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As US and Iran trade wars intensify, stocks fall, bond routs deepen.
The world stock market fell Wednesday, as U.S. strikes on Iran drove oil prices to five week highs. This stoked inflation concerns and extended a global bond selloff. Tehran claimed that it had targeted U.S. assets in the entire region while Washington said that they struck Iranian military targets close to the Strait of Hormuz. This was the largest exchange of fire between the two countries since July. Brent crude futures rose 0.6% to $95.18 per barrel on fears of further disruptions in energy supplies. Wall Street futures predicted another slow start for Wall Street after the previous session, when it hit a one-month low. After sharper losses in Asia, the pan-European STOXX 600 dropped 0.3%. South Korea's KOSPI fell almost 4% while the Nikkei was down 2.9%. The recent rise in energy prices has added upward pressure to bond yields that were already on the increase due to fiscal concerns, said?Kiran Ganesh. Multi-assets strategist at UBS Global Wealth Management. Stocks have been resilient to the rise in yields, but the increased rate will eventually put pressure on the equity markets. The yield on the benchmark U.S. Treasury 10-year bond increased to a near three-year-high of 4.8182%. Meanwhile, the yield on a 10-year Japanese government bonds?held at above 3% for the second consecutive session after reaching a three decade high earlier in the week. The increase in borrowing costs across the major economies has?deepened fears about tighter monetary policies and deteriorating fiscal dynamics. The U.S. Dollar Index, which measures greenbacks against a basket six currencies, rose 0.1% to 99.734, close to its highest level since August 17. The rise in bets on a U.S. rate hike also helped. The U.S. Dollar's appeal as a safe haven was bolstered by rising yields and increasing geopolitical tensions, while demand for stocks and other riskier investments decreased. Ganesh stated that the market has already priced in a fairly hawkish Fed outlook, so there is more room for a dollar decline than for other currencies. DATA-DEPENDENT Investors increased their bets after Kevin Warsh's hawkish remarks prompted them to raise the odds on an interest rate increase in the U.S. According to CME Group’s FedWatch tool, traders now give a two-in three chance that the Fed would deliver a 25 basis-point rate increase this month. This is up from 37% a week earlier. Investors are looking at upcoming U.S. data to determine if the economy is strong enough to justify tightening monetary policy. ADP's private payrolls are due on Wednesday. The nonfarm payrolls will be released on Friday, and the consumer inflation data on September 11. Markets will be watching closely the policy meetings of the European Central Bank (ECB) and the Bank of Japan to see how much they are willing to tighten their policies in response to persistent inflation risks. Matthew Ryan, director of Ebury's market strategy department said that September will test how far central banks will go to control inflation. Gold fell 0.1% to $4,322.24 per ounce. Bitcoin dropped 0.6% to $76,951.01 while ether dropped 1% to $2,394.57.
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As tensions in the Middle East escalate, copper is leading base metals to fall.
Copper and zinc were the two base metals that fell the most on Wednesday, as the conflict in the Middle East intensified. U.S. troops struck Iran, while Iranian forces fired at American bases throughout the region. This stoked fears of inflation due to higher oil prices. Benchmark three-month Copper on the London Metal Exchange fell by 1% to $14,133 per metric ton at 1007 GMT after reaching $14,092, which was its lowest level since August 21. Metal also fell below the support of the 21-day average price of $14,162. John Meyer, analyst at SP Angel, said that "all the base metals have weakened due to the higher oil prices resulting from the renewed conflict between Iran and the U.S." The dollar reached a new two-week high after the largest exchange of fire between Washington and Tehran since July plunged Iran and its Arab neighbours back into war. The copper price fell for the second time after hitting a seven-month record high of $14441.50 on February 2. This was due to the strengthening dollar and the increasing bets placed that the U.S. Federal Reserve would raise interest rates by September. Meyer stated that it is "more likely than not" that the Fed will raise interest rates. The dollar value of metals increases when the U.S. dollar is stronger. This makes them more expensive to buyers who use other currencies. Higher borrowing costs affect the outlook for future metals demand, which is directly related to 'the pace of economic growth. Zinc dropped 1.7% to $3856. On Tuesday, the metal reached a record high of $3.990 due to speculative purchases and low inventories outside China. The daily LME data showed that supplies were less tight, indicating a small inflow of copper and zinc to LME-registered storage facilities. Additional stocks have helped to reduce premiums on cash metals over?three month contracts in both markets. LME tin fell 0.9% to $54,090 after hitting a low of $53,850. Nickel, meanwhile, dipped by 0.4% to $16,595, reversing some of its losses following a drop to $16,500. Aluminium dropped 0.7% at $3,256.50, and lead fell 0.9% to $1,901.50.
