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Copper prices fall on strong dollar while traders wait for Fed rate decision
The price of copper fell for the second consecutive session on Tuesday. This was due to a strong dollar and increased bets that interest rates would rise by the Federal Reserve, which could reduce demand for industrial metals. Benchmark 'three-month' copper on the London Metal Exchange fell 0.5% to $13,663.50 a metric ton at 0910 GMT. It had fallen as much as 0.8% in the morning. The 50-day moving mean of the contract was supporting around $13,570. Sucden Financial, a brokerage firm, said in a report that "Overall we expect base metals to remain supported when individual supply stories still are positive." The Fed's decision and important U.S. statistics later this week will be key indicators of whether or not the rally is a success. The dollar remained near a four-week high. The dollar remained near its four-week high. The dollar's strength can make metals denominated in dollars more expensive to holders of other currencies. The market awaited the Fed's meeting on Wednesday. This was especially true in light of the recent relief in oil prices following a lull between the U.S. According to CME FedWatch, 62% of market participants believe that the Fed is likely to keep interest rates at their current level. 38% expect a minimum 25-basis point hike. This is up from just 16% one week ago. The higher rates could dampen economic activity and reduce demand for copper. The LME's copper stocks are still tight despite the drop to 268,775 tonnes, their lowest level since March. Cash-to-three month?spread backwardation The price of a ton was $30 after reaching $44.50. This is the highest it has been since January. This indicates a tight supply in the near future. Aluminum prices fell 0.5%, to $3,151.50 a ton, despite the fact that stocks at LME-registered storages increased. The number of people who are unable to work has fallen to the lowest level in this century. Lead was unchanged at $1,890. Zinc fell 0.9%?to $3577.50. Nickel dropped 0.9% to $17.055. Tin lost 1.3% to $43,580. (Reporting and additional reporting by Solomon Cefai, Editing by Varun HK, Mrigank dhaniwala, Jan Harvey).
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The chip market is on a downward spiral as world stocks fall to a one-month low
Investors dumped chipmakers over concerns about Chinese competition, and the funding of the AI boom. Meanwhile, rising odds?of an interest rate increase in the U.S. as soon as this week further dampened mood. Asian chipmakers were 'at the 'heart' of Tuesday's sale. South Korea's KOSPI plunged more than 10%, hitting a three-month high. This triggered a circuit breaker on its way down, as it headed for its biggest monthly drop on record, surpassing the declines experienced during the Asian Financial Crisis in 1997. The index's value had tripled over the past 12 months, but has lost more than a quarter of that value since its peak. Shares of SK Hynix, Samsung Electronics, and other companies that are facing extra pressure on a market that is transforming due to leverage, have suffered losses in excess of 12%. Their stratospheric rise has slowed down in a hurry. Wall Street was set to open with a weaker opening as Nvidia's and Micron Technology’s shares dropped?in the premarket trading. Nvidia's shares fell 5% overnight, after The Wall Street Journal reported that the company is in discussions to provide $250 billion worth of financing guarantees for OpenAI in a massive data center project. Positive earnings reports from Unilever, Mercedes-Benz and other companies helped to offset losses in technology shares. The MSCI All Country World Price Index fell by 0.5%, to its lowest level since June 29. "You've seen hyperscalers not participating in AI because they are worried about cost and leverage. We're now seeing concerns about the profitability of the semiconductor industry, especially in Asia," Dorian Carrell said, Schroders' head of multi-assets income. The AI story is still evolving, but this kind of growth rate (in profit) is rarely sustained. We believe that the market is healthy in questioning these issues. The Information reported that China had begun producing its own immersion deep ultraviolet machines, which are used to make chips. ASML has long been the dominant supplier of this tool. ASML's