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Ireland reduces fuel duty with 250 million Euro energy package
Ireland will reduce excise duties on fuels up until the end of May, as part of a 290 million euro package to cushion the economic impact of the Middle East conflict. Prices at some Irish service station have risen above 2 euros per unleaded litre, a price last seen in 2022 when the Ukraine conflict began. The government announced that the reduction in excise tax of 15 cents per litre on petrol and 20 cents for diesel would take effect at midnight on Tuesday. Micheal Mart, Prime Minister of Canada, said at a press conference held on Tuesday that these measures were "targeted" and "temporary", but would be reviewed based on the market's development. The government will also pause for two months the National Oil Reserves Agency (NORA), which will lower the price of home heating oil and motoring fuel by two cents each litre. However, this will require additional legislation. The levy is used to fund the agency, which is responsible for maintaining Ireland's strategic oil supplies. The heating payments for social welfare recipients are to be extended by four weeks. A rebate program for hauliers will also be improved. Simon Harris, Finance Minister of the United Kingdom, said on Sunday that the government will limit the initial package in order to allow for additional?help should the energy crisis persist. The European Commission has suggested that member states reduce their national fuel taxes to curb the rising energy prices. Italy has temporarily reduced?excise duty, while Spain proposed on Friday wider measures, worth 5 billion Euros, including reductions of fuel prices and electric bills.
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Gold continues to decline due to expectations of high interest rate
Gold prices continued to fall on Tuesday. This was due to a combination of 'persistent Middle East tensions' that fueled inflation fears and expectations for higher interest rates worldwide. By 9:00 am, spot gold had fallen 0.6% per ounce to $4 377.93. ET (1300 GMT), having hit its lowest level since November, at $4,097.99. U.S. Gold Futures for April Delivery fell 0.6% to $4378.80. Bart Melek is global head of commodity strategies at TD Securities. He said: "If energy prices continue to rise and the war continues, this is not good news for gold." He added, "Gold is going to be under pressure in the second quarter. But I think that by the end of the year, gold's outlook should look very good, because we hope by then, central banks such as the Fed will have more freedom, and we might see the dollar loosen and rates fall." Bullion is a "safe-haven" asset and inflation hedge. However, because it does not yield interest, its appeal diminishes in an environment with high rates. Iran launched waves missiles against Israel on Tuesday. This came a day after U.S. president Donald Trump claimed that there were "very productive and good" talks to stop the war between the U.S. The war has effectively stopped shipments of around one-fifth of all oil and gas through the Strait of Hormuz. This has pushed up energy prices, and raised inflation fears. Following this, the?top central bankers?have stressed their willingness to act in case prices rise further due to the war. Spot gold is down about 22% from its January 29 record high of $5,594.82. "The recent price slump is likely to have been just as much an overreaction, as was the massive increase at the beginning of the year. Commerzbank analysts said that the pendulum had swung back and forth from one extreme to the other. Silver spot fell by 1.3%, to $68.20. Platinum rose 0.2%, to $1.885.18. Palladium dropped 2.9%, to $1.392.25 (Reporting and editing by Sahal Muhammad in Bengaluru, Ashitha Shivaprasad from Bengaluru)
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McGeever: It's time to reconsider the safe-haven investment.