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UK fines Citibank London 6 million pounds for Russia sanctions violations
The 'U.S. The 'CBNA London' unit of the bank made money available to those who were affected by sanctions. The Office of Financial Sanctions Implementation in Britain said that the majority of breaches took place between February and November 2022 and CBNA London voluntarily reported the majority of breaches to the regulator. Since the Russian invasion of Ukraine, in February 2022, Britain and the United States have imposed sanctions against thousands of individuals, entities, and ships. OFSI stated that many breaches occurred after sanctions were initially imposed, which they said placed "significant stress on the alert handling and investigative processes of the bank". "OFSI doesn't consider that CBNA London had any intention to violate sanctions. The 'errors and failures' referred to were material and significant in aggregate and occurred in a wide range of areas and systems in the bank, according to the regulator. Citi did not respond immediately to a comment request.
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As US and Iran trade wars intensify, stocks fall and bond routs deepen.
The world stock market fell on Wednesday as fresh U.S. strikes on Iran pushed oil prices up to a five-week high, fueling inflation fears and extending the global bond saleoff. The U.S. attacked Iranian military targets near Strait of Hormuz while Tehran claimed it had targeted U.S. resources across the region. This was the largest exchange of fire for weeks. Brent crude futures rose 0.1% to $94.87 per barrel on fears of further disruptions in energy supplies. Kiran Ganesh is a multi-assets strategist at UBS Global Wealth Management. She said that the recent rise in energy prices had put further upward pressure on bond rates, which were already on the increase due to some fiscal concerns. The yield on the benchmark 10-year U.S. Treasury bond reached an intraday peak of 4.8122%. This is its highest level in nearly three years. Meanwhile, the yield on the 10-year Japanese Government bond held at above 3% for the second consecutive session, after reaching a three-decades high earlier this week. The?U.S. dollar tends to be supported by rising yields, which make it more attractive as a safe-haven asset. Dollars are viewed as safe haven assets, which increases their appeal. The U.S. dollar index, which measures greenbacks against a basket of six currencies was up 0.05% to 99.734, its highest level since August 17. Ganesh stated that the dollar is more susceptible to a downward surprise than other currencies, because the market has already priced in a fairly hawkish Fed outlook. MSCI's global stock index fell by 0.2%, and was hovering near its one-month low. STOXX 600 in Europe fell by 0.3% after Asia's sharp losses following Wall Street’s overnight sell-off. South Korea's KOSPI fell almost 4% while Nikkei was down by 2.9%. Futures for the U.S. stock index pointed to a muted opening. DATA DEPENDENT Investors boosted their bets after Kevin Warsh's hawkish remarks prompted them to increase bets for another U.S. rate hike. Investors are awaiting the upcoming U.S. Economic data to determine if the economy is strong enough to warrant another rate hike. ADP private payrolls is due Wednesday, and the nonfarm employment report is on Friday. FedWatch, a tool of CME Group, shows that Fed funds futures indicate a 68% probability of a rate hike this month by 25 basis points, compared to 37% last week. As expected, the New Zealand dollar fell 1.2% to $0.58220 following the Reserve Bank of New Zealand's hike in interest rates. The currency was impacted by the central bank's hawkish statement. Gold fell 0.1% to $4,322.24 per ounce. Bitcoin dropped 0.6% to $76,951.01 while ether fell 1% to $2,394.57.
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UK bond yields reach new 18-year high, increasing pressure on Healey
British government bond yields reached new 18-year-highs on Wednesday, following a global sell-off in response to the latest escalation of Iran's war. This added to the challenge faced by finance minister John Healey as he prepares his first budget. The yield on the 10-year gilts reached its highest level since June 2008. It hit 5,268% shortly after 7am GMT, an increase of about 4 basis point on?the day. This is on top of a 15-bps rise on Tuesday. Investors are worried about the inflationary effect of the rising oil prices due to the return of the Gulf conflict. The increase in debt servicing costs for the government comes at a delicate time for Britain's newly appointed Prime Ministers Andy Burnham and Healey, who are preparing their first budget for October 28. Pantheon Macroeconomics economists say that the increase in gilt yields has reduced Healey’s margin of error when it comes to meeting the government’s goals for improving public finances. In a client note, they told clients that "higher interest costs have reduced fiscal headroom to about PS13 billion (18 billion dollars) from PS23.6 in the Spring Statement." The Chancellor must either raise taxes or cut spending by PS11 billion a year to restore the margin of headroom. The markets will be nervous as the 'budget' approaches and the government continues to'make spending commitments. The cost of borrowing for shorter-term periods also rose on Wednesday, with the five-year gilt rate reaching its highest level since October 2023. It increased by 4 basis points to 4.7534%.
