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Dollar falls, longer-dated US Treasuries increase as Trump's Fed battle fuels concerns
The dollar and longer-dated U.S. Treasury rates fell on Tuesday, as President Donald Trump’s decision to fire a Federal Reserve Governor fueled fears about the Fed’s independence. Wall Street stocks were relatively unchanged. Trump announced on Monday that he had fired Fed Governor Lisa Cook due to allegations of improper mortgage borrowing. Cook stated that Trump does not have the authority to dismiss her as a central banker and that she will not resign. Her term was set to expire in 2038. Trump's unprecedented move could result in a long-lasting legal battle, which risks setting new norms regarding the independence of a central bank and presidents' involvement in monetary policies. Cook's departure from the Fed may accelerate the president's plan to reshape the Federal Open Market Committee, which sets interest rates. Trump has been pressing the Fed to lower interest rates in order to boost economic growth. The expectation of a more dovish Fed pushed yields on shorter-dated bonds lower. A Fed with a political influence that maintains rates lower than would otherwise be the case could raise concerns about rising inflation, and decrease foreign demand for debt due to credibility fears. These factors will affect longer-dated bonds. "President Trump has launched a potentially ineffective and risky battle against the Fed." In order to get a majority on the FOMC to follow Trump's line, it would require seven votes, not two or four," Brian Jacobsen wrote in an email. Trump has repeatedly threatened to fire Fed Chair Jerome Powell. This month, he fired an official at the Labor Department after accusing her without evidence of manipulating job data which had disappointed him. Trump has now backed off from this threat, as Powell's term is about to expire in May next year. Inflation Report Cook News reported that the dollar was down against major currencies, and that a global index of stocks had fallen, with losses in Europe led by France, as political unrest in the country increased. France's CAC40.FCHI dropped 1.5%, as it became more likely that the country's minor government would be overthrown next month. Investors waited for Nvidia to release its NVDA.O earnings on Wednesday, and a major inflation report due later this week. The market is focusing on the inflation rate, the labor force, consumer spending, and corporate earnings. Oliver Pursche is senior vice president at Wealthspire Advisors, a firm in Westport, Connecticut. He said that despite the pun, this "trumps all" The Dow Jones Industrial Average dropped 49.02 points or 0.11% to 45,233.45. The S&P 500 increased 1.25 points or 0.02% to 6,440.45. And the Nasdaq Composite rose by 37.51 points or 0.18% to 21,486.80. The MSCI index of global stocks fell by 2.49 points or 0.26% to 950.47. The pan-European STOXX 600 fell by 0.69%. The dollar index (which measures the greenback in relation to a basket of currencies, including the yen, the euro and others) fell by 0.3%, while the euro rose by 0.34%, reaching $1.1657. The dollar fell 0.14% against the Japanese yen to 147.54. The yield on the 2-year US2YT=RR note moves along with expectations of interest rates. The yield was down by 2.4 basis points for the day, to 3.706%. The yield on the benchmark U.S. 10 year notes US10YT=RR increased 1.2 basis points, to 4.287%. Investors eagerly await the U.S. consumer prices reading on Friday, which is considered to be the preferred inflation indicator by Fed. Gold prices rose, but oil prices fell. U.S. crude dropped 1.13% to $64.07 per barrel. Brent was down to $68.08 a barrel, a drop of 1.05% for the day. Gold spot rose by 0.34%, to $3377.61 per ounce.
