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Gold nears record high after Fed rate-cut bets. Tech shares lead Asia share rally
Tech shares rose on Thursday, boosting Asia stock indexes, while gold hovered at a record-high and the dollar sank as a weak U.S. Labour Market Report boosted bets that Federal Reserve interest rates would be cut. It was almost certain that the U.S. shutdown would prevent the release of vital monthly payroll data on Friday. However, overnight, the ADP private employment report revealed the unexpected loss of jobs in September. The prior month had also been revised downwards. Even without official labour data, traders priced in quarter-point Fed rates cuts at both of the remaining two policy meetings for the year. Wall Street reached new record highs Wednesday as the promise of a more relaxed policy environment boosted Wall Street. The Philadelphia SE semiconductor index also rose by over 2%. The Nikkei gained 0.5% in Japan, largely due to the gains made by chip sector stocks. Taiwan's tech heavy bourse rose 1.5% while South Korea's KOSPI soared 2.8% following the signing of partnerships between chip giants Hynix and Samsung to supply OpenAI Data Centres. Hong Kong's Hang Seng gained 0.5%. According to Kyle Rodda of Capital.com, the ADP report suggests that "the U.S. economic situation is so dire, it requires further policy support." As a result, markets discount a higher probability for rate cuts in December and October. He added that "after initial jitters the markets have shrugged off the U.S. Government shutdown, at least until now." Rodda stated that the shutdowns have historically had a minimal impact on the economy, but the delay in critical economic data may increase uncertainty regarding the future of U.S. monetary policies and thus raise volatility. As partisan differences prevented Congress and White House from coming to a funding agreement, the government shut down most of its operations Wednesday, setting up what could be an extended, bitter standoff. Fed easing bets, along with some shutdown anxiety, pushed gold overnight to a new all-time record of $3,895.09. This also supported U.S. Treasuries and sent yields sharply down. On Thursday, during Tokyo's trading hours, the yield on two-year Treasury bonds fell to its lowest level in two weeks at 3.531%. The last time gold changed hands was around $3,865. The U.S. Dollar Index, which measures the currency's performance against six major counterparts, remained near the overnight low of 97.459, reached one week ago. The last time it was at 97.672, it was slightly lower than Wednesday's closing price. After a three-day decline of 1.8%, the dollar was unchanged at 147.01yen. The euro increased slightly to $1.1738 and the sterling rose to $1.34835. The oil prices rose on the prospect of tighter sanctions against Russian crude. They were looking to end a losing streak of three days and reach 16-week-lows. Brent crude futures rose 0.2%, to $65.50 per barrel. U.S. West Texas Intermediate crude also increased 0.2%, to $61.92 per barrel.
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Pertamina says there will be no disruptions in supply after the fire at its Dumai oil refinery.
A company official confirmed on Thursday that the Indonesian state energy company Pertamina will divert fuel from its Dumai refinery to some areas in Sumatra after a fire broke out at the facility. The official added that there had been no disruptions of supply. Agustiawan, a company spokesperson, said that the fire was put out late Wednesday night. He added that gasoil and other supplies were still safe for nearby Sumatra areas. The refinery is still able to supply jet fuel and gasoil for certain areas. Agustiawan stated that other Pertamina refining facilities will divert gasoil and fuel jet to areas where the Dumai refinery cannot supply. He said: "With the help of other refineries in Indonesia, we would like to assure you that there has been no disruption to the supply for the people." "Stocks and distribution of fuel are at a safe level." Pertamina reported that the Dumai refinery is Indonesia's third largest oil refinery, with a capacity of 170,000 barrels per day. The cause of the fire is not known. (Reporting and editing by Thomas Derpinghaus; Bernadette Cristina, Stanley Widianto.
