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ROI-US, Japan share unorthodox anti-inflation tool - fiscal stimulus: McGeever
Both the United States and Japan use a novel tool to combat inflation: fiscal stimuli. Both U.S. president Donald Trump and Japan’s prime minister Sanae Takaichi want to calm down angry voters who are being squeezed by rising costs of living. Offering lavish fiscal giveaways in order to control inflation is like trying to put out a raging fire by dousing it with petrol. Trump's Republican Party lost key gubernatorial elections and mayoral elections earlier this month. Concerns about high costs of living were a big factor. The White House seems to have heard loud and clear the electorate. The president is now determined to send a $2,000 cheque to the majority of U.S. homes, funded by money raised from increased duties on U.S. imported goods. Treasury Secretary Scott Bessent stated on Wednesday that the issue is being discussed. What? The hundreds of billions in tariff revenue was supposed to be used to reduce the budget deficit, right? Trump's 'One Big Beautiful Bill Act,' which he pushed through earlier this year, made it clear that the former was no longer a priority. According to the nonpartisan Congressional Budget Office, the package contains a slew of tax cuts which are expected to add $2.4 billion to the federal deficit over the next decade. Trump's administration is focused on growth. This means that it will keep the economy humming, even at the cost of inflation above target. White House officials may not have said it publicly, but they seem to believe that inflation nearer 3% than the Fed target of 2% is worth it in order to maintain nominal growth. FISCAL HOUSE DISEORDDER Looks like Japan's new Prime Minister is adopting a similar strategy. The rising cost of living in Japan was a major factor in the historic defeat suffered by the Liberal Democratic Party in the summer elections that led Takaichi to surprise sweep to the top last month. Takaichi and Trump advocate a fiscal easing, rather than tightening policy to combat inflation. Her newly formed government is preparing a stimulus package for the economy that will probably exceed last year's package of $92 billion. One of the three main goals of this package is to reduce the impact of rising costs. She has also appointed members of key government economic panels who advocate an expansionary fiscal strategy. This week, she indicated that her willingness to slacken long-term commitments in getting the country's financial house in order. Takaichi, as well as Trump, have both made it known to their central banks that they want to maintain a stimulative monetary policy - something with which many rate-setters may disagree. Both leaders seem to be determined to counter the effects of inflation by taking actions that may very well worsen inflation. Inflation Doom Loop Fiscal stimulus is a powerful tool that can help lower-income people spend their money. The Global Financial Crisis of 2007-09 and the Pandemic of 2020 both showed that fiscal generosity is necessary during times when the economy is trapped in a liquidity trap, the demand for goods and services has collapsed and deflation must be defeated. The U.S. and Japan are not facing an economic disaster. In aggregate, both countries are experiencing a soft but steady growth, with unemployment at a historically low level and inflation a full percentage-point or more above the target. Also, it is unclear by how much the fiscal spree will boost growth. The 'fiscal multiplyer' is not a measure that is universally accepted. It is a measure of how much additional government spending and tax cuts increase economic growth. The San Francisco Fed's 2020 paper stated that economists agree it is higher during recessions. It is also higher when debt-to GDP ratios are low and monetary policy less "activist". It is a completely different environment than the one that exists in both countries. Washington and Tokyo may find it politically appealing at the moment to indulge in populist fiscal splurges, but this unorthodox approach could make the fight against inflation harder. The opinions expressed in this article are those of the columnist, who is also the author. Open Interest (ROI) is your indispensable 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.
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Australia shares sink in a sea of red, as banks and miners lead the broad sell-off
Australian shares dropped nearly 1.5% Friday, sinking in a sea red and reaching their lowest level since July, as miners, financials, and fading expectations for a domestic interest rate cut this summer weighed on benchmark. S&P/ASX 200 Index fell 1.5% at 2348 GMT to 8,623.30. The benchmark index fell 0.5% Thursday. The index fell by 1.7% this week, on course for a third consecutive weekly decline. This was due to the weakness of major banks after the earnings announcements from Commonwealth Bank and the Thursday jobs data. The Labor Report reinforced expectations that Reserve Bank of Australia would hold rates for longer and dampened hopes of a rate cut this year. The higher-than-expected readings of inflation earlier this month cast doubt on any near-term policy easing. This prompted economists to delay their forecasts. Miners on the stock exchange lost 2.7% due to the lower copper price. BHP Group, Rio Tinto and other mining giants fell by 2% each. The sub-index gained 5.5% for the week as the copper price rose throughout the majority of the period. Mineral Resources, a major player in the lithium sector, also saw a rise. The "Big Four" banks led the losses, with financials falling as much as 1,9%. This sector is on track to have its worst week ever. Gold stocks dropped 4% due to lower bullion price. The sector is on track to have its best week ever since August. Technology stocks continued to decline and fell 4%. They reached their lowest level since the 29th of April. This sector has also lost 5% in the last week, marking its fourth consecutive session. The sub-index of energy stocks fell 1% due to lower global oil prices. Woodside Energy, a smaller competitor of Santos, traded mostly flat. As of 2348 GMT, the benchmark S&P/NZX 50 Index for New Zealand fell 0.5% to 13,540.70.