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Gold gained after Trump's attempt to fire Fed Governor Cook
The gold price rose on Tuesday as investors sought safe havens after President Donald Trump fired a Fed Governor. At 1018 am, spot gold rose 0.2% to $3372.05 per ounce. ET (14.18 GMT), after hitting its highest level since August 11, at $3,386.27. U.S. Gold Futures for December Delivery were up by 0.1% to $3,420.40. Overnight, you heard that Trump had fired one of the Fed Governors who was accused of mortgage fraud. Bob Haberkorn, RJO Futures' market strategist, said that it gave gold a boost because the Fed is driving gold at the moment. U.S. president Donald Trump announced that he would fire Federal Reserve Governor Lisa Cook for alleged irregularities in obtaining mortgages, a move that is unprecedented and could test the limits of presidential authority over the independent monetary policies body if it were challenged in court. Jerome Powell, Federal Reserve chair, signaled last week that a rate cut could be possible at the next meeting of the U.S. Central Bank. He said the risks on the job market had increased. According to CME FedWatch, the markets are pricing in a probability of over 86% that the U.S. Central Bank will implement a quarter-point cut in rates in September. Haberkorn said that gold would continue to rise if Powell hints at a dovish stance on rates during the next meeting, and if he moves forward with another rate cut this year. The data revealed that U.S. durable goods orders for July showed a decrease of 2.8%. This was compared to a 4% decline expected and a drop of 9.4% in the month of June. Investors are now awaiting the U.S. GDP on Thursday, and the Personal Consumption Spending (PCE) data on Friday. Gold that does not yield tends to be more appealing in an environment of low interest rates, and its appeal as a safe haven increases when there is economic uncertainty. Spot silver dropped 0.2% to $38.49 per ounce. Platinum increased by 0.2% to $1 345 05. Palladium increased 0.6% to $1.345.05 following its lowest price since July 9, earlier in the session. (Reporting by Sarah Qureshi in Bengaluru; editing by Sophie Walker)
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Commerce chief: US could look to buy a piece of US defense companies
Howard Lutnick, U.S. Secretary of Commerce, defended on Tuesday President Donald Trump's call for the federal government take stakes in U.S. businesses it does business with. He said it could expand into the defense sector. Lutnick, citing Pentagon officials, told CNBC that "They are thinking about it." There's much discussion to be done about how we finance our munitions purchases. "There is a monstrous debate about defense. Lockheed Martin gets 97% of its revenue from the U.S. Government. "They are essentially an arm of the U.S. Government," he said. Trump announced on Monday that he wanted to increase U.S. government investment in healthy American businesses, even though critics warned such a government role could limit corporate strategies and market agility. Questions were also raised regarding the impact of this policy on consumers. Last week, the Trump administration announced that it had acquired a nearly 10% stake in Intel. The Trump administration intervened in June to ensure that Nippon Steel, a Japanese company, completed the purchase of U.S. Steel. Washington received what Trump called a “golden share” which gave it control over its operations. It also bought a stake in the rare earths company MP Materials and negotiated a deal for chipmakers Nvidia, AMD and Intel to receive 15% of sales revenue of previously prohibited chips to China. "If a business comes to the United States of America and says, 'We need your help. We want to change everything... He told CNBC that it was up to the US president and CEO to decide whether they would listen and change the rules. (Reporting and editing by Bernadettebaum and Andrea Ricci; Reporting by Susan Heavey)
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Copper reaches two-week high as a knee-jerk response to the weaker dollar
The dollar fell on Tuesday as U.S. President Donald Trump announced he was removing Federal Reserve Governor Lisa Cook. This announcement raised expectations for interest rate reductions in the U.S. next month. The dollar price of metals is cheaper for holders other currencies. This drives up demand and prices. The traders, however, said that the price of copper had fallen since the initial kneejerk reaction because the dollar was stable and Chinese companies were selling. Trump wrote in a note that he had fired Cook for alleged irregularities in the mortgage loan process. Analysts claim that this has heightened investor concerns about the independence and stability of the U.S. Central Bank. The benchmark copper price on the London Metal Exchange was flat at $9.796 per metric ton, up from $9.862 earlier, the highest level since August 13. The disruption in supply in Chile was a major factor in the rise of copper. In Chile, Sernageomin, the mining regulator, has placed additional demands on Codelco to resume operations in affected areas after a fatal collapse at their El Teniente Copper Mine. Codelco has reduced its copper forecasts for the year due to the incident. The initial support for the copper price is the 50-day average of $9,754 and the 21-day average of $9,731. Traders expect the price of zinc to be supported elsewhere by falling inventories at LME-approved storage facilities, which have fallen 66% in just six months, from 65,525 to 65,525 . Metal earmarked for shipment or cancelled warrants indicate that another 23,725 tonnes are expected to leave the LME. The discount on the three-month cash zinc contract has been reduced due to concerns about the supply of zinc on the LME. Around $4 per ton, down from levels of over $40 in April. Lead was unchanged at $1.994.5. Tin rose 0.3% at $33,925. Nickel gained 0.3% at $15,140. Surveys of purchasing managers within China's manufacturing sector will provide valuable insight into the future demand for industrial metals in China. (Reporting and editing by Shreya biswas and Barbara Lewis; reporting by Pratima desai)