shares fell 8.5% on Monday. CXMT, China's largest memory manufacturer, raised $8.6 Billion on Monday. It ended its first session as the most valuable Chinese company. OIL SLIDES AND US RATE IS UP EYED Brent crude oil futures continued their nearly 9% drop on Monday, dropping more than 3% at $85.55 per barrel as hostilities between Iran and the U.S. cooled following Washington's sudden suspension of airstrikes on Saturday. Donald Trump stated on Monday that the United States was having "good discussions" with Iran, and that there is a possibility of a deal. The break in fighting on Monday pushed benchmark 10-year U.S. Treasury rates down?by approximately 4 basis points?to 4.64%, but shorter-term interest rates barely moved. The markets have estimated that there is a 35% probability of a Federal Reserve rate hike by 25 basis points this Wednesday. Thierry Wizman is a currency and rates analyst at Macquarie Group. He said that the U.S.-Iran conflict, which has pushed up the price of crude, will continue to be the'most important' factor in determining what happens to the global economic outlook... and by extension what determines the central bank policy forecasts at the'margin. We expect the Fed to tighten its bias this week. The dollar was supported by the expectation of a hike sooner rather than later, keeping the euro at $1.1370. The yen was trading at 163.83 against the dollar. This is barely above a four decade low. Markets are worried that Japan will intervene in the currency pair, especially if it holds rates this week. Wizman said that if BOJ communication was not hawkish, and USD/JPY continues to rise, traders can expect an official response. This could include verbal interventions, rate checks or direct FX market interference, possibly on Friday. (Reporting and editing by Tom Westbrook, Sruthi Shakar, Amanda Cooper, Saad Saeed and Anil D’Silva).
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Sources say that the Russian Tyumen oil refinery stopped operations on July 25, after a drone attack.
Two industry sources confirmed on Tuesday that the?Tyumen?oil refinery in western Siberia stopped oil processing on 25 July following an attack by a Ukrainian drone. The domestic fuel market has been experiencing a worsening shortage since May when Ukraine intensified its attacks on oil refineries to undermine Russia's military efforts. Local Russian authorities said on Saturday that an 'Ukrainian drone attack' sparked the fire at a refinery located more than 2,000 kilometers (1,200 miles), from Ukraine. Sources said that following the attack, a diesel hydrotreater as well as a unit for producing high-octane gas caught fire. The sources declined to give a timeframe for when the refinery could be back in operation. RI-Invest?which owns?the refinery?did not immediately respond?to a request for a comment. The refinery's nominal capacity is around?9 millions metric tons annually, or 180,000 barrels a day. According to estimates, it processes approximately 6 million?tons crude oil annually and produces?about 0.5million?tons gasoline and 2.8million tons diesel. (Reporting and Editing by Jan Harvey).
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The Fed's rate decision is in the spotlight as gold falls against a dollar that remains firm
Investors waited for the Federal Reserve to announce its policy decision at the end their two-day meeting in this week. They wanted insight into the direction U.S. rates will take. Spot gold dropped 0.8% at $4,042.29 an ounce as of 0843 GMT. U.S. gold contracts for August delivery fell 0.8%, to $4.042.80. "Gold has held to a very tight range since late June based on the support in $4,000 region, which suggests at some stage there will be a breakout," said Rhona Connell, StoneX's head of market research. Connell said: "Fundamentally the physical markets are still very quiet, while professionals are contorting over the interaction between interest rates, oil and the dollar. All of these are important drivers." The U.S. Dollar held at an all-time high on Tuesday, making bullion priced in greenbacks?expensive to buyers abroad. Donald Trump, the U.S. president, said on Monday that Washington is having "good discussions" with Iran, and that there was a possibility of a resolution to their conflict. He warned, however, that if the talks failed, strikes would be resumed. The oil prices fell on