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Law firm drops London lawsuit against Brazil Mining Group over dam disaster
Ibram, a Brazilian mining lobby group, said on Thursday that the law firm Pogust Goodhead would have to refund 811,000 pounds (about $1 million) after it dropped a London lawsuit filed against Ibram over a dam disaster in 2015. This amount is due to Ibram for the costs incurred as part of a lawsuit filed by 25 Brazilian municipalities represented by PG regarding the collapse of a Samarco dam, a joint-venture between Vale, BHP and Vale, that killed 19 people and contaminated a major river. A London court will announce its decision regarding BHP's responsibility in this case on Friday. The lawsuit was brought by individuals and cities who were affected by the collapse but did not wish to sign the compensation agreement of 170 billion reals ($31.5 billion), which the companies reached with Brazilian authorities in the past year. The law firm didn't respond to a comment request immediately. Ibram, the Brazilian Supreme Court, has ruled that the cities have violated the Brazilian constitution by suing abroad for compensation in the case of the dam failure. A Supreme Court Justice ruled in August that laws and foreign legal decisions must be approved by the country's judiciary system before they can take effect. "It's essential that Brazil protects the sovereignty it has over its mineral resources." Ibram has always tried to ensure that public policy and judicial decisions respect the right," Ibram president Raul Jungmann stated in a press release. (1 pound = 0.7451 pounds; 1 reais = 5.4039 pounds) (Reporting and writing by Marta Nogueira, Editing by Leslie Adler & Stephen Coates).
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China's copper imports are booming due to rising arbitrage and supply
The Chinese copper exports will likely set a new record in 2025. October shipments are expected to surpass 100,000 metric tonnage for the first time. China is the largest consumer of copper in the world and the net importer. The red metal is used for power lines, construction, and manufacturing. China's smelters produce more refined copper now than ever before, and exports with their higher margins are becoming increasingly attractive as a way to offset the losses caused by record-low processing charges. According to two sources in the industry who monitor cargoes, China probably shipped at least 100,000 tonnes of refined copper last month. This would bring the year-to date 2025 exports up to at least 580,000 tonnes, exceeding the 456,060 tonnes of exports in all of last. LUCRATIVE ARCURAGE Chinese smelters, traders and investors have been lured to Europe and North America by the higher prices offered. This was especially true earlier this year, when premiums at the U.S. Comex Exchange soared after traders bet Washington will put a copper tariff. Albert Mackenzie is an analyst with Benchmark Mineral Intelligence. He said that the arbitrage between LME & Comex made global markets extremely tight. Even though the White House has exempted refined Copper from tariffs, the premiums are still high enough to attract some material into the United States. China's refined exports of copper to the United States reached 164,226 tonnes in January-September 20,25 compared with 16,763 tons for all of 2024. One of the sources who track the exports said that of the 100,000 tons or so exported in October, 40,000 tonnes will be delivered to LME warehouses. Another 40,000 of copper of non-Chinese origin is being resold into the U.S. and another 20,000 tons are bound for Southeast Asia. EUROPEAN PREMIUMS GAIN According to LSEG Workspace, the LME copper price in early October was up to 3,234 yuan (US $454) per ton. This made exports a viable option. As of Thursday, it was 424 Yuan per ton higher. Local suppliers in Europe have increased their premiums, which has sparked an interest in cheaper Chinese cargoes. A Chinese copper smelter has said it will consider shipping a few hundreds of tons of refined Copper to Europe every month. Mackenzie, of BMI, stated that the increase in Chinese smelting capacities has also contributed to export growth. China will produce record volumes of refined metals this year. Smelters are trying to increase their revenue by increasing the processing of copper ore in order to extract gold and other by-products, and to cash in on the record prices of precious metals. Unexpected disruptions in major mines, including those owned and operated by Ivanhoe Mines (Ivanhoe) and Freeport-McMoRan (Freeport-McMoRan), have hampered the supply of ores outside China. ($1 = 7.1230 Chinese yuan renminbi)
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The COP30 climate health conference has raised $300 million to fund research on the effects of heatwaves worldwide.
