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Russia announces changes to its budget aimed at decreasing oil revenue dependence
The Russian Finance Ministry announced on Thursday a new measure that it claimed was designed to shield the state budget against oil price fluctuations as well as Western sanctions targeted at Russian energy exports. The government is lowering the price cutoff for oil that oil revenues are deposited into the fiscal reserves fund. This will ensure the fund has enough money to replenish it. At a public meeting, Finance Minister Anton Siluanov stated that "to make our finances more robust, we propose a reduction of dependence on different constraints, whether they are price-related or volume related, in the budget’s reliance on revenues from oil and gas". Siluanov's new measure, which he sought to reinstate the budget rule, after it had been abandoned following the beginning of the conflict in Ukraine, is a victory. However, Russian media claimed that he wanted a larger reduction. The budget is more vulnerable to a drop in oil prices if the rule isn't in place. Siluanov stated that the price cutoff would be reduced by $1 per year, bringing it down to $55 a barrel in 2030. Currently, the cut-off price for barrels is $60. The draft budget will be presented to the parliament on 29 September. Currently, the fiscal reserve fund has approximately 4 trillion roubles (48.25 billion dollars) available. The government plans to use 447 billion roubles (5.39 billion dollars) of the fund to cover a part of the deficit expected to exceed 1.7% GDP. Siluanov stated that the new measures will allow the state budget to reduce the share of revenues from energy to around 22% in the first eight month of 2025, down from 25%. ($1 = 82,9000 roubles). (Reporting and editing by Andrew Osborn. Darya Corsunskaya.
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Dollar gains after Fed Chair's remarks as gold falls further from records
Gold fell further from its previous session record, as the dollar rose after the U.S. Federal Reserve took a more measured approach to future easing in response to a widely anticipated 25 basis point interest rate reduction. As of 0801 GMT, spot gold was down by 0.1% to $3,657.21 an ounce. Prices reached a record-high of $3,707,40 on Wednesday before falling 0.8%. U.S. Gold Futures for December Delivery fell 0.7% to $3691.0. The Fed cut rates by 25 basis point on Wednesday, and said it would continue to lower borrowing costs throughout the remainder of this year. Fed Chair Jerome Powell described the action as risk-management in response to a weakening labour market. He said that the Fed was in a situation where it is "meeting by meeting" in regards to interest rate outlook. Peter Fertig, an analyst at Quantitative Commodity Analysis, said that there was a "bit of disappointment" in the gold market, as the market had expected the Fed to reduce the opportunity costs for gold holdings (more than they did). Gold became more expensive for holders of other currencies due to the 0.2% increase in the dollar. On Wednesday, it fell to its lowest level in more than three-and-a half years. In a low-interest rate environment, non-yielding gold bullion is a good investment. It's a safe haven during times of geopolitical or economic uncertainty. According to CME Group’s FedWatch tool, traders are pricing in a 90 percent chance that the Fed will cut rates again by 25 bp at its next meeting in October. ANZ said that it expects gold will outperform the early stages of the easing cycle. The bank said that the demand for safe haven assets in a geopolitical environment of uncertainty is likely to increase investor demand. The SPDR Gold Trust is the largest gold-backed ETF in the world. Its holdings dropped 0.44% on Wednesday to 975.66 tons from 979.95 on Tuesday. The price of spot silver increased by 0.1%, to $41.70 an ounce. Platinum rose 2%, to $1,389.57, and palladium remained unchanged at $1,154.0/oz. (Reporting by Ishaan Arora in Bengaluru; Editing by Jan Harvey)
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Octopus Energy, UK spins off Kraken Technology arm
Octopus Energy announced on Thursday that it will spin off its technology arm Kraken Technologies and name Tim Wan the newly-separated company's Chief Financial Officer. Britain's largest electricity provider is focusing on its core business. Kraken, a company that provides energy software to major energy companies such as EDF, National Grid US, and Tokyo Gas has reached $500 million in annual revenue committed through licensing agreements. Separation will allow Kraken to expand and invest as required, while also reassuring Kraken's customers about potential conflicts of interests from being owned by another company. Kraken is a global success business that has been operating independently for a while. Completing our journey towards full independence is the next strategic and inevitable step, said Kraken CEO Amir Orad in a press release. Wan, the incoming CFO, was finance chief of the U.S. listed software platform Asana between 2017 and 2024. He oversaw the market listing. Octopus Energy has not provided specifics about Kraken's spin-off. Sky News A report from July stated that the technology group's value could reach up to 10 billion pounds ($13.63billion) if it were separated. The spin-off is expected to also boost Australian electricity and Gas retailer Origin Energy Octopus is owned by, who owns approximately 23%. Origin did not respond immediately to a comment request.