The Iran War and the global energy crisis it unleashed could have "killed" the idea of an asset that fits all. It is not a novel concept given the poor performance of the U.S. Treasuries did well after the Russian invasion of Ukraine four years earlier. The extraordinary fall in gold prices since the U.S. and Israeli strike on Iran, February 28, has brought it into the spotlight. In times of increased economic, geopolitical or financial uncertainty, investors tend to flock to gold, Swiss franc, Treasuries and the dollar. These are the assets that will most likely serve as a safe haven in times of crisis. Gold has been a safe haven for non-financial assets, especially in times of inflation. Gold has not only performed poorly in the current crisis, but it is also one of the most underperforming assets. It has lagged behind high-yielding credit, emerging markets stocks, and frontier market stocks. Silver was the only asset that has performed better than it, and this is because of a speculative boom. Gold has fallen 17% in March so far, and is on course to have its worst month since 1982. This is an astonishing result in a month marked by the worst Middle East conflict, biggest global energy shock for decades, increasing inflation pressures and $6 trillion worth of value being wiped from global stocks. Around the middle of 2012, gold began to be untethered by whatever economic fundamentals were supporting it. Retail investors, momentum traders, and machines chased gold higher as central bank demand cooled. It culminated in a January high of $5 595 per ounce. This "fear of losing out" (FOMO), euphoria soon turned into widespread liquidation and drowned out any "FTQ", or flight to quality, demand that was sparked by this crisis. PLENTY ?OF REASONS TO SELL, FEW TO BUY The dollar and U.S. Treasuries are not much better. The dollar is up, but only by a little more than 2%. The Federal Reserve is not expected to tighten its policy more than other major central banks this year, so there's no support for the dollar from the anticipated rate differential. Analysts at Deutsche Bank note that many central banks from Asia and the Middle East will likely look to reduce their FX reserves to cover their increased import costs, to prevent their currencies weakening excessively, and to cushion any inflation shock. This could cap the dollar, and be a greater drag on U.S. Treasuries. This may have already begun. The amount of Treasuries that are held by the New York Fed for global central banks dropped by $75 billion over the last four weeks. Analysts at Deutsche Bank estimate that this is equivalent to approximately $60 billion in sales by the official foreign sector. This would be the second-largest net sale since the COVID-19 Pandemic. It's true that the Treasuries Market is the most liquid market in the world. But it's not automatically considered the safest. The Swiss franc, and the Japanese yen are both affected by domestic issues. Both currencies have historically enjoyed current-account deficits and low rates of inflation. Swiss National Bank warned that its willingness to intervene on the foreign exchange markets has increased in response to currency appreciation. The yen is already at multi-decade lows and doesn't hold much appeal, given that Japan imports most of its energy. Investors need to be more flexible and creative. The current turmoil is a good example. Trading strategies are often more effective than buying safe-haven assets. The response to each crisis will vary depending on its origin, for example, buying energy stocks during an energy crisis, or buying defense stock during a conflict. Cash is the one asset that seems to always do well during a crisis or even an inflationary supply shock. Since February 28, U.S. Money Market Funds have increased by around $60 billion, reaching a record $7.86 trillion. You can't bet against the total exceeding $8 trillion within weeks. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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EU declares Slovakia's diesel restrictions illegal
A spokesperson for the European Commission said that Slovakia's decision to enact a resolution this month allowing service stations to limit diesel sales and set higher prices on cars with foreign plates is a violation of EU law. "We note that the Slovak Government has adopted a new measure, which imposes a 30-day restriction on diesel fuelling in Slovakia and introduces?differentiated prices for domestic vehicles and foreign cars. The spokesperson said that higher prices would be charged for vehicles with foreign license plates. We will take legal action in order to comply with the law. "We believe that this measure is discriminatory, and it violates EU Law. While we understand the need to help citizens at this time, measures must not discriminate based on nationality. The Slovakian government has been trying to secure its supply as global energy prices are soaring due to the Iran War, and the Druzhba Pipeline is no longer delivering Russian crude to the country due to damage in Ukraine. Fuel pumps in Slovakia can only sell diesel if they have a full tank. They may also sell up to an additional 10 litres. The exports of diesel fuel for foreign registered cars will be restricted, and the prices can be based on a 'comparative average' of the prices in neighbouring countries such as Austria, Poland, and Czech Republic. The measure will last for 30 days, and does not apply to gasoline. (Reporting and editing by Inti landauro)
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Coal India's Central Mine Planning unit Central Mine Planning $199 million IPO is fully subscribed at the final bid day
The $198.7-million initial public offering of Central Mine Planning & 'Design Institute Ltd (CMPDIL), aided by large institutional investors, was fully subscribed at the end of Tuesday's bidding. Exchange data for 5:42 p.m. IST revealed that the company, a subordinate of Coal India, the largest coal miner in the world, had received bids on 83.7 million shares compared to 79.8 millions offered. Retail investors bid for a third of shares, while qualified institutional buyers bought more than three-times the amount reserved. Analysts cited the fragile global sentiment caused by the Middle East war. CMPDIL follows a successful IPO in?January of another Coal India division, Bharat Coking Coal. The?shares of the company nearly doubled in value on their debut, making it one of India's strongest listings. The IPO of the company was oversubscribed by 147 times, mainly due to strong demand from retail and institutional investors. Swastika Investmart stated that CMPDIL is a 'tactical play for the short to medium term, due to its discounted valuation and its debt-free balance sheets. However, its dependence on Coal India as a source of 90% of its revenues poses an immediate 'risk. The company provides consulting and support services to coal?and?mineral?exploration. It is looking for a valuation up to $1.33billion. The company raised $4.69 billion rupees (about $50.26 million) on Wednesday from anchor investors. About 69% of the funds came from domestic mutual funds. Coal 'India plans to sell up to 107,1 million shares. Stocks are expected to be listed on March 30. ($1 = 93.3060 Indian Rupees) (Reporting and editing by Vivek M. in Bengaluru, and Nandan Mandayam from Bengaluru)
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Oil rebounds as the glimmering relief from the Iran war fades.