Tuesday and hovered around their one-week-low amid?hopes of a resolution to the U.S./Iran conflict. The Federal Reserve is expected to raise interest rates due to the rising energy prices. Gold is often seen as a hedge to inflation. However, due to its non-yielding nature, it loses some of its appeal when interest rates rise. Trump said on Monday that the U.S. must have the lowest interest rate in all of the world. According to the CME FedWatch Tool, market participants are preparing for tomorrow's?Fed decision on interest rate. About 34% of participants anticipate a 25 basis-point increase. Also, traders have priced in a 79% probability of an interest rate increase at the September meeting of the central bank. Silver spot fell by 1.4%, to $57.56 an ounce. Platinum dropped 0.8%, to $160776. Palladium was down 1.5%, to $1272.71. (Reporting by Sukanya Mitra in Bengaluru; Editing by Vijay Kishore)
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TotalEnergies and Eni approve Cyprus Gas Field for LNG startup in 2028
TotalEnergies announced on Tuesday that France's TotalEnergies, and Italy's Eni, have 'approved' the development of 'the Cronos gas field' in Cyprus, which will supply Europe with natural gas liquefied. Production is expected to begin in 2028. The two companies will share the 2.8 million tons of LNG expected to be produced by the field. After losing their access to Russian gas and oil in 2022, the European countries are now focusing on their own resources. Cronos is the name of a large?natural gas find in Block 6 in Cyprus' exclusive economic zones in the Mediterranean Sea. It was discovered by Eni and TotalEnergies in a joint venture. The project, estimated to contain more than 3 trillion cubic feet of gas, will pipe and process reserves at Eni's facilities in Egypt for export to Europe via the Damietta?terminal. Cronos, as Cyprus' first gas project, will help develop a regional gas hub in the Eastern Mediterranean by leveraging Egypt’s infrastructure, said TotalEnergies CEO Patrick Pouyanne. He added that "this new gas route will help Europe to be more secure in terms of its energy supply by diversifying the LNG sources." Reporting by Hugo Lhomedet, Gdansk; Francesca Landini, Milan; America Hernandez, Paris. Editing by Milla Nissi-Prussak, and Louise Heavens.
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Japan's Kyushu region is hit by a major earthquake
A quake with a preliminary magnitude of 7.1 hit Japan's southern Kumamoto Prefecture on Tuesday. It knocked out the power to thousands of homes, stopped rail services, and triggered warnings about tsunamis and aftershocks. The area where the quake occurred is home to many companies, including Sony, the world's biggest contract chipmaker. Sony's spokesperson confirmed that the company is?checking on the situation. TSMC didn't immediately respond to a?request for comment. The Japanese government has issued emergency earthquake alerts for Kumamoto and Nagasaki prefectures as well as Kagoshima and Fukuoka. These are all located on Japan's southern Kyushu Island. The Japan Meteorological Agency said that a tsunami warning was issued for a wave measuring 1 m (3.2 feet). Japan is one the most earthquake-prone nations in the world, with an earthquake occurring every five minutes. Japan, located along the "Ring of Fire", a series of volcanoes and oceanic trenches that partially surround the Pacific Basin region, is responsible for about 20% of all earthquakes of magnitude 6 or higher in the world. According to an official count, a massive earthquake that struck Kumamoto ten years ago killed 275 and injured 2,739 people. Kyushu Electric Power reported that 40,000 homes lost power due to the quake. JR Kyushu, a railway company, said it suspended all services including bullet trains. The nuclear regulating authority in Japan said that there were no irregularities at the nuclear power stations. (Reporting and writing by Anton Bridge, Kantaro Kommiya and Mariko Katsumura; editing by Chang-Ran and Kate Mayberry; Writing by John Geddie)
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Major Gulf bourses are in red as they await Fed decision and Iran talks
