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MORNING BID EUROPE - Jackson Hole will open under Trump's shadow
Kevin Buckland gives us a look at what the future holds for European and global markets. Today, the Federal Reserve's Jackson Hole Symposium is a highly anticipated event for the U.S. central banks. Investors will be listening intently to every word that central bankers around the globe say. Jerome Powell, the Fed's chairman for his final year at this annual meeting, will deliver a speech on Friday. He's likely, like his predecessors to take the opportunity to shape how his tenure will be recorded in history books. This is especially true considering the harsh criticism he received from President Donald Trump this year for not cutting rates. Investors are looking for any hint of a September cut. They have increased their bets on an easing after a surprising soft payroll report earlier in the month. Recent consumer prices show little impact of Trump's aggressive tariffs but higher-than-expected producers prices suggest that sticker prices could rise in the coming months. The implied odds of a quarter point cut on September 17, currently at 80% are down from 84% just a day earlier. The Fed minutes of last month's meeting suggested that only Governor Christopher Waller and Vice Chair for supervision Michelle Bowman were pushing for a cut in rates. Trump's increasing influence on monetary policy is another reason why the Fed is in the spotlight. Lisa Cook is the latest target of President Obama, who has demanded her resignation after allegations were made by a political ally about mortgages that she held in Michigan and Georgia. If Trump were to remove Cook from the Fed board, that would be an addition to his choices, as Council of Economic Advisers chair Stephen Miran is set to replace Adriana Kulgler after her sudden resignation. Bowman and Waller are, of course both Trump appointments. Trump may end up having four of the seven board members support his demand for lower rates. Investors were unnerved by Trump's threat to fire Powell, before his tenure as governor expires in May next year. This led to a sharp decline in the dollar. But the U.S. dollar has taken these latest developments in stride. Asian stocks are generally mixed as they adjust to recent sharp selloffs or rallies. Japan's Nikkei, for instance, continued to retreat after reaching a record high earlier in the week. South Korea's KOSPI, on the other hand, bounced strongly back from a drop to a 6-week low earlier that day. Wall Street's tech selling off was mostly shaken off. Advantest, Japan's largest chip-testing equipment manufacturer by far, is the Nikkei's biggest index point gainer. Trump, aside from the sky-high prices, is also being cited as a cause for the downturn. This administration has been looking at taking equity stakes into chip companies such as Intel, just weeks after negotiating revenue-sharing agreements with Nvidia, AMD, and others. Walmart will release its earnings today and provide a barometer of the U.S. Consumer's health. Target's stock dropped on Wednesday, after the company appointed Michael Fiddelke to be its CEO. It also maintained annual forecasts which were reduced in May. The following are key developments that may influence the markets on Thursday. - Jackson Hole symposium opens The Philadelphia Fed's Business Index, U.S. Weekly Jobless Claims, Existing Home Sales for July - Walmart results - Flash PMIs for euro zone, France, Germany, Britain
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Iron ore prices rise as fears over China's demand recede
Iron ore futures recovered on Thursday, as a mandatory production cut in China ahead of a parade military proved to be less severe and shorter that expected. This eased demand concerns. The January contract for iron ore on China's Dalian Commodity Exchange closed the morning trade at 777.5 Yuan ($108.39). As of 0321GMT, the benchmark September iron ore traded on Singapore Exchange was up 1.44% at $102.2 per ton. The benchmarks fell for six consecutive sessions until Wednesday. This was due to concerns about demand, as steelmakers at China's largest steelmaking hub Tangshan had been asked to reduce production in order to improve air quality in Beijing in time for the military parade commemorating World War II on September 3. The length of the production restriction in Tangshan is shorter-than-expected, therefore the overall impact will be limited, analysts said. One analyst, who spoke on condition of anonymity because he was not authorized to speak with the media, predicted that hot metal production, a measure of iron ore consumption, would likely remain stable this week. This will support ore prices. Coking coal and coke, which are both steelmaking ingredients, also saw gains, rising by 0.77% each. The benchmarks for steel on the Shanghai Futures Exchange are mixed. Hot-rolled coils were flat, wire rod was up 0.48%, and stainless steel fell 0.16%.
