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BHP is unlikely to attack Anglo or Teck in its pursuit of organic growth
Investors and bankers on Wednesday said that BHP, the world's largest copper miner, is focusing on growing its own assets as it transitions to a new leadership. This means it will not be able to gatecrash a planned $53 billion merger between Anglo American Resources and Teck Resources. Anglo American, a London-listed company, and Teck Resources, a Canadian firm, announced their merger on Tuesday. This is the second-largest tie-up in this sector. The goal of the merger is to create a global heavyweight focused on copper. The deal was announced just over a month after BHP canceled a $49-billion bid for Anglo, which would have boosted the Australian miner’s position in the metal considered essential to the energy shift. Investors said that BHP's strategy has been consistent, and it suggests it will not be making a move against Anglo or Teck. Andy Forster, portfolio manager of Argo Investments, Sydney, which owns BHP shares, said that any move by BHP would be a surprise, given BHP's statement, "We have moved forward." BHP spent instead $2 billion on a stake in two Argentinian projects with Lundin, including the Josemaria Mine, whose life last month was extended by six more years. It also has pushed to increase production at the top copper mine Escondida, in Chile. BHP refused to comment on the AngloTeck deal, but pointed out recent comments made by its CEO who said that M&A is just one of many levers for growth. Mike Henry, CEO of BHP, said in an August results call that it was difficult to find the right combination between commodities we want, and asset quality we desire, at a cost that would still allow us to unlock value for BHP's shareholders. Anglo, despite its recent inability to sell its Australian coal assets has worked hard to increase its share price compared to a year earlier, according to a M&A banker. Both miners are now in the game. Anglo's shares are up. They could likely put in a strong defence, like they did the last time," said he. Anglo shares are up 20% since BHP's late April bid, while BHP has dropped 8%. Two people told me that the deal was clever because it benefited Canada in ways that other companies that might be interested in buying Teck would find difficult to duplicate, like moving the headquarters of the new company to Canada. The Australian government required that the holding company's headquarters be in Australia as part of the conditions it set for the approval of BHP's 2001 merger with South Africa’s Billiton. Another potential stumbling-block is succession. BHP Chair Ross McEwan succeeded Ken MacKenzie as CEO in March after a decade of his tenure. Henry, however, is now more than five years deep into the typical six-year period, so BHP's focus may be on replacing him, rather than on large M&A. Bankers don't rule out BHP's possible involvement in the future, particularly if the deal does not go as planned. A M&A banker who was not directly involved with the deal said, "You would have to seriously think about it. The two most obvious targets for a deal that has no premium." The parties anticipate the deal to take between 12 and 18 months to close. They have time. A deal does not have to be completed tomorrow.
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Austria loses its legal challenge against EU 'green gas' and nuclear rules
Austria lost its legal challenge to the European Union's rules classifying nuclear energy and gas as climate-friendly investment on Wednesday. Europe's second highest court sided in favor of the EU. Austrian government challenged the decision of the European Commission to include nuclear and gas in the EU "taxonomy", which is a list of investments in Europe that can be labeled and marketed. The court agreed with Brussels in a ruling that said the EU Commission was "right to believe that certain economic activities within the nuclear energy sector and the fossil gas sector can, under certain circumstances, contribute significantly to climate change adaptation and mitigation." Gas and nuclear were included in the EU taxonomy for 2022, which exposed deep rifts among countries about what energy sources they should use to achieve climate change goals. Spain and Denmark, among others, had said that it was not credible for gas, which is a fossil fuel emitting CO2, to be labelled as climate-friendly. Poland and Bulgaria are among the countries that have sought to support investments in gas as a way to get rid of more polluting coal. Austria's legal case, filed to the EU general court, argued that Brussels should annul rules because nuclear energy can't meet the requirement of "doing no significant harm" to environment due to concerns about radioactive wastage. Austrians are generally against nuclear power, and the country never built an atomic reactor. (Reporting and editing by Charlotte Van Campenhout, Charlotte Abnett)
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ANZ increases gold price forecast by ANZ to $3,800 due to solid demand
ANZ Group, an Australian bank, raised its gold price forecast for the year to $3,800 on Wednesday. It expects that prices will peak at $4,000 per ounce by June next year, due to strong demand from investors. Gold prices reached a record high of $3,673.95 Tuesday. They have gained 38% this year due to a weak dollar, central bank purchases, dovish monetary policies and increased global uncertainty. ANZ analysts stated in a report that "prospects of continued accommodative monetary policies, increasing geopolitical challenges, ongoing macroeconomic issues, and concerns about the Fed's independent will strengthen the investment case" for gold. The central bank's gold purchases in 2025 are expected to be between 900 and 950 tons, which translates to 485 to 500 tons of purchases in the second half of the calendar year. China's central banks added gold to their reserves in August. This is the 10th consecutive month that they have purchased bullion. The U.S. Fed will probably maintain its current easing policy until March 2026, due to rising risks on the labour market. This will put downward pressure on U.S. Treasury rates, which usually increases the appeal of Gold," ANZ stated. The Australian lender raised its silver price target for the year to $44.7 an ounce. It cited support from the gold bull run, and strong ETF inflows. On Monday, spot silver rates reached a record high of $41.65/oz.
