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Prices of oil to rise above $100 in the final week for the first time since nearly 4 months
The price of oil rose on Friday, and both major benchmarks will 'end the week above $100 per barrel for the first time since mid-May. This is due to the increasing number of attacks on key shipping routes across the Middle East. Brent crude futures rose $1.05 or 1% to $108.68 per barrel at 0045 GMT. U.S. West Texas Intermediate Crude rose 95 cents or 1% to $103.45 per barrel. Both benchmarks were up over 6% Thursday. The benchmarks gained nearly 13% on a weekly basis - the biggest gain since the week ending July 17. The Houthis, who are Iran-aligned, took control of Yemen's Mocha port on Thursday. This poses a new threat to Red Sea and Gulf traffic. Analysts say that the attacks by Yemen on Saudi energy installations marked an escalation of tensions beyond Iran and Strait of Hormuz and raised concerns about 'prolonged disruptions? in the region. Donald Trump, the U.S. president, warned that the U.S. may strike Iran's Pickaxe Mountain located near its damaged Natanz uranium-enrichment facility and said that the war would end following the November midterm election. Tony Sycamore, an IG analyst, said that "with events spiralling" and Iran showing its willingness to prolong this conflict for as long as possible, it's becoming more likely that WTI will retest $119.48 from early March. Iran claimed that it had launched 10 attacks on ships in the vicinity of the Strait of Hormuz after the U.S. attacked five Iranian oil tanks. Iran's Islamic Republic?Guard Corps has said that it will escalate its response to further attacks. According to GasBuddy's price tracking service, the U.S. average price of diesel in the United States surpassed $6 per gallon on Thursday for the first ever time. This is due to the U.S. Iran war and the?Ukrainian attack on Russia's refining facilities, which have squeezed the supply. Analysts believe that the durability of the rally will depend on China, as the world's biggest crude importer. China's continued purchases could increase the impact of disruptions in supply and push prices higher. OPEC has lowered its 'forecast of world oil demand growth - 2026, to 380,000 barrels a day. This is the fifth consecutive downward revision. A survey revealed that OPEC's oil production fell by 640,000 bpd during August.
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Global bonds fall due to rising oil prices
On Friday, global bond yields reached new highs while sharemarkets fell. Soaring oil prices exacerbated inflation risk and investors were scrambling to factor in further policy 'tightening' from central banks around the world. Brent crude futures hit a four-month record of $109.97 per barrel on Friday. Oil flow through the Strait of Hormuz was restricted as Iran and the U.S. traded blows, while the Houthis, who are aligned with Iran, took control of Yemen's Mocha port, threatening Saudi Arabian oil exports to the Red Sea. Analysts at RBC Capital Markets said that the Houthi advance has gravely threatened maritime traffic through Bab el-Mandeb. They predicted Brent could reach $121.99 a barge in the fourth quarter. This was a warning to markets who are now beginning to factor in the possibility of a prolonged war. The comments from Donald Trump, that the war might last past the midterm elections in November, haven't helped. Bond yields are surging worldwide on inflation fears. The benchmark 10-year Treasury yields rose overnight, closing in on the crucial 5% level. The 30-year Treasury yields reached their highest levels since 2007. Asian bonds plunged on Friday. Australia's government bond yields for three years soared 17 basis points, reaching a 15-year-high of 5,037%. Japan's 10-year bond yields increased 5.5 basis points, to 2.965%. We expect eight out of nine DM central bank to raise rates before the end of this year. The Fed, BoJ and all four European central banks that we cover are included. Australia, New Zealand, Australia, New Zealand, Australia, New Zealand, said JPMorgan analysts in a recent note. "Canada will remain the lonesome hawk." For now, tightening will remain modest, but the risks of our forecasts point to more action due to resilient growth, core inflation that is sticky, and commodity price pressures. The rise in oil prices is raising the stakes in U.S. consumer price data due later today. This could make or break the case for a Fed rate hike next week. Forecasts centre on a 0.2% rise in CPI core, but the risks are more skewed to a higher number because the PPI data showed some stickiness overnight. The discount rates for corporate valuations were raised by higher bond yields, putting Asian stocks in the red. Australia's resource-heavy stock fell 1%. Japan's Nikkei plunged 2.8%. South Korea's KOSPI dropped 2.7%. Nasdaq Futures dropped?0.2%, and S&P500 futures remained unchanged. Overnight, the U.S. Dollar gained 0.4% against its major counterparts due to higher Treasury yields. The dollar was stable on Friday, at 99.06. Gold held steady at $4,317 per ounce in the commodity markets after dropping by nearly 2% over night, failing to capture some of safe-haven demand.
