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Gold gains on weaker dollar; US inflation data is in focus
Gold rose on Wednesday, aided by a weaker?U.S. Investors weighed the price pressures of renewed attacks in the Middle East, and awaited important inflation data to get clues about the Federal Reserve policy outlook. Spot gold increased 1.1%, to $4401.09 an ounce, by 8:25 GMT. U.S. gold contracts for December delivery rose 0.1%, to $4445.10. The U.S. Dollar has weakened, making greenback priced bullion more accessible to buyers abroad. Lukman Otunuga is a senior research analyst with FXTM. He said that a weaker US dollar and technical buying are providing ample support for gold. "Normally, an oil-driven inflation fear would have a negative impact on gold and reinforce the argument for higher interest rates. The broader dollar softness today is more important than?that pressure, and its near-term course will be determined by the U.S. Inflation data this week. Investors prepare themselves for Thursday's data of the Producer Price Index (PPI), and Friday's data of the Consumer Price Index. According to CME FedWatch Tool, traders are pricing in a 60% probability of an interest rate increase at the central banks policy meeting next Monday. Iran's Revolutionary Guard also said that it had fired ballistic missiles at a U.S. military base in Jordan and attacked ten ships on Wednesday after Washington claimed to have destroyed five Iranian oil tankers. Brent crude prices surpassed $100 per barrel for the first time since July 24, Gold is often seen as a hedge against inflation, but higher rates tends to reduce its appeal. In a note, Ole Hansen said that bears may focus on a head-and-shoulders pattern. A break below $4,300 could signal a deeper corrective move towards the established $4,000 support area. "Conversely a sustained break above the '200-day moving averge would improve the technical outlook, and bring $4.770 into focus." Silver spot gained 1.3% per ounce to $66.59, platinum rose 2.2% to 1,852.86, while palladium rose by 0.5% to 1355.6.
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Google invests $15 billion in AI infrastructure, and purchases nuclear power in Finland
Google, a subsidiary of Alphabet, said it would invest at least EUR13 bn ($15.1 bn) in artificial-intelligence infrastructure in Finland over the next two years. It also announced that it had signed its first contract for nuclear power outside the U.S. Fortum, the operator of Finland's nuclear power plants, said that part of the deal is a 22-year agreement to purchase up to 50 percent of energy produced by one of Finland’s two nuclear reactors. Finland is a country that offers a lot of nuclear power as a low-carbon source of energy. Companies like Microsoft, TikTok's owner ByteDance, and Google are looking for sites to build data centres. Ruth Porat, Chief Investment Officer of Google U.S.A., told Helsinki reporters that this was the company's first nuclear deal outside the United States. "We think it's an important cornerstone for everything we do here," she said. The companies have said that Fortum and Google will also look at the development of nuclear and renewable energies in Finland. Fortum's shares rose by 10% at?0825 GMT. This was higher than the 1.4% rise in the Helsinki benchmark index. The biggest deal in Europe so far Alphabet increased its investment in the global market this year to between $195 and $205 billion dollars as it seeks out to capture the growing computing demand. Google says the AI investment in Finland is its largest deal ever in Europe. Google announced that the investments would include data centres, improvements to the electricity grid, and clean energy projects and battery projects, which will drive services like Gemini, Search, Maps, and YouTube. The company stated that "the new digital infrastructure will be building blocks for Finnish digital readiness and innovation as well as AI development" Google stated that the investment will support 7,000 jobs per year once it is operational. It will also contribute $3.6 billion to Finland's Gross Domestic Product during construction. In a statement, Finland's Premier Petteri Orpo stated that Google's decision is "a clear testimony to our strengths". He added that "the value of the data-economy?extends beyond direct investments into spurring research and development, innovation, and creativity." Fortum stated in a statement that the long-term contract provided financial certainty for a lifetime upgrade and extension of 'the Loviisa Power Plant through 2050. The plant is located near Google's Hamina Data Centre. The cold climate of Finland lowers costs, not only because of the abundance of low-emission electricity but also because the energy required to deal with the heat generated by data centres is reduced.