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Shanghai copper falls to a new low after Fed rate cut
Shanghai copper futures dropped to their lowest level in over a week Thursday, as traders booked profits after an anticipated 25-basis point interest rate reduction by the U.S. Federal Reserve and due to a higher supply from China's top consumer. The U.S. Central Bank also announced that additional rate cuts will be made in October and December. The red metal, used in construction and power generation, was affected by traders closing long positions in order to cash out profits on bets about the rate reduction. The Shanghai Futures Exchange's most traded copper contract fell below the psychologically important level of 80,000 Yuan ($11256.51) for a metric ton. It was down by 1.36%, to 79.620 yuan per ton. Early in the session, the contract reached its lowest level since September 10, at 79.500 yuan. The benchmark three-month copper price on the London Metal Exchange fell 0.43% to $9,953.5 per ton at 0815 GMT, after hitting its lowest level in a week at $9925 on Wednesday. "Prices are close to their moving average of 20 days and could fall to a previous support range between 79,000 yuan to 79,500 yuan," Xiao Jing said, lead analyst for broker SDIC Futures. The inventory data will be released on Friday. ANZ analysts also said that the higher metals production in China weighed down on sentiment in a recent note. China's refined output of copper in August increased 15% on an annual basis, reaching a near-record high level. Aluminium, nickel, tin, zinc, and lead all saw a decline of 0.91%. Nickel fell by 0.89%. Tin dropped by 1.46%. Zinc lost 1.1%. Other LME metals saw a decline of 0.26%. Nickel slipped 0.88%. Lead fell 0.1%. Tin dropped 0.63%. Zinc declined 0.73%. $1 = 7.1070 Chinese Yuan (Reporting and editing by Amy Lv, Lewis Jackson and Harikrishnan Nair).
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Australia's largest takeover deals have fallen apart
After months of disagreements over terms and valuation, a consortium led by Abu Dhabi National Oil Company withdrew on Wednesday its $18.7billion offer to purchase Australian gas producer Santos. The third failed bid by Santos in the last seven years highlights the difficulties in Australia in completing large transactions. Disagreements over valuations, shareholder approval thresholds, and regulatory risks have consistently derailed mega-deals. This is a list containing some of the largest failed mergers and purchases involving Australian companies in the last three years. ADNOC-SANTOS A consortium led Abu Dhabi's ADNOC has withdrawn its bid of $18,7 billion for Australia's Santos after commercial terms were not agreed. XRG (ADNOC's overseas division) pulled the offer, saying that "a number of factors when taken together have impacted the Consortium’s assessment of the Consortium’s indicative offer." Santos claimed that the consortium refused a fair risk sharing, which included taking responsibility for securing approvals from regulatory bodies and committing itself to gas supply and development in domestic markets. In June, the XRG consortium offered $5.76 per share. At that time, it was A$8.89. Santos' last price was A$6.74. BHP-ANGLO AMERICAN BHP Group of Australia, the largest mining company in the world, has withdrawn from its $49 billion offer to buy rival Anglo American by May 2024, after being rejected three times. Anglo's collapse was due to the structure of BHP’s deal. It required Anglo to separate its South African iron ore and platinum businesses. BHP's bid values Anglo shares at 29,34 pounds. Anglo American's last trading price was 25.18 pounds. WOODSIDE-SANTOS Early 2024, Australia's Woodside Energy (Australia) and its smaller rival Santos (Santos) ended their talks to form a global oil and natural gas giant worth up to A$80 billion. Sources claim that the talks failed because the two companies couldn't agree on the valuation level. BROOKFIELD ORIGIN ENERGY The joint bid of $10.6 billion by Canadian investment firm Brookfield and MidOcean Energy to take over Origin Energy in Australia failed in 2023 after only 69% shareholders voted for the deal. This was below the 75% threshold. Brookfield was offering A$9.53 per share. Origin's last price was A$12.41. ALBEMARLE LIONTOWN RESOURCES Albemarle, a U.S. miner, backed out of a buyout offer for Australian lithium developer Liontown Resources worth A$6.6 billion (4.39 billion dollars) in 2023 due to "growing complexity" surrounding the transaction. Albemarle offered A$3 per share. Liontown's last share price was 91 Australian cents. KKR RAMSAY HEALTHCARE After talks stalled, a group led by the private equity firm KKR & Co retracted a bid of nearly $13 billion for Australian hospital operator Ramsay Health Care. Ramsay claimed that the KKR Group had cited the weak performance of the company when deciding to not sweeten the offer. According to sources, KKR was unable to access the accounts of Ramsay Sante's European division to perform due diligence. KKR offered A$88 per share. Ramsay's last trade was at A$32.95.
