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Stocks rise on Fed rate-cut bets; gold is on a tear
The global stock market was on course for a weekly increase on Friday, as the expectation of rapid U.S. interest rate cuts led to a reduction in borrowing costs worldwide. This would be a relief for stressed bond markets, and drag on dollar. European shares fell 0.2% at the opening of trading, while Nasdaq futures and S&P500 futures dropped 0.1-0.2% after hitting new highs overnight. The MSCI All Country World Index remained on course for a weekly gain of 1.7%. Gold was also on course for its fourth consecutive weekly gain and traded at near-record levels as investor concerns over global economic uncertainty persist. Stock markets in Asia have made significant gains. Chinese stocks reached a three-and-a half year high due to expectations of AI related earnings growth. While the U.S. Consumer Price Report showed a rise in prices, the markets were still focused on the weak job numbers from the previous week. Amelie Derambure is a senior portfolio manager of Amundi. She said, "Even though we may have weaker job numbers, the markets really focus on the Fed's impact, which will give growth a boost in the future." Veronica Clark, a Citi economist, said that the bank continues to expect 125 basis point Fed rate cuts in the next five meetings. The futures market shows a 93% probability of a quarter point cut to 4.00%-4.25 next week and a 77% likelihood of a half point cut. The yield on the benchmark 10-year Treasury note rose by 3 basis points to 4,043%. It had fallen below 4% on Thursday for the first since April. ECB - "IN A GOOD PLACE" The dollar index, which measures the greenback versus six other currencies, edged up 0.2% to 97.757. The dollar rose 0.5% against the yen, to 147.89. This was after Japanese and U.S. Finance Ministers released a joint statement on Friday reaffirming their commitment not to target currency levels. The euro fell 0.1%, to $1.171725. It had received a modest boost on Thursday after the European Central Bank left rates unchanged and indicated that it was "in a good place" with its policy. Greg Fuzesi is an economist with JPMorgan. He said, "This indicates the Governing council is not inclined towards easing in the absence a significant growth shock." "We have therefore pushed back our call for the final rate cut to December from October." ECB sources said that the December meeting was the most realistic date to discuss whether another cut is needed to cushion the economy. The markets indicate that there is only a 1 in 6 chance of an easing in December. Britain's economy records Zero monthly growth In July, the data was in line with expectations, but showed a sharp decline in factory production, which weighed on sterling, which fell 0.3% to $1.3536. Gold prices rose 0.3% on the commodity markets to $3,644 per ounce. This is just a little bit below the previous record high of 3,673.95 set early in the week. The International Energy Agency forecast a record oil surplus for next year, as OPEC pumps more product. Brent crude was essentially flat at $66.38 per barrel. U.S. crude fell 0.1% to a price of $62.31 a barrel.
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Norway sovereign wealth fund excludes Eramet on ethical grounds
A spokesperson from Norges Bank Investment Management, the fund's operator said that Eramet, a French mining company, was excluded from its portfolio due to ethical reasons. According to data from the fund, as of 30 June, it held a stake in Eramet valued at $6.8 millions. Eramet didn't immediately respond to a comment request. The Council on Ethics of the fund, which is its ethics watchdog, recommended the divestment due to Eramet’s participation in Indonesia’s PT Weda Bay Nickel, where Eramet is the operator of mine. The Council on Ethics recommended that Eramet SA should be excluded. "There is an unacceptable risk the company may contribute to or be responsible for severe environmental damage, and serious violations of human rights by uncontacted indigenous people," it said in a press release. Separately, Indonesian authorities said that on Friday a special task force had seized hundreds of acres of land from the miner PT Weda Bay Nickel due to a lack of relevant forestry licenses. Indonesia has been cracking down against illegal mining in the country. Last week, President Prabowo said that over 1,000 such operations had already been identified. (Reporting and editing by Louise Rasmussen. Additional reporting by Guz Trmpiz, in Paris.