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Oil recovers from 16-week lows amid prospects of tighter Russian oil sanctions
Oil prices rose Thursday, ending a three-day loss streak and recovering from 16-week-lows, on the prospect of tighter sanctions against Russian crude. However, expectations of a higher supply due to an OPEC+ production boost next month capped the gains. Brent crude futures rose 15 cents or 0.2% to $65.50 per barrel at 0116 GMT. U.S. West Texas Intermediate Crude climbed by 14 Cents, or 0.2% to $61.92 per barrel. Brent and WTI lost about 1% on Wednesday. Brent closed at its lowest level since June 5, and WTI reached its lowest level since May 30. As WTI approached its $60 support, increased geopolitical risk and speculations about tighter sanctions against Russian crude also contributed to the increase in buying interest, said Hiroyuki Kikukawa. He is chief strategist at Nissan Securities Investment, an arm of Nissan Securities. The Group of Seven finance ministers announced on Wednesday that they would take measures to increase pressure against Russia, targeting those who continue to buy Russian oil at higher prices and those who facilitate circumvention. The Wall Street Journal reported Wednesday that the U.S. also will provide Ukraine intelligence to launch long-range missiles against Russian energy infrastructure. The WSJ reported that this will make it easier to strike refineries, pipelines, and other infrastructure in order to deprive the Kremlin revenue and oil. Nissan's Kikukawa noted that despite the U.S. shutdown, the world economy was still impacted by the uncertainty. Expectations of a higher production from OPEC+ (the Organization of the Petroleum Exporting Countries) and its allies weighed heavily on the sentiment, limiting the gains in prices. The U.S. administration of President Donald Trump on Wednesday frozen $26 billion in funding for Democratic-leaning States, following up on its threat to use the shutdown to target Democratic priority. Three sources familiar with the discussions said that OPEC+ may agree to increase oil production in November by as much as 500,000 bpd, which is triple the October increase, because Saudi Arabia wants to reclaim its market share. This would happen even if the U.S. demand and Asian demand begins to fall. Energy Information Administration reported on Wednesday that U.S. crude, gasoline and distillate inventory rose last week due to a decline in refining and demand. The crude oil inventories increased by 1.8m barrels, to 416.5m barrels for the week ending September 26. A poll had predicted a rise of 1m barrels. (Reporting and editing by Tom Hogue; Yuka Obayashi)
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Australian shares are boosted by gold and mining stocks; Wall Street gains also add to the lift
Australian shares rose on Thursday, with broad gains led by gold and miners. The positive mood was boosted by Wall Street’s performance. S&P/ASX 200 rose up to 0.7% in the early session. It was at its highest level since September 2 and had risen 0.6% as of 0032 GMT. The benchmark index ended Wednesday 0.1% lower. The benchmark index for the day was led by the miners, who gained 1.9% on a rise in copper prices. The sub-index reached its highest level since December 2023. The shares of BHP, Rio Tinto, and Fortescue all rose between 0.9% to 1.4%. Gold stocks rose to a new record, climbing 2.5% as bullion prices surged on demand for safe havens. St Barbara, a gold mining company, saw its shares rise 5%. Shares in Evolution Mining, Northern Star Resources, and Genesis Minerals rose between 1.9% to 2.6%. Investors shrugged off the weak data on private payrolls and the uncertainty surrounding the U.S. shutdown's first day. Wall Street's gains can often boost Australian markets, by increasing global investor sentiment and appetite for risk. The "Big Four" banks' shares rose between 0.3% to 0.5%, adding 0.6% to benchmark gains. Energy stocks rose 0.1%, while healthcare stocks gained 1.3%. The benchmark S&P/NZX50 index for New Zealand fell 0.2%, to 13,400.88. Investors have their attention focused on the Reserve Bank of New Zealand's policy announcement next week. According to a report, ANZ analysts expect a rate cut of 25 basis points to 2.75%. (Reporting from Bengaluru by Roshan Thomas; Editing by Alan Barona).
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The G7 nations have announced that they will be targeting those who continue to buy Russian oil.
