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MORNING BID EUROPE: Markets racked with anxiety as we approach the day of Fed
Ankur Banerjee gives us a look at what the future holds for European and global markets Investors are on edge about the U.S. financial policy outlook, ahead of the?expected Federal Reserve rate cut this week. A divided central 'bank and the prospect that a dovish Fed Chair will replace?Jerome Powell have investors worried. Welcome to the almost-Fed Day! The traders are almost certain that the Fed will cut rates by 25 basis points on Wednesday. Let's face it, most traders are focused on what Powell says and how many rate reductions the dot plot for 2026 will show. The markets are predicting 77 basis point easing by the end of 2026. This means that two more price cuts will remain after December. This week, the Fed is expected to adopt a semihawkish tone and warn that the next rate cut bar will be raised. Anything that sounds even vaguely dovish is a surprise, and could cause a lot of volatility. Bond investors are preparing for a short-term easing cycle by reducing their exposure to Treasuries with long maturities and rotating into intermediate maturities in order to get a better return. White House economist Kevin Hassett said that the Fed should lower interest rates in an interview. This added yet another layer to a likely complex Fed decision-making day. Jamie McGeever, Open Interest Markets columnist, writes that the markets aren't so sure. Stocks are largely trading sideways in the'skittish' mood. European futures suggest a lacklustre start to the year. However, chip stocks may be worth watching. Donald Trump announced on Monday that the United States would allow Nvidia H200 processors to be exported to China, and charge a 25%?fee? for such sales. The Australian dollar also fluctuated after the central bank of Australia kept interest rates the same as expected. After a brief period of weakness, the yen remained steady as soon as news of a powerful quake in Japan began to filter through. The impact of the earthquake has been minimal, as Japanese authorities have lifted tsunami warnings. The following are key developments that may influence the markets on Tuesday. Exports and imports of Germany for October
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Orangutans in danger as Indonesia floods destroy habitat
Amran Siagian (39), a resident of Sipirok in North Sumatra province, met Tapanuli Orangutans frequently on a hill. Siagian who has been working at the Orangutan Center (OIC), as a ranger, to protect this endangered animal for at least five year, recalls that the orangutans loved eating durians and other fruits grown in the surrounding area. Orangutans have disappeared from Sipirok after the landslides. As of Tuesday, 962 people had died from the cyclone-induced flooding and landslides. 291 are still missing. Storms in southern Thailand and Malaysia also claimed the lives of?about 200 other people. "They must have gone further and farther away." I could not hear their voices," Siagian said. Local leaders and green groups have said that?deforestation caused by mining and logging has exacerbated the impact of floods and land slides. Large trees were cut down in Sipirok, which is a village located in South Tapanuli, and was one of the worst hit areas by the disaster. Siagian claimed that a company has been logging the area for more than a year. He said that the deforestation affected orangutans before the floods. Orangutans live by moving from branch to branch between the forest canopy. Siagian stated that if the forest was sparse, they would have a difficult time. OIC founder Panud Hadisiswoyo stated that there were approximately 760 orangutans living in the Tapanuli Region. He said that the biggest threat to forests is due to plantations, and extractive industries. According to World Wildlife Fund, there are 119,000 orangutans in Indonesia and Malaysia. Orangutans may become extinct in this area if the government does not step up. Siagian added that the deforestation was a major factor. (Reporting and writing by Ahmad Luqman Ismail in South Tapanuli, Ananda Teresia, Editing by Stephen Coates.
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Gold prices stable as markets prepare for Fed's hawkish tone
The price of gold was flat on Tuesday, as investors had already priced in a Federal Reserve rate cut. They were also preparing for signs that the U.S. Central Bank may adopt a more moderate easing cycle than expected at its two-day meeting beginning later that day. As of 0444 GMT, spot gold was flat at $4,189.17 an ounce. U.S. Gold futures for December delivery were flat at $4.218.50 an ounce. Kelvin Wong, senior market analyst at OANDA, said that investors are repositioning themselves largely ahead of the Federal Reserve's policy-setting meeting. Powell had given a hawkish rate cut guidance in his press conference earlier this month. Investors in the U.S. Treasury Market are now adjusting their positions. The benchmark 'U.S. The 10-year Treasury yields remained near the 2-1/2 month high reached on Monday. Analysts expect to see a "hawkish" cut this week, accompanied by forecasts and guidance that indicate a high threshold of further easing next year. The U.S. The Fed's preferred inflation indicator, the Personal Consumption Expenditures Price Index (PCE), was in line with expectations. Consumer sentiment also improved in December. The private payrolls in November showed a sharpest decline since more than two-and-a half years. However, jobless claims dropped to a 3-year low during the week ending November 28. According to CME’s FedWatch Tool, the markets now give an 89% chance of a quarter point cut at the Fed’s meeting on December 9-10. Gold is a non-yielding asset that tends to be favoured by lower interest rates. Silver rose by?0.2%, to $58.24 an ounce. This is not far off the record high of $59.32 per ounce that was reached on Friday. Wong said that silver was a more risky play than gold, due to its low inventories and strong industrial demand. He also added that the Fed's rate cut expectations and low inventory levels are pushing silver into a high-risk mode. Palladium rose 0.7%, to $1475.38, and platinum gained 0.4%, to $1649.10. (Reporting and editing by Sumana Aich, Rashmia Aich, and Ishaan arora in Bengaluru)
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The US rate decision and peace talks with Ukraine have a positive impact on oil prices.
