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The specter of stagflation clouds Fed's optimism
Kevin Buckland gives us a look at what the future holds for European and global markets. The market is optimistic about monetary policy. Rising equity prices and falling bond values are a good indicator of this. A rate cut next week at the Fed meeting has a decent chance to be a big one. Wall Street closed with new record highs over night, Taiwan's benchmark has reached a new peak and Japan's Nikkei index is moving back to Tuesday's unprecedented level. The unquestionable weakness of labour market indicates that policy easing will be imminent. The question is, however, how much the Fed's rate cut trajectory is complicated by the still-sticky inflation. Markets will receive two crucial days of data, namely PPI today and CPI the following day. The Fed would be forced to take a risky course of action if inflation levels were high. The market currently has 66 basis point of easing priced for the end of the year, with 7% odds on a 50 basis-point cut coming next Wednesday. The Fed is still the most important story on the global markets, but European investors should keep an eye on the geopolitical situation after NATO member Poland shot down for the first time apparent Russian drones it claimed had infringed on its airspace when it launched an attack against western Ukraine. French politics is also a major topic. The deeply unpopular President Emmanuel Macron has named Sebastien lecornu, a 39-year old loyalist, as his fifth Prime Minister in less than two-years, raising the question of just how long either of them can hold on to power. The outcome of ECB’s two-day summit that begins today is now more certain. Economists are almost unanimous in their expectation for rates to remain unchanged. The ECB's two-day meeting that begins today is more certain, with economists almost unanimously expecting rates to remain steady. The following are key developments that may influence the markets on Wednesday. US PPI (August). -Sweden monthly GDP (July) -Norway, Denmark CPI (both August) Italy, Spain, Greece Industrial Output (all July).
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US inflation data and gold rates are in focus
Investors were watching for key inflation reports this week, as well as expectations of an interest rate reduction in the United States this month. As of 0101 GMT spot gold was up 0.3%, at $3,635.329 an ounce. It had hit a record-high of $3,673.95 per ounce on Tuesday. U.S. Gold Futures for December Delivery eased by 0.2% to $3673.70. "Sentiment has been very bullish." Gold prices are being driven by several factors. "The primary factor is U.S. interest rate expectations," Capital.com's financial market analyst Kyle Rodda stated. The near-term outlook is heavily dependent on these inflation data. If the data is a little spicy, rate cuts may be triggered marginally. This could spark a correction in a market that's technically overbought. Watch closely the U.S. producer prices inflation data due at 1230 GMT and the consumer price reading on Thursday for further clues about the Federal Reserve's rate path. The U.S. government reported on Tuesday that the economy probably created 911,000 less jobs than originally estimated in the 12-month period through March. This suggests that the job growth had already slowed before President Donald Trump imposed aggressive import tariffs. The U.S. Nonfarm Payroll Data released last week indicated a weakening of labor market conditions and sealed the case to cut rates at the Fed’s September Policy Meeting. According to CME Group’s FedWatch Tool, markets are pricing in a rate cut of 25 basis points, with a probability of a 50-basis point cut at 6%. Gold prices are up 38% this year after a 27% increase in 2024. This is due to a soft dollar, central bank accumulations, dovish monetary policies and increased global uncertainty. Gold that does not yield is usually a good investment in an environment with low interest rates. Silver spot rose by 0.3%, to $41 an ounce. Palladium remained flat at $1148.57 while platinum gained 0.9%. (Reporting and editing by Sherry Jac-Phillips in Bengaluru, Eileen Soreng and Brijesh Patel from Bengaluru)
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Asia stocks rise, bonds fall when traders look at odds of a bigger Fed cut
Asian stocks followed Wall Street higher Wednesday, while bonds fell. Traders increased their bets on the possibility that the Federal Reserve would cut rates next week by at least one quarter point due to a softening of U.S. labor market conditions. The dollar is also rising, as the U.S. Inflation figures will be released on two days, beginning later Wednesday. These data are crucial for the Fed to make its September 17th decision. After Israel's attack against Hamas leaders in Qatar, crude oil prices remained high. Geopolitical concerns remained at the forefront of investors' thoughts after Poland and NATO scrambled their air defences in order to shoot down drones as a result of a Russian air strike on western Ukraine. The markets also took in stride the court ruling which temporarily prevented President Donald Trump from removing Federal Reserve governor Lisa Cook. This case is likely to be heard by the U.S. Supreme Court. Investors are closely following the unprecedented court