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Stocks in Asia are hesitant, and a lot depends on the Fed's decision
Asian shares were near their four-year-highs on Monday, ahead of a week of action that will likely see the U.S. Federal Reserve resuming its easing cycle and possibly leaving the door open for a series cuts. Bank of Canada and Bank of England are also meeting this week and both are expected to keep rates the same. The EUROSTOXX futures are 0.3% higher. S&P 500 and Nasdaq Futures both rose by 0.1%. The markets are priced in for a 25 basis point Fed easing, bringing its funds rate down to 4.0-4.25%. Futures indicate a mere 4% chance that the Fed will ease by 50 basis points. The Fed's "dot-plot" projections of rates, and the guidance provided by Fed Chair Jerome Powell regarding the pace and extent of further easing will also be important. Investors will be disappointed if the futures market is anything but dovish. David Mericle is the chief U.S. economics at Goldman Sachs. We expect that the statement will acknowledge the softening of the labor market, but we do not expect any change in policy or an indication of a cut for October. On Sunday, U.S. president Donald Trump continued to attack the central bank by saying Powell is incompetent and harming the housing markets. The holiday in Japan led to thin trading in Asia Monday. The euro showed little reaction to Fitch downgrading France. The dollar was steady at $1.1732. It is still a long way off its recent high of $1.1780. The dollar fell 0.15% against the yen to 147.44 but was still within the range of 146.22-149.13 for the last month. The euro is supported by the steady outlook of EU rates. Last week, the European Central Bank said it was "in a good place" with its policy. This week, a number of ECB officials will be speaking. This includes President Christine Lagarde. CHINA DATA MISSES While the Nikkei closed for the holidays, futures were at 44,520. This was just below the close cash of 44,768, after having increased more than 4% in the last week. MSCI's broadest Asia-Pacific share index outside Japan closed the last session flat. However, it had earlier reached a four-year-high. The South Korean stock market rose by 0.4%, reaching another record after the government dropped a plan to increase taxes on stocks. Investors redoubled their bets on Chinese technology shares in the wake of Sino-U.S. Trade Talks, and Chinese blue chips rose 0.5%. Hong Kong's Hang Seng Index also increased 0.2%. U.S. officials and Chinese officials held their first day of trade talks in Madrid, Spain on Sunday. They will continue the discussions on Monday. Trump said that he is still negotiating the divestiture date for Chinese short video app TikTok. The data released on Monday revealed that the Chinese economy has lost momentum in August. A number of indicators, from industrial production to retail sales, were below expectations. Home prices fell 0.3% more in August as well, continuing a downward trend which has been in place since early 2023. Lynn Song, ING’s Greater China chief economist, said: "Given that the economy has slowed down in recent months, there is a strong argument for additional short-term stimuli efforts." "We continue to see a high possibility for another 10bp rate cut and 50bp reserve-requirement-ratio cut in the coming weeks." Oil prices continued to rise on the commodities markets on Monday, as investors assessed the potential impact of Ukrainian drone strikes on Russian refineries which could disrupt the country's crude and fuel exports. Brent crude oil rose by 0.5%, to $67.33 per barrel. U.S. crude oil rose 0.5%, to $63 a barrel. Gold was unchanged at $3,644 per ounce. This is not far off from the all-time record high of $3.673.93 set last week. Due to the Japanese holiday, the cash Treasuries markets were closed. The yields on 10-year Treasuries were last at 4.07% after hitting a five-month high of 3.994% in the previous week.