On Tuesday, world stocks made modest gains while oil prices remained above $100 per barrel. This was due to caution after U.S. president Donald?Trump postponed the bombing of Iran’s?power grid. U.S. Treasury Yields increased and the dollar regained ground in a retracement of a rally that swept the markets overnight, after Trump extended his Saturday ultimatum to Iran for it to reopen Strait of Hormuz by 48 hours. Trump cited "productive" discussions Tehran. Iran fired waves of missiles towards Israel on Tuesday. This kept the markets on edge. Oil last traded at $101.5 per barrel after a 15% drop on Monday. Bob Savage is the head of BNY's markets macro strategy. He said that "markets are balancing fragile hope for a possible truce with the reality of persistent conflict, and tightening of financial conditions." U.S. Stock Futures were a little lower on the day, indicating a slight pullback after Monday's gains. Europe's STOXX600 was down just 0.1% after earlier gains. Shares in Asia finished firmly "in the green" despite being below their day's highest. The MSCI World Stock Index was 0.3% higher than the previous day but still 7% below its February record highs. Oil prices were expected to remain high as the war continued and the Strait of Hormuz was still closed for shipments of a fifth of the world's crude oil and natural gas. The growth of the private sector in the Eurozone almost stalled last month, as inflation expectations soared and delivery times increased. This is further evidence that the U.S.-Israeli war against Iran has already had a significant impact on the region, according to data released Tuesday. Thomas Mathews is the head of Asia-Pacific markets at Capital Economics. DOLLAR PARES LOSSES, YIELDS RISE The U.S. Treasury yields increased on Tuesday, after a steep fall overnight. Little clarity about an end to this conflict has left traders pricing in more hawkish interest rate outlooks globally. The benchmark 10-year rate was up by 3 basis points at 4.36%. Investors have abandoned hopes for a further monetary ease globally in favor of a price hike across the majority of developed nations. Futures indicate a slight chance of an increase, and traders are pricing in a rate hike from the Bank of England or European Central Bank. Kit Juckes is the head of Societe Generale's FX strategy. The dollar recovered from its Monday lows and the euro fell by almost 0.2% to $1.1594. The pound fell 0.3% to $1.34. Spot gold remained stable at around $4,400 per ounce. Prior to Trump's announcement, gold had been trading at a four-month low below $4,100 on the expectation of longer-term increases in U.S. interest rates.
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Sleijpen, ECB's Sleijpen, says that energy prices will likely hit the wider economy faster than 2022.
Dutch Central Bank Governor,?Olaf Sleijpen?said Tuesday that the rising oil and gas prices will likely affect the economy faster than they did during '2022's energy crisis. The Dutch representative in the ECB Governing Council stated that he and his colleagues would have more information on their April meeting about the second-round effect, which occurs if firms raise?their price to offset higher input cost and employees demand higher wages. We can't control the price of oil and gas, but we are able to act if we notice second-round effects. "I think we'll have more information?on that front - in April", he said, referring to ECB rate-setting on April 30. Sleijpen explained that in 2022 when the Ukraine war began, energy prices rose, the economy was in a low-inflation period, so it took longer for people to adjust to the price increase and realize the impact on their purchasing power. He told reporters in Amsterdam that "everyone is more alert now so shocks can easily spread?throughout the economy". Sleijpen stated that inflation expectations and producer 'prices' would be the key indicators for ECB at the April meeting. However, he said the data was still incomplete. He said, "It's going to be limited but we will have to work with it." The complete picture won't have emerged by the end of April. Bart Meijer is reporting; Barbara Lewis is editing.