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China reopens highway to Tibet's disaster zone
China has fully reopened a road leading to the Gyirong Border?crossing?into Nepal, one week after sections?were washed out by catastrophic flooding. Heavy machinery can now reach the main disaster area for the first. China airdropped equipment and supplies for frontline rescuers who had trekked through mountains to reach the site. Chinese state broadcaster CCTV reported that a large number of heavy machines, as well as equipment to strengthen search operations, have now arrived in the area where an inspection complex for the Chinese border once stood. CCTV showed footage of rescue crews and excavators and said that they had deployed rescue crews with life-detection equipment and?search dog's. The crews are hampered in their progress by the persistent rain, and difficult terrain. They have to work within a narrow mountain canyon, which is hemmed between unstable cliffs, and a swift-flowing river. The authorities, who have been monitoring the upstream lakes that could cause flooding if they burst said these risks have decreased but landslides are still a concern. Authorities in Nepal said that the hope of finding any more survivors was fading. Nearly 4,000 people are still missing and at least 1,114 have died. Over 30 Latvian tourists believed to be missing China's official death toll in Tibet has remained at 16 since Sunday, with 546 people still missing. This includes 104 Indians and 49 Nepali nationals as well as 33 Latvians believed to have been part of two tour groups. Karlis Eihenbaums said that the Latvian ambassador to China was in constant contact with the Chinese Foreign Ministry and authorities in Tibet for updates. He said that embassy personnel had not visited the Tibetan disaster scene because information from Nepal indicated that the missing Latvians may have been swept away to the Nepali-side. Many of the details about the tragedy in Tibet are only available from specific sources, mostly China's state controlled media. The Foreign Ministry cited the loss of access to roads and communications in the area, as well as the major safety risks posed by secondary disasters as reasons why it had not allowed foreign journalists to enter the 'disaster zones'.
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The FOREX Dollar reaches a two-week high. Middle East conflict, rate paths and the Middle East are in focus
The dollar reached a two-week peak on Wednesday, as investors flocked to the U.S. dollar amid growing concerns over the impact of the energy crisis and diverging monetary policies?across major economies. After the largest exchange of fire for weeks, the U.S. and Iran were back in a war-like situation on Wednesday. The dollar tends to gain from higher oil costs because the U.S. is less vulnerable to energy shocks compared to other major economies. This attracts demand to the detriment of currencies like the euro and the yen. The Federal Reserve faces a growing threat of tightening policy in 2027, even though most economists believe the European Central Bank is nearing the end of their tightening cycle following next week's much-anticipated rate hike. George Brown, Schroders' senior economist, stated that the ECB will finish its rate-hiking cycle by the end of the year while the Federal Reserve is likely to just be beginning. He added that Schroders was positioned to take advantage of a weaker Euro and expected the single currency to drop to $1.10 per dollar by the end of the year. A sell-off of?U.S. Treasuries, which are influenced by inflation fears and concerns over the fiscal trajectory of the United States can have a negative impact on the dollar. Rising debt levels and persistent pressures to reduce prices may also weigh down the dollar. assets. The dollar index (which measures the greenback in relation to a basket including the yen, the euro and other currencies) rose by 0.11%, reaching 99.76 after having reached 99.808, which was its highest level since August 17. The euro fell 0.16% to $1.1575 after reaching $1.1570 - its lowest level since August 20. The yield on the benchmark 10-year U.S. note reached a high of 4.812% - its highest since November 2023 - before falling to 4.804%. Japan's benchmark yield on the 10-year note extended its rally on Wednesday to 3.01% after reaching a milestone of three decades on Tuesday. According to CME Group’s FedWatch tool, the markets now price in a 70% chance of a Fed hike for September, up from 40% just a week ago. DOLLAR SLAVES BELOW 160-YEN After falling to its lowest level since July 31, the Japanese yen gained 0.45% to 159.50 dollars per yen. The yen was just above the psychologically significant 160-per-dollar barrier as markets weigh up the Bank of Japan rate path. BOJ Governor Kazuo Ueda said consecutive rate increases could be a possibility. The Treasury Department reported that U.S. Treasury Sec. Scott Bessent expressed strong support for "decisive monetary measures" to combat the yen's weakness during a meeting held with BOJ Governor Kazuo Ueda. The U.S. and Japan's rare joint intervention at the end July lifted the yen from its 40-year-low of 163,99, but it has since lost around half the gains made by the joint action. Tony Sycamore is a market analyst with IG. He said, "There seems little chance of a second round of coordinated intervention until the 'Strait of Hormuz' de-escalation takes some heat off of?the oil prices." Even after the central bank of New Zealand raised the official cash rate to 2.75%, the New Zealand dollar fell 1.01% to $0.5844. This is its lowest level since August 13. Analysts say market participants saw the decision as less hawkish that expected.
