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Mike Dolan: Autumn reckoning in Europe -- Bonds, Budgets and Billionaires
Washington is the dominant headline, but Europe has its own headaches after a hot summer. Three?things that the markets are looking at are a fraught European Budget Season, a drumbeat of joint euro debt, and an examination of super-rich trends on the east side. SEASONAL CHILL It's the season. The European budget season begins in September, runs into the fall and is usually a nerve-wracking affair for euro sovereign bonds markets. The inflation spike caused by the Iran oil crisis and the European Central Bank’s rate hike in response, along with the spillovers of volatile U.S. Treasury bonds and Japanese government bonds markets is making this 'year' more nerve-wracking than usual. Budget-setting is complicated by the messy politics of the Big Three economies in eurozone. France is a standout, as its presidential election in 2027 is now approaching and there's a real possibility that either a candidate from the far right or the far left will be elected to the Elysee following the April vote. Davide Oneglia, TS Lombard's Davide Oneglia, believes that there is a risk of this stalling agreement on the upcoming Budget. There is a possibility that no budget may be agreed by this time next. A further 0.5 percentage point increase in the deficit will bring it closer to U.S. levels, which are about 6% GDP. The French 10-year OAT rates are at their highest level in 18 years. The borrowing premium over Germany has returned to the levels of two years ago, during the heights of the budget crisis. And high-flying French banks stocks have retreated. Italy's budget and political landscape have been a lot more stable over the past few years as shown by its historically rare 10-year BTP rates trading below France's. Rome could be in for an even rougher 2027, as speculation is rife about a general elections as early as April when France goes to polls and Prime Minister Giorgia Melons right-wing coalition faces pressure from Futuro Nazionale a new, more right-wing party. Germany's political scene is no cleaner. Even though there is no federal election next month, three state elections will determine the "political climate" in Berlin, according to ING's Carsten Brzeski. The popularity of Chancellor Friedrich Merz is low and the AfD is doing well in two of these states. How soon will speculation begin to circulate about the ECB’s Transmission Protection Instrument (TPI), which would limit excessive intraeuro bond spreads, if euro bond markets become jittery -- or global bond-market anxiety overwhelms them? BONDED? The risks could refocus the minds of many on a joint euro issue, even if TPI is not used or not enough to calm the euro bond storm. In recent years, many proposals have been made for euro zone or European Union bond issues that are jointly backed. The latest paper was published this week on CEPR’s VoxEU website. The economists believe that the reform of the EU fiscal frameworks in 2024 still falls short on two fronts: In a deep recession the frameworks provide too little flexibility fiscally to avoid deflationary slowdown and perhaps too much for national debt sustainability concerns. In the paper, it is argued that "a Eurobond-financed fiscal capacity can reduce both tail risks." This proposal would shift the stabilisation of common shocks to the euro area level, while national debt is still firmly held at national levels. The economists claim that Eurobonds could be used for large European investment programs, if there are no severe shocks. This is similar to how joint debt was used after the pandemic of 2020. The use of joint debt to address budgetary concerns has been opposed many times over the past 27 years. The moment could have finally arrived, although the same fractious European politics which bring back the thinking may also be what makes joint action less likely. EURO BILLIONAIRES German businessman Klaus-Michael Kuehne died on Monday at the age of 89. He was the controlling shareholder of Swiss logistics company Kuehne + Nagel. Forbes lists his holdings in various businesses at $44 billion. This makes him Europe's 7th richest person. This has led to a debate about how many billionaires Europe has in comparison with the U.S., and whether or not public policy should take a stand on the rise of a super-wealthy group. Rebecca Christie, a senior fellow at Bruegel, has written this month on the pros and cons for the super-rich. This topic is egregious because of the scale of wealth and the inequality. It seems absurd that anyone would need as much money as these tycoons. There are many benefits from the economic dynamism which has fuelled this ascent. She wrote that policymakers must now figure out how to?court them, tax and regulate them". The numbers may surprise you if you thought that Europe was far behind the U.S. in this regard. Forbes puts the number of American millionaires at 989. The number of billionaires in Europe, including Britain, Switzerland and the EU as well as other countries is 875. The opinions expressed are those of Mike Dolan a columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Investors focus on oil costs as Nigeria's Dangote refining plant nears record IPO