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EU Aluminium Producers Push for 30% Scrap Export Levy
The European Union’s aluminium industry is calling on the European Commission (EC) to impose a duty of about 30% on scrap metal exports to prevent it from flooding out of Europe and leaving local producers short. According to the industry group European Aluminium, EU aluminum scrap exports will reach a record 1,26 million metric tonnes in 2024. This is around 50% more than it was five years ago. The majority of these scraps are headed to Asia. According to the EU industry, since then, the situation has worsened because of President Donald Trump’s import tariffs. These were set at a 50% rate for aluminum but only a 15% rate for scrap. This has led to a rise in scrap imports from the United States, and a decrease in exports. Asian buyers are now more focused on EU supplies. Paul Voss, director general of European Aluminium, said that European companies are unable to compete with Asian buyers who can pay more due to lower standards in terms of labour and environment and subsidies. He said: "It is perfectly understandable for scrap traders to prefer selling to the highest bidder. But it is the role of the public policy to correct this kind of market failure in order to protect Europe’s strategic interests." European Aluminium and Eurofer (which represents the steel industry) have met with the Commission in order to press for the export tax. The EU executive started monitoring exports in early July, and will decide if any action is needed by the end third quarter. Recycling aluminium is 95% more energy efficient than mining bauxite to produce metal. European Aluminium reported that European companies invested 800 million euros (821 million dollars) to increase the recycling furnace's capacity to 12 millions tons. Several countries outside the EU limit exports of metal scrap. According to GMK Center, 48 countries, including India, China and South Korea, restrict the export of ferrous scrap. Steel sector says that it is important to keep scrap within Europe, but it also has immediate concerns. These include a new system of curbing finished steel imports which the Commission will announce soon. However, scrap dealers in Europe oppose export restrictions. The recycling industry group EuRIC has said that scrap exports are a result of low demand at home and an insufficient capacity for mixed scrap, such as scrap from shredded cars. Reporting by Philip Blenkinsop, Editing by Joe Bavier.
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Iron ore to gain for the third week in a row on better China demand and supply problems
Iron ore futures were in a range on Friday and expected to rise for the third week running, helped by an improving demand from China, the top consumer, and concerns about supply over Guinean projects. However, higher ore and metal inventories limited gains. The day-traded contract for January iron ore on China's Dalian Commodity Exchange closed 0.06% lower, at 799.5 Yuan ($112.29 per metric ton). The contract showed a weekly increase of 1.6%. As of 0810 GMT the benchmark October iron ore traded on Singapore Exchange had risen 0.54%, to $106.05 per ton. However, this is only a 0.54 percent increase from last week. After the end of the military parade on September 3, steelmakers began to resume production, which boosted iron ore prices. The average daily hot metal production, which is a measure of ore consumption, increased 5% from week to week, reaching a record high of 2,41 million tons on September 11th, according to data provided by consultancy Mysteel. Prices rose earlier this week as fears about the supply of oil from the Simandou project in Guinea grew after local reports that Rio Tinto wanted to build refineries locally. This could limit the amount of ore that can be exported. The sharp decline in shipments by Brazil, a major supplier in the first weeks of September, also helped boost bullish sentiment. Prices fell from their highs of Thursday due to the rising stocks of steel during the peak season for demand in September. According to Mysteel, this, along with an increase of 0.2% in iron ore portside inventories from week-to-week, limited the weekly price increases. Coking coal and coke both saw increases of 0.88% and 0.43 %, respectively. The benchmarks for steel on the Shanghai Futures Exchange have gained ground. Hot-rolled coils rose by 0.66%. Wire rods increased by 0.06%. Stainless steels climbed by 0.43%.
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South Sudan opposition claims government is trying to enforce the "one tribe rule"
South Sudan's Opposition has accused the Government of trying to enforce a "authoritarian Control and One-Tribe Rule" after First Vice president Riek Machar, who was suspended for orchestrating militia attacks, was charged. Machar's SPLM -IO party has rejected the charges brought against him, along with 20 other individuals. These included murder, treason, and crimes against humanity. They were accused of participating in raids in the northeast by the White Army militia. Machar’s house arrest under the order of March has sparked international concerns about a possible resurgence of the devastating civil war that raged between his Nuer ethnic forces and Dinka fighters loyal his long-time rival, President Salva Kiir. Kiir served as a member of the unity government that was formed to end that war. However, their relationship remained strained. The charges were fabricated in order to undermine the (peace accord), marginalize Dr. Machar, and the SPLM-IO and establish total government control," Machar’s SPLM-IO said late Thursday night shortly after the Justice Ministry announced the charges. Analysts say that Kiir is trying to replace Machar, his closest ally, with Second Vice President Benjamin Bol Mel. He was sanctioned in the U.S. because of suspicions he had received preferential treatment when securing contracts. Joseph Szlavik told the Washington Post last month that South Sudanese officials had asked for the lifting of these sanctions in recent bilateral talks. Szlavik stated that these conversations also included the possibility of sending more deportees from the United States to South Sudan, following the arrival last July of eight men - including seven from a third country. Nairobi Newsroom, Hereward Holland and William Maclean (Reporting)
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Bali flood waters recede after 16 deaths and two missing
Officials said that two people are still missing in Bali, Indonesia, a resort island. At least 16 people have been killed by flooding this week. Torrential Rains On Tuesday and Wednesday, the rapid rise of floods caused by the rains blocked major roads in Denpasar as well as six out of Bali's eight districts. Some areas also experienced landslides. I Nyoman Maha Putra, an architect and planning expert from the Warmadewa University, Denpasar, stated that the rapid development of the island had not taken into consideration the need for adequate drainage infrastructure. He said, "City planning does not take into account disasters." "All infrastructure construction is designed to make Bali more attractive for tourists and investors." Local media reported that Bali's Governor, Wayan Koster said, "Conversion of land use is not the cause for this week’s flooding in Denpasar." The Bali government's regional planning and development body did not respond immediately to a comment request. Bali's primary source of income is tourism. Last year, more than 6.3 millions international tourists arrived on the island. This was higher than the number of arrivals in 2019, the year prior to the COVID-19 pandemic that brought ground tourism to an end. Bali was the destination of choice for over 40% of Indonesian tourists last year. I Nyoman, head of Bali's search-and-rescue body, stated that the search for two missing persons was still continuing on Friday.
