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MORNING BID EUROPE-Washington goes dark
Stella Qiu gives us a look at what the future holds for European and global markets. The U.S. Government has now entered its 15th government shutdown since 1981, and second under Donald Trump. He took the opportunity to threaten dismissal of more federal employees. The biggest federal exodus since 1980 is about to happen this week. Over 150,000 employees will be leaving the payroll after a buyout. The FAA will furlough about a quarter its staff during the shutdown, so if you are planning to fly in the U.S. soon, be aware. Trump's new tariffs will also go into effect on Wednesday. These include the tariffs on big trucks and patented drugs. The administration has stated that tariffs will be collected even if the government shuts off. All of this is set to increase concerns at the Federal Reserve over a slowing labour market. Investors bet that the Fed will cut rates this month despite the lack of economic information. Prices are 96% higher than they were just one day ago. S&P futures and Nasdaq Futures both fell 0.5% today - a small move given the rally in share markets this year. S&P 500 futures have averaged 12 gains, 9 losses and a median increase of 0.1% during the 21 previous shutdowns. This uncertainty has provided gold bulls with a good excuse to promote the idea of purchasing assets outside the control of the government, causing the metal to reach a new record of $3.875 per ounce. Silver and platinum have also been on an upswing. The Asian session has been mixed, as Chinese markets are closed for the National Day holiday. Japan's Nikkei fell 1% but Taiwan rose 1% and South Korea gained 0.8%. Investors are not frightened by the lack of data due to the shutdown, but they do worry about the data vacuum. There's no payrolls report for you to bet on. The ADP National Employment Report will be released later today. The forecasts predict a modest increase of 50,000 jobs in the private sector as the labour markets continues to cool. The JOLTS report released on Tuesday showed that hiring was weak. It is not clear whether this weakness is due to AI or tariffs, but it could be something longer-lasting. The euro zone's inflation data for September is expected to show an increase in inflation to 2.2%, up from the previous 2%. The risks could be on the upside, after German inflation was higher than expected. The hot number could indicate that the European Central Bank has likely finished easing in this cycle, and give a reason for going long on euros. The following are key developments that may influence the markets on Wednesday. Eurozone HICP Flash Inflation Readings for September -- ISM US Manufacturing survey ADP Private Payrolls
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BHP allocates $555 Million to increase copper production in South Australia
BHP announced on Wednesday that it will invest over A$840 Million ($555.16 millions) in its Olympic Dam Copper operations in South Australia, as the miner prepares for an investment decision to be made by mid-2027. Olympic Dam, one of BHP’s three copper-growth projects, is located in South Australia. Olympic Dam is a project that holds a large deposit of gold, copper and uranium. This makes it crucial for BHP's and Australia's roles as major global suppliers of copper. Copper is a critical metal for the transition to low-carbon living. Over the last three years, the project has consistently produced over 300,000 tons of copper per year. BHP, world's biggest listed miner is preparing to announce a final decision on an expansion of the Olympic Dam smelter/refinery by mid-2027. The goal is to double South Australia's copper production to 650,000 tonnes by mid-2030s. The A$840m investment will fund a number of key initiatives including an underground tunnel access, a backfill system and expanded ore passage capacity. It will also help to improve smelter efficiency. BHP stated that "together, these projects will improve efficiency and future growth options for South Australia's Copper Province", BHP. The company stated that the investment will create 200 construction jobs and reinforce South Australia's status as a global copper supplier.