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The energy transition in Asia is threatened by coal subsidies and policy instability
Industry executives warned on Wednesday that Asia's clean-energy push would stall unless the governments cut fossil fuel subsidies and offered a stable policy direction. They also said they needed to invest in upgrading grids. Executives cited the cancellation of renewables' auctions and the subsidies given to fossil fuel industries as the main obstacles to growth for green investments, at a time that data centres are driving the growth in energy demand. "Coal is still subsidised, and energy and power in general are used to gain votes." Lawrence Wu, Chief Financial Officer for Asia at Portugal-based renewable energy firm EDP Renewables told the APPEC Conference in Singapore that this was the biggest obstacle. The coal industry in major Asian economies, including Indonesia and India, continues to be rewarded, claiming that it keeps retail electricity tariffs low. They also cite lower emissions per capita to justify their dependence on fossil fuel. Nitin Apte is CEO of General Infrastructure Partners' Vena Group in Singapore. The company has quadrupled the construction of renewable energy project in Asia. We can estimate the risk if we know that a permit will take four years to obtain and we are certain of all the steps. Apte explained that the concern arises when an auction is run and then cancelled, or if the power purchase contract is not bankable. Taiwan has revoked its offshore wind generation licenses following a review in this year. India, on the other hand, has cancelled 11,4 gigawatts of renewable energy tenders over the past two years due to high tariffs. He said that data centres are causing a surge in demand for power across the region. This is not due to renewable energy. "I don't believe they (data centers) really care about the carbon intensity of their data centres." "They just want energy," Apte stated. Malaysia, one the most important data centres markets in Southeast Asia, has increased coal-fired electricity production and imported fuels at record levels to take advantage of low prices. The executives said that delays in obtaining permits and other challenges were increasing financing costs. They also called for a long-term plan and predictable timelines. Wu said EDPR was "doubling down" in Japan and Australia because they had "sustainable" risk that the company is "prepared to accept". The predictability of the project helped to reduce capital and financing costs. (Reporting and editing by SonaliPaul; Sudarshanvaradhan)
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Asia stocks rise, bonds fall when traders look at odds of a bigger Fed cut
Asian stocks followed Wall Street higher Wednesday, and safe-haven bond prices fell. Traders increased their bets on the possibility that a softening U.S. labor market would prompt the Federal Reserve to lower rates by at least one quarter point next Monday. S&P 500 Futures rose 0.3%, while STOXX50 futures in Europe gained 0.2%. The dollar is little changed after two days of crucial U.S. inflation data, which will begin later on Wednesday and continue until the Fed's September 17, decision. After Israel's attack against Hamas leaders in Qatar, crude oil prices continued to rise. Geopolitical concerns remained at the forefront of investors' thoughts after Poland and NATO scrambled their air defences in order to shoot down drones as a result of a Russian air strike on western Ukraine. The Nikkei 225 index in Japan rose 0.8%. South Korea's KOSPI increased by 1.7%. Taiwan's equity benchmark reached a new record high of 1.5%. Hong Kong's Hang Seng rose 1.3% while mainland Chinese blue-chips rose 0.3%. Overnight, S&P 500 and Nasdaq Composite, as well as Dow Jones Industrial Average, each finished the day with new all-time records. The CME Group's FedWatch Tool reveals that traders see a Fed rate cut next Wednesday as an almost certain thing. They even place odds of 8.4% on a half-point increase. Investors were convinced that the Fed could not wait to support the economy any longer after a dismal payroll report last week. The final obstacles to this view will be the readings of consumer and producer inflation on Wednesday and/or Thursday. Kyle Rodda is a senior financial market analyst at Capital.com. He said that an upside inflation surprise would cause the probability of a rate cut to be reduced, not just for September but also for future months. According to current risk appetite, the rapid deterioration of U.S. data on the economy, especially jobs, is the reason that markets are pricing such aggressive easing by the Fed. The markets have taken the court ruling, which temporarily prevented President Donald Trump from removing Federal Reserve governor Lisa Cook. This case is likely to be heard by the Supreme Court. Investors are closely following this unprecedented legal battle, as it could threaten the long-held independence of the central bank. Treasury bonds in the United States fell for a second consecutive day on Wednesday. This pushed yields up. After a nearly 3-basis-point increase on Tuesday, the 10-year Treasury yield increased by 1 basis point, to 4,088%. The equivalent yields on Japanese government bonds