battle, as it could undermine the long-held independence of the central bank. However, there has been no immediate reaction on the market. In Asia, Japan’s Nikkei gained 0.3%, South Korea’s KOSPI rose 1.3%, and Taiwan’s equity benchmark reached a new record high of 1.46%. Hong Kong's Hang Seng rose by 0.5% while mainland Chinese blue-chips rose by 0.2%. Overnight, S&P 500 and Nasdaq Composite, as well as Dow Jones Industrial Average, each finished the day with new all-time records. S&P futures were 0.2% higher Wednesday. The CME Group's FedWatch Tool shows that traders see a Fed rate cut next Wednesday as an almost certain thing. They even place 7% odds on such a large half-point drop, according to the tool. Investors were convinced that the Fed could not wait to support the economy any longer after a dismal payroll number was released last week. The final obstacles to this view will be the readings of consumer and producer inflation on Wednesday and/or Thursday. Kyle Rodda is a senior financial market analyst at Capital.com. He said that an upside inflation surprise would cause the probability of rate cuts to be reduced, not just for September but also for future months. According to current risk appetite, the rapid deterioration of U.S. data on the economy, especially jobs, is the reason that markets are pricing such aggressive easing by the Fed. Treasury bonds, a safe-haven investment that has been around for centuries, fell for a second consecutive day on Wednesday. This pushed yields up. After a nearly 3-basis-point increase on Tuesday, the 10-year Treasury yield increased by almost 2 basis points. The equivalent yield on Japanese government bonds rose by 1.5 basis points, to 1.575%. In the last session, the U.S. Dollar held onto gains made on Tuesday. The dollar index (which measures the currency against its six main rivals) was unchanged at 97.78 after beginning Wednesday with a slight increase. The dollar was unchanged at $1.1705 to the euro, and down by 0.06% on 147.33 yen. This Thursday, the European Central Bank will set its policy and it is expected that rates will remain unchanged. A month ago economists were divided on whether the ECB would continue to reduce rates. However, recent data shows that inflation is close to the 2% goal and unemployment has reached a new low. On Friday of next week, the Bank of Japan will announce its latest policy decisions. It is widely expected that they will not raise rates this time. Bloomberg and the BOJ issued contradictory reports Tuesday regarding tone. Bloomberg reported that policymakers were looking at a hike in this year, while Bloomberg said they may delay tightening policy. Investors are also watching politics. They're focusing on Shigeru-Ishiba's successor as Japan's new prime minister and the ability of France's fifth newly appointed prime minister in just two years to stay on. The price of gold edged up by 0.2%, to $3,633 an ounce. This comes after the previous day's record jump to $3,673.95. Brent crude futures increased 0.5%, reaching $66.74 per barrel. U.S. West Texas Intermediate Crude futures climbed 0.6% to $62.99 per barrel. Prices settled at 0.6% higher in the previous session, after Israel claimed it had attacked Hamas leaders in Doha. Qatar's Prime Minister said that this attack threatened to derail talks between Hamas & Israel.
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Five-Well Drilling Campaign on BP’s Agenda for Mediterranean Sea
BP has signed a memorandum of understanding (MoU) with the Egyptian government to evaluate opportunities for a five-well drilling program in the Mediterranean Sea.The program, at water depth ranging from 300 to 1,500 meters, is designed to accelerate the development and production of national gas reserves, with the intent of extending the use of existing production facilities in the West Nile Delta.Drilling operations are expected to start in 2026, with possible tie-back options following evaluation of the drilling campaign and resource potential.The agreement comes as BP plans to increase production to 2.3-2.5 million barrels of oil equivalent a day in 2030 with the capacity to increase production out to 2035. It follows a successful exploration campaign in the first half of 2025 in which bp has made 10 discoveries including two in Egypt, where it completed drilling activity at the Fayoum-5 gas discovery well and El King-2 exploration well, both part of the West Nile Delta development.“Today’s announcement reaffirms our commitment to supporting investment in Egypt’s gas sector. We appreciate the continued engagement and support from H.E. Minister Karim Badawi. “We look forward to applying BP’s technological expertise to build on our recent exploration and development momentum to bring on new gas resources and accelerated production for the country as well as deliver value for our business,” said William Lin, executive vice president for gas and low carbon energy.“We are proud of our longstanding partnership with the Egyptian government. This memorandum represents a strategic step in our investments in Egypt’s energy sector during this decade, enabling us to develop additional gas resources in the West Nile Delta and bring them onstream as quickly as possible to meet the needs of the local market,” added Nader Zaki, regional president for the Middle East and North Africa.