After months of high earnings, boosted by the Iran War, Nigeria's Dangote Refinery is expected to list its biggest IPO in Africa in October. The company will be looking to raise $5 billion. Investors are wondering if Aliko Dangote's Dangote can maintain its profits without sacrificing its ability to source enough crude oil in order to fund its plans for doubling capacity within three-years. The IPO is part of the funding. Rob Thummel is a senior portfolio manager with Tortoise Capital Management in the U.S. He said that if Nigeria was the only source of oil for Dangote, the investment risk would be higher. Dangote doesn't disclose its margins. But as a group, the refinery industry has seen higher profits after the Middle East disruption increased the demand for alternative fuel sources. Dangote was ideally placed to meet the demand in Africa and beyond. It was a new refinery that reached its maximum capacity of 650,000 bpd in February, just before U.S. and Israeli attacks started the war against Iran. The refinery's production has been tested at 700,000 barrels a day. Diversifying the sources of crude oil is another priority. The pitfalls of buying Nigerian crude Dangote should ideally rely on the domestic oil industry, particularly since Nigeria is Africa's largest producer, with a production of 1.6 millions bpd. In reality, much of the Nigerian National Petroleum Company Limited (NNPC)'s joint venture crude is tied to oil backed loans and pre export deals. This reduces the amount available to Dangote. David Bird, the chief executive officer of Dangote Refinery, said that imports represent between 30 and 40 percent of crude intake. Both economics and availability are factors that affect the problem. Mikolaj JUDSON, an analyst with the risk consultancy Control Risks, said that "challenges in obtaining feedstock at competitive rates would increase costs, compress margins, and reduce utilisation rates. This could impact on the refinery's performance commercially and its valuation." The crude oil that Dangote purchases from other African producers as well as distant producers such as the United States and Guyana is priced in dollars. Dangote claims that although some domestic Nigerian crude oil is priced in nairas, it is still very expensive because the NNPC 'prices Nigerian Crude against international benchmarks like Brent, which include freight and logistic costs, even though domestic refiners don't incur them. Edwin Devakumar, Group Vice President at Dangote Industries Limited, said that certain Nigerian cargoes are more expensive than comparable imported goods without providing precise figures. According to S&P Global Energy Platts, the grades Dangote imported include U.S. WTI 'Midland Crude,' which generally traded higher than Nigerian grade Bonny Light by 2026. Nigerian authorities claim they want to increase the flow of "local crude" Oritsemeyiwa Eysen, the chief executive officer of the regulatory body 'the Nigerian Upstream Petroleum Regulatory Commission', stated that authorities were looking into a 'crude swap system, which would match refiners and local producers in order to reduce delivery time and simplify logistics. Dangote is able to import goods because of its coastal location. Alan Gelder, Wood Mackenzie's analyst, said that the main risk was the cost to import these barrels.
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Six Chinese among seven dead in Russian gas plant explosion
The?plant reported on Wednesday that six Chinese nationals have died and nine others are missing following a fire at a complex of gas chemicals in Russia's Amur region. The plant reported on Telegram that seven people had died, 152 were injured, and 36 were taken to hospitals. It added that the fire that broke out on Tuesday was extinguished. A plane from the emergency services arrived to transport injured patients to hospitals across Russia. This complex is a joint venture between Sinopec and Sibur, a Chinese oil and gas company, and Russian company Sibur. It bills itself as the largest polyethylene and -propylene producer in the world. The complex has not yet begun operations, but was preparing to start production. For the construction of large infrastructure and industrial projects, Russia relies on a lot of foreign workers, including those from China. The Russian Investigative Committee stated that it was investigating this incident as a possible breach of industrial safety regulations. It was also working to determine the cause of the fire. The Amur Gas Chemical Complex will produce approximately 2.3 million metric tons of Polyethylene and 400,000 metric tons of Polypropylene each year. (Reporting and editing by Muralikumar Anantharaman, Stephen Coates and Vladimir Soldatkin)
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Markets are waiting for '9 to 5.'