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Sources: EDF will face EU probe over state aid for nuclear power plants
EDF will face an EU investigation into a state aid package for the construction of six nuclear power plants. This is due to 'concerns that the support would reinforce the market dominance of the French state-owned utility. The plan, which is worth tens and tens billions of Euros, is at the heart of France's plan for renewing its nuclear fleet. It would add 10 gigawatts to France's capacity. A long EU investigation could delay that timeline. People said that the European Commission,?the EU's competition enforcer, will open an investigation in January. The French government asked Brussels late last year to approve state aid, including a subsidised loan covering at least 50% of the construction costs of six nuclear reactors. The new plants will replace the old nuclear plants and secure future energy supply to?cover the rising demand in the next decade, which is driven in part by data centres' energy needs. The people who spoke to the media said that EU regulators wanted more time to examine the complex undertaking. It is one of the largest public projects undertaken in the country for many years. Brussels is worried that six new power stations will further consolidate the dominant market position of EDF, a state-owned energy company. The company currently controls more than 75% France's net energy production. One source, citing concerns from the Commission, said that boosting EDF's share of the market could distort the competition and prevent new players from entering the market. EDF, the French Energy Ministry and the Commission declined to comment. In 2020, the project estimated in 2022 will cost 72.8 billion euro ($84 billion). One of the people said that an in-depth investigation by the EU would allow the Commission to create a 'ironclad' case in the event Austria's government, which is against nuclear power, launches a legal challenge to the Commission's approval of the deal. This, according to some EU officials, seems likely. Vienna has challenged state aid in the past for nuclear projects in Hungary, and a former EU member Britain.
Gold trims losses after investors consider conflicting signals about Mideast talks
Gold prices have pared their losses after dropping by more than 2% on Tuesday. Investors remain wary of the Middle East conflict, despite conflicting signals about Iran-U.S. negotiations.
Around 0820 GMT, spot gold fell 0.2% to $4396.74 an ounce. Prices fell more than 8% to $4,097.99 an ounce on Monday, the lowest level since November 24. They then pared some losses.
U.S. Gold Futures for April Delivery fell?1.5%, to $4340.90.
Iran denied that it had held any talks with the U.S., after President Donald Trump backed down on his threat to bomb Iran's electricity grid. He cited what he called productive discussions with unnamed Iranian official. The Israeli military reported that Tehran fired multiple waves of'missiles' at Israel on Tuesday.
It's all about the?event unfolding (in this?) U.S.-Israeli-Iran conflict. The key stakeholders do not have a uniform message across the board here ....so we can see that markets are in flux at this time," said Kelvin Woong, senior analyst at OANDA.
Benchmark Brent is above $100 per barrel. The higher crude oil prices tend to increase inflation because they drive up the cost of?transportation and manufacturing.
Gold's appeal to hedge against inflation is usually boosted by rising inflation, but high interest rates reduce the demand for this non-yielding investment.
Since the U.S. and Israeli war against Iran began on?February 28, spot gold prices have fallen by 18%.
According to historical trends, "liquidity needs" could keep gold under pressure from four to six week. Standard Chartered analysts said that price risks are likely to increase if inflation fears, debt or recession concerns or?oil scares take precedence.
Markets are currently torn by the inflation shocks, negative output growth and the risk of rate increases.
Spot?silver fell 3.4%, to $66.70 per ounce. Palladium fell 2.7% and spot platinum dropped 2.1%. Reporting by Noel John in Bengaluru, Pablo Sinha, Swati verma, and Mrigank Dahniwala. Editing by Sumana Nandy and Rashmi aich.
(source: Reuters)