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Dollar eases with Trump's Fed Battle, US Treasury Yields
The dollar and short-dated U.S. Treasury rates fell on Tuesday. President Donald Trump's decision to fire a Federal Reserve Governor raised concerns about the independence of the U.S. Central Bank. Wall Street stocks also edged up. Trump announced on Monday that he had fired Fed Governor Lisa Cook due to allegations of improper mortgage borrowing. Cook stated that Trump does not have the authority to fire Lisa Cook and she will not resign. Her term was set to expire in 2038. Trump's unprecedented move could result in a long-lasting legal battle, which risks setting new norms regarding the independence of the central bank and presidents' involvement in monetary policies. Cook's departure from the Fed may accelerate Trump's attempts to reshape Federal Open Market Committee (FOMC), which sets interest rates policy. Trump has pushed the Fed to reduce rates in order to stimulate growth and lower borrowing costs. The expectation of a more dovish Fed pushed yields on shorter-dated U.S. debt lower. A Fed that is politically motivated to keep rates lower than normal could cause inflation fears and decrease foreign demand on the basis of credibility concerns. These factors will affect longer-dated bonds. "President Trump has launched a potentially ineffective and risky battle against the Fed. Brian Jacobsen wrote that it would take seven FOMC members to vote in favor of Trump, and not two or four. Trump has repeatedly threatened to fire Fed Chair Jerome Powell. This month, he fired an official at the Labor Department after accusing her without evidence of manipulating job data which had disappointed him. Trump has now backed off from this threat, as Powell's term is about to expire in May next year. Inflation Report On Cook News, the dollar dropped against major currencies. A global stock index fell as European shares declined, with losses in France leading the way, as political unrest in France increased. France's CAC40 fell by 1.7%, as it became more likely that the country's minor government would be overthrown next month. Investors are awaiting Nvidia’s results, which will be released on Wednesday, and the key inflation report due later this week. The market is very focused on the inflation rate, consumer spending, and corporate earnings. Oliver Pursche is senior vice president at Wealthspire Advisors, a firm in Westport, Connecticut. He said that despite the pun, this trumps all. The Dow Jones Industrial Average rose by 3.22 points at 45,285.69. The S&P 500 gained 5.71 points or 0.09% to 6,445.03 while the Nasdaq Composite gained 30.17 points or 0.14% to 21,479.47. The MSCI index of global stocks fell by 2.37 points or 0.25 percent to 950.59. The pan-European STOXX 600 Index ended 0.83% down. The dollar index (which measures the greenback in relation to a basket of currencies, including the yen, the euro and others) fell by 0.29%, while the euro rose by 0.27%, reaching $1.1649. The dollar fell 0.31% against the Japanese yen to 147.31. The 2-year note US2YT=RR The yield moves along with the expectations of interest rates. The yield was down by 4.3 basis points, to 3.687% from 3.73% at the end of Monday. The yield on the benchmark 10-year U.S. note fell by 1.7 basis points, to 4.258%. Investors eagerly await the U.S. consumer prices reading on Friday, which is considered to be the preferred inflation indicator by Fed. Morgan Stanley became the latest brokerage on Tuesday to predict a U.S. rate cut for September. This follows other global firms who had forecasted a policy-easing in September in Powell's speech from last week. Gold prices rose, but oil prices dropped more than 2%. U.S. crude dropped 2.31% to a price of $63.29 per barrel. Brent, however, fell to $67.23 a barrel - a 2.28% drop on the day. Gold spot rose by 0.57%, to $3385.53 per ounce.
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Minister: Canada and its allies will explore financing critical mineral projects
Tim Hodgson, Minister of Energy and Natural Resources, said on Tuesday that Canada works with its allies in order to fund important mineral transactions. This is similar to the U.S. Government's work with MP Materials, which was done to diversify China's supply chain. Hodgson stated that the main target would be minerals under China's export restrictions, which are affecting production in G7 and NATO nations. Hodgson: "I believe you'll be seeing us look at similar types transactions, working with allies." The MP Materials deal differs in that the entire output is sent to the United States. He said that we are interested in these types of deals as a partnership with our partners to share the production with our allies. MP Materials announced on July 10, that it has entered into a partnership with the U.S. Department of Defense in order to develop a domestic supply chain for rare earth magnets and reduce its dependence on foreign sources. (Reporting and writing by Riham Alkousaa, in Berlin; editing by Leslie Adler).