The Group of Seven finance ministers announced on Wednesday that they would take joint measures to increase pressure against Russia, targeting those who continue to increase their purchases of Russian crude oil and those who facilitate circumvention. The G7 Finance Ministers have also agreed that trade measures such as tariffs, import and export restrictions, and bans on certain products are important in the effort to reduce Russian revenue due to Moscow’s invasion of Ukraine. The statement was released after a virtual finance minister meeting. Why it's important Washington has called upon its allies, including India and China, to impose tariffs against purchasers of Russian crude oil. Trump has not imposed additional tariffs against Chinese imports due to China's purchase of Russian oil. However, his administration has imposed extra tariffs upon imports from India. In the G7 statement of Wednesday, India and China were not mentioned. KEY QUOTES The G7 statement stated that "we will target those who continue to increase their purchases of Russian oil after the invasion of Ukraine, and those who facilitate circumvention." It added, "We will take measures to reduce our remaining imports, with an aim of eliminating them, including hydrocarbon imports." The G7 Foreign Ministers said that they are also "considering seriously" trade measures and other limitations on countries who help finance Russia's military efforts. The statement did not identify any country. CONTEXT Russia's full-scale Invasion of Ukraine The next election will be held in February 2022. In 2014, Moscow annexed Crimea. Western powers have imposed heavy sanctions on Russia and are considering ways to limit its financing. war efforts . (Reporting and editing by David Gregorio in Washington)
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Gold hits record price as US Government Shuts Down
The dollar and U.S. stock market were inchoate on Wednesday as the U.S. shutdown its major operations. This delayed the release of important jobs data that could affect the outlook for interest rates. The U.S. payroll data showed that employment in the private sector fell by 32,000, contrary to expectations of a 50,000 increase. This fueled fears that the U.S. labour market may be weakening. In the past, weak employment numbers would have led to increased bets that interest rates could be cut in order to support equity markets. However, with this week's shutdown of the government, it is less clear what will happen. Due to the government shutdown, Friday's publication of the Labor Department's September employment report, which is more comprehensive and closely watched than other reports in this category, will not take place. This would make it difficult for the Federal Reserve to determine whether or not rate cuts are warranted, as they assess U.S. economy health. Matthew Miskin is co-chief investment strategy at Manulife John Hancock Investments, Boston. The Fed is made more difficult by the lack of other data. The agencies have warned that the government shutdown will result in the furloughing of 750,000 federal employees at a cost of $400,000,000 per day. After a volatile session, the S&P 500 ended 0.3% higher. The Nasdaq Composite gained 0.4% and the Dow Jones Industrial Average remained flat. The MSCI All-World Index.MIWD00000PUS gained 0.4% after moderate gains on Wall Street. Gold prices rose to $3,895 per ounce, a new record for the third consecutive session. The benchmark 10-year Treasury yield in the United States fell by 5 basis points, to 4.1%. The STOXX Europe 600 index rose 1.2%, bucking the trend of the global market. It is now hovering near record highs. The FTSE 100 in Britain and the SMI in Switzerland outperformed. Healthcare stocks soared on expectations that they would avoid excessive U.S. tariffs following President Donald Trump's agreement with Pfizer regarding prescription drug prices. In the STOXX 600, the healthcare sector is ranked third. Lars Skovgaard is senior investment strategist for Danske Bank. He said: "There are a lot political risks in the healthcare industry, but once you see these risk diminish, investors will buy." I think that this could support European shares in the next few days." SLOW DOWN to Delay Data Investors may give greater weight to the ADP National Employment Report if Friday's nonfarm payrolls data is not released. George Lagarias is the chief economist of Forvis Mazars. He said: "The general notion is that these things will have a short term impact and not a longer-term effect, and the markets know this." The lack of data means we will assume that the current trend will continue. If there's no sign of a strong recovery in the economy, the Fed is likely to continue its current course. The futures market now indicates a 95% likelihood of a Fed rate reduction in October. This is up from 90% a day ago, and there's a 75% chance that another move will be made in December. Anthony Saglimbene is the chief market strategist for Ameriprise. He said that, if the shutdown continues, mid-October inflation reports could be affected. In a note, he stated that "an extended period in which the U.S. Bureau of Labor Statistics does not operate at full capacity could affect data collection for other reports and may impact the data quality." Japan's Nikkei fell 0.9% on Tuesday after a 11% rise in the previous quarter. South Korea's stocks rose by 0.9% to add to their 11.5% gains in the previous quarter. Data showed that exports in September rose at the highest rate in 14 months. DOLLAR FALLS The dollar index fell for the fourth consecutive day on foreign exchange markets. It was down last by 0.1% at 97.78. The euro remained unchanged at $1.1729 while the pound sterling rose 0.2% to $1.3478. The dollar fell 0.6% to 147.12yen after a Bank of Japan report showed that confidence among large Japanese manufacturers had improved in the second quarter. This increased the likelihood of an interest rate increase as early as this month. After two days of declines, oil prices dropped further as investors weighed up potential OPEC+ plans to increase output next month. U.S. crude fell about 0.7% to $61.93 per barrel, while Brent dropped 0.8% to $65.5.