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Nigerian President says Brazil's Petrobras could return to Nigeria soon
Bola Tinubu, Nigerian president, said that Brazil's Petrobras oil company, which left Nigeria in 2005, should be able return quickly. The visit was part of a 2-day trip to strengthen ties. Petrobras started operations in Nigeria in the deep waters of the Niger Delta in 1998. It sold its stakes over 10 years ago in order to raise money for domestic projects. Nigeria has since then been crackingdown on the issues that have limited oil production. "We have a large gas reservoir." "I don't understand why Petrobras should not return to Nigeria as a partner as soon as possible," Tinubu stated during a press conference held with Brazilian President Luiz inacio Lula da S Silva on Tuesday in Brasilia. Tinubu stated, "I am grateful for President Lula's assurance that this would be done as quickly as possible." Tinubu noted that the economic reforms are beginning to show results in Nigeria, citing an improved access to foreign currency. During their visit to Brazil, both leaders signed agreements in the areas of trade, energy and aviation, as well as science and finance, all part of the efforts to improve ties between the largest economy in Africa and the biggest market in Latin America. The leaders also announced an agreement between Nigerian airline Air Peace and Brazilian aircraft manufacturer Embraer for the establishment of a service center in Nigeria. Nigeria will be Brazil's 49th most important export destination in 2024, with bilateral trade expected to reach nearly $2.1 billion. Brazil exported $1 billion in goods to Nigeria, mostly sugar and jams. Brazil imported $1.1 billion of fertilisers. Petrobras' contribution is not clear. Nigeria's Foreign Minister said in May that the country and the company were discussing the exploration of the deep-water oil acreage. Petrobras also announced that it is in discussions with ExxonMobil and Shell to purchase a portion of their African assets. (Writing and editing by Barbara Lewis; Chijioke Ahuocha)
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Rare Earth prices reach two-year high after MP Materials stops China shipments
The price of two rare earths, which are needed to make super-strong magnets, has risen to its highest level in over two years. This is because U.S. miner MP Materials has stopped exports to China's leading magnet manufacturer due to rising demand. China is the dominant player in the rare earths supply chain, with 90% of the refining capacity, and 70% of the mined output. But the U.S. has responded by signing a contract in July with its largest producer MP to refine their output at home. Adamas, a consultancy, said that MP's shipments have in the last three years contributed 7% to 9% of China's production of oxides from rare earths (neodymium) and praseodymium(NdPr), which are vital for magnets used to power electric vehicles and wind turbines. Adamas' managing director, Ryan Castilloux said that MP's shipments were an important part of the NdPr supply to China's factories. "This has left a large void," he added. NdPr oxide: Chinese price The benchmark price, which is regarded as the industry standard, has increased to 632,000 Yuan per metric tonne or $88 per kilogram, its highest level since March 2023. It was $63 per kg on July 9, and it's now at $88 per kilogram, the highest rate since March 2023. The West is looking to reduce its dependence on Beijing, and the 40% increase in the stock price after years of decline will help mine projects that are seeking outside investment. After China, in April, clamped down its exports amid a trade dispute with the U.S. and forced some auto plants to close their doors, it became urgent for the West to boost rare earth production. Last month, the U.S. announced an unprecedented agreement with MP that stipulated that the company stop shipments to China. The U.S. government also offered MP a price support for its NdPr, based at $110 per kilogram, which was then about twice as much as the Chinese price. Analysts said that MP had stopped shipments to China due to high tariffs in April, but any shortages were masked due to a weakness in magnet demand caused by Chinese export restrictions. U.S. supply of rare earth ore to China dropped in May, then reached zero in June, before spiking last month. This was probably due to MP's final shipments. China's rare earth magnet exports have recovered and reached a six-month peak in July, after Beijing loosened its export controls following a series agreements with the U.S. POPULAR MANUFACTURING SESSION In recent years, NdPr has been affected by an oversupply. Prices in March of last year fell to 345, 000 yuan - the lowest since November 2020. Recent gains in their stock prices are also due to a rebounding demand. China is in the peak of its manufacturing season for consumer electronics, electric vehicles and wind turbines. The cyclical increase in demand for NdPr has increased the pressure on supply. The uncertainty around Chinese mining and smelting quotes, which were released without the usual public statements this year, has also been a source of support. Castilloux stated that some players might be anticipating lower quotes. He added that he anticipates a modest increase of 5% in Chinese production this year in contrast with a demand growth of about 10%. Ellie Saklatvala is the head of metal pricing for Argus. She said that whether the rally continues will depend in part on the demand from magnet manufacturers and their ability to absorb higher prices. The producers of NdPr are relieved that prices are now moving away from the loss-making zone. It will be up to buyers like magnet makers to decide if their margins are strong enough to continue paying these higher prices for feedstock.