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WSJ reports that the Pentagon is in talks with Fluidstack to lend $5 billion.
Wall Street Journal reports that the Pentagon is in talks to loan $5 billion to the AI cloud computing startup Fluidstack to shore up the U.S. Data Center Supply Chain. The newspaper reported that the money would be coming from?the Pentagon Office of Strategic Capital. Fluidstack 'would use the loan to shore -up?the U.S. manufacturing capacity and supply chain for certain data centre-related components rather than funding a brand new AI 'facility, WSJ said. The U.S. The Department of Defense and Fluidstack have not responded to requests for comments immediately. Last month, U.S. president Donald Trump signed a presidential order declaring a "national emergency" and prohibiting the use of certain foreign equipment within the United States. The data centers use the electricity grid. The Office of Strategic Capital previously struck deals with rare-earth companies Vulcan Elements and Phoenix?Tailings, as well as Energy Fuels. The WSJ reported that it has also signed deals to?fund some?drone firms, including Unusual Machines, and Sequoia capital-backed Neros.
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Petrobras is preparing to raise diesel prices, while waiting for government protection measures, say sources.
Petrobras, the state-owned oil company in Brazil, is preparing to increase diesel prices at its refineries by about $1.964 per liter. However, it is waiting for government protection measures to protect consumers. The increase 'would help Petrobras close the gap between domestic prices of diesel?and international benchmarks. This has been widened by the conflict in the Middle East, and the Russian restrictions on diesel exports. Brazil is a diesel producer but imports about a quarter of its demand. Petrobras' profitability is hurt when it has to import fuel for higher prices abroad than what it charges in Brazil. One source claimed that the price gap could?almost disappear' with a real increase of 1 percent. The increase is possible because a new diesel subvention?of 1 real per milliliter will be added to the existing subsidy of 1.12 reais. The details of the measure are yet to be revealed. Petrobras didn't immediately respond to a request that it comment on the price increase.
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Officials say that Ghana has drafted wage and tender floors for mining contractors.
A senior official revealed on Thursday that Ghana's mining regulator was developing minimum wage?and?tender benchmarks to be used by contract mining companies. The goal is to reduce aggressive underbidding, as the country encourages its miners to subcontract more work to local contractors. Ghana, Africa's largest gold producer, ordered in January 2025 that surface operations (blasting, loading and hauling) be transferred to Ghanaian owned contractors, and underground operations, to joint ventures with a minimum of 50% local ownership, by December 31, or face sanctions. This is part of a larger push by Africa's resource-rich countries to retain the value of their mineral wealth. Ghanaian miners have spoken out against this directive. They claim that contractors offer lower wages and less job security. Ben Birch Mensah, Director of Local Content at the Minerals Commission, the national regulator said in an interview on Thursday that officials wanted to make sure that wages and conditions for workers would not be affected. Birch-Mensah stated, "The regulator does not want contract mining to make people worse off." We are creating a base so that contract miner's cannot pay their employees below a specific threshold. OFFICIALS TRY CURB UNDERBIDDING Birch-Mensah added that the commission is also preparing benchmarks for minimum bids in order to prevent contractors from submitting bids below levels which are sustainable. He stated that aggressive underbidding in some cases had left contractors unable meet operating costs. A committee will be formed to determine the details of this policy. Ghana's mining rules of January 2025 required that miners switch to contract mining. Birch-Mensah stated that the December 2026 compliance requirement for local contractors was "non-negotiable." He added that firms such as?Newmont?, Zijin? and Ghana Manganese Company?were still to meet this deadline. The companies didn't immediately respond to our requests for comments. Ghana Chamber of Mines criticised the policy and said that contract mining should not be mandatory but optional. The chamber, on the other hand, supported?efforts aimed at addressing underbidding and warned that unhealthy competition between contractors could impact worker welfare and safety. Ken Ashigbey, CEO of the Chamber, said that if people continue to undercut themselves, then they might not have the resources necessary to complete the job, or they might not pay workers correctly, or they wouldn't train them. Ashigbey added that the chamber is also looking at contractor classifications and thresholds for minimum bids in order to reduce underbidding. He noted that contractors are responsible for a large share of mining accidents.