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After the attack on Russian energy installations, oil gains continue
Oil prices continued to rise on Monday, as investors weighed the potential impact of Ukrainian drone strikes on Russian refineries which could disrupt Russia's crude and fuel exports. They also looked at U.S. fuel demand growth. Brent crude futures were up 36 cents or 0.5% to $67.35 per barrel at 0632 GMT, while U.S. West Texas intermediate crude was $63.05 per barrel, an increase of 36 cents or 0.6%. Both contracts gained more than 1% last week as Ukraine stepped up attacks on Russian oil infrastructure, including the largest oil exporting terminal Primorsk and the Kirishinefteorgsintez refinery, one of the two largest refineries in Russia. In a note referring to the attack in Primorsk, JPMorgan analysts headed by Natasha Kaneva stated that "the attack indicates a growing willingness" to disrupt international oil market, which could add upward pressure to oil prices. Primorsk is the largest port of western Russia and has a loading capacity of about 1,000,000 barrels per day. Surgutneftegaz operates the Kirishi refinery which processes 355,000 barrels per day (bpd) of Russian crude oil, equivalent to 6.4%. Tony Sycamore, IG markets analyst, said that despite concerns about oversupply and OPEC+'s plans to increase output, "if we are seeing a shift in strategic focus by Ukraine to Russian oil exporting facilities - this brings upside risks to our forecasts." Radiy Khabirov, the regional governor of Bashkortostan in Russia, said that despite Saturday's drone attack an oil company will continue to produce at its current levels. As U.S. president Donald Trump reiterated Sunday that he was willing to impose sanction on Russia, Europe must act in a manner commensurate to the United States. Investors will also be watching the U.S. and China trade talks that began in Madrid on Sunday, amid Washington's demand that its allies impose tariffs on imports of Chinese oil due to its purchase by China. The Federal Reserve will likely cut interest rates at its meeting on September 16-17. However, last week's softer data about job creation and inflation in the U.S. was a cause for concern. (Reporting and editing by Muralikumar Anantharaman, Christian Schmollinger and Florence Tan)
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China continues to build crude oil stocks despite processing gains: Russell
In August, China's excess crude grew to just under 1 million barrels a day (bpd), as imports and domestic production outpaced an increase in refinery processes. According to the National Bureau of Statistics, data released on Monday shows that China's refiners produced 14.94 million barrels per day in August, an increase of 7.6% compared to the same period last year. This is the second highest month of the past 17. The crude oil imports in August were 11,65 million bpd, and the domestic production rose by 2.4% compared to the same month of 2024. It now stands at 4.3 million. After subtracting the actual processing rate, this left a surplus of 1,01 million bpd, which is almost twice the 530,000 surplus in July. China does not reveal the volume of crude oil flowing in or out of its strategic and commercial stockspiles. However, an estimate can still be made by subtracting the amount processed from the total crude oil available from both imports and domestic production. The average crude oil surplus in China for the first eight month of the year was 990,000. This volume was built up mainly from March as crude imports, domestic production and refinery processing increased at a faster pace than each other. Not all this excess crude has likely been stored, as some is processed in plants that are not included in the official data. Even if you ignore the gaps in official data, there is no doubt that since March China has imported crude oil at a rate far greater than what it requires to meet its own domestic fuel needs. Why are Chinese refiners building up their inventories when it is widely expected that prices will continue to fall as OPEC+, the group of eight exporters, continues to reduce their voluntary output reductions? The answer to this question is partly that the anticipated move towards oversupply has only been recent. China's refiners were more likely to buy more crude than needed because the price trend was already moderating. Brent benchmark futures have trended downwards from a peak of $82.63 per barrel in January to a low $58.50 per barrel on May 5. Since then, the price of oil has briefly spiked above $80 per barrel in June during the conflict between Israel & Iran, before stabilizing at a level around $65. More to be stored? Market participants are wondering if prices at this level can continue to encourage China’s refiners add to their inventories. During the APPEC oil-and-gas events held in Singapore last week, the future of China's stocks was a hotly debated issue. There was consensus that Chinese refiners could add more crude oil to storage. However, there were disagreements over the likelihood of this happening. China's refiners are usually concerned with price. It appears that their views are changing and they now believe that the prices should be closer to $50-$60 per barrel, rather than the current range of $60-$70. It's worth mentioning that China still buys significant quantities from three countries currently subject to Western sanctions. These are Russia, Iran, and Venezuela. According to Kpler commodity analysts, the number of imports from Venezuela in August was 561,000 bpd, making it the highest month since 2013. Kpler has tracked imports at 755,000 bpd, and is expecting this to continue in September. Kpler reports that imports from Iran increased to 1.02 million barrels per day (bpd) in August from 737,000 in July. Kpler expects a rebound in September to 1,13 million bpd. China's crude oil stockpiling is a major factor in the oil market this year. It is expected to continue being so, given how opaquely it is done. It is reasonable to expect that China will continue to buy more oil than needed if prices fall amid increased supply. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. ROI provides data-driven, thought-provoking analysis on everything from soybeans to swap rates. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X. These are the views of a columnist, who is also an author.