The oil prices fell a little more?on Tuesday. This was a continuation of the 2% decline in the previous session. Markets are keeping a close watch on the peace talks that will end the war between Russia and Ukraine, as well as the imminent decision by the U.S. Federal Reserve on interest rates. Brent crude futures fell 8 cents or 0.1% to $62.41 per barrel at 0409 GMT. U.S. West Texas Intermediate Crude was trading at $58.75 - down 13 cents or 0.2%. Both contracts dropped by more than $1 per barrel on Monday, after Iraq restored production of Lukoil’s West Qurna 2 Oilfield, which is one of the largest in the world. Priyanka Sahdeva, senior market analyst at Phillip Nova, said that Brent's move back?towards the $62 level (aligns) seamlessly with the broader narrative for December. The noise about potential Iraqi disruptions faded overnight and the market quickly returned to its core theme: ample supply and conservative demand expectations. After talks between the President of Ukraine Volodymyr Zelenskiy and leaders from?France Germany and Britain in London, Ukraine will share its revised peace plan with the U.S. Tim Waterer, KCM Trade's chief market analyst, said that oil is "keeping to a narrow trading range" until we know the outcome of the peace talks. He added that if the talks fail, oil prices will likely rise. If progress is made and it is possible for Russian energy to be supplied to the global market again, the price is expected to drop. Sources familiar with the issue claim that the Group of Seven and the European Union have been in discussions to replace the price cap on Russian oil exports by a complete ban on maritime services in an effort to reduce Russia's revenue from oil. The Federal Reserve policy decision is due on Wednesday. Markets have priced in a 87% chance of a rate cut by a quarter point. Low interest rates are typically a positive factor for oil demand, given that they reduce the cost of borrowing. However, some analysts remain cautious as to how this will affect oil prices in the near future. Sachdeva, of Phillip Nova, said that although markets are heavily invested in the FED's policy decision for Wednesday, which could result in a 25bp cut and provide short-term support to the lower end 60-65 range, the price structure is still anchored on the expectation of an oversupplied oil market by 2026. Reporting by Ashitha Shivprasad from Bengaluru, and Trixie Yap from Singapore. Editing by Thomas Derpinghaus & Jamie Freed.
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Gold prices stable as markets prepare for Fed's hawkish tone
Investors had already 'priced in' a Federal Reserve rate reduction, and were bracing themselves for signs that the U.S. Central Bank may adopt a more moderate easing cycle than expected at its two-day meeting beginning later in the afternoon. As of 0231 GMT, spot gold remained unchanged at $4,186.99 an ounce. U.S. gold futures for December delivery dropped 0.1% to $4215.80 an ounce. Kelvin Wong, senior market analyst at OANDA, said that investors are repositioning themselves largely ahead of the Federal Reserve's policy-setting meeting. Powell had given a hawkish rate cut guidance in his press conference earlier this month. Investors in the U.S. Treasury Market are now adjusting their positions. On Monday, the benchmark U.S. 10-year Treasury yields reached a two-and-a-half-month high. The higher U.S. treasury yields raise the opportunity costs of holding non-yielding investments like gold. Analysts expect to see a "hawkish" cut this week, accompanied by forecasts and guidance that indicate a high threshold of further easing next year. The U.S. The Fed's preferred inflation indicator, the Personal Consumption Expenditures Price Index (PCE), was in line with expectations. Meanwhile, consumer sentiment improved in December. Private payrolls fell by the most in over 2-1/2 years. However, jobless claims dropped to a 3-year low. According to CME’s FedWatch Tool, the markets now give an 87% chance of a quarter point cut at the Fed’s December 9-10 meeting. This is down from 90% Monday. Gold is a good example of a non-yielding asset that benefits from lower interest rates. Silver was flat at $58.10 per ounce after reaching a record high on Friday of $59.32. Silver is currently a more risky play than gold, according to Wong. Low inventories, industrial demand and the expectation of Fed rate reductions are all driving it. Palladium was up 0.4% to $1,471.25, while platinum gained 0.5% at $1,650.20. (Reporting and editing by Sumana Aich, Rashmia Aich and Ishaan arora from Bengaluru)
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BHP signs $2 billion deal with GIP to fund WAIO power grid
BHP Group announced on Tuesday that BlackRock's Global Infrastructure Fund (GIF) will invest $2 bn in Western Australia Iron Ore (WAIO)'s inland?power?network for a minor stake. BHP and GIP will form a joint entity, in which BHP holds 51% of the shares while GIP will hold the remaining 49%. BHP will pay the entity a tariff based on its share of WAIO inland power over a period of 25 years. BHP will retain full operational control over WAIO and its inland electricity infrastructure. Vandita Pan, Chief Financial Officer at BHP, said in a press release that "this arrangement is a good example of BHP's disciplined capital portfolio management." She added, "It enhances BHP shareholder value and supports BHP's long-term value creation." Investors are looking for assets with low-risk and consistent returns, while miners evaluate new ways to unlock the capital in infrastructure investments. Rio Tinto's CEO Simon Trott stated last week that Rio Tinto has identified several assets that are worth a lot of money. It is not necessary to own It said it would explore options including partnerships and divestments. BHP said that the agreement with GIP would not affect its?existing joint-venture agreements.