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Brent crude crosses $100 per barrel amid Middle East conflict
Benchmark Brent crude oil futures surpassed $100 per barrel on Wednesday, reaching a six-week high. They also broke the symbolic barrier for the first since July 24, as the intensifying conflict in Middle East increased concerns about oil flow from the region. Brent crude futures rose $2.01 or 2.05% to $99.93 per barrel at 0802 GMT after touching $100.19 earlier. U.S. West Texas intermediate crude gained $1.49 or 1.60% to $94.52 per barrel. Brent crude prices are up by a quarter compared to early last month, as the hope for a permanent solution to the six-month old U.S./Iran conflict fades. Brent oil has risen to a record high of $126.41 per barrel since the Iran war began on February 28. This peak was reached on April 30, 2009. The attacks this week by the?Houthis, who are backed by Iran, on Saudi energy installations set oil installations on fire, threatening to escalate the conflict. The attacks threaten oil shipments through the Red Sea. This route has been a vital alternative to the Strait of Hormuz where oil flow has been severely restricted?since February 28, when the Iran war began. MOUNT THE RISKS OF SUPPLY Market participants seem to be pricing in an extended conflict in the Middle East, as well as a risk that the recent escalation of military strikes will disrupt oil flows out of the Middle East," Hamad Hussain said. The key risk is if the recent attacks on oil tanks lead to fewer transfers of oil from ship to ship in the Gulf of Oman. These transfers have "so far" played a major role in providing oil for global markets and containing prices. In recent days, a growing number of banks have?increased their crude oil price forecasts. These include Goldman Sachs and Bank of America. According to Rystad's Chief Economist Claudio Galimberti the volume of oil flowing through Hormuz had doubled in the week prior to the resumption of fighting on August 30. However, it has fallen to below 2 million bpd more recently. "I believe the market is attempting to treat this increase in energy prices as a one-off. It's not. This is structural. It is not going to go away and I would say it's a part of what i would call a security premium. It's only going to grow," said Jeffrey Currie. The International Energy Agency (IEA) said in its report last month that despite the increase in oil production by non-OPEC producers such as?the United States of America, Canada, and Guyana, it expects global oil supplies to fall this year, by 4.3 millions bpd or about 4%.
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Data shows that Indonesian wildfires are the world's most destructive.
Data released on Wednesday showed that Indonesia has the highest carbon dioxide levels in the world due to wildfires burning across parched forest and peatland in Borneo, Sumatra and other islands. Fire Emissions Watch is a portal created by the European Union’s Copernicus Climate Monitoring Service. It shows that Indonesian fire emissions between September 1 and September 7 reached?19.7 millions metric tons. This week, Indonesia overtook Russia, making up a third or more of the total global. Indonesia has one of the most dangerous fire seasons in the world. But as "super El Nino" weather conditions cause temperatures to rise and droughts to worsen, authorities are battling the most intense wildfires season the country has seen in 11 years. Mark Parrington, senior researcher at the Copernicus Atmosphere Monitoring Service, said: "We expect some fires to occur in the region this time of the year. But with El Nino it gives them a huge boost." "These fires are burning in a much more extreme manner when they ignite." Copernicus data revealed that between September 1 and September 7, the fire emission intensity was more than 1,500 kg/sqkm, which is 10 times higher than the Russian level. The highest concentrations were in Kalimantan, Indonesia's part of Borneo, and the eastern parts Sumatra. The emissions were 273% above the seasonal average but still lower than 21.7 million tonnes emitted during the same week in 2015 when Indonesia was fighting?similarly intensive El Nino conditions. According to IQAir, a Swiss air quality monitoring company, the city of Pontianak, in West Kalimantan was one of the worst affected areas. The air quality index on Wednesday reached 394. A reading of 300 is considered dangerous. In a press release, Indonesia's Environment Ministry said that the readings of hazardous air quality in Kalimantan (and elsewhere) were "of concern". It said that it monitored Copernicus data but also added that it "doesn't directly reflect air-quality conditions in a particular area" and other factors had to be taken into consideration. "BELOW THE DETECTION LINE" Nisa Novita, of the environmental group YKAN that helps communities fight fires, stated that from January to July of this year, around 202,000 hectares (780 sq miles) of Indonesian lands were burned. This is about a third of what was burnt during the same time period in 2015. She said that August data "shows a significant growth of approximately 600,000 hectares in Kalimantan and Sumatra, as well as South Papua." In 2015, Indonesia lost an area larger than Wales of 2.6 millions hectares due to fire. According to the Indonesian Forest Ministry monitoring platform Sipongi based on NASA's Terra and Aqua satellite data, from August 1, 2015 to September 8, 2016, there were 13,443 hotspots recorded, compared with 9,454 during the same period in 2015. Sipongi data revealed that a record high monthly for hotspots occurred in October 2015. Fire Emissions Watch estimates particulate matter concentrations, volatile organic compounds (VOCs), greenhouse gases, and other fire-fuelled pollutions using satellite observations. But Parrington says it may actually be "underestimating" the extent of problem. He said that if peat fires are burning underground or at low temperatures, the sensors will not detect them. Fires in Indonesia produced more emissions each day in 2015 than the entire EU and caused more than 100,000 extra deaths in Indonesia, Malaysia, and Singapore. "We have to remember that we are still at the beginning of the summer season and we expect fires to continue, and emissions to increase, possibly through the end of October like we did in 2015." said Parrington. In two months, we will know the extent of this year's El Nino, but early indications suggest that it has been at a pace, if only slightly higher than previous El Nino seasons.