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Under planned reforms, investors in Vietnam will be subject to strict police screening
A draft decree states that investors in Vietnam's energy, telecommunications and construction sectors will have to get police approval before they can proceed with their projects. This is part of a major reform designed to increase security and guarantee the "absolute authority" of the ruling Communist Party. The text of the proposed public security ministry proposal, which is subject to change, could increase the compliance costs for businesses in Southeast Asia while also significantly increasing the power of the security apparatus. The proposal, published on the website of the Ministry of Security, stated that "in socio-economic development security must be assured, without sacrificing the national interest for economic benefits." Other ministries are invited to comment until September 22, 2009. The prime minister could sign it into law if no major changes were requested. Vietnam, a country that is heavily dependent on exports and foreign investors, conducts only limited security checks for most development projects. The police are primarily consulting in this regard. If approved, it is not clear how widely the new rules will be implemented and whether they will only apply to future projects. In a separate explanation, the ministry stated that the new provisions are necessary in order to cope with an increasingly complex international environment dominated by strategic rivalry aimed at "increasing the spheres of influence of powerful countries," but did not specify which nations. The ministry didn't respond to a comment request. In a communist-run Vietnam, the police play an important role that goes beyond security. They have a significant influence on the legislation, and their interests in economics are growing. To Lam, the party leader and Vietnam’s most powerful man before he became the president, was the head of the security ministry. Separately the army is responsible for a variety of businesses including banks and Viettel, the country's largest telecom operator. The proposed reform would grant the security ministry the authority to evaluate development projects for critical infrastructures such as nuclear power plants and telecommunications and satellite services that involve foreign participation, ports, and oilfields on the basis of security. SpaceX and Amazon, two U.S.-based companies, plan to launch satellite communication services in Vietnam. POLICE TO VET GOLF PROJECTS According to the draft document, even less-critical operations, such as industrial parks and golf clubs, would require the approval of the Ministry. Vietnam Golf Association reports that the country plans to expand from its current nearly 100 golf courses. Donald Trump's family business is working with a local developer to build a large resort near Hanoi. The country also hosts large industrial operations of multinationals such as South Korea's Samsung Electronics and Japan's Honda, who are drawn to the low cost of labour but sometimes express concerns about slow project approvals. According to the proposal, the ministry will, with support from national and local police, determine whether or not security conditions, yet to be defined, are met before projects, including those that involve foreign investors, can proceed. Unnamed legal consultant in Vietnam, who spoke more freely because he did not want to be identified, said that the decree effectively gave the police the right to veto any project. He also noted that some companies expressed concern about the draft document as they feared it would increase compliance costs and cause delays. The other corporate, diplomatic, and legal representatives that we contacted about the draft rule declined to comment. Some refused to speak on the matter due to the sensitive nature or lack of clarity surrounding the proposed rule. The document states that the proposal will include a mechanism for the security ministry to oversee and inspect foreign aid and "to assess comprehensively the impact on security, social stability and safety of foreign-invested project, implemented in key localities and regions, where many workers and labourers live." In 2019, a similar decree was issued to ensure that defence priorities are taken into consideration for economic projects. However, it gave the Army less explicit powers and was limited in scope. Reporting by Francesco Guarascio, Khanh Vu and Shri Navaratnam.
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There are Fed Weeks where decades occur.