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Copper prices drop from record highs; Market awaits Fed policy
The price of copper eased on Tuesday from its record high as the Federal Reserve's rate decision this week and tight supply continue to dominate trading. As of 0255 GMT, the most traded?copper?contract on Shanghai Futures Exchange fell 0.58%, to 91900 yuan (12,998.77 dollars) per metric tonne. The benchmark copper for three months on the London Metal Exchange was also down, falling 0.54% to $12,572.50 per ton. Shanghai copper is up 25% so far this season, while the London benchmark is up more than 30%. Analysts at Sucden Financial expect copper prices to be "characterized by sharp rallies, followed by shallow consolidation", since there is limited interest in selling at the current levels. Investors are expecting a U.S. rate cut this week, as well as Jerome Powell's hawkish remarks on future reductions. Markets now predict fewer rate reductions in 2026 due to lingering concerns about inflation and the resilience of the U.S. economy. Copper is a market that continues to be affected by supply issues due to the disruption of mines and the constant dislocation of copper stocks into the U.S. After reaching a record-high?on the 5th of December, copper stocks at Comex warehouses increased to 439 510 short tons (398 717 metric tons). Other base metals in the SHFE fell by 1.33%. Zinc was down 0.09%, lead dropped 0.72%, Nickel was down 0.17% and Tin was down 0.44%. Aluminium fell 0.54% on the LME, while zinc dropped 0.42%. Lead also decreased 0.10%, nickel increased 0.24%, and tin remained unchanged.
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Simandou iron ore project begins supply
Iron ore prices continued to fall on Tuesday as the Simandou project, located in Guinea in west Africa,?shipped out its first ore. This increased prospects for more supply, at a time when China, the top consumer, is expected to see a decline in demand due?to falling steel production. The most traded iron ore contract at China's Dalian Commodity Exchange was down 1.51% as of 0229 GMT. Its lowest price since July 10, and headed for its fifth straight session of losses. As of 0219 GMT the benchmark January iron ore price on the Singapore Exchange fell for a third session in a row, falling 0.94% to $100.11 per ton. This is its lowest level since November 10. Rio Tinto, the largest iron ore exporter in the world, announced on Monday that the first shipment of the Simandou Project had left Guinea. The mine will have a production capacity of 120,000,000 tons per year, making it the largest iron ore mine in the world. China imports 80% of its iron ore from Australia and Brazil. Analysts predict that the share of Guinean supply will fall as it increases. Analysts at broker Xinhu Futures stated in a report that the near-month contract would face 'further pressure due to high supply, swollen inventory, and decreasing demand. This year, China's crude steel production is expected to drop below 1 billion tons for the first time in six years. Coking coal and other?steelmaking components coke and coking coal both fell, by 2.39% and 2.67 percent, respectively. This was due to lingering fears about an increasing supply. The Shanghai Futures Exchange saw a decline in most steel benchmarks. Rebar fell 1.5%, while hot-rolled coil dropped 1.27%. Wire rod also declined 0.38%. Stainless steel was not affected.
Sudan's RSF paramilitary RSF claims it has taken control of the strategic Heglig Oilfield
The Sudanese paramilitary Rapid Support Forces, or RSF, announced on Monday that they had taken over the strategic Heglig Oilfield in South Kordofan Province.
Heglig is the largest processing plant for South Sudanese crude oil. This makes up a large part of the government's revenue.
Sources from the government said that the workers and the government forces at Heglig oilfield retreated on Sunday in order to avoid any clashes which could have damaged oil facilities.
Sources at the Heglig Oil Field said that oil workers and the army had left the oil field for South Sudan.
The Greater Nile Pipeline System transports oil to Port Sudan at the Red Sea, where it is exported. This makes the Heglig site crucial for both Sudan's hard currency earnings and South Sudan which is landlocked, and relies on pipelines mostly through Sudan.
The conflict that broke out in April 2023, between the Sudanese Army and the RSF, has disrupted South Sudan’s oil flow. Before the conflict, South Sudan exported between 100,000 and 150.000 barrels of crude oil per day via Sudan. (Reporting and editing by Bernadettebaum)
(source: Reuters)