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Australian critical mineral companies head to Washington
Four sources familiar with the matter said that more than 20 Australian companies, including Trafigura's Nyrstar unit, will be heading to the U.S. to explore possible areas of collaboration next week. The Australian Trade and Investment Commission will lead a delegation to Washington and New York for meetings with senior officials of the Trump administration. The trip was described as routine by sources, but the companies are expected to arrive soon after the Australian Prime Minister Anthony Albanese spoke with President Donald Trump about the opportunities for the critical minerals companies of both countries in the last week. Albanese, the Australian ambassador to New York for the United Nations General Assembly later this month, has asked to meet with Trump. No meetings have yet been announced. Australia is trying to establish itself as a major supplier of Western allies, as they develop an alternative supply network to China. Meanwhile, the U.S. prepares to invest in its battery and defense industries. Reports last month indicated that the Trump Administration was considering reallocating at least $2 billion of the CHIPS Act funds, which support semiconductor research and chip plant construction, for critical minerals projects. Last month, Nyrstar won the support of the Australian government to evaluate whether it is possible to produce four essential minerals in two aging smelters. This includes antimony that is used for ammunition and whose exports from China are limited. Nyrstar will need additional funds to put this plan into motion. Some attendees were looking for funding opportunities. The meetings are described as an opportunity to understand the priorities of the Trump Administration, as well as meeting administration officials and building relationships. Other miners include Australia's leading lithium producer Pilbara Minerals, which supplies lithium primarily to China and South Korea. International Graphite, which has a graphite mining operation in Western Australia, is expanding its processing capabilities. Representatives from Pilbara Minerals International Graphite, and Cobalt Blue have confirmed that they will be attending next week. The delegation will be without Australia's Trade and Resources Minister Madeleine King. Requests for comments on the prospects of major announcements were not immediately responded to by the ministers' offices. Australia and the United States have a vital minerals partnership. Under legislation passed late in 2023, Australian deposits will qualify as domestic supplies for U.S. defense procurement. (Reporting and editing by Lincoln Feast; Melanie Burton).
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UBS increases gold price target to 3,800 oz by the end of 2025
UBS increased its gold price forecast on Friday by $300 per ounce to $3800 by the end 2025 and by $200 per ounce to $3900 by mid-2026. It cited anticipated Federal Reserve easing, U.S. Dollar weakness linked to rate reductions and geopolitical risk. The Swiss bank revised its estimate of gold exchange-traded funds (ETFs) holdings. It now projects levels to surpass 3,900 metric tonnes by the end 2025. This is close to the previous record set in October of 2020 of 3,915 metric tons. We maintain an attractive view on gold, and remain long the metal as part of our global asset allocation. UBS stated that a percentage of gold in the mid-single digits is optimal. Bank of America highlighted geopolitical issues and differences in policy between the U.S. Administration and the Federal Reserve, as well as U.S. president Donald Trump's preference for lower interest rates. UBS anticipates that central bank gold purchases will remain strong at around 900 to 950 tons in this year. This is slightly less than last year's record-breaking purchases just over 1,000 tons. UBS said that the Fed could be forced to increase rates if inflation surprises lead to higher interest rates. The price of non-yielding gold, which is often viewed as a safe haven during times of economic and political uncertainty, and also known to perform well when interest rates are low, reached a new record of $3,673.95 Tuesday, and has gained over 39% in the past year. (Reporting and editing by Jacqueline Wong, Rashmi aich and Anmol Choubey from Bengaluru)
The global trade situation is further complicated by the contradictory statements of US and China.