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Stellantis has paid US fuel efficiency penalties of $190.6 Million this year.
According to a report by the Italian-American automaker and the government, Chrysler's parent Stellantis was fined $190.6 Million for failing to meet U.S. fuel efficiency requirements. In an annual report, the National Highway Traffic Safety Administration stated that Stellantis had paid $112.3 in June and $78,3 in March as payments for shortfalls in 2019 and 2020 models. Stellantis paid a total of $773.5 Million since 2018. NHTSA informed automakers last month that they would not be fined for failing to meet fuel-efficiency rules going back to 2022, as per a law signed into law by President Donald Trump. Stellantis confirmed Tuesday the figures but declined to comment further. Trump's budget and tax bill eliminates penalties for failing to meet Corporate Average Fuel Efficiency rules set out in a 1975 law on energy. Rivian stated in a filing in court this month that the NHTSA had not processed any end-of-year or compliance notifications for 2022 and later model years, so it could not finalize transactions previously negotiated worth $100 million of credit revenue. Washington has made a number of changes to ease the process for automakers in building gasoline-powered cars. GM has already paid $128.2 Million in penalties to date for 2016. Tesla reported that it earned $2.8 billion last year from the regulatory credits it receives for selling zero-emission EVs, and sold to other automakers who are trying to meet vehicle emission targets. NHTSA declared in June that the former administration of Joe Biden exceeded its authority when it assumed a high uptake for electric vehicles to calculate rules. Under Biden's administration in 2023, NHTSA projected that its fuel efficiency proposal would cost the automotive industry $14 billion through fines. This includes $6.5 billion to GM, Stellantis and Ford, as well as $3 billion to Stellantis. The agency stated that the final rule adopted in 2013 eased the requirements, and that the industry will not face fines exceeding $1.83 billion through 2031.
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Critical Metals signs an agreement to supply rare Earth to a US Government-funded facility
Critical Metals announced on Tuesday that it had signed a 10-year contract to supply heavy rare-earth concentrate to Ucore Rare Metal’s U.S. Government-funded Louisiana processing plant. The Tanbreez Project, a Greenland-based mining project in the development stage, is expected to produce up to 10,000 tons of concentrate per year. This represents 10% of initial production projections. The U.S. is looking to increase domestic production of essential minerals in order to counter China's near total control over the sector. Ucore Louisiana's facility received $18.4 Million from the U.S. Defense Department to begin construction on phase one of four. The company expects to reach a capacity of 7,500 tonnes per year (tpa), in 2028. Rare earths is a grouping of 17 metals which are used to produce magnets, which turn energy into motion. China halted its exports to the United States in March, as part of the trade dispute with Trump. The tensions began to ease in June. Critical Metals received a letter in June of interest from the U.S. Export-Import Bank for a loan up to $120,000,000 to fund the Tanbreez Mine. This was the first investment by the Trump Administration in a mining venture overseas. Once fully operational, the Tanbreez project will cost approximately $290 million and produce 85,000 tons of rare earths and two minor metals per year. (Reporting and editing by Leroy Leo in Bengaluru, Pooja Menon from Bengaluru)
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Coffee prices are rising due to tariffs, climate changes and a smaller Brazil crop, according to the ICO.
The executive director of the International Coffee Organization, (ICO), said on Tuesday that tariffs imposed by United States, climate changes, and a smaller Brazilian crop are all driving up coffee prices. Vanusia nogueira, speaking at an event organized by the National Federation of Colombia Coffee Growers, said that despite the trend of rising prices, the market is still volatile. Nogueira stated that the global coffee supply has been in shortfall for several years due to production deficits caused mainly by adverse weather conditions in key growing areas. Brazil, which is the world's biggest coffee producer, has been hit by weather-related problems, such as frost. This has reduced the harvest size and bean weight. Nogueira said, "We do not know when Brazil's crop will return to normal. We experience very strong weather events each year." Experts say that tariffs of 10% to 50%, imposed by U.S. president Donald Trump, on coffee imports from countries producing the product have created uncertainty in the market. Nogueira said that despite the rising price, demand is still growing. "Consumers will pay." "Consumers want coffee," added she. (Reporting and writing by Luis Jaime Acosta, Writing by Natalia Siniawski, Editing by Gabriel Araujo).