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Gold drops over 1% after US inflation data supports Fed hike bets
Gold prices dropped by over 1% after strong U.S. inflation figures and rising oil prices. This increased the odds of a Federal Reserve rate increase next week. By 01:42 pm EDT (1742 GMT), spot gold had fallen 1% per ounce to $4,355.85. Bullion had fallen by about 1.7% earlier to $4,323.78, the lowest point of the session. U.S. Gold Futures fell by 1.2% to $4,407.30. According to Kyle Rodda of Capital.com, the Producer?Price index (PPI) data shows that there is a slight increase in underlying inflation within the U.S. The Bureau of Labor Statistics of the Labor Department reported on Thursday that PPI for Final Demand rose 0.4% in August after a?0.1% increase upwardly revised in July. According to CME FedWatch Tool, traders now price in a 70% probability of an increase in U.S. rates next week. This is up from 62% prior to the data. The majority of economists surveyed by the Fed expect that the Fed will hold rates at the September 15-16 meeting, and throughout the remainder of the year. Gold prices were further impacted by the U.S. dollar's rise, as it made greenback-priced gold more expensive in other currency. Rodda said that bonds must reflect a higher level of inflation due to the steeper rise in oil prices. Gold is typically pressured by rising bond yields because they increase the cost of holding non-yielding assets. Brent crude, the benchmark oil price, hit $105 per barrel on Thursday after the largest spike in 'attacks against shipping since the beginning of the U.S. - Iran war prompted supply disruption fears. The European Central Bank raised interest rates for the second time this year on Thursday, in an effort to curb the rise in inflation caused by war-related energy costs. Silver spot fell 4.6% per ounce to $64.19, platinum was down 5.5% at $1,791.13, and palladium dropped 5.1% at $1,283.52.
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UK retailers stock charcoal that is linked to Paraguay's deforestation.
According to a report published on Thursday by the advocacy group Global Witness, major British retailers such as B&Q, Waitrose and others are selling charcoal made from trees that have been cleared in Paraguay’s Gran Chaco to make more farmland. The report links charcoal sold by UK supermarkets and hardware shops to the Paraguayan forest company Taruma. Global Witness claims that Taruma, the biggest international supplier for British barbecue brand Big K whose products are distributed across the country, is Taruma. Gran Chaco is the subtropical forest region of South America, second largest after Amazon. It stretches over Paraguay and Argentina. A Waitrose spokesperson responded that all charcoal sold by the company complies with the standards of the Forest Stewardship Council (an independent forest certification system). B&Q has not responded to any requests for comments. Paraguay is seeking to strengthen its?trade ties? with Europe via the EU-Mercosur Agreement, as the environmental impact of imported goods from South America, which includes Paraguay and?Argentina?, Brazil, and Uruguay, has become increasingly scrutinized. According to the report, satellite analysis found that Taruma sourced its wood from ranches which have since 2012 cleared more than 28 hectares (69 acres) of forest. The report stated that a second supplier, Paben SA, who worked with Big K up until 2023 has cleared approximately 2,700 hectares in the Paraguayan Chaco forest since 2021. Paben SA has not responded to requests for comments. Taruma, in a letter to?, denied any wrongdoing. Taruma doesn't clear forests and does not hold clearing permits. Our operations don't add to the deforestation of the region or its effect on climate. Rahmeen Farudi, Chief Executive of Taruma, said that the sustainability team closely follows research on Chaco Land-Use Change. Scientists, including NASA scientists have stated that Paraguay is one of the countries with the highest rates of deforestation relative to forest coverage, primarily due to farming and cattle ranching. Paraguay is a major grain and meat exporter. In July, it unveiled its first national forest policy. It acknowledged decades of deforestation by the state for agricultural purposes. The government has pledged to increase environmental monitoring in order to meet EU standards. The sale of charcoal to Britain may harm Paraguay’s plans to sell other goods to the EU as part of a future?trade agreement with Mercosur. The National Forestry Institute of Paraguay did not respond when contacted for comment. DEFORESTATION LEGISLATION, TRADE AND DEFORESTATION Global Witness stated that the UK's flawed environmental legislation and Paraguay’s permissive environment laws allow deforestation linked charcoal to reach the British Market. The '2021 Environment Act in Britain bans imports that are linked to illegal deforestation. The ban only applies to imports originating from land that has been illegally deforested and excludes charcoal products. Paraguayan products produced on legally cleared lands can still enter the UK. Beginning December 30, the EU's stricter rules will prohibit?all products that are linked to cleared land, regardless of whether or not?the clearing?was legal. The UK Department for Food, Environment and Rural Affairs (Defra) did not respond immediately to a comment request. Environmental groups, as well as several EU governments including France, Austria, and Poland have warned that the expansion of Mercosur agricultural exports into Europe could speed up deforestation.
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Alcoa: Cutting Canada tariffs will not be enough to reduce the US aluminum premium.