In an interview published Friday, U.S. president Donald Trump claimed that tariff negotiations with China were in progress, but Beijing denied there were any talks taking place. This is the latest in a string of contradictory signals about what progress has been made in de-escalating a trade conflict that threatens to sap global economic growth. Trump told TIME that talks were underway and that Chinese President Xi Jinping called him. He repeated this claim to reporters on his way out of the White House to Rome for the funeral service of Pope Francis.
China responded in a statement from its foreign ministry posted by the Chinese embassy in the U.S., "China and the U.S. have NOT been in consultation or negotiations on #tariffs." "The U.S. shouldn't be creating confusion."
Speaking to reporters on Air Force One, Trump said that it would be a great win for the United States if China opened its markets to U.S. goods and that tariffs might help make this happen.
"Free China. "Let's go into China and work it," he said. "That would be fantastic. It would be great, but I am not sure I will ask for it. They don't want the door open.
The back and forth added to the uncertainty over the current state of play regarding Trump's erratic policy. Not only in regards to China, but as it pertains the dozens countries scrambling for their own deals to relieve the burden of hefty import tax he unleashed after returning to the White House.
His team of negotiators conducted what was a lightning round trade talks with the foreign officials that had flooded Washington this week to attend the spring meetings for the International Monetary Fund (IMF) and World Bank Group.
While Trump officials, including Treasury Secretary Scott Bessent, touted signs of rapid progress, their counterparts, such as the finance chiefs from the IMF, were more circumspect. They were also urged to return home urgently in order to reduce the risk posed by the tariffs.
Paschal Donohoe, Irish Finance Minister, said: "I am walking away from these meeting with a clear understanding of what is at stake, and the risks there are for jobs, growth, and living standards around the world." The meetings here reminded me why we must leave no stone unturned over the next few months and weeks to find ways to reduce uncertainty.
DE-ESCALATION
There were some signs of de-escalation, even though it was unclear whether or not deals would be struck to prevent the imposition of higher tariffs in early July. China has exempted certain U.S. products from its high tariffs. Business groups claim that Beijing allowed U.S. pharmaceuticals to enter China without paying the 125% duty it imposed in response to Trump’s 145% tariffs.
A list of 131 categories of products that are allegedly being considered for exemptions is also circulating in some business and trade groups. The list includes chemicals, vaccines and jet engines. China has yet to make a public statement on the matter. Trump's administration also signaled in recent days that it was looking to defuse tensions with China. Bessent said both sides view the current situation as untenable. Trump also told reporters in the White House that an agreement with Japan was close. Analysts see this as a test case for other bilateral agreements, even though the talks may be difficult. Many expect Shigeru Shiba, the Prime Minister of Japan, and Donald Trump to announce an agreement when they meet in Canada at the G7 Summit in June.
Trump told TIME he made "200 deals", which he said would be finished in three to four weeks. He declined to give specifics. He said that if tariffs remained between 20% and 50% in a year, he would call it a victory.
Trump has claimed that his thickets of trade barriers would revive U.S. Manufacturing Industries that have been hollowed by global competition.
However, economists warn that this would increase prices for U.S. customers and the risk of recession. U.S. stock indexes are on track to gain a week, even though they have fallen by about 10% since Trump took office in January. They lag other countries' indexes, and the dollar is falling at an unprecedented pace. The dollar rose for the first time in over a month on Friday, while European and Asian shares were headed to a second consecutive week of gains. Investors took comfort from signs that the U.S. was willing to end its trade war with China. Wall Street's major indexes grew slightly as investors sought clarity on the U.S./China trade front.
Trump has imposed additional tariffs on autos, steel and aluminum in addition to country-specific duties. Trump has also proposed additional levies for the pharmaceutical and semiconductor industries. According to industry estimates, this could lead to a 12.9% increase in drug prices across the U.S.
The tariffs of Donald Trump dominated the IMF meetings in this week. Finance ministers vied for one-on-1 meetings with the U.S. Treasury secretary. Bessent described the initial talks with South Korea on Thursday as "very succesful." Seoul referred to it as a "good beginning." Next week, further discussions will take place. Switzerland said that it was also satisfied with the initial meeting between Bessent and Switzerland. The U.S. Trade Office said that it was "constantly engaging" with Japan and others, but Trump would decide whether or not they proceed. The IMF's Kristalina Gheorgieva warned that the lack of progress in other countries could lead to a serious slowdown of global growth. Reporting by Bureaus Worldwide; Writing by Andy Sullivan, Dan Burns and Editing by Chizu Nomiyama, Marguerita Choy
(source: Reuters)