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This week, it's all central banks in MORNING BID Europe
Gregor Stuart Hunter gives us a look at what the future holds for European and global markets. You wait for central bank meetings to happen, but then they all come at once. Last week, the ECB was in charge. This week, however, we will see the U.S. Federal Reserve and the Bank of England, as well as the Bank of Japan, make decisions on interest rates. The Fed's latest policy meeting is held with an historic challenge to the Fed's leadership still pending in courts, and a rush to confirm the nominee of President Donald Trump to fill a vacant seat on the Board of Governors. This should resolve questions about the central bank's autonomy that have been bubbling throughout the summer. According to CME Group’s FedWatch tool, markets are pricing in a 25 basis-point cut on Wednesday but have lowered expectations of a 50-basis point reduction to only 3.8%. Stocks in Asia started the week with a 0.1% rise, despite the Japanese markets being closed. South Korea's Kospi index also hit a record, as the government dropped plans to raise taxes on capital gains. Early European trades saw the pan-regional futures up 0.11%. German DAX Futures were flat and FTSE Futures fell 0.1%. OAT futures continued to decline for a second consecutive day following Fitch's downgrade of France's credit ratings on Friday. The S&P 500 eminis U.S. Stock Futures are up 0.1% before Friday's Triple Witching Event, which will see the expiration of single-stock and equity index futures, as well options. The U.S. is preparing to announce an agreement on civil nuclear energy and technology during U.S. president Donald Trump's second unprecedented state visit to Britain this week. Meanwhile, the UK hopes that steel tariffs will be finalised under a much-vaunted international trade deal. Other trade news: U.S. officials and Chinese officials will continue their talks on Monday after concluding a first-day of discussions in Madrid. Trump said that he is still negotiating the divestiture date for the Chinese short-video application TikTok. A source told the U.S. was expected to extend the deadline of September 17 for China's ByteDance, to divest their U.S. Assets. The Chinese economy lost momentum in August as a number of indicators were below expectations. The industrial output of China grew at a slower pace than the 5.7% growth rate in the previous month. Retail sales also grew only 3.4% compared to a year earlier. There were also signs in China that the hot Labubu bubble was about to burst. Hong Kong shares of plushie maker Pop Mart fell as much as 9 percent after J.P. Morgan reduced the rating to neutral. The company said the stock was priced for perfection and susceptible to setbacks. Wall Street analysts expressed their disappointment at the lack of visibility of the next version of the brand. This includes the release date for new interactive toys or animations. Pop Mart, give the people what they desire! Market developments on Monday that may have a significant impact Economic Data Eurozone trade balance for July Euro zone reserves for August Debt auctions: France: four-month, five-month, six-month and one year government debt auctions Germany: 1-year government debt auction
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China's crude steel production falls for the third consecutive month due to clean-air restrictions and slow demand
China's crude output of steel in August fell for the third consecutive month, as steelmakers in northern China curtailed operations in order to clean up the air in preparation for an early September military parade in Beijing and due to a seasonal drop in demand. Data from the National Bureau of Statistics revealed on Monday that the world's biggest producer produced 77.37 millions metric tons of raw steel in August - the lowest level since December. The volume in August was 2.9% less than the previous month, when it had been 79.66 millions tons. Calculations based on data show that the average daily production in August was 2,57 million tonnes, down from 2,57 million tons in June. The top steelmaking hub in China, Tangshan (east of Beijing), was required to limit operations in order to maintain good air quality in time for the military parade that will take place in the capital, on the 3rd of September, to commemorate World War II's end. Data from the consultancy Mysteel revealed that hot metal production had fallen to its lowest level in over a month by late August. Steel production for the first eight-month period of this year totaled 671.81 millions tons, which is a decrease of 2.8% on an annual basis.
