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Who's afraid of an inflated PPI?
Gregor Stuart Hunter gives us a look at what the European and global stock markets will be like today. Did you think the U.S. market would be stopped by a PPI, no matter how big? S&P futures held on to their 0.2% gain in Asian trading despite the rise in wholesale prices. Nasdaq's futures fell for the third day in a row. The yield on a 10-year Treasury bond in the United States was down by 2 basis points to 4.2732%. According to CME Group's FedWatch, the market has given in on the hope of a 50-basis point rate cut by the Federal Reserve. The CME Group's FedWatch tool shows that traders still expect a 92.1% chance of a 25-basis point rate cut during the September meeting. This is compared to a 100% probability yesterday. Data from Asia's two largest economies revealed that Japan's economy was booming last quarter, keeping shelves stocked in advance of Donald Trump's deadline for tariffs, while China showed renewed signs of slack. Hong Kong shares fell by 1.2% following the release of disappointing Chinese economic data, including retail sales and production. The large-cap CSI 300 rose 0.5% on speculation that the data could justify additional stimulus. India and South Korea have closed their markets for public holidays. The Nikkei recovered 1.2% on Friday after ending a six-day streak of gains on Thursday. It was the biggest single-day decline since April 11. Japanese GDP data showed that the economy expanded by an annualised 1,0% in the quarter April-June, exceeding analyst expectations and sending more signals to Bank of Japan which will meet next on September 19. The dollar fell 0.3% to 147.64 yen after ending a six-day winning streak on Thursday. Brent crude fell 0.1% to $66.79 a barrel on the commodities market, just a few cents away from its two-month low. This is ahead of Friday's meeting between U.S. president Donald Trump and Russian President Vladimir Putin in Alaska. Marc Velan is the head of investments for Lucerne Asset Management, based in Singapore. He said that "the first meeting does not seem to be a market-moving event – it's really more about setting up a subsequent meeting, which may prove more important." If a ceasefire occurs, the euro will rise and the dollar will fall. The following are key developments that may influence the markets on Friday. Eurozone reserve assets: July data UK debt auctions reopen 1-month, 3-month, and 6-month government bond auctions
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The weekly iron ore price is set to fall due to China's falling property demand
The price of iron ore futures fell on Friday. They are on course to lose money for the week as China's property market weakened. As of Friday, 0328 GMT, the most traded January iron ore contract at China's Dalian Commodity Exchange was trading 1.27% lower. It was trading at 774.5 Yuan ($107.83), per metric ton. This contract has fallen 1.34% this week. On the Singapore Exchange, September benchmark iron ore was $101.95 per ton lower. The contract has fallen 0.2% this week. China's crude output of steel fell to a low for seven months in July. This is a 4% drop from June, and marks a second consecutive monthly decline. The drop reflects efforts to reduce overcapacity while heavy rains and high temperatures restricted outdoor construction. China's new homes prices dropped 0.3% in July compared to the previous month, despite local governments offering more incentives for homebuying. Property investment fell 12% from a previous year in the first 7 months of this year. The declines in the number of people living in Tier-one, Tier-two and Tier-three cities are decreasing. In recent months, the central government has continued to call for the stabilisation of the market. This could be a sign that further policy support is on the way. Analysts at ANZ said that a recent drop in steel production has helped to improve profitability in the steel industry, pushing the margins of steel mills up and allowing iron ore prices to rise. ANZ stated that Beijing's renewed emphasis on reducing the overcapacity may see this rally continue, providing additional support for iron ore. Coking coal and coke, which are used to make steel, also fell on the DCE. They were down by 0.45% and 0.03% respectively. All steel benchmarks at the Shanghai Futures Exchange have lost ground. Rebar fell 0.81%, while hot-rolled coils dropped 0.35%. Wire rods also declined 0.7%, and stainless steel fell 0.69%. ($1 = 7,1824 Chinese yuan). (Reporting and editing by Sonia Cheema; Lucas Liew)
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Angola Seeks Gas Growth as Oil Output Stagnates
Optimistic over Angola’s untapped gas potential, Azule Energy is considering another gas exploration well after leading the country’s first drilling campaign targeting gas and hitting success last month, the CEO told Reuters.Angola expects gas production to rise more than 20% in the next five years as it targets higher exports to Europe and Asia and to meet growing domestic demand, while its oil output stagnates despite the country exiting OPEC.Sub-Saharan Africa's second-largest crude producer after Nigeria, Angola is pivoting towards natural gas to help drive an industrialisation programme based on favourable investment terms."Given that Angola has a couple of prolific basins, I can imagine that we will be able to find much more reserves of gas," said Adriano Mongini, chief executive of Azule Energy, a joint venture between