The major Gulf stock markets fell in early trading on Tuesday as investors awaited U.S. Federal Reserve policy decisions and developments in the Iran Conflict, although ongoing corporate earnings provided some support. The majority of Gulf?Cooperation Council nations,?including?UAE?, have their currencies pegged against the U.S. Dollar and closely follow the Fed?s policy, exposing them to the direct effect of monetary tightening on the world?s largest economy. The Fed ends its two-day session on Wednesday. CME FedWatch?shows that 62% of policymakers are likely to keep rates the same, and 38% are expecting a minimum 25-basis point increase. This is up from 16% one week ago. The markets are also pricing in an 81% probability of a rate increase at the meeting scheduled for September. Donald Trump urged the Fed on Monday to lower rates. He argued that the United States should have the lowest borrowing costs in the world. Saudi Arabia's benchmark stock index fell 0.4%. This was due to a 0.6% drop in the oil giant Saudi Aramco, and a 1.2% decline in Saudi Arabian Mining Co. Yemen's Iran aligned Houthi group said that it had attacked several crude oil transportation and supply facilities linking eastern Saudi Arabia with Yanbu, an important Red Sea oil export hub. Zain Saudi Arabia, however, saw its share price rise by 1.4% after it reported a profit increase of more than 60% in the second quarter. Dubai's main stock index fell?0.5% due to a 1.5% drop in the sharia compliant lender Dubai Islamic Bank. Alpha Dhabi Holding, a major Abu Dhabi-based company, lost 0.8%. Fertiglobe, a?fertilizer company, reported a sharp rise in its quarterly profit. The Qatari Index was down by 0.1%. Trump warned that the U.S. would resume strikes if negotiations fail. He said that Washington was having "good talks" and that a possible deal to end the conflict with Iran was in sight. Iran said it would retaliate if any more attacks were made. (Reporting and editing by Andrei Khalip in Bengaluru. Ateeq Sharif is based in Bengaluru.
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Copper prices fall as bets on rate hikes weigh down on demand
The copper price fell on Tuesday as investors assessed a possible pause in the 'U.S. Strikes?on Iran. By 0700 GMT, the benchmark three-month price of copper at the London Metal Exchange had fallen by 0.4% to $13,678 per metric tonne. The Shanghai Futures Exchange's most traded copper contract fell 0.13% to 104,810 Yuan ($15.487.03) per ton. The market awaits the outcome of the U.S. Federal Reserve's meeting on Wednesday and weighs the impact that a reduction in oil prices will have after the lull between U.S.-Iran fighting. Analysts from Chinese broker Galaxy Futures stated that "as tensions between the United States and Iran ease, crude oil prices have fallen. However, expectations of more Federal Reserve rate increases?have increased." According to CME FedWatch, 62% of market participants believe that the Fed will keep interest rates steady, and 38% expect a minimum 25 basis point increase. This is up from just 16% one week ago. Copper market fears that higher rates will dampen economic activity and reduce demand. Red metal has benefited from the expectation of increased demand for AI infrastructure, electric vehicles and electrification. Stock markets that are jittery also weigh. On Tuesday, chipmakers led Asian stocks?down? on concerns about funding requirements of the AI boom. Galaxy Futures analysts stated that "with the?market entering into a week of heavy earnings reporting, sentiment remains fairly cautious." Aluminum was up by 0.19% at the SHFE and down by 0.44% at the LME. Total stocks in LME registered warehouses On Monday, the lowest level since 1998 was reached. Other?LME Metals: Zinc lost 0.43%;?lead fell 0.16%; nickel dropped 0.71% and tin lost 1.56%. On the SHFE, zinc fell 0.3%, while lead was unchanged, nickel dropped 1.35%, and tin declined 1.33%. $1 = 6.7676 Chinese Yuan Renminbi (Reporting and editing by Varun H. K. and Mrigank. Dhaniwala).
VW factory danger stress-tests Germany's economic design
Having lost low-cost energy from Russia and facing unpredictability over its oncelucrative trade ties with China, big German organization is now dealing with a crunch point over a 3rd active ingredient in its long time formula for success consensual industrial relations.
Together, Germany's market leaders, trade unions and political leaders for decades looked for and found agreement over production and labour decisions that in turn provided the underpinning for the nation's post-war financial development.