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Gold hits record highs as US shutdown begins, stocks fall and stock prices decline
Wall Street futures fell, gold reached a record-high and Asian stocks wilted on Wednesday as the deadline for the U.S. Government shutdown passed. This is expected to delay release of important jobs data and cloud the interest rate outlook. The government shutdown has no way out. Agencies warned that there was no clear solution. It would prevent the release of an employment report for September, which is closely watched. This would also lead to the furloughing of 750,000 federal employees at a cost of $400,000,000 per day. S&P 500 and Nasdaq Futures both fell by 0.5%. Gold prices rose to $3,875 per ounce in the third consecutive session, reaching a new record high. European futures were largely unchanged. Investors may give greater weight to the ADP National Employment Report, due later today. Forecasts predict a modest increase of 50,000 jobs in the private sector. "Typically, a shut down is not important for the markets. The 2018-2019 shutdown lasted over a full month and actually led to a rise in Wall Street, according to Kyle Rodda. Rodda said that the markets face two issues. The first is the delayed release of non-farm payroll data. He said that the other issue is that "U.S. president Trump has also threatened permanently to lay-off employees, which could turn this shutdown into a small labour market shock." The Federal Reserve is now expected to cut rates in October by 96%, up from 90% a day ago, and there's a 74% chance that they will do so again in December. Anthony Saglimbene is the chief market strategist for Ameriprise. He said that if shutdown continues, inflation reports from September could be affected by mid-October. He said that a prolonged period in which the U.S. Bureau of Labor Statistics was not fully operational could impact data collection efforts and the quality of data for other reports. The Nikkei 225 index of Japan fell over 1% on Wednesday after a 11% increase in the previous quarter. South Korean shares increased by 0.6% to add to the 11.5% gains in the previous quarter. Data showed that exports in September rose at their fastest rate in 14 months. Taiwan's stocks gained 1.3%. The island's chief tariff negotiator stated on Wednesday that Taiwan would not accept a deal to have half of all semiconductor production take place in Washington. Chinese markets are closed, including Hong Kong. Overnight Wall Street closed the quarter in a positive way, with a higher closing price. The data showed that U.S. employment declined in August, while job openings were marginally higher. Consumer confidence also fell more than expected. The dollar index on the foreign exchange market held steady at 97.84 after three consecutive days of losses. It was unchanged at 147.98, with little reaction to a Bank of Japan report showing that Japanese companies expect prices to increase by an average of 2.4% per year in the future, which is above the 2% central bank target. Asia's Treasury yields remained stable. The benchmark 10-year Treasury yield in the U.S. was unchanged at 4,1561% after rising 1 basis point overnight. After two days of declines, oil prices stabilized on Wednesday as investors weighed the possibility of OPEC+ plans to increase output next month with the shrinking U.S. inventories. U.S. crude climbed 0.1% to $62.46 per barrel while Brent rose 0.2% to $66.16.
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Fears of sanctions stymie Russian panda bond sales in China
Sources said that Russian companies' plans for low-cost financing through China's massive bond market are not working because Chinese investors and banks avoid them due to concerns over Western sanctions. The conundrum shows how difficult it is for Russian companies to raise capital in a country which has been an ally since Moscow's invasion of Ukraine over three years ago. Beijing, which is seeking a deal with Washington while also forging a partnership with Russia - a relationship that is said to have no limits - is being put to the test. Last month, sources at top Russian companies including the state-owned nuclear corporation Rosatom, and the giant gas concern Gazprom reported that they were exploring the sale of "panda bonds" denominated in yuan. The announcement came shortly after Russian President Vladimir Putin's visit to China in early September. Since the Ukraine invasion, Russian companies are no longer able to access the capital markets of the West. Chinese investors and bankers, however, dismissed the prospect of a panda bond issue by Russian companies in the near future. A person with knowledge of the situation said that banks and regulators were concerned about secondary sanctions. The person said, "Preparation is always underway, but it's just impossible to push the project ahead," citing the lack of progress in the panda bonds issuance by Rosatom and Russian aluminum producer Rusal over the last year. Rusal declined comment. Rosatom declined to comment, despite the fact that its top management was sanctioned by the U.S. Gazprom did not reply to a comment