A group of philanthropies has committed $300 million to developing solutions that can save lives as temperatures rise around the world. The money announced at this week's COP30 climate talks in Brazil is aimed at developing and figuring out best investments to combat rising risks due to extreme heat, air pollutants and infectious diseases. "We are a charity." "We can't keep plugging gaps and resuscitating an dying model of development", said Estelle willie, director of health policy at The Rockefeller Foundation. She said, "We are working together to test and validate new solutions using our philanthropic capital." Separately the COP30 host Brazil has launched a project called the Belem Health Action Plan, which encourages countries to monitor climate-related health policies across their ministries and departments. This effort is part Brazil's larger focus at the U.N. Climate talks on strengthening countries' abilities to prepare for and adapt to worsening climate effects including floods and fires. According to a study published in the PLOS journal in 2023, this $300 million pledge adds to $1 billion to $2 billion in public funds spent on research into climate-related health effects. Experts say that there is much more to be done. Willie stated in an interview that "progress on health is decreasing." "We have achieved many hard-fought victories in the health sector through technology and the global health system. Climate change is making global health and every problem worse now. A report published in The Lancet journal in October estimates that the number of deaths caused by heat-related conditions, which are worsened due to climate change, is around 550,000 per year. The report states that air pollution is responsible for another 150,000 deaths each year. This pollution comes from burning fossil fuels and also worsening fires. Infectious diseases are also on the rise. The report also said that reported cases of dengue have increased by 49% since 1950. In August, U.N. agencies estimated that more than 3.3 Billion people or half of the world population are already suffering from the heat. Climate change is a reality. John-Arne Rottingen is the chief executive of Wellcome Trust. Another funder. He said that children, pregnant women and older people, as well as "those communities who have the least resources" are most at risk. The Gates Foundation and IKEA Foundation are also funders of the newly formed Climate and Health Funders Coalition. Other 27 philanthropies signed up but have not yet committed funds. (Reporting from Simon Jessop in Belem Brazil, Lais Morais, and Anna Portella; Writing by Katy Daigle, Editing by David Gregorio.
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Heatwaves around the world prompt $300 million for climate health research
A group of philanthropies has committed $300 million to developing solutions that can save lives as temperatures rise around the world. The money announced at this week's COP30 climate talks in Brazil is aimed at developing and figuring out best investments to combat rising risks due to extreme heat, air pollutants and infectious diseases. "We are philanthropy." "We can't keep plugging gaps and resuscitating an dying model of development," Estelle Willie said, director of health policy at The Rockefeller Foundation. She said, "We are working together to test and validate new solutions using our philanthropic capital." Separately the COP30 host Brazil has launched an initiative named the Belem Health Action Plan, which encourages countries to monitor climate-related health policies across their ministries and departments. This effort is part Brazil's larger focus at the U.N. Climate talks on strengthening countries' abilities to prepare for and adapt to worsening climate effects including floods and fires. According to a study published in the PLOS journal in 2023, this $300 million pledge adds to $1 billion to $2 billion in public funds spent on research into climate-related health effects. Experts say that there is much more to be done. Willie stated in an interview that "progress on health is decreasing." "We have achieved many hard-fought victories in the health sector through technology and the global health system. Climate change is making global health and every problem worse now. A report published in The Lancet journal in October estimates that the number of deaths caused by heat-related conditions, which are worsened due to climate change, is around 550,000 per year. The report states that air pollution is responsible for another 150,000 deaths each year. This pollution comes from burning fossil fuels and also worsening fires. Infectious diseases are also on the rise. The report also said that reported cases of dengue have increased by 49% since 1950. In August, U.N. agencies estimated that more than 3.3 Billion people or half of the world population are already suffering from the heat. Climate change is a reality. John-Arne Rottingen is the chief executive of Wellcome Trust. Another funder. He said that children, pregnant women and older people, as well as "those communities who have the least resources" are most at risk. The Gates Foundation and IKEA Foundation are also funders of the newly formed Climate and Health Funders Coalition. Other 27 philanthropies signed up but have not yet committed funds. (Reporting from Simon Jessop in Belem Brazil, Lais Morais, and Anna Portella; Writing by Katy Daigle, Editing by David Gregorio.
