates. LSEG data shows that traders expect at least 25 bps more by year's end.
The 10-year bond -- the benchmark for the region -- is at its highest level since August 2009.
The centre-left opposition in Sweden looked to be on track to form the new government after preliminary results showed that it had a three-seat advantage over the ruling right-wing parties, with the majority of votes counted following Sunday's election.
(source: Reuters)