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China's property sector is struggling, and iron ore prices are falling.
Iron ore futures prices fell in the early trading on Monday due to persistent weakness in China's top consumer, its property sector. Steel benchmarks and steelmaking components, however, posted gains. As of 0215 GMT, the most traded January iron ore contract at China's Dalian Commodity Exchange was down 0.5% to 794.5 Yuan ($111.54). The benchmark iron ore for September on the Singapore Exchange fell by 0.38% to $105.3 per ton. China's new house prices dropped by 0.3% from the previous month in August. This continues a downward trend which began in May 2023, and highlights ongoing weakness on the housing market. In China, however, the number of new bank loans rebounded after an unexpected decline in July. However, the recovery was less than expected as the government's efforts to reduce industrial overcapacity and the property slump continued to dampen demand for credit. China's crude-steel output fell 0.7% on an annual basis, and output in the first eight month of this year was 2.8% lower than the same period last. Analysts from ANZ said that iron ore futures still posted a third weekly gain in a row last week. This was due to renewed activity at steel mills in China following the end of environmental production restrictions relating to a military display. According to Chinese consultancy Mysteel, the domestic demand for construction steel will recover in September due to better weather conditions and improved financial health in certain non-real estate industries. Coking coal and coke, which are used to make steel, also increased in price, by 2.77% and a 3.07% respectively. Broker Hexun Futures stated in a report that coke and steel firms are increasing the restocking coking coal as Chinese National Day approaches. All steel benchmarks at the Shanghai Futures Exchange gained ground. Rebar increased by 0.26%. Hot-rolled coils rose by 0.21%. Wire rod gained 0.18%. Stainless steel grew 0.81%.
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Base metals are ranging with the focus on Sino-US Trade Talks and Fed rate movements
The price of base metals in Shanghai, London and New York was largely unchanged on Monday due to renewed concerns about trade tensions between two of the largest economies in the world. This offset optimism over a rate cut by the U.S. Federal Reserve. U.S. officials and Chinese officials are set to begin a second round of negotiations on Monday, after concluding their first day of discussions in Madrid on Sunday. The talks were aimed at repairing the strained ties between them. Washington has demanded that its allies impose tariffs on Chinese imports over their purchases of Russian crude oil. Meanwhile, Beijing launched an anti-discrimination probe into U.S. policy on trade over chips, and a separate inquiry into dumping. By 0247 GMT the SHFE copper edged up 0.09%. Nickel added 0.19%. Lead advanced 0.95%. Aluminium fell 0.17%. Zinc slipped 0.09%. Tin shed 0.43%. LME copper grew 0.05%. Aluminium grew 0.06%. Nickel fell 0.33%. Lead dropped 0.32%. Tin declined 0.69%. Zinc dipped by 0.05%. A series of disappointing data from China, the world's largest consumer, also weighed on sentiment. Analysts use the outstanding total social financing (TSF) as a measure of credit and liquidity in the economy. It is used to gauge industrial metals demand. In August, it rose by 8.8% compared to July's pace of 9.0%. China's new house prices dropped 0.3% from the previous months in August, showing that the housing sector continues to be a drag on the economy. Investors also focused on this week's U.S. Federal Reserve Meeting, where policymakers were expected to announce an interest rate cut after consecutive weak labor reports. Dollar-priced goods are cheaper for foreign buyers when the dollar is weaker. Click here to see the latest news in metals.