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German coalition agrees on subsidised electricity price for industry
Friedrich Merz, the German Chancellor said that Germany's ruling parties had agreed to introduce an energy subsidy for energy-intensive industry until 2028 in order to cut costs and boost Europe’s largest economy. German companies have complained for years that high energy costs put them at a disadvantage in the global market. This includes automakers and steelmakers. After coalition talks, Merz, the conservative leader of the coalition with his Social Democrat partners, announced that the price of subsidised electricity for industry would be fixed at 5 eurocents per kilowatt-hour until 2028. Merz stated that the goal is to reduce production costs and significantly ease the burden on our economy. EU rules on state aid must be followed. Merz stated that "Discussions have been completed with the EU Commission and we are expecting to be approved for this." The VCI, the association of the chemical industry, called the measure helpful but said that the government must do more to make Germany competitive in the industry. In a press release, VCI's Wolfgang Grosse Entrup warned that the situation was "growing more acute" for businesses. German voters voted Merz into office in February after he promised to boost German Industry during an extended economic downturn. The coalition and the chancellor also agreed to tender 8 gigawatts for gas power plants and reduce air traffic fees, saving the aviation industry 400 million euros. The exchange rate is $1 = 0.8575 euro. (Reporting and editing by Mark Potter, Lisa Shumaker and Andreas Rinke)
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As hopes for a Fed rate cut in December fade, equity and bond prices drop.
The steep drop in Wall Street stocks on Thursday dragged MSCI’s global equity index lower, while U.S. Treasury rates rose. Investor hopes of a Federal Reserve rate reduction in December faded as a chorus hawkish remarks from central bank officials. The dollar fell in currencies despite hawkish comments from several Fed officials after the House of Representatives passed a bill to reopen U.S. Government late Wednesday, and President Donald Trump approved it. Investors have been buying stocks in recent sessions, anticipating a U.S. reopening of the government after a 43-day record shutdown that disrupted food assistance for millions of Americans, left hundreds and thousands of federal employees unpaid, and snarled up air traffic, while also halting important economic data releases. Trump administration officials have shattered hopes of a more accurate view of the U.S. economic situation in the near future. Kevin Hassett, White House economist, told Fox News, that while the government would have an employment number for October, the data on the U.S. rate of unemployment may never be released because the survey was not conducted due to the shutdown. Multiple Fed officials also slammed the idea that rates would be cut by the central bank in December. Alberto Musalem - the head of St Louis Federal Reserve Bank - reiterated on Thursday that his policy is more neutral than modestly restrictive. He said there was little room for further easing without becoming too accommodative. Beth Hammack, President of the Federal Reserve Bank of Cleveland, said that interest rate policies should be restrictive to bring down inflation levels. Neel Kahkari, president of the Minneapolis Federal Reserve, said that he is seeing mixed signals in the economy. He said that the inflation rate, which is around 3%, is too high. Meanwhile, parts of labor markets "appear to be under pressure." Mary Daly, the San Francisco Federal Reserve president, said earlier that the Fed's goals have been balanced after it cut interest rates two times this year. She said that the rate of decline in services inflation was not consistent and that she was more concerned about a continued slowdown in labor demand. CME Group's FedWatch tool shows that traders bets on December rate cuts have fallen to 49.6% from 62.9% as of Wednesday. Bob Doll said, "Markets had been expecting a rate cut in December, but we may not see it," referring to the cautious Fed remarks on this idea. "Most are warning us that it is not a gimme, just as the Fed Chair said when he gave this presser following the last Fed Meeting. It's not a new idea, but the public didn't accept it. Anthony Saglimbene is the chief market strategist of Ameriprise. He said that investors are worried because of a lack of clarity regarding the U.S. economic health. What you see today is a risk off assessment. Saglimbene stated that we're going to continue getting a cloudy view of economic data. He said that with the market showing signs of concern over high valuations of heavyweight technology stocks and those linked to artificial intelligence, it is not surprising for investors to "take a step back, sell down the losers