rose by 0.5 basis points, to 1.565%. This is a slight decline from the earlier increase after a successful auction of five-year bond. When bond prices drop, yields increase. The U.S. Dollar Index, which measures currency against six rivals retreated slightly to 97.707 and reversed earlier gains. The dollar was unchanged at $1.1715 for the euro and down by 0.07% to 147.31 yen. This Thursday, the European Central Bank will set its policy and it is expected that rates will remain unchanged. Last month, economists were divided on whether the ECB would continue to reduce rates. However, recent data shows that inflation is close to 2% and unemployment has reached a new low. On Friday of next week, the Bank of Japan will announce its latest policy decisions. It is widely expected that they will not raise rates this time. Bloomberg and the BOJ published contradictory reports Tuesday regarding tone. Bloomberg reported that policymakers were looking at a hike in this year, whereas Bloomberg suggested the BOJ could wait a little longer before tightening policy. Investors are also watching politics. They're concentrating on who will succeed Shigeru Shiba as Japan’s next Prime Minister, and the longevity of France's fifth newly appointed prime minister in just two years. Gold prices rose by 0.5%, to $3644 an ounce. This is a drop from the previous day's record high of $3673.95. Brent crude futures increased 1.1%, to $67.13 per barrel. U.S. West Texas Intermediate Crude futures also rose 1.1%, to $63.34. Prices settled at 0.6% higher in the previous session, after Israel claimed it had attacked Hamas leaders in Doha. Qatar's Prime Minister said that this attack threatened to derail talks between Hamas & Israel.
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Aramco, the Saudi oil giant, will sell two-part Islamic bonds
A term sheet obtained by revealed that Saudi Aramco has opened the books for the sale a U.S. Dollar Islamic bond (sukuk) with a maturity of five and ten years. The sukuk is expected to be priced later on Wednesday. Aramco, a company in which Saudi Arabia is the majority shareholder and Aramco planned to raise debt to Leverage your balance sheet Last week, it was reported that oil prices were falling and the sale could generate between $3 billion to $4 billion. The term sheet stated that the initial price target was 105 basis points above U.S. Treasuries for the five-year portion, and 115 for the longer-dated tranche. Aramco’s issue coincides with a surge of bond issuance in the Gulf region, including Saudi Arabia’s $5.5 billion Sukuk. This was driven by strong investor interest and large inflows to bond funds. It will also test the appetite of investors for regional deals, a day after Israel tried to kill Hamas political leaders with an Airstrike on Qatari neighbour The military action of the United States in the Middle East has been intensified. Al Rajhi Capital Company is mandated as the active bookrunner on this transaction. Saudi Aramco has not responded to an immediate request for comment on the transaction. (Reporting and editing by Christopher Cushing, Kim Coghill and Scott Murdoch)
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The specter of stagflation clouds Fed's optimism
Kevin Buckland gives us a look at what the future holds for European and global markets. The market is optimistic about monetary policy. Rising equity prices and falling bond values are a good indicator of this. A rate cut next week at the Fed meeting has a decent chance to be a big one. Wall Street closed with new record highs over night, Taiwan's benchmark has reached a new peak and Japan's Nikkei index is moving back to Tuesday's unprecedented level. The unquestionable weakness of labour market indicates that policy easing will be imminent. The question is, however, how much the Fed's rate cut trajectory is complicated by the still-sticky inflation. Markets will receive two crucial days of data, namely PPI today and CPI the following day. The Fed would be forced to take a risky course of action if inflation levels were high. The market currently has 66 basis point of easing priced for the end of the year, with 7% odds on a 50 basis-point cut coming next Wednesday. The Fed is still the most important story on the global markets, but European investors should keep an eye on the geopolitical situation after NATO member Poland shot down for the first time apparent Russian drones it claimed had infringed on its airspace when it launched an attack against western Ukraine. French politics is also a major topic. The deeply unpopular President Emmanuel Macron has named Sebastien lecornu, a 39-year old loyalist, as his fifth Prime Minister in less than two-years, raising the question of just how long either of them can hold on to power. The outcome of ECB’s two-day summit that begins today is now more certain. Economists are almost unanimous in their expectation for rates to remain unchanged. The ECB's two-day meeting that begins today is more certain, with economists almost unanimously expecting rates to remain steady. The following are key developments that may influence the markets on Wednesday. US PPI (August). -Sweden monthly GDP (July) -Norway, Denmark CPI (both August) Italy, Spain, Greece Industrial Output (all July).