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Gold prices fall as dollar strengthens ahead of Fed rate decision
Gold prices fell on Monday due to profit-taking, a rise in the dollar and investors' anticipation of a U.S. Federal Reserve Meeting, where rate cuts are expected after a string of poor labour market reports. As of 0152 GMT, spot gold was down by 0.2%, at $3,633.86 an ounce. Bullion rose about 1.6% in the last week and reached a record-high of $3,673.95 per ounce on Tuesday. U.S. Gold Futures for December Delivery fell by 0.4% to $3671.30. "Gold looked overbought from a technical perspective, which led to some profit-taking at the start of this week." "The dollar's resilience is also a factor that works against gold," said Tim Waterer, Chief Market Analyst at KCM Trade. The U.S. Dollar Index edged up 0.1%, making greenback priced bullion costlier for overseas buyers. The relative strength index of gold is currently at 75. This suggests that the metal has been overbought. The RSI, a momentum indicator, ranges between 0 and 100. Readings above 70 indicate 'overbought conditions', which means the asset is likely overpriced, or due for a correction. Waterer stated that "a period of consolidation for gold is possible, and any pullbacks to support at $3.500 would attract buyers as long as the Fed maintains its dovish stance." Inflation data released last Thursday came in slightly above expectations, but market believes this will not deter the Fed from a widely anticipated quarter-percentage-point rate cut on Wednesday. The Fed's meeting on policy this week is taking place amid challenges. These include a legal dispute about its leadership, and the efforts to confirm Donald Trump's nominee for the Board of Governors. Goldman Sachs wrote in a Friday note that while the risks of our forecast for $4,000/toz by mid-2026 are skewed upwards, the increasing speculative duration increases the risk of a tactical pullback, since positioning tends towards mean-reversion. In the week ending September 9, speculators reduced their gold net long position by 2,445 contracts, to 166 417. Other metals, such as spot silver, were unchanged at $42.14 an ounce. Platinum rose 0.5% to 1,397.76, while palladium fell 0.9% to $1187.06.
BHP ignores big acquisitions, but cites organic growth in copper and US interest
BHP, the world's largest mining company, highlighted its solid copper potential on Monday and called out the United States as an attractive investment. However, executives did not mention the possibility of a major buyout when they briefed their shareholders.
The CEO Mike Henry, and the Chief Financial Officer Vandita Pant took a few questions from investors in their first opportunity since the blockbuster merger of Anglo American with Teck Resources last week.
The answers focused on the growth potential of BHP's Argentinian assets, investment attraction in the United States, and production delays for BHP's Jansen Potash Project in Canada.
Uncertainty remained as to whether all shareholder questions were answered. BHP didn't immediately respond to a question about how it selected the questions to be answered.
Henry stated that "the copper growth story of BHP is a big story." We have made such progress...We have four large copper growth basins, on top of 28% growth in copper that we've seen over the past few years.
These basins include Vicuna, a joint venture 50-50 with Lundin Mining of Argentina and the U.S. Resolution's tie-ups with Rio Tinto and Escondida, in Chile, as well as BHP's South Australian Copper operations.
Henry avoided the question of whether he was interested in purchasing NGEX Minerals, a Toronto-listed company that is active in Argentina’s Vicuna District. NGEX declined to comment on a request made outside of office hours.
The issue of large-scale mergers and purchases was not addressed. Ango-Teck's $53 billion tie-up, announced last week, is expected to spark more M&A activity. This will be a breakthrough in years of failed consolidation attempts in the mining industry.
The deal was announced just over a month after BHP canceled a $49 billion bid for Anglo, which would have in one acquisition increased the Australian miner’s copper holdings. Copper is seen as essential in the energy transition.
Last week, investors and banks said that they didn't expect BHP would gatecrash the deal because it was focusing on growing its copper assets at a time when leadership is changing.
Henry said that the United States with its half-priced power costs was focusing on attracting mining investment as Australia reviewed productivity.
He acknowledged that BHP’s internal rate of returns from its Jansen investments would be under pressure as it increased capital expenditure estimates in the summer and delayed first production. (Reporting and editing by Clarence Fernandez; Melanie Burton)
(source: Reuters)