BP and Eni.Responding to emailed questions, he said a second well could be drilled within two years and existing infrastructure close to the first gas discovery, Gajajeira-01, may aid its development.Initial estimates show Gajajeira-01 exceeding one trillion cubic feet (tcf) of gas and having up to 100 million barrels of condensate, a press statement said.The latest government data showed natural gas exports totalled 1.35 million metric tons in the second quarter, up 19.1% from the first quarter. Liquefied natural gas accounted for most exports, with India and Spain the top two markets.Gas revenues, however, are a fraction of Angola's crude oil sales of $5.6 billion over the same period, as the oil export-reliant country also faces discontent over efforts to reduce domestic fuel subsidies.Angola's gas output was seen rising to 3,659 million standard cubic feet a day (MMSCFD) by 2030 from 2,973 MMSCFD this year, national oil and gas agency ANPG forecast, although the average this year might fall short, said some analysts.Chevron's Sanha Lean gas project and the Azule-led New Gas Consortium (NGC) will help lead higher output efforts, the government said."Development of (NGC's) Quiluma and Maboqueiro fields, due to launch around end-2025, is the real litmus test for gas monetisation in Angola," said Jimmy Boulter, an Enverus analyst.Unlike gas, oil output will decline to just above 1 million barrels a day by 2027 from around 1.1 million bpd now, ANPG officials told Reuters, adding the reduced level could be held if investment and development plans are maintained.Angola anticipates $60 billion in oil and gas investments over the next five years, with 23 exploration wells expected to be drilled, 11 of them offshore.Recent projects, including Azule's 120,000 bpd Agogo FPSO that started producing oil in July and TotalEnergies' 60,000 bpd bump have temporarily boosted Angola's oil profile."We expect post-2030 oil production to decline significantly," David Thomson, a Welligence analyst, said.(Reuters - Reporting by Wendell Roelf, editing by Alex Lawler, Nina Chestney and Hugh Lawson)
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Gold to drop by a week's worth as US data dampens Fed rate cuts hopes
Gold prices fell by a significant amount on Friday as the Federal Reserve lowered rates in September. This was due to hotter than expected inflation data from the United States. As of 0244 GMT, spot gold was up 0.1% at $3,339 an ounce. Bullion is down 1.8% this week. U.S. Gold Futures for December Delivery are flat at $3384. Tim Waterer is the chief market analyst for KCM Trade. He said, "Gold still struggles with the PPI spike, which raises questions about just how far Fed may be inclined this year to reduce rates." Labor Department data released on Thursday showed that the U.S. Producer Prices Index (PPI), which measures producer prices, rose 3.3% in July compared to the previous year, beating expectations of a 2.5% increase. The number of weekly jobless claims was lower than expected, at 224,000, compared to estimates of 228,000. Separately U.S. consumer price increases were only marginal in July, which boosted hopes for a Fed rate reduction. The Fed is less likely to opt for a 50-bps cut at its next meeting due to the fact that the PPI reading was higher than expected. Waterer stated that if this spike in wholesale price becomes a trend, and then the CPI gains pace, it could reduce expectations of US rate cuts, which would hinder gold's performance on a yield basis. Alberto Musalem, St. Louis Fed president, said that a rate cut of a half point in September is not warranted. This comes a day after Treasury secretary Scott Bessent had said this was possible. Gold that does not yield is more likely to thrive in an environment with low interest rates. Investors are not optimistic about a major breakthrough in the Ukraine war after the meeting between Donald Trump & Vladimir Putin on Friday, despite signs of progress. Spot silver fell by 0.2%, to $37.91 an ounce. Platinum dropped 0.2%, to $1354.94, and palladium was down 0.3%, to $1142.51. (Reporting and editing by Sumana Nady and Rashmi Anich in Bengaluru)
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China's July crude steel production hits a seven-month low due to weather problems
China's crude output of steel fell to its lowest level in seven months in July. It was down 4% compared to June, extending a downward trend for the second consecutive month as hot temperatures and heavy rainfall sapped demand for domestic construction. Data from the National Bureau of Statistics revealed that in July, the world's biggest producer produced 79.66 millions metric tons of crude iron and steel, down from 83.18 a month before. Beijing had promised in March that it would restructure this sector by cutting outputs. Calculations based on data showed that the average daily production was 2,57 million tons last month, a 7.3% decrease from June's 2.77 million ton figure. Analysts said that the scorching heat and heavy rains brought by major storms slowed down outdoor construction, resulting in a lower output of steel last month. Cao Ying is a Beijing analyst with broker SDIC Futures. Steelmakers' profitability also suffered last month, after officials began checking for signs of excessive production at coal mines. This led to a rise in the prices of coke and coal coking, two key inputs. The first seven months of this year saw a total of 594.47 millions tons of output, which is a decrease of 3.1% on an annual basis.