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Asia stocks rise, bonds fall when traders assess the odds of a bigger Fed cut
Asian stocks followed Wall Street higher Wednesday, while bonds fell. Traders increased their bets on the possibility that the Federal Reserve would cut rates next week by at least one quarter point due to a softening of U.S. labor market conditions. The dollar is also rising, as the U.S. Inflation figures will be released on two days, beginning later Wednesday. These are the last data that will inform the Fed’s decision of September 17. Crude oil prices remained high after Israel's attacks on Hamas leaders in Qatar. The Nikkei 225 index in Japan rose 0.3%. South Korea's KOSPI increased by 1.3%. Taiwan's equity benchmark also increased by 1%. Hong Kong's Hang Seng rose by 0.5% while mainland Chinese blue-chips rose by 0.2%. Overnight, S&P 500 and Nasdaq Composite, as well as Dow Jones Industrial Average, each finished the day with new all-time records. S&P futures were 0.2% higher Wednesday. The CME Group's FedWatch Tool shows that traders see a Fed rate cut next Wednesday as an almost certain thing. They even place 7% odds on such a large half-point drop, according to the tool. Investors were convinced that the Fed could not wait to support the economy any longer after a dismal payroll number was released last week. The final obstacles to this view will be the readings of consumer and producer inflation on Wednesday and/or Thursday. Kyle Rodda is a senior financial market analyst at Capital.com. He said that an upside inflation surprise would cause the probability of a rate cut to be reduced, not just for September but also for future months. According to current risk appetite, the rapid deterioration of U.S. data on the economy, especially jobs, is the reason that markets are pricing such aggressive easing by the Fed. Treasury bonds, a safe-haven investment that has been around for centuries, fell for a second consecutive day on Wednesday. This pushed yields up. After a nearly 3-basis-point increase on Tuesday, the 10-year Treasury yield increased by almost 2 basis points. The equivalent yield on Japanese government bonds rose by 1.5 basis points, to 1.575%. In the last session, the U.S. Dollar held onto gains made on Tuesday. The dollar index (which measures the currency versus six rivals) was flat at 97.78 after beginning Wednesday with a slight increase. The dollar was unchanged at $1.1705 to the euro, and 0.06% lower at 147.33yen. This Thursday, the European Central Bank will set its policy and it is expected that rates will remain unchanged. One month ago, economists were divided on whether the ECB would continue to reduce rates. However, recent data shows that inflation is holding near the 2% target, and unemployment has reached a new low. On Friday of next week, the Bank of Japan will announce its latest policy decisions. It is widely expected that they will not raise rates this time. Bloomberg and the BOJ issued contradictory reports Tuesday regarding tone. Bloomberg reported that policymakers were looking at a hike in this year, while Bloomberg said they may delay tightening policy. Investors are also watching politics. They're focusing on Shigeru-Ishiba's successor as Japan's new prime minister and the ability of France's fifth newly appointed prime minister in just two years to stay on. The price of gold edged up by 0.2%, to $3,633 an ounce. This comes after the previous day's record jump to $3,673.95. Brent crude futures increased 0.5%, reaching $66.74 per barrel. U.S. West Texas Intermediate Crude futures increased 0.6% to $62.99 per barrel. Prices settled at 0.6% higher in the previous session, after Israel claimed it had attacked Hamas leaders in Doha. Qatar's Prime Minister said that this attack threatened to derail talks between Hamas & Israel.