Ankur Banerjee gives us a look at what the day will bring for the European and global market. A 'holding pattern' has developed as traders await Nvidia earnings that will test their confidence in the AI trade. Meanwhile, rising expectations of a resurgence of supply through the Strait of Hormuz have pushed down oil prices in order to help bond yields. Brent crude futures dropped for the third day in a row on Wednesday. They fell more than $2, to $86.22 a barrel after Iran announced that it had resumed talks with Oman about?managing the Strait of Hormuz despite increased economic pressure by U.S. president Donald Trump. Investors are putting themselves up for another disappointment by their 'growing optimism' in the face of a lack of evidence that supply issues will be resolved immediately. Commodity vessels transiting through the Strait of Hormuz reached their lowest level since?three months. This highlights the global supply shortages caused by the conflict that has lasted for?nearly 6 months. Nvidia's second-quarter results, the poster girl of the AI frenzy, will be the'main event' on Wednesday. In the 12 previous quarters, Nvidia's market value fluctuated by 7.4% on average following its earnings announcement. Options traders are pricing a more moderate reaction this time -- only $280 billion, or 5.4% of the market value will move after Nvidia reports. As traders await clues about the monetary?policy, the U.S. Dollar was stable ahead of U.S. PCE data in the afternoon and Jackson Hole over the weekend. The U.S. Treasury Department's decision to buy back bonds in order to cap an increase in long-end yields has been a source of concern for the markets. The "debasement" trade continues as the move to calm down the bond market has put pressure on the dollar. Spot gold and bitcoin have risen three months in a row. We?end our sad news with the sad announcement that country music icon Dolly Parton died on Tuesday in Nashville. She was 80. The following are key developments that may influence the markets on Wednesday. Data on U.S. PCE * UK CBI Distributive Trades for August (By Ankur B. Banerjee, Singapore; Editing done by Sonali P.
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Copper firms worry about dwindling LME inventory
The copper price rose to its highest level in six months on Wednesday, boosted by supply concerns over dwindling LME inventories and a positive economic outlook. By 0300 GMT, the benchmark three-month price of copper at?the London Metal Exchange had risen by 0.49% to $14,419.5 per metric tonne. The price of a ton reached $14,437 earlier in the day, its highest level since January 29. The Shanghai Futures Exchange's most traded copper contract rose by 1.11%, to 109 360 yuan (16,272.36) per ton. Non-traditional copper players, such as hedge funds and speculative traders trading on volatile LME inventory figures, have supported the price gains. David Wilson, BNP Paribas' head of metals strategies, said that there are many non-traditional sources of copper trading and a large amount of "fast money" is being moved on the release of data. The uncertainty surrounding?potential U.S. import tariffs on refined copper has led to large?outflows? of the metal from LME warehouses. Exchange data shows that the amount of copper available in LME registered warehouses dropped by 11,925 tons, to 106.950 tons, on Tuesday. showed. The outflows of this week have revived inventory concerns, which had been somewhat alleviated by large warehouse deposits made last week. Wilson stated that the ongoing uncertainty over tariffs "has kept the arb (arrangement) window between the CME?and LME open enough to encourage more metal to be moved into the U.S.," he said. Dr Copper, a metal that is used as a 'barometer for economic health', has been a standout performer in a market of largely flat industrial metals, ahead of Wednesday's release of important U.S. inflation figures. As tensions between the U.S. and Iran shifted to economic pressure rather than military conflict, lower oil prices helped boost economic sentiment, which in turn supported metals that are growth-dependent. Aluminium was up by 0.02% on the LME, while zinc remained stable, lead increased by 0.03%, and nickel was down 0.01%. Tin was also up by 0.22%. Aluminium gained 0.4% on the SHFE. Zinc gained 1.15, lead added 0.4% and nickel increased by 0.1%.