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Brent crude crosses $100 per barrel amid Middle East conflict
Benchmark Brent crude futures surpassed $100 per barrel on Wednesday. This was the first time that the symbol had been breached since July 24, as the intensifying conflict in the Middle East fueled a growing concern about oil exports from the region. Brent crude futures were up $2.15 or 2.2% to $100.07 a bar by 0721 GMT. U.S. West Texas Intermediate crude rose $1.70 or 1.83% at $94.73 a bar. Brent crude prices are up by 25% since the beginning of last month, as hope for a permanent solution to the U.S.-Iran conflict fades. The attacks this week by the?Houthis, who are backed by Iran, on Saudi energy installations set oil installations ablaze and threatened a significant extension of the conflict. The Houthi attacks may threaten the crude shipments through the Red Sea, which is a vital alternative route for the Strait of Hormuz. Crude flows in the Strait of Hormuz have been drastically curtailed ever since the Iran War began on February 28, 2014. In recent days, a growing number of banks have increased their crude oil price forecasts. These include Goldman Sachs Bank of America, HSBC and Bank of America. According to Rystad's Chief Economicist Claudio Galimberti the volume of oil flowing through Hormuz was double that of the previous week, but it has recently dropped below 2 million bpd. The International Energy Agency said that while non-OPEC producers such as the United States and Canada have?increased output, it expects global oil supplies to fall by 4.3m bpd or about 4% this year.
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Gold gains 1% on US inflation data and Middle East risk focus
Investors focused on interest rate outlook as gold prices rose by 1% on Wednesday, as dollar remained subdued. By 0633 GMT, spot gold had risen 1% to $4,399.45 an ounce. U.S. Gold Futures rose 0.1% to $4,443.20. Dollar remained tame, allowing holders of other currencies to afford greenback-priced gold and silver. In the gold market there is a short-term tug of war between bulls and bears. This 'kind of movement may continue until the CPI report at the end of the week," said Kelvin?Wong, senior market analyst at OANDA. While the expectation of a hawkish Fed is weighing on gold prices, dollar debasement and fiscal deficit concerns remain supportive. The markets are waiting for the U.S. Producer Price Index?data due on Thursday. Consumer Price Index data is expected on Friday. Iran's Revolutionary Guard claimed it fired ballistic rockets at a U.S. military base in Jordan and attacked 10 vessels, after the U.S. announced it destroyed five Iranian oil tanks, in a dramatic escalation in the six-month war. Brent crude prices rose for the?fourth session in a row. As energy costs rise, they tend to push up inflation. The 'CME FedWatch tool' shows that traders believe there is a 60% probability that the Federal Reserve will raise interest rates at its next policy meeting. Although gold is widely regarded as an inflation hedge, elevated rates weigh on the appeal of ?non-interest-bearing bullion. Kelly Xu is a commodities analyst at Alpine Macro. She said that precious metals are facing a test in the near term, but that another major selloff was unlikely. Silver's long-term support is based on the physical market tightness, structural supply deficits, and inelastic mining production. Spot silver rose 1.3% to $66.59; platinum rose almost 2% to $1847.33 and palladium gained 0.3% to 1,353.71.
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Inditex, Zara's owner, reports strong August sales despite heatwaves
Inditex, the owner of Zara, reported better than expected results for its autumn trading on Wednesday. Currency-adjusted sales were up 9% during August, even as extreme heat in Europe changed shopping habits in Zara's biggest market. Fast-fashion giant, Zara, made EUR11 billion ($12.8billion) in sales during its second quarter from May to July. This was a good showing considering the summer's high energy prices and the weakened consumer sentiment due to?the ongoing Iran War. Oscar Garcia Maceiras, CEO of the company, said that "these excellent results demonstrate the extraordinary abilities of our teams." He added that they were operating in an "extremely complex global environment." Inditex's share price is soaring: it hit a record EUR59.1 in the last month. The IPO filings by Shein, a cheap fashion platform, revealed a slowed down sales pace, a sign that the pressure on European fast-fashion companies like Zara and H&M to compete is easing. Inditex is trying to attract more lower-income shoppers that may have been turned off by Zara's move to higher prices. Inditex's first-half gross profit increased by 8.3% to EUR11.6 Billion, with a margin of 58.7%. LONGER, HOTTER SUMMERS The hot weather is affecting retailers in Europe and America, who are forced to change their sourcing schedules. According to European Union scientists Western Europe experienced its hottest June and July ever, as climate changes pushed temperatures up, fueling?wildfires throughout the region. RBC analysts estimate that Inditex's annual capital expenditure is three times greater than its Swedish competitor H&M.