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Company: Worker killed by Russian attack on coalmine in eastern Ukraine
DTEK reported on Tuesday that a Russian attack near the frontlines of eastern Donetsk inflicted three injuries and killed one miner in a DTEK coal mine. In recent weeks, Russian invasion forces intensified their offensive against eastern Ukraine where the majority of coal mines in the country are located. The attack caused damage to the company's equipment and buildings, and a power failure. DTEK posted on Telegram that 146 underground miners are still being brought to the surface. The report did not mention the exact location or how the Russian forces struck the mine. Ukraine reported this month that small groups of Russian soldiers had advanced about 10 kilometers (six miles), towards the main defensive lines near the eastern city of Dobropillia. This has raised fears of an even wider break-through, which could threaten other key cities. Later, Ukrainian officials claimed that Kyiv had stabilized the battlefield in a part of the east where Russian troops had suddenly pushed to penetrate Ukrainian defences.
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China's carbon markets will introduce absolute emission caps in 2027
The cabinet announced on Monday night that China would tighten the market for carbon trading by introducing absolute emission caps in certain industries starting 2027. According to a joint statement from the State Council of China and the Central Committee of the Communist Party, the caps will first be implemented in industries that have relatively stable carbon emission levels by 2027. China's national carbon market, or emissions trading system (ETS), will be largely established by 2030. "Policymakers have tightened the system", said Xuewan Chen senior research analyst at LSEG. In a statement, it was stated that the national carbon market would replace the eight pilot markets currently in place, launched in 2021. It would feature absolute emission caps, as well as a mix of paid and free carbon emissions allowances. CEAs currently are based more on benchmarks for carbon intensity that are gradually reduced, than on absolute emission caps. A quota is given to each company and, if the actual emissions are higher than the quota in a compliance period, the company must purchase more allowances on the market. If the company's emissions are lower than expected, they can sell their excess CEAs. The (cabinet document) provides much-needed clarity for the timeline of China's carbon market development, said Mai Duong Asia-Pacific Carbon Markets Analyst with Veyt. She added that it demonstrated China considers carbon markets to be "the key" tool in meeting its goals for decarbonisation. The statement did not specify which industries would be covered by the ETS. Analysts believe that chemicals, petrochemicals and papermaking, as well as domestic aviation, will be included in China's plan. Duong added that the regulation will also increase liquidity by allowing banks and financial institutions to participate in the market. China announced in September of last year that it would expand the carbon market to include steel cement and aluminum, which would cover approximately 60% of the country’s greenhouse gas emission. Analysts said that because of the high number of allowances available, the carbon market had so far not affected China's emissions. Duong stated that it is a positive development that China has now set a timeline for the full-scope expansion. However, whether or not this will have measurable effects in reducing China's huge emissions remains to see.
Indonesia: US tariff exemptions for palm oil, cocoa, and rubber
Indonesia's chief trade negotiator announced on Tuesday that the United States had agreed in principle to exclude Indonesian exports such as cocoa, rubber and palm oil from the tariff of 19% imposed by Donald Trump since August 7.
Airlangga hartarto, chief economic minister and also the U.S. ambassador to Indonesia, said that the exemption would take effect when both parties reached a final agreement. However, no time frame has been established because the U.S. was busy with tariff negotiations with other countries.
Airlangga told an interview that the two countries discussed possible U.S. investments in fuel storage in Indonesia, in partnership with Southeast Asia's sovereign fund Danantara as well as state energy company Pertamina.
He added, "We're waiting for their reply, but basically the principle (exemption) was agreed during the meeting for products that are not produced in the U.S. such as cocoa, palm oil, and rubber... It will be zero or near zero."
The U.S. Embassy in Jakarta didn't immediately respond to an inquiry for comment.
Indonesia is a major supplier of rubber and palm oil in the world.
Tariffs: Certainties
Indonesia, which is the largest economy in the region, was one of the first countries to reach a tariff agreement with Trump. However, Jakarta's rate ended up being the same as other countries like Thailand and Malaysia and only slightly below Vietnam's 20%.
Indonesia made an offer to invest billions in the U.S., and purchase planes, farm products, LPG and crude oil. It also promised to impose zero tariffs on nearly all U.S. products entering its market.
Airlangga stated that recent progress made in negotiations about a free-trade agreement with the European Union and the certainty of U.S. Tariffs could boost Indonesia's economy, helping it reach its 5.4% growth target for 2026. This is up from an estimated 5% this year.
He said that "they bring an optimistic perspective from the global markets since most investors look for certainty, and Indonesia is a country that provides global certainty."
Airlangga, a Jakarta-based economist, said that the city wants to attract foreign investors in order to develop industrial facilities. This includes the processing of key commodities.
Airlangga stated that the government also wants to increase investment in silica processing, such as the production of wafers and solar panels for semiconductors. (Editing Gayatri Suryo; Editing Clarence Fernandez, Helen Popper).
(source: Reuters)