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Gulf Stocks Fall after US-Iran Exchange Strike
Gulf equities fell in the early trade on Wednesday, after the United States and Iran exchanged strikes over night. This dampened hopes for a rapid easing of tensions?in?the Middle East. Washington claimed to have carried out airstrikes overnight on Iranian targets, provoking a reaction from Tehran. This is the most serious escalation of tensions between the two nations in recent weeks. Iran's Revolutionary Guards claimed to have?fired missiles at an American military base in Jordan and alleged that they?had inflicted severe casualties. Iranian state media reported that a drone attack was also carried out on a U.S. military base in Bahrain as a retaliation to the U.S. attacks. Dubai's main index fell 0.6% with the majority of constituents in negative territory. Blue-chip ?developer Emaar Properties lost 1.3%, ?while toll-road operator Salik declined 1.1%. Qatar's benchmark fell 0.5% with almost all stocks trading lower. Industries Qatar dropped 1.2% while Qatar National Bank was down 0.5%. Saudi Arabia's benchmark stock index fell 0.3% due to a decline in utilities, healthcare and materials stocks. Saudi Arabian mining fell by 1.4% and ACWA Power by 1.3%. The National Shipping Company of Saudi Arabia and Rabigh Refining and Petrochemical Co. bucked this trend, both?increasing 2.1%. IFR reported that Saudi Arabia also raised $3.25bn through a two tranche sale of U.S. Dollar sukuks, its "second debt market transaction" this year. Orders were in excess of $15 billion and proceeds will be used to fund general budgetary requirements. Abu Dhabi's benchmark indices fell?0.7% led by shares in telecom, technology and industrial companies. First Abu 'Dhabi Bank, the UAE’s largest lender, dropped 1.3% while conglomerate Alpha Dhabi Holding fell 2%.
Lynas Rare Earths claims it was involved in takeover discussions earlier this year
A spokesperson for Australia's Lynas Rare Earths said that the company was involved in takeover talks earlier this year, but they did not proceed.
Three people said that the talks led Lynas, through Chairman John Humphrey, to suspend its search to find a new CEO for Amanda Lacaze, who retired from her position in June.
Lynas plays a major role in developing a Western supply network for metals that are crucial to electric cars, wind turbines and defence systems. It's also a big draw for?Australia. The country has committed to being a key mineral supplier to its allies. Any acquisition by a foreign company must be approved by the regulators of that country.
The spokesperson responded in a written statement to a question regarding the takeover discussions that took place earlier this year.
Lynas held post-results discussion with investors in Sydney, Melbourne and Brisbane this week.
Lacaze left the company on January 13. Humphrey explained to investors why the CEO search took so long. The investors spoke on condition of anonymity due to the sensitive nature of the matter.
Humphrey, according to one investor, told him that the CEO search was suspended for 4 1/2 months.
How could they not disclose? Another investor agreed. "It is not a short time."
Lynas didn't mention in its statement whether the CEO search was suspended. Because the search process had not been completed before Lacaze's retirement, Lynas appointed Pol Le Roux as interim CEO. It said that the CEO search is still ongoing.
DIFFERENTIATING SUPPLY CHAINS
Lynas had previously been in merger talks with MP Materials, based in the United States. The talks ended in 2024 when the companies couldn't agree on an appropriate valuation. It wasn't immediately clear which company had been involved in the discussions this year.
The Australian takeover laws stipulate that an 'listed company' is not required to reveal that the CEO search was suspended. The company is required to disclose the suspension only if it constitutes "market-sensitive information."
The news of the talks came as top-developed economies around the world scrambled to support the development and diversification of supply chains away from China, the dominant producer.
Lacaze's shoes are likely to be hard to replace. Over her 12-year tenure, she oversaw the 12-fold increase in the?share prices of the company as it grew to a $16-billion company.
Lynas reported last week a significant increase in its annual profit. This was aided by a record-high average selling price for?rare earth oxide and a strong demand. However, it fell short of?market expectations.
The company also stated that it would expand its global supply chain. It is currently in discussions with mine suppliers from around the globe and will support the development of an American magnet supply chain.
(source: Reuters)