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Wall Street closes at a higher level as investors ignore the US shutdown and jobs data
Wall Street's major stock indexes rose Wednesday with support from the Healthcare sector, despite a weaker than expected private payroll data and the uncertainty surrounding the first day of U.S. Federal Government shutdown. Investors were closely watching the ADP National Employment Report, as the Labor Department is expected to postpone its September jobs report if the federal government does not reopen by Friday. ADP reported a decrease in private payrolls by 32,000, and a downwardly-revised 3,000 drop in August. These numbers were lower than the economists' forecasts of growth of 50,000 for September, and the previous report of 54,000 in August. The Institute for Supply Management reported that U.S. manufacturing eked out a recovery in September. All three major U.S. indices rose after opening lower. S&P 500 Healthcare, which was boosted by pharmaceutical firms, was the largest gainer among the 11 major S&P 500 industry sectors. Tuesday, after Pfizer announced that it had reached a deal with President Donald Trump of the United States, healthcare rallies began in earnest. In exchange for tariff relief, the drugmaker agreed that it would lower its prescription drug prices under Medicaid compared to what they charge in other developed nations. Trump said that he expects more drug companies will follow suit. Lara Castleton of Janus Henderson Investors said that yesterday was a catalyst for the healthcare sector. She added that the sector had underperformed the market this year. She said that people haven't avoided it but haven't put as much money into healthcare as in technology or all the AI hype. Preliminary data shows that the S&P 500 rose 22.46 points or 0.34% to 6,710.92, and the Nasdaq Composite increased 94.02 or 0.42% to 22,754.03. The Dow Jones Industrial Average increased 42.04 points or 0.09% to 46,439.93. The S&P 500 technology sector gave the benchmark index another boost. Materials was the sector that saw the largest percentage drop during the session. Castleton observed that investors in equity appeared to be ignoring the uncertainty surrounding the shutdown. The markets have always been resilient when the government is closed. According to a Deutsche Bank note, the S&P 500 has risen during each of six shutdowns in recent years. The indexes advanced during the last government shutdown between the end 2018 and the start of 2019. AES shares rose sharply after Financial Times reported BlackRock's Global Infrastructure Partners is close to a deal worth $38 billion to buy the utility group. The U.S. Department of Energy took a 5% share in Lithium Americas, and another 5% in its joint venture with General Motors. Albemarle shares also soared after the U.S. Department of Energy acquired a stake. Corteva announced it would separate seed and pesticide business into separate publicly listed companies, sending shares of its company sharply down.