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China's inflation figures are weak and iron ore prices have fallen due to profit-taking
The iron ore futures fell on Wednesday due to profit-taking, and lower-than-expected data for inflation in China, the top consumer. However, bets that demand would pick up, along with a resumption of production among mills, helped limit losses. As of 0320 GMT, the most-traded contract for January iron ore on China's Dalian Commodity Exchange slipped 0.06% down to 802.5 Yuan ($112.61) per metric ton. As of 0310 GMT, the benchmark October iron ore traded on Singapore Exchange was down by 0.56% to $106.75 per ton. Steven Yu, senior analyst at Mysteel, explained that traders have been liquidating some long positions in order to cash in on profits. This has led to a softerening of prices. It's not easy to predict the direction of the market and prices were largely driven by expectations. Therefore, it is normal to see a downward correction after a price rally. China's consumer price index in August was down 0.4% compared to a year ago, which missed the poll prediction of a dip of 0.2%, and weighed on sentiment. The Brazilian miner Vale announced on Tuesday that the fire at its maritime terminal Ponta da Madeira, which had damaged an auxiliary tower, was put out. The fire had no impact on the miner's schedule for iron ore shipment nor the volume of steelmaking material that it expected to ship. Ore demand is expected to increase after Chinese steelmakers resume production following the military parade in Beijing. This will limit price losses. Coke and other steelmaking materials, such as coking coal, fell by 2.11% and 1.111% respectively. The Shanghai Futures Exchange has seen a decline in most steel benchmarks. Rebar fell 0.67%, while hot-rolled coil fell 0.39%. Wire rod also lost 0.15%, and stainless steel remained flat. ($1 = 7.1261 Chinese Yuan) (Reporting and editing by Amy Lv, Lewis Jackson)
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Reports of CATL restarting a China mine have dragged lithium miners around the world
Shares in lithium mining companies around the globe fell after a report by China's state-run media said that Contemporary Amperex Technology, or CATL, is likely to resume production soon at a mine of lithium in Yichun in Jiangxi Province in south China. The prices of futures for lithium carbonate in China dropped more than 7% to a more than month-low on Wednesday. The potential reopening of the massive mine adds a fresh blow for the sector, which has been struggling with a glut following weaker-than-anticipated growth in demand for electric vehicles. Securities Times' report about the restart of production at CATL’s lithium mine was released during premarket trade in the U.S. Tuesday. This sent U.S. listed shares of lithium mining companies lower due to easing supply worries. On Tuesday, shares of Albemarle Corp., the world's biggest producer of lithium-ion batteries, and U.S. listed Sigma Lithium Corp. ended lower by 11.5% and 6.9%, respectively. In Sydney, Pilbara Minerals lost as much 16.7% - the highest among Australia's listed lithium miners - while IGO and Liontown Resources both shed as much 12.7% and 15%, respectively. As of 0126 GMT, the lithium miners also weighed heavily on the S&P/ASX 200 index benchmark, which was mostly flat. Shares of Tianqi and Ganfeng, both listed in China, opened at a loss of about 5%. CATL suspended operations at Jianxiawo Lithium Mine following the expiration of a license on August 9. This led to an increase in the prices of lithium futures and lithium mining companies' shares. (Reporting and editing by Sumana Aich and Rashmi Nandy in Bengaluru)
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Elliott reports that it has taken a stake in Japan's Kansai electric
The Financial Times reported on Wednesday that activist investor Elliott Management is now one of the three largest shareholders in Kansai Electric Power, with a stake between 4% and 5 %, according to people familiar with the situation. Kansai's shares rose 6% after the report. According to the report, Elliott has urged Kansai, a major nuclear operator, to increase dividends, and buy back shares, by selling non-core assets worth 150 billion yen per year. The FT reported that Elliott had identified non-core assets worth over 2 trillion yen. These include a stake in a building firm and property worth more than 1 billion yen. Kansai Electronic declined to comment about individual shareholders, but stated "we remain committed" to maintaining careful communications with our shareholders. Elliott did not respond immediately to a comment request. The Tokyo Stock Exchange and regulators are putting pressure on Japanese companies to increase shareholder value and returns, which is driving interest from foreign investors in the market. Elliott has expanded its investment activities in Japan, targeting companies such as Tokyo Gas and Dai Nippon Printing. Kansai Electric, Japan's largest nuclear power company by the number of reactors it operates, is planning to build a reactor in Fukui Prefecture in western Japan. ($1 = 147.4700 Japanese yen) Reporting by Rishabh Jaisewal in Bengaluru, Anton Bridge and Yuka Obaashi in Tokyo and editing by Himani Sarkar
Russia and China trade new copper disguised as scrap to skirt taxes, sanctions
Russian copper producer RCC and Chinese firms have avoided taxes and skirted the effect of Western sanctions by trading in brand-new copper wire rod camouflaged as scrap, three sources knowledgeable about the matter told .
Copper wire rod was shredded in China's remote Xinjiang Uyghur region by an intermediary to make it tough to distinguish from scrap, the sources stated, permitting both exporters and importers to profit from distinctions in tariffs applied to scrap and brand-new metal, the sources said.