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Asia markets tumble as Fed rate cuts hype is tempered by hot PPI prints
Stocks in Asia recovered unevenly as higher than expected producer price inflation dampened the expectations of a rate cut at Federal Reserve's meeting in September, while U.S. Bonds and Equity Futures stabilized. MSCI's broadest Asia-Pacific index outside Japan fell 0.3% following a report from the Bureau of Labor Statistics on Thursday, which showed that the Producer Price Index had increased by 0.9% on a monthly basis in July. This was well above the expectations of economists. Mike Houlahan is the director of Electus Financial Ltd. in Auckland. According to CME Group's FedWatch, the market currently prices in a 92.1% chance of a rate cut of 25 basis points at its September meeting. This compares with a 100% probability of a rate cut on Thursday. The probability of a 50-basis point jumbo cut has dropped to 0%, from 5.7% yesterday. U.S. Stock Futures were flat early in Asian trading, after a volatile trading session on Wall Street ended with modest gains on Thursday. The yield of the 10-year Treasury Bond was down by 1 basis point to 4.2829%. The yield on the two-year bond, which is sensitive for traders to expectations about Fed Fund rates, fell to 3.7304%, down from a U.S. closing of 3.739%. Nasdaq Futures continued to lose for a third day in a row, falling 0.1%. After the PPI release, the dollar index, which tracks greenback's value against a basket other currencies of major trading partners, has retraced gains, trading lastly down by 0.1% to 98.143. The Nikkei recovered 0.4% on Friday after ending a six-day streak of gains with its largest one-day decline since April 11. Japanese GDP data showed that the economy expanded by 1.0% annually in the quarter April-June, exceeding analyst expectations. The dollar fell 0.3% to 147.64 yen after breaking a six-day winning streak on Thursday. Australian shares last rose 0.2% while stocks in Hong Kong fell 0.9% after losses on Thursday by U.S. exchange-traded fund tracking Chinese companies. After the release of lower-than-expected Chinese data, the CSI 300 lost its early gains and traded flat at last. Economic data For July, including retail sales and production. India and South Korea have closed their markets for the public holidays. The cryptocurrency markets have stabilised following a record high for bitcoin on Thursday of $124480.82. However, the new record quickly fell after it missed its next major milestone. The digital currency gained 0.7% and recovered some ground. Ether also gained 1.7%. "Bitcoin’s failure to overcome the $125,000 opposition signals another consolidation phase," Tony Sycamore said, a market researcher at IG Sydney. Brent crude was unchanged at $66.94 a barrel on the commodities market ahead of an Alaskan meeting between U.S. president Donald Trump and Russian leader Vladimir Putin. The gold price was slightly lower, as markets digested inflation-adjusted rates of interest. These typically move opposite to bullion prices. Spot gold traded up 0.1% to $3,339 an ounce. Early European trades saw the pan-regional futures up 0.4%. German DAX Futures were also up 0.3%, at 24,489 and FTSE Futures were 0.5% higher.