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Fermi: Allies could own equity in US nuclear consortium
The founders Fermi America, a company that hopes to build the largest data center in the world and fuel it using nuclear power, solar, and gas, said on Wednesday, foreign countries may take an equity stake. Fermi made its Nasdaq debut on Wednesday, with shares valued at $14.8 billion. Investors are increasingly interested in AI infrastructure stocks. Founders Rick Perry and Toby Neugebauer, a former U.S. Energy Secretary in the first Trump administration, want to build a site near Amarillo in Texas that will have four Westinghouse Electric AP1000 nuclear reactors. This would be the second U.S. plant to be built in a desert. Perry and Neugebauer are looking for the U.S. Government to partner with them in this project. It would be home to artificial intelligence powered by nuclear energy that the Pentagon could use. The founders stated that it is possible for the U.S. and other allies to take equity stakes into a nuclear consortium where Fermi will be involved. Neugebauer stated that high-level delegations from around the world have visited Neugebauer's office to discuss a possible partnership. "It's possible that other countries would also take an equity position in a nuclear consortium. He said that other countries could be interested in reinvesting in the United States, and becoming partners with us. After Trump's executive orders were issued in May, the interest in nuclear reactors increased. These executive orders aimed to speed up applications for new nuclear reactors, revamp the Nuclear Regulatory Commission and make nuclear waste and excess plutonium available for reactor fuel. The latest reactors in the U.S. were also Westinghouse AP1000 models at Vogtle, Georgia. They were delayed for years and cost about $16 billion more than budget. (Reporting and editing by Timothy Gardner, Echo Wang)
US offers to purchase stakes in Australian critical mineral companies
Executives recently returned from Washington reported that the U.S. Government has offered to purchase equity in Australian critical mineral companies as part a funding package designed to increase its supply of minerals and reduce its dependence on China.
This push is part of an effort to create alternative mineral supply chain after China, as the largest producer of critical minerals, restricted exports of permanent magnets and rare earths in response to U.S. duties.
Minerals such as lithium, cobalt, and rare earths are vital to the technologies that are used in many sectors including semiconductors, clean energy and weapons.
U.S. officials "were telling companies to come to us and submit a proposal, and we will assess it, and then try to make it work using the various funding channels and programmes that we have at our disposal," Andrew Worland told The Australian.
Worland was a member of an Australian delegation of 15 companies critical to the mining industry that visited Washington, New York and Washington last month in order to meet with senior administration officials.
Worland reported that among the officials they met were former mining executive David Copley who runs an office within the U.S. National Security Council focusing on strengthening supply chain, and Joshua Kroon who is a deputy assistant secretary for critical metals and minerals at the International Trade Administration.
Worland added that funding pathways include debt, equity and debt models. This would be debt financing plus an "equity boost" and offtakes where the U.S. might prepay for supplies to add to its defence stockpile.
The White House didn't immediately respond to an inquiry for comment about the discussions with Australian companies.
The U.S. Government has already acquired equity in critical minerals companies listed on the U.S. stock exchange. The U.S. Department of Energy announced on Tuesday that it will acquire a 5% share in Lithium Americas, and another 5% in its joint venture with General Motors to develop the Thacker Pass lithium mining project.
The U.S. Government will purchase stakes in Lithium Americas through warrants that are free of charge, which is the latest private sector investment made by the Trump Administration after recent purchases of Intel and MP Materials to boost industries deemed vital to U.S. National Security.
Also reported on Tuesday, Australia is willing and able to sell shares of its strategic reserve of minerals critical to allies, including Britain, to reduce their dependency on China.
The reserve will likely be used as a bargaining tool by Prime Minister Anthony Albanese on his meeting with President Trump on October 20, in Washington. The Trump administration is reviewing Australia, UK, U.S.'s (AUKUS), defence pact. This includes a multi-billion-dollar program to provide Australia with attack submarines powered by nuclear power to counter China in Indo-Pacific.
The CEO of Cobalt Blue Andrew Tong, who was part of the delegation, said: "The biggest takeaway message from this trip is that the U.S. Government is open for business. They will use whatever financial instrument is appropriate or suitable in each case."
He said that Cobalt Blue was seeking funding to build its Australian cobalt mining facility and refinery, as well as integrate it into the U.S. Supply Chain.
Because of the small markets and volatile prices, it has been hard to finance critical mineral projects. This makes valuations and investments risky. The government's backing of projects, as well as the possible U.S. involvement, has boosted investor interest. (Reporting and editing by Christian Schmollinger; Additional reporting by Jarrett Renshaw)
(source: Reuters)