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Talos Energy Announces Successful Exploration Results at Daenerys
Talos Energy Inc. announced successful drilling results at the Daenerys exploration prospect located in the U.S. Gulf of America Walker Ridge blocks 106, 107, 150, and 151.The discovery well was drilled to a total vertical depth of 33,228 feet utilizing the West Vela deepwater drillship and encountered oil pay in multiple high-quality, sub-salt Miocene sands. A comprehensive wireline program was conducted, acquiring core, fluid, and log data to evaluate the reservoir. The well was drilled approximately 12 days ahead of schedule and delivered approximately $16 million under budget. Planning is underway for an appraisal well to further define the discovered resource. The discovery well has been temporarily suspended to preserve its future utility.Talos, as operator, will hold a 27% working interest ("W.I."), Shell Offshore Inc. will hold a 22.5% W.I., Red Willow will hold a 22.5% W.I., Houston Energy, L.P. will hold a 10% W.I., Cathexis will hold a 9% W.I., and HEQ II Daenerys, LLC will hold a 9%."We are encouraged by the results of our Daenerys discovery well, which confirms the presence of hydrocarbons and validates our geologic and geophysical models," said Talos President and Chief Executive Officer Paul Goodfellow. "We believe these results support Talos's pre-drill resource assumptions. We are now working closely with our partners to design an appraisal program that will further delineate this exciting discovery. We anticipate spudding the appraisal well in the second quarter of 2026."
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Aluminium prices rise on reduced stocks and improved China demand
Aluminum prices rose on Thursday, beating their peers as signs of improved demand and lower inventories in China, the top consumer, boosted prices. As of 0231 GMT, the most traded aluminium contract at the Shanghai Futures Exchange had risen by 0.73% to 20,670 yuan for a metric ton. The benchmark three-month aluminum on the London Metal Exchange increased 0.17%, to $2.581 per ton. The price of aluminium has been supported by the improvement in spot demand. This, coupled with a destocking of certain products, was said under condition of anonymity because he wasn't authorized to speak to media. Analysts at Galaxy Futures wrote in a report that lower aluminium inventories will support Shanghai's prices in the event of potential downside risks. A higher global supply has, however, limited further price increases. The International Aluminium Institute (IAI), which released data on Wednesday, showed that the global primary aluminium production in July increased 2.5% compared to last year. Investors are also closely monitoring the Federal Reserve Chair Jerome Powell’s Friday speech for clues to test their bets for a rate reduction. The dollar price of metals could increase due to a weaker U.S. dollar. SHFE copper grew by 0.06%. Zinc advanced by 0.31%. Lead gained 0.35%. Nickel fell 0.23%. Tin dropped 0.68%. LME copper edged up 0.02%. Nickel slipped 0.05%. Lead lost 0.08%. Zinc dropped 0.11%. (Reporting and editing by Amy Lv, Lewis Jackson, Sonia Cheema).
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As markets prepare for Jackson Hole, the dollar drifts and Asian stocks are mixed.