Russia's export task on copper rod was 7% in December, lower than the 10% levy on scrap. Imports of copper rod into China are taxed at 4%, but there is no task on Russian scrap imports.
There are no legal barriers avoiding China from purchasing metal from Russian firms under Western sanctions. But producers are stressed over losing export organization to consumers - consisting of those in the U.S. and UK - if they are known to be doing business with Russian companies.
The sources said some Chinese companies have established brand-new teams to deal with Russia-related organization.
U.S. sanctions, targeted at reducing Russia's export profits, can also indicate troubles with processing dollar payments as global trade is normally carried out in dollars.
Sales of brand-new metal camouflaged as scrap, which began in December, are reflected in a discrepancy between Chinese and Russian data. There is no distinction between sanctions on copper scrap and rod.
Chinese customs data revealed China has bought substantially more copper scrap from Russia since December, while Russian figures acquired from a business data service provider revealed the quantity of scrap exported to the nation's biggest trade partner was negligible.
In response to a ' inquiry on the inconsistency, Russian customizeds stated: The Federal customs service temporarily does not provide information on foreign trade. It stopped releasing trade data in April 2022, shortly after Russia's invasion of Ukraine. Since then, the marketplace has relied on commercial providers.
Asked about the trade in copper rod to Chinese firms, RCC, or Russian Copper Company, which undergoes Western sanctions, stated it supplies items just to Russian companies. It did not comment even more.
China's custom-mades in Xinjiang, which surrounds Russia, did not respond to an emailed query and a phone conversation.
China has become a major location for Russian business seeking to export their products after the United States imposed sanctions on Russia for its intrusion of Ukraine in February 2022.
The United States and the European Union have actually likewise imposed sanctions on Chinese companies for supporting Russia's war effort in Ukraine.
DISGUISE
Shredding newly-made copper wire rod is an efficient method to disguise brand-new material that looks really different to ditch.
The brand-new, high-purity copper long, thin rods, mainly utilized for making power cables, are usually coiled for ease of transportation.
Copper scrap, by contrast, is a mix of wires, tubes and pipes that have already been utilized. They are chopped into grain-sized pieces, or coiled and pressed like packs of noodles, for transportation.
The shredding got away notice as China has limited access to the Xinjiang region in response to global condemnation of Uyghur repression, the sources said.
Apart from the financial incentive of avoiding taxes, the shredded metal is harder to determine and trace - making it simpler to sell to Chinese manufacturers.
' DE FACTO COPPER ROD'
Last December, according to an industrial information provider, Chinese companies made an overall of 5 purchases of items identified as copper rod from RCC's plant in the Urals region. The purchases made by a United Arab Emirates-based entity called Modern Commodity Trading DMCC produced earnings of approximately $65. million, according to the industrial data supplier.
The UAE-based firm might not be grabbed comment.
Russia has actually never been a significant seller of scrap copper to. China.
Nevertheless, from December last year, China's copper scrap. imports from Russia increased substantially, custom-mades information revealed.
The majority of that, 97% or 6,434 metric loads, came through the. Alashankou border of Xinjiang in December.
Russian data revealed a mismatch, indicating the nation offered. just 73 lots of copper scrap to China in the very same month.
In 2021 and 2022 an average of 95.3 heaps and 125 lots of. Russian copper scrap were sold to China monthly.
Volumes increased sharply over the last few months with month-to-month. imports reaching 11,599 tons by February 2024.
Customs data on Chinese imports of copper wire rod is not. publicly readily available.
This scrap from Russia is de facto copper rod, but not. declared as rod. I can not reveal any more information, stated a. Chinese manufacturing source who asked to stay anonymous. The. source added the material could be directly consumed by copper. fabricators in Jiangsu and Zhejiang provinces.
While Russian data revealed minimal scrap exports, a sudden. increase in wire rod exports took place in December.
According to the information, Kyshtym Copper Electrolyte Plant JSC,. a plant run by RCC, delivered 8,041 lots of copper wire rod to. China via Alashankou in Xinjiang in December, compared to just. 1,618 tons in November.
As of today, Kyshtym Copper Electrolyte Plant offers its. items just to domestic business, the Kyshtym plant said in. a response to concerns on its sales to China.
We have not monitored the products' additional fate, so I have. absolutely nothing to contribute to what has actually already been stated.
(source: Reuters)