and move into defensive areas of market". The Dow Jones Industrial Average dropped 708.88 points or 1.47% to 47,545.04, while the S&P 500 lost 108.91 or 1.59% to 6,741.94; and the Nasdaq Composite was down 537.47 or 2.30% to 22,869.43 at 2:45 p.m. The MSCI index of global stocks fell by 11.50 points or 1.14% to 1,000.28. EUROPEAN INDEXES DROP AFTER HItting Records The pan-European STOXX 600 closed at a loss of 0.61%, after reaching a record high. Europe's FTSEurofirst 300 index also lost 0.66%. Prices were lower in U.S. Treasuries and yields rose as investors lowered their expectations of imminent rate cuts due to lingering uncertainties over inflation and sharp divisions between Fed policymakers about the direction the U.S. Economy and monetary Policy will take. The yield of the benchmark 10-year U.S. notes increased 2.7 basis point to 4,106% from 4.079% on Wednesday. Meanwhile, the yield on 30-year bonds rose 3.7 basis point to 4.6986%. The yield on the 2-year note, which moves typically in line with expectations of interest rates from the Federal Reserve, increased 1.9 basis points, to 3.585%. Five officials with knowledge of the matter said that European financial stability officials are debating creating an alternative to Federal Reserve financing backstops, by pooling the dollars held by central banks outside the U.S., in order to reduce their dependence on the U.S. during the Trump administration. The dollar index, which measures greenbacks against a basket including the yen, the euro and other currencies, fell 0.36%, to 99.12. The euro rose 0.41% to $1.164. The dollar fell 0.23% against the Japanese yen to reach 154.42. Oil futures on the energy market settled a little higher, after a sharp drop in the previous session. Investors weighed global oversupply concerns against looming Lukoil sanctions. U.S. crude oil settled up by 0.34% or 20 cents at $58.69 per barrel. Brent settled at $63.01 a barrel, an increase of 0.48% or 30 cents on the day. The gold price fell after reaching a three-week-high earlier in the session amid the general market sell-off that followed the reopening the U.S. Government. Spot gold dropped 0.7% to $4169.10 per ounce. U.S. Gold Futures dropped 0.13%, to $4199.00 per ounce. (Reporting and editing by Sharon Singleton and Ed Osmond in London, and Marc Jones in New York; and Stephanie Kelly and Sinead carew in New York)
Morgan Stanley is questioned by US House committee over Zijin gold IPO in Hong Kong
Morgan Stanley and its U.S. shareholders were at risk of financial, regulatory and reputational damage as a result of the underwriting of Zijin Gold International’s Hong Kong IPO, a U.S. House of Representatives Committee warned Morgan Stanley on Thursday.
Zijin Gold, a subsidiary company of Zijin Mining Group is listed on the U.S. Government list of companies that are prohibited from importing their products due to alleged abuses of human rights by Uyghurs.
The House Select Committee on China stated that Morgan Stanley helped with Zijin Gold’s IPO in September to help raise funds for its parent company by selling non-Chinese assets of gold mining and listing them at the Hong Kong Stock Exchange. The committee questioned whether Morgan Stanley's involvement helped Zijin Mining avoid the U.S. ban.
Morgan Stanley declined comment. Zijin Gold & Zijin Mining didn't immediately respond to comments.
In a letter sent to Morgan Stanley CEO Ted Pick, Representative John Moolenaar (chair of the committee) wrote: "When U.S. Financial Institutions engage with Chinese companies linked to Uyghur Forced Labor, they undermine U.S. Government's goal to deter forced labor worldwide."
Zijin Mining has been added to the Uyghur Forced Labor Prevention Act Entity List in January. This list restricts imports that are linked to what the U.S. calls a genocide against minorities taking place in western Xinjiang, China.
U.S. officials claim that Chinese authorities have set up labor camps in Xinjiang for Uyghurs, as well as other Muslim minorities. Beijing denies all abuses.
In his letter, Moolenaar requests documents and communications related to Morgan Stanley's involvement with the public offering, including its links to the Chinese Government, Chinese Communist Party and military as well as human rights violations. He requested the information before November 27.
This letter is a new action taken by the committee to address the involvement of U.S. Financial Institutions in the underwriting of IPOs for Chinese companies that have ties with the Chinese military, or illegal labor practices.
The committee issued subpoenas to JPMorgan in July for documents pertaining to their role as underwriters of the Hong Kong IPO of China’s CATL, which is the largest manufacturer of electric vehicles batteries in the world. The U.S. Department of Defense has designated CATL as a Chinese military firm. Reporting by Karen Freifeld and Kanishka in Washington, editing by Jamie Freed.
(source: Reuters)