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Enea Q2 profits slump on weaker mining and generation
Enea, the state-controlled utility in Poland, reported on Wednesday a 31% drop in net profit for the second quarter of last year. This was due to a weaker performance in mining and conventional power generation. Why it's Important Enea, Poland’s third largest power utility in terms of market value, has to contend with the government’s withdrawal from previous coal spin-off schemes. This is despite the uncertainty of capacity payment rules beyond 2028. It highlights a wider industry challenge in managing coal operations and pursuing financial stability at a time when renewables are gaining momentum. CONTEXT According to Forum Energii, a think tank for energy policy, Poland will reduce its reliance upon coal. Coal is expected to account for 57.1% (or about 1.2 billion kWh) of electricity production in Poland by 2024. In May, the utility announced that it would reintroduce its dividend payouts. It will distribute 30% to 60% its annual net profits to shareholders once its financial condition permits. BY THE NUMBERS Enea’s preliminary second-quarter profit reached 874 millions zlotys. This was higher than the 611 millions zlotys predicted by analysts. Analysts polled by predicted 1.27 billion zlotys. EBITDA came in at 1,45 billion zlotys. What's next? The utility will release its second-quarter full results on September 8, 2018. (Reporting and editing by Matt Scuffham; Marta Maciag, Rafal Nowak)
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Dollar falls, longer-dated US Treasuries increase as Trump's Fed battle fuels concerns
The dollar and longer-dated U.S. Treasury rates fell on Tuesday, as President Donald Trump’s decision to fire a Federal Reserve Governor fueled fears about the Fed’s independence. Wall Street stocks were relatively unchanged. Trump announced on Monday that he had fired Fed Governor Lisa Cook due to allegations of improper mortgage borrowing. Cook stated that Trump does not have the authority to dismiss her as a central banker and that she will not resign. Her term was set to expire in 2038. Trump's unprecedented move could result in a long-lasting legal battle, which risks setting new norms regarding the independence of a central bank and presidents' involvement in monetary policies. Cook's departure from the Fed may accelerate the president's plan to reshape the Federal Open Market Committee, which sets interest rates. Trump has been pressing the Fed to lower interest rates in order to boost economic growth. The expectation of a more dovish Fed pushed yields on shorter-dated bonds lower. A Fed with a political influence that maintains rates lower than would otherwise be the case could raise concerns about rising inflation, and decrease foreign demand for debt due to credibility fears. These factors will affect longer-dated bonds. "President Trump has launched a potentially ineffective and risky battle against the Fed." In order to get a majority on the FOMC to follow Trump's line, it would require seven votes, not two or four," Brian Jacobsen wrote in an email. Trump has repeatedly threatened to fire Fed Chair Jerome Powell. This month, he fired an official at the Labor Department after accusing her without evidence of manipulating job data which had disappointed him. Trump has now backed off from this threat, as Powell's term is about to expire in May next year. Inflation Report Cook News reported that the dollar was down against major currencies, and that a global index of stocks had fallen, with losses in Europe led by France, as political unrest in the country increased. France's CAC40.FCHI dropped 1.5%, as it became more likely that the country's minor government would be overthrown next month. Investors waited for Nvidia to release its NVDA.O earnings on Wednesday, and a major inflation report due later this week. The market is focusing on the inflation rate, the labor force, consumer spending, and corporate earnings. Oliver Pursche is senior vice president at Wealthspire Advisors, a firm in Westport, Connecticut. He said that despite the pun, this "trumps all" The Dow Jones Industrial Average dropped 49.02 points or 0.11% to 45,233.45. The S&P 500 increased 1.25 points or 0.02% to 6,440.45. And the Nasdaq Composite rose by 37.51 points or 0.18% to 21,486.80. The MSCI index of global stocks fell by 2.49 points or 0.26% to 950.47. The pan-European STOXX 600 fell by 0.69%. The dollar index (which measures the greenback in relation to a basket of currencies, including the yen, the euro and others) fell by 0.3%, while the euro rose by 0.34%, reaching $1.1657. The dollar fell 0.14% against the Japanese yen to 147.54. The yield on the 2-year US2YT=RR note moves along with expectations of interest rates. The yield was down by 2.4 basis points for the day, to 3.706%. The yield on the benchmark U.S. 10 year notes US10YT=RR increased 1.2 basis points, to 4.287%. Investors eagerly await the U.S. consumer prices reading on Friday, which is considered to be the preferred inflation indicator by Fed. Gold prices rose, but oil prices fell. U.S. crude dropped 1.13% to $64.07 per barrel. Brent was down to $68.08 a barrel, a drop of 1.05% for the day. Gold spot rose by 0.34%, to $3377.61 per ounce.