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Oil gains continue ahead of Trump-Putin Summit
The price of oil rose on Friday, reaching a new one-week peak after U.S. president Donald Trump warned that there would be "consequences", if Russia refused to sign a peace agreement with Ukraine. This sparked concerns over supply. The positive economic data from Japan, one of the world's largest crude importers, also helped to boost sentiment. Brent crude futures rose 16 cents or 0.2% to $67.00 per barrel at (0017 GMT). U.S. West Texas Intermediate Crude Futures rose 14 cents to $64.10, or 0.2%. The focus is on the meeting between Donald Trump and Russian President Vladimir Putin, which will take place in Alaska this Friday. A ceasefire in Ukraine's war is the main agenda. The oil market benefits from a continuing conflict between Russia, Ukraine and other countries. Trump also stated that he believed Russia was prepared to end its war in Ukraine. New Japanese government data released Friday revealed that the economy grew by an annualised 1.0% during the April-June period, compared to a median market expectation of a 0.4% rise. A rise in the gross domestic product (GDP), compared to a median estimate, translated into an increase of 0.3% quarterly. Oil consumption is typically boosted by strong economic activity. Oil prices were held back by the prospect of longer-term higher U.S. rates. The Federal Reserve's high interest rate policy is usually associated with a reduction in oil consumption. However, the data showed that inflation was higher than expected and the U.S. jobs figures were weaker than expected. (Reporting and editing by Muralikumar Aantharaman; Laila Kearney)
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Rusal, the Russian aluminium giant, swings into a first-half loss due to expenses surging
Rusal announced a net loss for the first half of its financial year on Friday as higher costs, increased interest expenses, and fluctuations in foreign exchange rates weighed down on Rusal's earnings. The Hong Kong listed company, which is the largest aluminum manufacturer outside China, suffered a net loss for the six months ended June 30 from a profit last year of $565 millions. Rusal is under constant pressure from Western sanctions against Russia for the conflict in Ukraine. This has been going on for over three years. Although the company was not sanctioned directly, some Western buyers have avoided new contracts for Russian Metal. Finance expenses increased by $408 millions, mainly due to higher interest rates on company and bank loans, bonds, and other charges. A foreign exchange loss of $181 million also contributed to the hit. The cost of sales increased by about 40%, to $6.11billion, due to higher prices for alumina, raw materials, and electricity, and an increase in primary aluminium volumes. Rusal's revenues rose by 32%, to $7.52 Billion, due to increased sales of primary aluminum and alloys.
California Coastal Commission opposes SpaceX expansion on West Coast again
California Coastal Commission voted against SpaceX's plan to double the number Falcon 9 rocket launches that the company can conduct from Vandenberg Space Force Base each year, from 50 up to 95.
As was the case last October when the commission voted to oppose an expansion of SpaceX launches from 36 to fifty at the installation. The U.S. Government can simply override California regulators' objections and approve this latest plan.
The U.S. Department of the Air Force (parent agency of the Space Force) has stated that the proposed expansion of the launch site at Vandenberg is an activity of the federal government and therefore exempted from state oversight. Vandenberg is located about 60 miles northwest of Santa Barbara, on the central California coastline.
According to a staff report of the commission, SpaceX Falcon 9s were responsible for 46 out of 51 rockets that were launched from Vandenberg last year.
The report stated that while SpaceX does fly missions for NASA and the Defense Department, its expanded launch operations are intended to carry payloads primarily for Starlink, the company's satellite network.
SpaceX has also sought to expand the launch facilities at NASA Kennedy Space Center, Cape Canaveral in Florida.
Air Force officials were not present at the Calabasas Commission meeting, which took place north of Los Angeles on Thursday, when it voted 11-1 against SpaceX.
SpaceX and the Air Force representatives could not be immediately reached for comment. SpaceX sued the California Coastal Commission for its previous objections. The company accused the agency of singled out Musk's firm for increased regulation as a retaliation to his political views.
The new plan will allow up to 95 launches per year for the Falcon 9 rocket, the workhorse of the company. It would also permit up to 5 launches of the Falcon Heavy rocket and up 24 landings with the company's reusable boosters. This is twice as many landings as were previously allowed. The base will also have two new landing zones. The number of landings at sea would also increase.
The staff of the commission recommended disapproval due to what they called inadequate information about the plan, and their concerns regarding noise pollution and animal disturbance caused by more frequent and louder sonic blasts as SpaceX's launch activity increases.
The staff report also noted the need to close more frequently public beaches and campsites located within launch hazards zones around the base. Steve Gorman, Los Angeles (Reporting; Sonali Paul, Editing)
(source: Reuters)