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Australian Indigenous group appeals compensation ruling over Fortescue's mining impact
The Australian Yindjibarndi Indigenous Group said that it had filed an appeal to the Federal Court on Wednesday regarding the amount of compensation given by Fortescue since 2012 for mining their land without a contract. The Yindjibarndi group filed a native title claim for A$1billion ($718m) in cultural losses and A$800m in economic losses against Fortescue and the Western Australian state government. In May, an Australian court ordered Fortescue to pay A$150m in compensation for cultural losses caused by mining. The court also awarded A$136.757 in economic losses and A$217.152 compound interest on that amount. The decision was one of the biggest ever payments in Australia's past under native title laws that recognise Indigenous rights and interest in certain parcels of land. Australia is the largest producer of iron ore in the world. The majority of it comes from Western Australia’s Pilbara Region, which is home to dozens of Indigenous tribes. Since Rio Tinto destroyed two culturally significant rock refuges at Juukan Gorge, in 2020, the mining industry has been updating its agreements with Indigenous groups. Michael Woodley, CEO of YindjibarndiNgurra Aboriginal Corporation YNAC, said that YNAC was appealing the amount awarded by the Court to compensate for economic and cultural losses. The group claims that the court should've tied compensation to royalty payments typical under native title agreements in Pilbara. It assessed the economic loss instead based on land value, and?disregarded the value of iron ore deposits. The mine also claims that the community is entitled to compensation due to social divisions caused by it. The Federal Court, in its judgment, found that there had been significant damage to Yindjibarndi songs and other cultural sites, including 240 FMG heritage places of which 124 were completely destroyed. Song lines are cultural routes that span the country. The court found that the damage done was legal, and had been approved by government authorities, but not by YNAC which has exclusive native title rights to the land. The YNAC group said that Fortescue continued to mine native title land on Yindjibarndi since '2012 without any agreement with YNAC or Indigenous Land Use Agreement. Fortescue did not immediately comment, but previously stated that it had sought to settle with YNAC over a 15-year period and paid the award sum.
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Investors focus on US inflation data as gold prices remain stable
Investors awaited the release of a crucial U.S. inflation data to determine the Federal Reserve's future interest rate path. As of 0150 GMT, spot gold was unchanged at $4,652.39 an ounce. Tuesday, prices rose to their highest level since mid-May after last week's sharp gains following the U.S. Treasury bond buyback announcement. U.S. Gold Futures rose 0.3% to $4,709.20. The U.S. The Personal Consumption Expenditures price index (PCE) for July is due at 1230 GMT. The Fed chairman Kevin Warsh will also be speaking at the Jackson Hole symposium on Friday. "For gold, a soft-than-expected inflation combined with a balanced or dovish message from Warsh would be the most favorable outcome, reinforcing the expectations of lower real yields, and reducing opportunity costs associated with holding a nonyielding investment," said Wael Makarem, Financial Markets Strategists Lead at Exness. A renewed decline in confidence about U.S. fiscal stability could be significant (for gold), especially given recent Treasury buyback plans and their impact. Data released earlier this month showed a surprising decline in nonfarm payrolls in the United States and consumer inflation that was in line with expectations. This dampened expectations of a September rate hike. According to the CME FedWatch tool, traders are pricing in an?63.6% probability that?the Fed?will leave rates unchanged next week. Iran announced that it had re-started talks with Oman about managing the Strait of Hormuz. This lowered oil prices. Kristalina Georgeeva, Managing Director of the International Monetary Fund, said that the global economy had weathered energy shock from Iran's war better than expected. She did, however, raise concerns over the deteriorating fiscal situation in some countries. Other metals saw spot silver rise 0.7% to $69.09, platinum up 0.6% to $1869.22, and palladium firmer 1.4% at $1,345.30.
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Oil prices drop 2% after Iran-Oman talks on reopening Strait of Hormuz
The oil prices fell 2% Wednesday, adding to the previous session's losses. This was due to renewed hopes that?the Strait of Hormuz? could be reopened after Iran announced it had resumed discussions with Oman about managing this strategic waterway. Brent crude futures dropped $1.78 or 2.0% to $86.80 a barge by 0027 GMT. U.S. West Texas intermediate crude futures were also down $1.49 or 1.8% at $80.87. Both benchmarks fell more than 3% Tuesday. Mitsuru Muraishi is an analyst at Fujitomi Securities. He said that the market has continued to react to developments regarding navigation through the Strait of Hormuz and hopes of progress in negotiations between Iran and Oman. He added that "uncertainty over the outlook" has led to bargain-hunting, which is limiting future losses. Prices are expected to remain range-bound in the near term. Iran has said that it has restarted discussions with Oman about managing the Strait, as it is facing increased economic pressure from U.S. president Donald Trump. Iran and Oman are in sporadic talks about the control of?traffic along the waterway. This was the route that handled one-fifth the global oil and LNG shipments prior to the start of the war in February. The two countries announced on Tuesday they had discussed "a temporary joint navigational corridor" and agreed to clean it of mines. Two people familiar with the situation said that despite the tensions the U.S. has begun to send back personnel to diplomatic missions in the Middle East which were evacuated or reduced due to tensions with Iran. Washington's move indicates that it sees less risk in the short term of a conflict escalating with Iran, even though some embassies initially will operate below full capacity. Washington increased sanctions on Monday to cut off Iran's economic lifeline. It threatened?to punish those countries that continued?to do biz with Tehran. The United Kingdom Maritime Trade Operations reported that an unidentified 'projectile' struck and disabled an oil tanker on Tuesday, about 9 nautical mile (17 km) northeast from Oman’s Ash Shishah which?lies near the entrance of the strait. The American Petroleum Institute said crude oil inventories in the U.S. rose by?about 4.2 million barrels during the week ended August 21. The analysts polled by?by predicted that crude oil stocks would increase on average by 600,000 barrels. The EIA (the statistical arm of the U.S. Department of Energy) will release official data at 10:30 am. ET (1430 GMT), on Wednesday. Reporting by Yuka Obaashi; Editing and Sonali Paul by Chris Reese
Andy Home: Chinese exports ease the pain of London zinc shorts
The London Zinc Market remains a hazardous place for "bears".