Investors were preparing for three days worth of market-moving information from the Federal Reserve annual symposium at Jackson Hole. The event will begin later that day. However, traders will be focusing on Fed Chair Jerome Powell’s Friday speech as they look for clues about the possibility of a rate cut in September. The Nikkei fell 0.6% during the morning session and is now further away from its record high reached on Tuesday. Advantest was up 3%, while Tokyo Electron fell 2%, despite a tech-driven selloff overnight on Wall Street. South Korea's KOSPI rebounded by 0.9% on Thursday after hitting a six-week-low on Wednesday. Australia's benchmark index rose 0.6% to a new all-time high. Hong Kong's Hang Seng index was mostly flat, while mainland Chinese blue chips rose 0.5%. U.S. Stock Futures are pointing lower. Nasdaq futures have fallen 0.2%, and S&P futures are down 0.1%. Overnight, Nasdaq Composite fell 0.7% while the S&P 500 Cash Index dropped 0.2%. Kyle Rodda is an analyst with Capital.com. Equity prices are starting to reflect the risk that Jackson Hole will disappoint, and there is a lot of uncertainty about whether or not the Fed will pivot in the aggressive dovish direction implied on the rates markets. The odds are currently around 80% that the Fed will cut rates by a quarter point on September 17 and they price in 52 basis points over the remainder of the year. On Wednesday, odds of a rate cut in September were 84%. Fed Chair Powell said that he was reluctant to reduce rates due to the expected price pressures caused by tariffs this summer. Minutes from the Fed’s July meeting, where policymakers voted for rates to remain unchanged, were released overnight. They suggested that Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman were the only two who pushed for a reduction in interest rates at the gathering. The traders increased their bets on a September reduction after a surprising weak payrolls report was released at the beginning of this month. They were also encouraged by consumer price data, which showed that tariffs had little impact on prices. The policy picture was complicated by a higher-than-expected reading of producer prices last week. The central bank was again under pressure overnight by President Donald Trump, who is not only a potential influencer but also a trader. Trump, who had earlier attacked Powell for not cutting interest rates, targeted Fed Governor Lisa Cook on Wednesday, demanding her resignation amid allegations of wrongdoing in connection with mortgages on properties that she owns in Georgia, Michigan and elsewhere. Cook stated that she "had no intention" of being bullied into stepping down. Investors were unnerved by Trump's call for greater control over the Fed earlier this year. The dollar fell. The dollar index was unchanged at 98.252 in the morning, after climbing to its highest level since August 12 at 98.541 the day before. Rodrigo Catril is a strategist with National Australia Bank. If he were to remove Cook from the Fed Board, he could end up having four out of seven members supporting his call for lower rates. Trump nominated Council of Economic Advisers chair Miran to be a Fed Governor earlier this month following the resignation of Adriana Kulgler. The yield on the 10-year Treasury bill in the United States was unchanged at 4.2965% during the last session. The yields on Japanese government bonds have risen, however. For the first time since 1999, the yield for the 20-year bond has risen to 2,655%. Investors are concerned about increased fiscal spending, especially as the pressure on the Japanese Prime Minister to resign grows. The dollar was little changed at 147.41 Japanese yen. The Euro and Sterling were both flat at $1.1647 each and $1.3458 respectively. Bitcoin has continued to climb from the 2-1/2 week low of $112,386,93 reached on Wednesday, to reach around $114 690. Gold prices have slipped slightly to $3,342 an ounce. Prices of oil edged up as the U.S. crude oil and fuel inventory declined more than expected, supporting expectations of steady demand. Brent crude futures rose 0.5% to $67.19 per barrel after rising 1.6% the previous session. U.S. West Texas Intermediate crude futures (WTI) rose 0.6% to $63.00, after gaining 1.4% in the previous session.
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Investors' views on gold are not much different as they await Jackson Hole comments
Investors waited for clues about the Federal Reserve’s policy outlook before the annual economic symposium in Jackson Hole, Wyoming that begins later in the day. As of 0202 GMT, spot gold declined 0.1% to $3341.93 an ounce. U.S. Gold Futures for December Delivery also fell 0.1% to $3384.40. Investors will be watching closely to see if Fed Chair Jerome Powell supports measures to boost the labor market, or focuses on inflation risks. We don't believe gold prices will rise much and think they are consolidating right now. We could see gold prices rise slightly even if the interest rate is cut a little. The $3,400 level may be possible. If not, prices could continue to stabilize or even drop a bit, to a level closer to $3300," said Brian Lan. Two Fed officials, Vice Chair for Oversight Michelle Bowman, and Governor Christopher Waller, voted last month for a quarter point rate cut in order to address the job market's weakness. However, their position was not widely supported. CME's FedWatch tool predicts an 85% probability of a quarter point rate cut in September. Gold usually performs better in low-interest rate environments and times of increased uncertainty. U.S. president Donald Trump demanded that Fed Governor Lisa Cook resign due to issues allegedly related to her mortgages held in Michigan and Georgia. This was part of his increased efforts to influence the central bank. Russia also said that attempts to resolve Ukraine's security concerns without Moscow's involvement were "a road to nowhere". Silver spot remained at $37.86 an ounce. Platinum fell by 0.3% to 1,334.99, and palladium dropped 0.1% to $1,000.46. (Reporting and editing by Sumana Aich and Rashmi Nandy, Bengaluru)
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Beijing, historically dry, is it ready for a wetter future?