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Commerce chief: US could look to buy a piece of US defense companies
Howard Lutnick, U.S. Secretary of Commerce, defended on Tuesday President Donald Trump's call for the federal government take stakes in U.S. businesses it does business with. He said it could expand into the defense sector. Lutnick, citing Pentagon officials, told CNBC that "They are thinking about it." There's much discussion to be done about how we finance our munitions purchases. "There is a monstrous debate about defense. Lockheed Martin gets 97% of its revenue from the U.S. Government. "They are essentially an arm of the U.S. Government," he said. Trump announced on Monday that he wanted to increase U.S. government investment in healthy American businesses, even though critics warned such a government role could limit corporate strategies and market agility. Questions were also raised regarding the impact of this policy on consumers. Last week, the Trump administration announced that it had acquired a nearly 10% stake in Intel. The Trump administration intervened in June to ensure that Nippon Steel, a Japanese company, completed the purchase of U.S. Steel. Washington received what Trump called a “golden share” which gave it control over its operations. It also bought a stake in the rare earths company MP Materials and negotiated a deal for chipmakers Nvidia, AMD and Intel to receive 15% of sales revenue of previously prohibited chips to China. "If a business comes to the United States of America and says, 'We need your help. We want to change everything... He told CNBC that it was up to the US president and CEO to decide whether they would listen and change the rules. (Reporting and editing by Bernadettebaum and Andrea Ricci; Reporting by Susan Heavey)
Gold gained after Trump's attempt to fire Fed Governor Cook
The gold price rose on Tuesday as investors sought safe havens after President Donald Trump fired a Fed Governor.
At 1018 am, spot gold rose 0.2% to $3372.05 per ounce. ET (14.18 GMT), after hitting its highest level since August 11, at $3,386.27.
U.S. Gold Futures for December Delivery were up by 0.1% to $3,420.40.
Overnight, you heard that Trump had fired one of the Fed Governors who was accused of mortgage fraud. Bob Haberkorn, RJO Futures' market strategist, said that it gave gold a boost because the Fed is driving gold at the moment.
U.S. president Donald Trump announced that he would fire Federal Reserve Governor Lisa Cook for alleged irregularities in obtaining mortgages, a move that is unprecedented and could test the limits of presidential authority over the independent monetary policies body if it were challenged in court.
Jerome Powell, Federal Reserve chair, signaled last week that a rate cut could be possible at the next meeting of the U.S. Central Bank. He said the risks on the job market had increased.
According to CME FedWatch, the markets are pricing in a probability of over 86% that the U.S. Central Bank will implement a quarter-point cut in rates in September.
Haberkorn said that gold would continue to rise if Powell hints at a dovish stance on rates during the next meeting, and if he moves forward with another rate cut this year.
The data revealed that U.S. durable goods orders for July showed a decrease of 2.8%. This was compared to a 4% decline expected and a drop of 9.4% in the month of June. Investors are now awaiting the U.S. GDP on Thursday, and the Personal Consumption Spending (PCE) data on Friday.
Gold that does not yield tends to be more appealing in an environment of low interest rates, and its appeal as a safe haven increases when there is economic uncertainty.
Spot silver dropped 0.2% to $38.49 per ounce.
Platinum increased by 0.2% to $1 345 05. Palladium increased 0.6% to $1.345.05 following its lowest price since July 9, earlier in the session. (Reporting by Sarah Qureshi in Bengaluru; editing by Sophie Walker)
(source: Reuters)