request. The company cannot raise finance in the U.S., Europe, or Canada, but it has not been subjected to U.S. blockade sanctions, known as SDN List. The official of a Chinese securities exchange said that he did not know of any concrete plans for issuance by Russian companies. Several Chinese bond investors also said they were wary about buying such debt because of the geopolitical risk. The five sources that were interviewed for this article declined to be identified due to the sensitive nature of the subject. First source: China's state owned brokerages, such as Galaxy Securities, have stopped doing deals with Russia after 2022. The "Big Four" banks of the state are also unwilling to do such deals due to geopolitical issues. Galaxy has not responded to a request for comment sent via email. Zhan Kai of Yuanda China Law Offices in Shanghai said that there was no legal barrier to Russian companies issuing panda bond as long as they were not listed on the U.S. sanction list. Zhan, a Chinese company advisor who helps Chinese firms avoid sanctions and manage risks, said: "It is clear that local traders and bankers are concerned about acting as underwriters and buyers." He said that the market will ultimately determine whether or not a Russian bond is sold. "I don't anticipate a lot appetite in China" to buy Russian bonds, he added. Requests for comments were not responded to by the China Securities Regulatory Commission or the People's Bank of China. YUAN BORROWINGS ARE CHEAPER S&P Global reported that 35 offshore companies raised 116 billion Yuan ($16.3 billion), after raising 194.8 billion yuan last year. This was the highest volume since the data began to be available in 2015. Since the conflict in Ukraine 2022, no Russian companies have issued debt on China's panda bond markets of 342 billion yuan. Rusal was the only Russian company to sell panda bond in China before Russia's troops invaded Ukraine in 2016. The Chinese rating agency CSCI Pengyuan assigned to Gazprom a "triple A" rating in early September, indicating a very low default risk and paving its way for its yuan bonds issuance. According to a Moscow fund manager who declined his name, the Russian rouble's borrowing rates are high. They range from 15%-16% per year. So issuing Yuan bonds would be a good way to obtain cheap capital. Comparatively, in July a Chinese BMW unit sold a panda-bond with a coupon of 1.73%. According to a Russian official, there's nothing stopping Russian companies issuing panda bonds as long as demand exists. "Large corporations work with their own placements." "We only assist them with infrastructure and solutions," said the official. He added that the question is now who will purchase them in China where banks fear secondary sanctions. A manager at a Chinese state owned company, who declined to give his name, revealed that some Russian companies are desperate to find low-cost financing and are willing to restructure their loans through a commodities deal. Kirill Lysenko of the Russian rating agency Expert RA said that issuing panda bond by Russian companies could take many years. Geopolitical risks exist even within the framework of a "friendly nation". He said that if sanctions were to impact China's financial infrastructure, debt servicing would become more complicated. $1 = 7.1979 Chinese Yuan Renminbi (Reporting from Shanghai and Hong Kong Newsrooms, Anastasia Lyrchikova in Moscow, Oksana Kobieva in Singapore and Rae Wee at Rae Wee; Editing done by Sumeet Chatterjee & Muralikumar Aantharaman).
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Acteon’s UTEC Nets Structural Monitoring Deal for Polish Baltica 2 OW Farm
UTEC, Acteon's Geo-Services business line, has secured a structural monitoring contract for Baltica 2, set to be the largest offshore wind project in the Polish part of the Baltic Sea, jointly developed by Ørsted and PGE.Ørsted commissioned Acteon for the design, engineering, procurement, installation and commissioning of measurement and associated data acquisition systems for the Baltica 2 offshore wind farm.Located offshore Poland, the Baltica 2 project will comprise 107 turbines and will have the capacity to generate 1.5 GW of power. It is expected to be completed by the end of 2027.The project will include campaigns to measure a variety of data crucial to the structural integrity of the Baltica wind turbines, from environmental and metocean, to settlement, load and acceleration, corrosion and anode efficiency.This data will be integrated in real-time through Acteon’s proprietary NX2 digital platform, to provide the client with a seamless and synchronous journey from sensor to desktop.Acteon will execute the project-based systems integration and software development at their Technology Centre in Wokingham, UK. Installation will take place in construction yards in Poland and other European locations.“The Baltica 2 contract is another significant testament to our capabilities to support the global offshore energy industry. We are proud to be leading the data-driven part of such an important energy transition project,” said Paul Smith, Executive Vice President of UTEC Geo-services.