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US inflation data and gold rates are in focus
Investors were watching for key inflation reports this week, as well as expectations of an interest rate reduction in the United States this month. As of 0101 GMT spot gold was up 0.3%, at $3,635.329 an ounce. It had hit a record-high of $3,673.95 per ounce on Tuesday. U.S. Gold Futures for December Delivery eased by 0.2% to $3673.70. "Sentiment has been very bullish." Gold prices are being driven by several factors. "The primary factor is U.S. interest rate expectations," Capital.com's financial market analyst Kyle Rodda stated. The near-term outlook is heavily dependent on these inflation data. If the data is a little spicy, rate cuts may be triggered marginally. This could spark a correction in a market that's technically overbought. Watch closely the U.S. producer prices inflation data due at 1230 GMT and the consumer price reading on Thursday for further clues about the Federal Reserve's rate path. The U.S. government reported on Tuesday that the economy probably created 911,000 less jobs than originally estimated in the 12-month period through March. This suggests that the job growth had already slowed before President Donald Trump imposed aggressive import tariffs. The U.S. Nonfarm Payroll Data released last week indicated a weakening of labor market conditions and sealed the case to cut rates at the Fed’s September Policy Meeting. According to CME Group’s FedWatch Tool, markets are pricing in a rate cut of 25 basis points, with a probability of a 50-basis point cut at 6%. Gold prices are up 38% this year after a 27% increase in 2024. This is due to a soft dollar, central bank accumulations, dovish monetary policies and increased global uncertainty. Gold that does not yield is usually a good investment in an environment with low interest rates. Silver spot rose by 0.3%, to $41 an ounce. Palladium remained flat at $1148.57 while platinum gained 0.9%. (Reporting and editing by Sherry Jac-Phillips in Bengaluru, Eileen Soreng and Brijesh Patel from Bengaluru)
Egypt looks for credit in summer season LNG tender, sources state
Egypt is looking for big volumes of gas from global markets this summertime with delayed payments of approximately six months, terms that market sources said would narrow the list of bidders and increase premiums at a time of high completing need from Asia.
The most populated Arab nation had been setting itself up as a reputable LNG exporter to Europe in the last few years, but diminishing natural gas products have forced Cairo to return to being a web importer of gas.
In a tender that closes on June 26, Egypt's Natural Gas Holding Business (EGAS) is looking for delivery of 17 LNG cargoes, 7 in July, six in August and 4 in September on an ex-ship ( DES) basis, trading sources told .
To protect the requested volumes, Egypt could ultimately pay more than the average premium of in between $1 and $2 per million British thermal unit (mmBtu) to the Dutch TTF hub gas price, the sources said.
Any longer-term payment terms would warrant an additional premium, one source said.
Cairo has actually already paid a premium to the TTF cost of in between $ 1.30 and $1.70 per mmBtu for freights it bought previously this year, S&P information revealed.
Egypt's petroleum ministry did not react immediately to a. ask for comment throughout the Eid vacation.
There is robust Asian demand for Atlantic volumes, which are. also expected to be the primary source of Egypt's supply, as the. Bab al-Mandab strait remains effectively closed because of. Middle East tensions.
It is most likely just Atlantic LNG supply would be competitive. in this tender. But demand from Asia, particularly Japan, has. been stronger in recent weeks than had actually been expected by. lots of, stated Samuel Good, head of LNG pricing at product. prices agency Argus.
Any non-standard aspects in the tender terms would further. buoy this premium.
The Hoegh Galleon drifting storage and regasification unit. ( FSRU), which got to Ain Sokhna port recently, is expected. to manage 12 of the anticipated cargoes while 5 others will be. gotten at the Aqaba port in Jordan, the sources said.
Several traders said they are offering the tender cautious. factor to consider. The tender is for Egypt's largest purchase in. years and comes versus a backdrop of concern over the nation's. credit threat and difficult economic situation.
Egypt's financial challenges and shortage of foreign currency. has left the government with billions of dollars in receivables. owed to significant oil and gas business, 2 other sources at significant. oil and gas business told .
The government has just recently resumed payments to some. manufacturers.
(source: Reuters)