Cui Jian, the owner of a rural hotel in Beijing, and his guests were stranded in the rain on a roof during the deadly floods that struck Beijing last month. Rescuers had to battle through metres-high silt and mud to reach them the following day. Beijing's northern Huairou District and the neighbouring Miyun District received an entire year's rain in just one week. This led to flash floods which devastated entire villages, killing 44 people. It was the worst flood in Beijing since 2012. Most Huairou villagers were asleep when the authorities issued their most severe weather warning. In the past, they evacuated tourists, closed scenic areas, and relocated villages. It's good to warn people, but it is a disaster if you don't. The floods revealed weaknesses in Beijing's rural emergency response infrastructure. Beijing is an urban center surrounded by a number of rural districts. They also showed how Beijing, a city of 22 million, which has a history of being dry, is not prepared for an increasingly wet climate, according to experts. Forecasters predicted that the Chinese capital would only experience three deluges every 100 years. Climate experts warn of a growing threat to disasters previously unimaginable in scale. Chinese experts increasingly call for city planners in China to prioritize "ecological resilient" due to the devastating effects of climate changes. Zhou Jinfeng is the Secretary-General of China Biodiversity Conservation and Green Development Foundation. He said: "The current understanding and future challenges of climate change are insufficient. This naturally leads to inadequate deployment and planning." Beijing's city government and China's housing and environment ministries did not reply to faxed comments. While two Beijing districts devastated by floods in 2023 have issued long-term reconstruction plans prioritising "climate-adaptive city construction" and proposing measures to improve rural flood control systems and upgrade infrastructure, the vast majority of recently-commissioned infrastructure projects in the capital do not prioritise climate adaptation in their plans. In a database of the Chinese government, only three Beijing infrastructures projects were mentioned in the last five years in terms of "ecological resilient", while hundreds more tenders that mention "climate changes" are mostly research projects at Beijing's state scientific institutes. According to Zhou, ecological resilience is a term that refers to such measures as restoring natural river banks, reducing concrete and other hard material use, and artificial landscaping as well as increasing biodiversity. A top-level meeting on urban planning in July emphasized the importance of building "liveable and sustainable" cities. Mid-July marks the start of northern China's wet season, but it began earlier this year than ever before. Several Beijing rivers also experienced their worst floods. Official data revealed that the citywide rainfall for June and July was 75% higher than a year ago. The director of China’s National Climate Center, who works for the state-owned China Newsweek newspaper, said that this is because of the "significant northward extension of China’s rain belt" since 2011, which has been linked to climate changes. This marks a shift to "multiple, sustainable, long-term cycles of rainfall" within the traditionally arid North. 'SPONGE CITIES' China's policymakers took some steps to fight urban flooding. Since 2015, "Sponge City" projects are underway in China, which transform concrete-laden megacities into cities with hidden drainage infrastructure, such as permeable pavements, sunken rainfall gardens, and modernised sewer systems. This concept originated in China and refers to the ability of a sponge to absorb rainwater, then release it. Recent projects in Beijing include flood control pumps, riverside parks and manmade lakes. Official data shows that China will spend more than 403,78 billion yuan (2.9 trillion yuan) in 2024 on infrastructure projects for "sponge cities". The authorities aim to cover 80% of all urban areas by 2030. However, many provinces and large cities are still behind schedule. According to a Chinese database of procurement tenders, in Beijing, this year has seen the start of new "sponge cities" worth at least 150 million yuan. Media reports claim that 38% of Beijing’s urban areas currently meet the "sponge-city" standards. Experts say that such initiatives will not help Beijing's rural fringes, because of the mountainous terrain, which makes villages more vulnerable to secondary disasters, such as landslides, due to their location at the base of steep hillsides, and the lack emergency response infrastructure. Yuan Yuan is Greenpeace East Asia’s climate and energy campaigner. She said that the current "sponge cities" standards were also based on historic precipitation data, and they are not equipped to handle extreme rainfall. She added that future contingency plans should also include pre-emptive evacuations of residents, and improved early warning systems. 