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Gold reaches record highs on US shutdown fears and rate-cut betting
Gold reached a new record on Wednesday, as investors flocked to safe-haven investments amid growing concerns about a U.S. shutdown. Meanwhile, weaker labour statistics boosted expectations for further Federal Reserve interest rate reductions. By 0206 GMT, spot gold had risen 0.4% to $3872.87 an ounce. U.S. Gold Futures for December Delivery gained 0.7%, reaching $3,901.40. Dollar-priced Gold is now more affordable to overseas buyers thanks to the dollar index. Nicholas Frappell is the global head of institutional market at ABC Refinery. He said that gold was benefitting from "concerns about a weaker US dollar and the political situation in the U.S. with the standoff over a government shut down and also the general geopolitical uncertainties". The U.S. Senate has failed to pass legislation extending funding for the government, pushing it closer to a possible shutdown. President Donald Trump also threatened further federal staff cuts. The shutdown may delay the release Friday of important economic data including the non-farm employment report. The JOLTS report released on Tuesday showed a marginal increase in U.S. jobs openings for August. This was accompanied by a decrease in hiring. These results indicate softer labour market conditions. According to CME Group’s FedWatch tool, traders priced in a 97% probability of a 25 basis-point cut this month, and a 76% likelihood in December. ADP's National Employment Report is due to be released later today and should provide more insight into the labour markets. Michael Hsueh of Deutsche Bank, precious metals analyst said that it was difficult to predict an end to the gold rally. Due to its low-interest rate nature, gold, which is a traditional hedge for economic and political uncertainties, thrives. It has risen by more than 47% in the past year. Silver spot also rose 1.5%, to $47.39 an ounce. This is a record high for more than 14 years. Palladium rose 0.9% to $1,267.75, while platinum gained 1.4% at $1,595.85. (Reporting and editing by Sherry Phillips and Subhranshu SAHU in Bengaluru, Anmol Choubey and Anjana Anil from Bengaluru).
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FT reports that BlackRock's GIP is close to a $38 billion acquisition of utility group AES.
The Financial Times reported Tuesday that BlackRock's Global Infrastructure Partners (GIP), which is owned by BlackRock, was close to a deal worth $38 billion, including debt, for the utility group AES. This information came from people who were briefed about the situation. Utilities will benefit from the surge in demand for electricity driven by artificial intelligence (AI) and data centers. This is causing companies and investors to make deals with utilities. The FT reported that although negotiations between GIP and AES had advanced, they could still fail to produce a deal. Could not confirm immediately the report. GIP, a fund that invests in infrastructure, refused to comment on the Financial Times. AES and GIP didn't immediately respond to an 'outside regular business hours request for comment. AES has seen its renewables division grow significantly over the last year. This is in line with Wall Street's expectations for AES' second quarter profit. The global drive for cleaner power generation coincides with predictions that U.S. electricity consumption will reach new records. AES shares surged by nearly 13% after Bloomberg News reported on July 8, that the power company was considering strategic options including a possible sale following interest from major investment firms. GIP is a utility specialist. GIP and CPP Investments purchased U.S. utility Allete for $6.2 billion, including debt, in 2024.