Alcoa's chief financial officer said that the steep price of aluminum in the U.S. would not?drop much even if Washington halved the tariffs on metals imported from Canada because other countries are still needed. The price that U.S. The price?U.S. Molly Beerman, Alcoa's Chief financial officer, said that the U.S. needs to import around 4 million tonnes of aluminum each year. Canada can only provide 3 million tonnes of this. Beerman stated that Midwest would not drop significantly, even if the U.S. were to receive a favorable rate from Canada. "It may come down a bit, but it won't return to the pre-tariff level." Beerman stated that if there are tariff waivers or relief for other trading partners, such as Japan, Europe, or South Korea, and the last million tons of grain is covered, then "you can expect the Midwest Premium to be reduced in response?to essentially eliminate the tariff benefit." Beerman stated that Pittsburgh-based Alcoa, which produces?around 900,00 tons of aluminum per year in Canada, is paying over $1 billion in tariffs in order to import the majority of this aluminum into the U.S. The Midwest compensates us for this, and also returns as margin due to the tightness of?tons. Customers in North America and Europe "actively seek our supply" because Middle East aluminum is "constrained," Beerman noted, adding that Alcoa’s order book "is almost completely sold out until 2026."
McGeever: The 2007 subprime credit warnings are echoed in the alarms of private lenders.
Each financial market crisis differs, but they all rhyme. Parallels are emerging between the 'tremors' now rippling across private credit and the subprime housing in the U.S. that led to 2007-09 Global Financial Crisis.
It's not to say that a replay of the historic crash is imminent. There is a growing danger that the increasing stress in the private credit market - i.e., the lack of liquidity, the opaque pricing and the soaring redemptions – could spill?over into the public markets.
BlackRock, with its $14 trillion in assets under management, announced?on? Friday that it had limited withdrawals after an influx of redemption requests. Blackstone, an alternative asset manager, had announced a few days prior that it raised the redemption limit on its BCRED private-credit fund in order to meet record withdrawals.
These alarms are a result of a similar incident at Blue Owl, a smaller alternative asset manager, last month. Also, the bankruptcy of U.S. auto parts supplier First Brands, and Tricolor, formerly based in California, prompted Jamie Dimon, CEO at JPMorgan Chase, to say: "When you find one cockroach there will be more."
Investors who have a sense for history or were around during the 2000s may find this all a little familiar. BNP Paribas and Bear Stearns blocked withdrawals from U.S. Subprime Funds in 2007 or warned of their problems. This small risk grew into a global financial crisis.
The GFC did not?fully explode' until September 2008, when U.S. officials allowed Lehman Brothers go bankrupt. The crisis was building steadily over the past 18 months. Investors were alerted by the tremors in those subprime funds.
It is likely that the?reason for not allowing investors to access their money today will be similar to 2007's justifications: the value of the assets has probably dropped significantly and they would have to be sold to make up the required cash; the manager may be afraid to trigger a fire-sale in other assets to raise the needed cash; or the fund might be struggling to sell illiquid assets. It could be all three.
It is difficult to know what private credit assets are worth today because the market is opaque and illiquid. Price discovery is often lost, and the bearish assumptions win.
A similarity to subprime of 2007 is the belief that private credit, and more generally private markets, do not pose a risk systemic stability. We all know that this was wishful thinking at the time.
SUBPREME RHYME, DO NOT REPEAT
This time, is it different?
If we look at sheer size, probably. According to Investec, the mortgage-backed securities, which were the cause of the GFC in 2007, were worth $7.2 trillion, or 5% of all global securities. Private credit is currently worth $2 trillion. This represents less than 1% all global securities.
Unlike subprime credit in 2007, private lending is not as tightly regulated today, at least compared to traditional banks, so its true impact is difficult to determine.
Even mom-and-pop investors have become more active. According to Investec, retail investors will hold 16.6% of private credit funds by the end of 2024. This is up from just 5.5% at the beginning of 2020.
Fitch Ratings, a credit rating agency, said last week that private credit default rates will reach a new record of 9.2% by 2025. This is up from the previous high of 8.1% set in 2024.
Unsettlingly, none of these defaults included software companies. These firms have become major private lenders. Fears of disruption from artificial intelligence have impacted the software sector this year, causing shares in Blackstone, KKR, and Apollo to drop by up to 45%.
Private credit appears to have a skewed risk profile. The?U.S. The?U.S. economy is in a precarious position, with a shaky job market, the aftermath of the Middle East war, wild volatility on oil markets, and the threat of "stagflation" in modern times.
The consensus is that the fundamentals of the economy are strong and private credit is not large or integrated enough to sabotage GDP growth or asset markets. Barclays strategists note that private credit problems are present, but not large enough to send the U.S. economy into recession.
This is how subprime mortgages were viewed in 2007!
When the liquidity wave 'goes out', you can see who has been swimming naked. Recent events on the private credit markets suggest that more funds could be exposed soon.
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(source: Reuters)