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Oil prices to hit $100; Asia stock markets fall as Middle East tensions increase
Brent crude rose to $100 per barrel Wednesday, keeping Asian stock markets subdued as the attacks in the Middle East intensified, fueling inflation fears ahead of the closely watched U.S. Consumer Price Data. As traders exited their short positions, the yen rose to a near seven-month high against the dollar. This was due to expectations of faster Bank of Japan rate hikes as well as a possible rush of Japanese capital repatriation. The euro edged up ahead of Thursday's European Central Bank policy decision, as markets were widely expecting an increase amid inflationary pressures due to the Iran War. The?Houthis, backed by Iran, launched attacks on Saudi cities in Yemen on Tuesday. This further embroiled a U.S. ally in the conflict. Meanwhile, U.S. forces struck multiple Iranian oil tankers, and Iran attacked a U.S. military base in Jordan. Brent crude futures rose $1.10, to $99.02 per barrel. ?U.S. West Texas Intermediate crude oil was $93.95 per barrel, an increase of $0.93. Hong Kong's Hang Seng fell 0.3%, while mainland Chinese blue-chips were little altered. The rebound in chip stocks and?AI helped other regional benchmarks, however. South Korea's KOSPI rose 1.2% while Taiwan's TAIEX managed to gain 0.2%. Overnight, the Philadelphia SE semiconductor index rose 1.3% despite declines in Wall Street's main three indexes. U.S. S&P futures rose 0.1% after the cash index fell 0.6% on Wednesday. Pan-European STOXXX 50 futures fell 0.5%. "Across several of the major macro markets, we see indecision in the price action -- tight ranges and a general holding/consolidation pattern," Chris Weston, head of research at Pepperstone, wrote in a client note. Brent crude is "one of most clear real-time signals" for sentiment for the market. $100 "now seems like an extremely achievable level," said he. Inflation fears have weighed on global equity markets in recent weeks, and bond yields are rising as traders increase the odds of central bank tightening. The U.S. CPI is due Friday. The odds of the U.S. Federal Reserve announcing a quarter point hike or a "hold" on Wednesday next week are close to equal, but traders are almost certain that the BOJ will announce a quarter point?increase two days later. The yen increased by 0.5%, to 153.32 dollars per yen. This is a slight increase from its previous high of 152.89. Market players say that the yen had surged by around 4% in the last five sessions. Hawkish comments made by BOJ officials were ostensibly what sparked this move, which then snowballed when key levels were broken. The ECB will almost certainly raise the euro zone interest rates on Thursday by a quarter-point. The euro rose 0.1% to $1.1634 and is now in the middle of the tight range it has been trading within for the last three weeks. The value of the pound was not changed much at $1.3552. The Bank of England will announce its latest decision next Thursday. Economists predict that the key rate for the rest of the year will remain unchanged. The Australian dollar rose by 0.2% to $0.7230. Bitcoin climbed to $79,009.09 and changed hands. Gold rose 0.7% to $4,385 per ounce.
Indonesia's chief regulator claims that the new commodity exchange will help it to be a "price influencer" with its new commodities.
Indonesia aims to influence the price of its top commodities in the early stages of operation at its planned 'new commodity exchange. The newly appointed chief regulator of the country said this on Wednesday. Jakarta is looking to become a global 'price maker.
Indonesia's new strategic commodities and minerals exchange, which is part of President Prabowo Subianto's ambition to increase state control over vast natural resources in the country, will launch on January 1, 2020.
Prabowo, in a fiery address to the parliament last month said that the resource-rich nation would prefer to keep its commodities rather than sell them at too low a price.
Sarjito said the bourse's first goal should be to achieve a smaller target in order to gain more influence on the international stage.
He told reporters that he didn't want the exchange to be a price taker at first, but rather a price influencer.
Sarjito (who goes by a single name) said, "At the very end, we have to be able and confident enough?to be a price maker."
He didn't set a deadline.
Indonesia is the largest exporter in the world of palm oil, thermal coal and nickel. It also ranks high on global lists for tin and copper.
The palm oil production and export policies of Malaysia are already impacting the benchmark price at the Malaysian derivatives exchange. A surge in nickel production over recent years also has pressured prices in London and Shanghai.
Analysts and industry veterans have warned that Indonesia's plan to set prices could backfire by driving away buyers if?trading on the?exchange is made mandatory, or if the price difference with other benchmarks gets too large.
Sarjito was nominated by Prabowo to this position and received parliamentary approval last month. He had promised to create a trusting exchange in a "fit?and?proper" test.
Sarjito stated that the new bourse will help to tackle tax leakage by addressing such practices as under-invoicing by exporters and transfer pricing.
Sarjito stated that his immediate priority was to finish commodity trading regulations before the deadline of September 17.
He said that a presidential directive would decide which commodities will be traded at the exchange.
(source: Reuters)