Metal that was expected to drop in price this year has risen. London Metal Exchange's (LME) 3-month zinc?hit a new four-year high of $3,858 a metric ton Tuesday morning.
The relentless rally has been accompanied by an abrupt?reduction in LME time-spreads.
The premium for metals delivered over a three-month period
The market tightening is due to the low LME inventories that were the cause of the last year's squeeze.
Help is on the way for LME shorts. China has begun lifting exports and dispatching metal directly to LME Hong Kong warehouses.
A Tale of Two Markets
Zinc demand is not booming. According to the International Lead and Zinc Study Group, global consumption grew modestly by 1.5% from January to may.
The Group assessed a global surplus of 145,000 tons of refined metals in the first five months of the year, based on a 3.5% increase in output.
However, the catch is that the majority of the growth in refined production came from China as it did last year. Western smelters are facing extreme margin pressure due to the collapse of treatment terms and a series of supply issues.
The majority of surplus metal is therefore also found in China.
Since the beginning of January, the stocks registered at the Shanghai Futures Exchange has more than doubled.
LME stock levels, which include those in off-warranty storage, remain 6,500 tonnes lower, at 124.677 tons, despite recent daily deliveries to LME warehouses.
HONG KONG FAST TRACK
Since the beginning of last week, there have been daily warranting actions as the LME premiums for cash deliveries are increasing.
The volumes have been modest, totalling 17,000 tons. However, they are enough to stabilize the on-warrant stock at around 95,000 tons.
The number of off-warrant stock has increased from 15,480 to 29,627 tonnes, a high compared to the low in July.
Hong Kong has delivered around two thirds of the LME-mandated deliveries and also holds another 5,000 tonnes in storage off-warrant.
Hong Kong was approved by the LME for good delivery only in January of last year. The first warehouse opened in July. But it is clear that Hong Kong has already become a conduit for arbitrage.
China has been historically a major importer of zinc refined. As recently as 2024, volumes reached as high as 445 000 tons.
The country's smelter capacity is now so large that it is close to self-sufficiency.
Imports dropped by one-third to 299,000 tonnes last year. China became a net exporter both in November and December. It delivered metal to LME storage facilities in Singapore and Taiwan in order to take advantage of the London cash crunch.
Shanghai Metal Market (SMM), a local data provider, reports that the country became a net exporter in July with shipments of 9,200 tonnes and imports continuing to fall.
This time, the pace of arrivals has clearly slowed down.
So far.
Turning Bullish
Bulls bet that even China's Smelters will have to reduce operating rates due to bombed out treatment charges.
There are many zinc bulls in town. Over 110,000 tons of long positions have been accumulated by investment funds, making it the largest collective bet since the LME began publishing its position reports in 2018.
The LME option market also shows a renewed interest in zinc. The LME options market also shows renewed interest in zinc.
The bull story is that of a limited mine supply. Global mine production increased by 4.8% last year after three consecutive years of decline. ILZSG reports that the momentum has waned quickly this year with growth only reaching 1.1% between January and May.
According to SMM, the competition for mined concentrats is so fierce that spot-treatment charges for Chinese imports have now reached a record low of minus $117.50 a ton.
China's smelters are still battling. According to ILZSG, growth was "significant" during the first five month of 2026.
How important will the LME bulls be? And, even more importantly, how urgent will it be for LME short position holders?
Andy Home is a columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
(source: Reuters)