Volkswagen's taboo-breaking threat to shutter German factories for the first time ever is a direct test of whether that agreement model can survive and still provide in a. international environment some see as existentially challenging.
De-industrialisation is happening in Germany, Volkswagen. works council head Daniela Cavallo stated today, demanding. services to make sure there will still be industrial tasks in. Germany in the future.
Manufacturing still represents 27% of total work in. Germany - below 32% from 20 years ago, International Labour. Organisation figures show, however still a far larger share than in. most innovative economies.
About 120,000 of the VW brand's 200,000-strong workforce is. in Germany.
The exact same consensual structures for labour relations that. over the years have purchased commercial peace and supplied job. security will now be put to work in negotiations in between. management and unions due to start next week.
Those talks occur as Volkswagen and other tradition. European cars and truck giants, including Stellantis and Renault, struggle. with high labour and energy costs as well as rising competitors. from lower-cost Asian competitors delivering more cars to the region.
The fact that worker agents have half the votes on. VW's supervisory board make it hard for the group to force. closures. Union leaders want a worked out option but. management say the scale of the difficulties indicates something has. to give.
If we continue like this, we will not be successful in the. improvement, Chief Financial Officer Arno Antlitz informed. workers at the carmaker's Wolfsburg head office.
It is our joint duty to improve the cost. effectiveness of the German websites.
IG Metall has said it could think about moving to a four-day. week as an alternative to closures - a move put in place in the. 1990s for over a decade as part of an earlier cost-cutting drive. that included smaller sized cuts in pay. Volkswagen has actually stayed. tight-lipped on whether this might work in today's environment.
TIME IS TIGHT
A different hair is what function the state need to have.
There is a lack of public investment to help establish. markets, said Olaf Lies, economy minister of Lower Saxony, where. Volkswagen's headquarters and most of the factories affected by. the end of the task security programme are based.
The state is likewise Volkswagen's second-biggest shareholder,. and holds 2 of the 20 seats on its supervisory board.
This is putting numerous companies, and for that reason Germany as a. place to do business, in a really tight spot, Lies told. Reuters.
This has actually not gotten away the notification of Chancellor Olaf Scholz's. coalition in Berlin. Anything to do with commercial production. which disappears will not come back, a source inside the. union told Reuters.
Both Economy Minister Robert Habeck and Finance Minister. Christian Lindner acknowledge Germany faces structural problems. as a service area, however they vary on what to do - even. down to what function electrical vehicles play in Germany's future.
While Habeck - from the ecologist Greens - said political leaders. need to offer state guarantees to support the transition to EVs,. Lindner - a pro-market Free Democrat - this week described the. fixation with EVs as an error and turned down federal government measures. to help the sector.
Scholz's unpopular coalition, whose component celebrations have. simply been damaged by the far-right in east German regional. votes, faces a basic election next year. The Volkswagen relocation. piles pressure on them to lastly set clear policy, some argue.
If such a commercial heavyweight really does need to. tighten its austerity programme and close plants, it is perhaps. an overdue wake-up call that the financial policy procedures taken. up until now need to be substantially increased, stated Carsten. Brzeski, global head of macro at ING.
Volkswagen is not alone. Thyssenkrupp, which for. decades avoided a significant restructuring at its steel department due. to stiff labour opposition, has actually also changed tack.
Its brand-new CEO Miguel Lopez has actually left from the strategy of. predecessors which kept relations with IG Metall steady to. demand a detailed revamp he says has been long overdue.
Similarly, chemical huge BASF CEO Markus Kamieth. said a series of plants have competitive problems. We must. for that reason also consider more plant closures.
In the meantime, however, even those who argue that German. organizations have been far too late to identify patterns in the international. economy and respond rapidly insist it is prematurely to call the. death of Deutschland AG and its industrial heavyweights.
We need forward-thinking ideas, stated Christiane Benner,. chair of IG Metall nationwide. VW has endured hard. scenarios before.
(source: Reuters)