31 residents of an elderly nursing home in Miyun died during the recent Beijing flooding. The elderly residents were not included in evacuation plans, and they became trapped by the rising water. Yuan stated that it was necessary to plan infrastructure in a rational way and to coordinate risk response plans, countermeasures and other measures to minimize future losses. Reporting by Laurie Chen, Editing by Kate Mayberry. $1 = 7.1813 Chinese Yuan Renminbi
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Prices of oil rise as US inventories are reduced, indicating a strong demand
The price of oil rose slightly on Thursday, as the decline in crude oil and fuel stocks in the U.S. - the world's largest oil consumer - was larger than expected. This supported expectations for steady oil demand. Brent crude futures rose 13 cents or 0.19% to $66.97 per barrel at 0055 GMT after rising 1.6% the previous session. U.S. West Texas Intermediate crude futures gained 15 cents or 0.24% to $62.86 after climbing 1.4% Wednesday. The U.S. Energy Information Administration reported on Wednesday that U.S. crude oil inventories dropped by 6 million barrels to 420.7 million last week, contrary to analysts' expectations based on a poll of a 1.8-million barrel draw. The EIA reported that gasoline stocks fell by 2.7m barrels versus the expected 915,000 barrels. This indicates a steady demand for summer travel. This was also reflected in a spike in the average four-week consumption of jet fuel, which reached its highest level since 2019. Daniel Hynes said that the price of crude oil rebounded on Thursday as strong demand from the U.S. boosted confidence. Hynes warned that "bearishness remains evident" as traders continue to watch negotiations to end Russia’s war against Ukraine. Russia said Wednesday that attempts to resolve Ukraine security issues without Moscow's involvement were "a road to nowhere", as U.S. military planners and European military planners began exploring post-conflict guarantees of security for Ukraine. Western sanctions against Russian oil supplies will continue indefinitely due to the long-term efforts being made to bring peace to Ukraine. Further U.S. tariffs and sanctions against Russian oil buyers are also a possibility. The Russian government is adamant that it will continue to supply crude oil to India, despite the warnings of the U.S. Donald Trump, the U.S. president, announced that an additional 25% tariff would be applied to Indian goods starting August 27, due to their purchases of Russian crude. The European Union also sanctioned Indian refiner Nayara Energy which is supported by Russian oil company Rosneft. Indian refiners initially stopped buying Russian oil, but officials at Indian Oil and Bharat petroleum have resumed purchases for delivery in September and October after the discounts were increased. (Reporting and editing by Christian Schmollinger in Tokyo, Katya Golubkova)
The Indonesian nickel slump puts pressure on coal miners hit by declining exports
The Indonesian coal producers find themselves in a difficult situation, as their exports are falling and the demand for fuel from nickel smelters is at an all-time high. This creates a conundrum of growth.
Indonesia's largest export is coal, which will generate $30.49 billion by 2024. A decline in revenues would have an adverse effect on Southeast Asia's largest economy, which is heavily dependent on commodities.
Lower profit margins and falling share prices point to coal's future woes, which include a reduction in workforce, a slowdown in production, and less money going into government coffers, at a time that President Prabowo is launching ambitious spending plans.
The fastest-growing demand for Indonesian coal has been from electricity-hungry smelters that process nickel.