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Wall Street futures drop as the clock ticks towards a US government shutdown
Wall Street futures fell on Wednesday, as the clock counted down towards a U.S. shutdown which would delay the release crucial jobs data. It could also muddy up the outlook for interest rates. The shutdown will begin at 0400 GMT, after the Senate rejected an interim spending measure which would have kept government activities afloat for another few weeks. The Senate's 55-to-40 vote ensured that government agencies would have to cease all activities except "essential", disrupting everything from airline travel to the monthly employment report. S&P 500 and Nasdaq Futures both fell by 0.4%. Gold prices rose 0.2%, to $3,865 per ounce. This is back at the record high set on Tuesday of $3,871.45 an ounce. Investors may give greater weight to the ADP National Employment Report, due later today. Forecasts predict a modest increase of 50,000 jobs in the private sector. "Typically, a shut down is not important for the markets. The 2018-2019 shutdown lasted over a full month and actually led to a rise in Wall Street, according to Kyle Rodda. Rodda said that the markets face two issues. The first is the delayed release of non-farm payroll data. He said that the other issue is "U.S. president Trump has also threatened permanently to lay-off employees, which could turn this shutdown into a small labour market shock." The Federal Reserve is now expected to cut rates in October by 96%, up from 90% a day ago, and there's a 74% chance that they will do so again in December. The Nikkei 225 index of Japan fell 1% on Wednesday after a 11% increase in the previous quarter. South Korean shares increased by 0.7% to add to their 11.5% gains in the previous quarter. This was after data revealed that exports in September rose at the highest pace in 14-months. Taiwan's stocks gained 1.3%. The island's chief tariff negotiator stated on Wednesday that Taiwan would not accept a deal to have half of all semiconductor production take place in Washington. Chinese markets are closed, including Hong Kong. Overnight Wall Street closed the quarter in a positive way, with a higher closing price. The data showed that U.S. employment declined in August, while job openings were marginally higher. Consumer confidence also fell more than expected. The dollar index on the foreign exchange market held steady at 97.84 after three consecutive days of losses. It climbed 0.1% to reach 148.1 yen. This was a small reaction to the Bank of Japan's survey which showed that Japanese companies expect prices to increase by an average of 2.4% per year in the future, well above its 2% target. The Reserve Bank of India will likely keep its rate at 5.5% later in the day as it assesses the economic impact of previous rate cuts amid trade uncertainty. Asia's Treasury yields were stable. The benchmark 10-year Treasury yield in the U.S. was unchanged at 4,1561% after rising 1 basis point overnight. After two days of declines, oil prices stabilized on Wednesday as investors weighed the possibility of OPEC+ increasing output next month with the shrinking U.S. inventories. U.S. crude climbed 0.1% to $62.46 per barrel while Brent rose 0.2% to $66.16.
Bankers: Vedanta Resources unit priced $500 mln bond below initial guidance
Two merchant bankers reported on Wednesday that a Vedanta subsidiary, a wholly-owned subsidiary of Vedanta Resource, has accepted bids for bonds with a seven-year maturity in U.S. dollars worth $500 million.
The bankers said that Vedanta Resource Finance II would pay an annual coupon below its initial price guide of 9.50% after receiving bids totaling over $2.2 billion.
CreditSights, however, sees the fair price of the bond as 9.22%. This is based on a relative value comparison of existing debt from December 2031 and March 2033 with similar bond structures and comparable returns.
The issue will include a call option after two years. Proceeds will be used to pay off a private loan facility. The remaining funds will be used for other debts as well as general corporate purposes.
Moody's has rated the offering B2 and Fitch Ratings B+.
The company didn't respond to an email asking for comment. Bankers asked to remain anonymous as they were not authorized to speak with the media.
The company has issued a second dollar bond in 2025. In January, it raised $1.10 billion through five-year-and-six-months bonds at 9.4750% and eight-year-and-three-months bonds at 9.85%.
The demand for dollar bonds issued by Indian companies has increased in recent weeks, following the rating upgrade of mid-August by S&P Global. This upgrade helped to improve the credit profile of the country.
The State Bank of India's bond sale of $500 million dollars attracted favorable pricing, which encouraged more companies to tap the international market.
Vedanta will guarantee the latest issue. The issue will be unconditionally guaranteed by other subsidiaries including Twin Star Holdings and Vedanta Holdings Maritius II. (Reporting and editing by Ronojoy Mazumdar; Dharamraj Dhutia)
(source: Reuters)