Gregor Stuart Hunter gives us a look at what the future holds for European and global markets. Vladimir Lenin said that just as there can be decades without any action, there can also be weeks in which decades are active. Central banking is also a busy area, but it's not as busy as the central bank. Markets are digesting U.S. Central Bank's actions, as the Federal Open Market Committee delivered a widely anticipated 25 basis point cut in rates on Wednesday. Only new Governor Stephen Miran disagreed with a 50 bps rate cut. Scorecards for those who want to know: the Bank of Canada cut and the People's Bank of China held. The Hong Kong Monetary Authority was forced to follow the Fed. After Wall Street's stumble, Asian markets bought into the dip Thursday, sending S&P500 e-minis and Nasdaq Futures 0.7% higher. This risk-on attitude is expected to continue in Europe where the pan-regional futures are up 0.6% and German DAX Futures are up 0.7%. FTSE Futures are also 0.2% higher. The bond markets have also recovered after a slight pullback. The yield on the benchmark 10-year Treasury note fell to 4,068% from its U.S. closing of 4,076% on Tuesday. The dollar held steady at 97.024 after recovering from a three-and-a-half-year low. Gold fluctuated, with gains and losses. It hit an air pocket, after reaching a record-high on Wednesday. The last price of bullion was $3,659.40. Even with the Fed's return to an easing cycle and the sugar rush that comes along with it, the growth concerns are always there. New Zealand shares and the Kiwi dollar fell after economic data that was worse than expected, and Australian stocks also dropped following the release of lower-than-expected employment market statistics. Santos shares fell as much as 13.6 percent after ADNOC, a consortium led from Abu Dhabi, canceled its bid of $18.7billion for the gas company. The consortium said that commercial terms couldn't be agreed. Brent crude dropped 0.2% to $67.84 a barrel. Despite all the drama, MSCI’s broadest Asia-Pacific share index outside Japan has traded flat. The following are key developments that may influence the markets on Thursday. Earnings of corporations Next, Embracer Group and Auto Trader Group Central bank decisions UK: Bank of England Economic Data UK GfK Consumer Confidence for September France debt auctions: 3 year, 5 year, 8-year 9-year and thirteen-year government bond auctions
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Oil prices drop amid concerns over the US economy and market oversupply
The oil price fell for a second time on Thursday after the Federal Reserve reduced interest rates, as was expected. Traders focused on the U.S. economic situation and the excess supply. Brent crude futures dropped 13 cents or 0.19% to $67.82 per barrel at 0417 GMT. U.S. West Texas Intermediate Futures fell 18 cents or 0.28% to $63.87. In response to signs of weakness on the job market, the Fed lowered its policy rate a quarter percentage point by Wednesday. It also indicated that it would lower borrowing costs steadily over the remainder of the year. Low borrowing costs usually boost oil demand and drive prices higher. But the recent move and the hint that there will be two more cuts in this year were already priced into the market, according to Priyanka Sahdeva, a Phillip Nova senior analyst. She said that Powell's message of negativity, the Fed chair, was what caught markets' interest. He emphasized weakening employment markets and sticky inflation, making the cuts look more like risk management than demand boosters. Claudio Galimberti is the chief economist at Rystad and the global director of the market analysis. He wrote a note to clients that the Fed's intention to cut rates further indicates the policymakers' assessment of the economic risk from unemployment as being higher than the inflationary threat. The market was also affected by the persistent oversupply of oil and the soft fuel demand from the United States, the largest oil consumer in the world. The U.S. crude stockpiles declined sharply in the last week, as imports plunged to a new record low and exports surged to near two-year levels, according to data released by the Energy Information Administration on Wednesday. The market was expecting a 1 million barrel increase in stockpiles. A 4 million barrel rise, however, has raised concerns about the demand in this world's largest oil consumer, and pushed prices up. (Reporting from Katya Glubkova in Singapore and Siyi LIU; Editing by Christopher Cushing, Tom Hogue).
Anglo American Australia cuts a'small number of' jobs in Brisbane
Anglo American announced on Thursday that it has cut a "small" number of jobs in its Brisbane office and coal mines in the area as part of its efforts to streamline its operations, adapt to falling coal prices and increasing costs.
The Queensland company has not specified the number of job cuts. This comes just a day after BHP, its larger counterpart, cut 750 jobs in a coal mine in that same region. BHP cited low coal prices as well as high royalties from the state government for its poor returns.
Ben Mansour is vice president of people and corporate affairs at Anglo American Australia. He said that the majority of the reductions were voluntary.
ABC News in Australia reported that 200 Anglo American jobs were at risk, citing Isaac Regional Council. Local government did not respond immediately to the request for comment.
According to its website, Anglo American has five coal mines located in Queensland's Bowen Basin that produce steelmaking coal. It sold 33% of one of its Australian coal mines that produces steelmaking coal for $1.1 billion last year to focus on its core copper assets.
Last week, the company announced a merger proposal with Canada's Teck Resources. This will be second largest mining deal in history.
(source: Reuters)