According to the Indonesian Coal Miners Association, (ICMA), the demand for nickel will reach a peak of 84.2 million tonnes by 2026, and then fall to 78.6 millions tons in 2027 due to overcapacity of the nickel industry and possible implementation of stricter emission regulations.
Kpler data showed that Indonesian coal exports were down 12.6% by volume compared to a year ago, while government data indicated a 19.1% drop in value.
Chinese data show that exports to China, which is the largest coal buyer in the world, dropped by 30% compared to a year ago. The country relies more on its domestic production and uses low prices to import coal of higher quality from other countries.
Manish Gupta is a senior analyst at Wood Mackenzie for Asia thermal coal. He said that Indonesian coal miners were diversifying their businesses to protect themselves against the steeply declining demand for low to mid-grade coal.
He said that he did not expect to see the increase in the number of captive plants, which are power plants linked to nickel smelting facilities.
According to Global Energy Monitor's coal plant tracker, Indonesia's nickel smelting sector has led to a threefold increase in Indonesian coal-fired power capacity from 5.5 gigawatts in 2019 to 16.6 GW by 2024.
As nickel prices fell due to increased overcapacity, and China's lower stainless steel imports, some Indonesian smelters idled their facilities.
Data from geospatial analysis firm Earth-i revealed that in June, Indonesian nickel pig-iron operations experienced a 9% increase in smelting activity compared to a year ago, which was the highest level in the past two years. This is primarily because the country's largest nickel producer, Tsingshan, likely stopped production at its joint-venture plants in Morowali Industrial Park.
H. Kristiono is the deputy chairman of ICMA which includes Adaro Bayan Bukit Asam and foreign traders Adani Global Trafigura. He still expects that the coal-fired capacity of the smelter sector will grow despite underutilisation.
The nickel industry will continue to use coal as its primary power source due to difficulties in switching to alternative sources, the slow progress of connecting sites to national grids and Indonesia's opposition to more stringent regulations.
Global Coal Monitor reports that the Global Coal Monitor estimates that Central Sulawesi, North Maluku and Central Sulawesi provinces are expected to have a combined capacity of 6 GW, or 46%, of all coal-fired plants currently under construction in Indonesia. These two provinces are where the nickel processing industry is concentrated.
Companies are squeezed
Indonesian coal producers are being squeezed by a combination of lower exports, slower growth in captive power demand and higher government payments.
LSEG data revealed that the profit margins of Bayan, a major miner in Indonesia, have been falling for three years. Bukit Asam has also seen its first-quarter margins fall below averages every year since 2010. This is due to higher royalty payments and increasing machinery costs.
The shares of Indonesia's five largest coal producers by production are down between 1% and 18% in this year. This is below the broader market growth rate of almost 7%. Adaro has fallen 18% while Golden Energy Mines, Bukit Asam and Bukit Asam lost over a tenth since the start of this year.
Requests for comment from the companies were not answered.
Indonesia announced in April new rates of royalty for nickel, coal and other minerals, to help Prabowo increase his spending. Some coal miners experienced a drop in their royalty rates, while others saw an increase of 1 percentage point.
According to the Energy Shift Institute, based in Australia, by 2024 royalties will account for 16% of average coal producers' cost structures, making them the most expensive among the major commodities produced in Indonesia.
Jakarta also considers export duties on coal for certain price levels in order to bolster state coffers. This is at a moment when miners are already facing higher fuel prices due to the removal biodiesel subsidy.
Analysts say that some coal miners are looking at diversification as a way to survive the current downturn, but they have made little progress. Bukit Asam said, for instance, in May that it was considering an investment of $3.1 billion in a facility to convert coal into synthetic natural gas.
Gupta, of Wood Mackenzie, said that producers are looking at a combination of downstream options, renewables, or investment in alternative commodities. (Reporting and editing by Christian Schmollinger, Ashitha Shivaprasad, Hongmei LI, Fransiska Nanangoy; Additional reporting by Sudarshan Varadhan).
(source: Reuters)