2024-09-18 00:09

Federal Reserve delivers cut of 50 basis points Traders pricing in more 2024 cuts of nearly 70 basis points Yield curve hits steepest level in more than two years NEW YORK, Sept 18 (Reuters) - The dollar edged higher in choppy trading after the Federal Reserve on Wednesday cut interest rates by half a percentage point, citing greater confidence that inflation will continue to recede to the U.S. central bank's 2% annual target. The Fed cut the overnight rate to the 4.75%-5.00% range, and policymakers see the Fed's benchmark rate falling by another half of a percentage point by the end of this year, another full percentage point in 2025, and by a final half percentage point in 2026 to end in a 2.75%-3.00% range. The dollar initially trading lower following the Fed announcement, but pared those losses after Chair Jerome Powell finished his press conference. The dollar index was last up 0.05% on the day at 100.970. It earlier reached 100.21, the lowest since July 2023. The euro dropped 0.01% to $1.111275. The greenback was flat at 142.370 Japanese yen . "It's a more dovish cut. It certainly wasn't a hawkish cut," said Vassili Serebriakov, FX & macro strategist at UBS in New York. "The way we thought about it before the announcement is that you know a 50-basis point cut is dollar negative. If they had cut by 25 bps, there were different scenarios where the dollar could perform. But a 50-basis point cut is unambiguously dollar negative," Serebriakov added. During his press conference, Powell said he does not see any indication of a recession or even an economic downturn ahead. "I don't see anything in the economy right now that suggests that the likelihood of a recession," Powell said. "You see growth at a solid rate, you see inflation coming down, and you see a labor market that's still at very solid levels." Following the Fed's rate move, futures on the fed funds rate, which measures the cost of unsecured overnight loans between banks, have priced in about 70 basis points of more rate cuts this year. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes , seen as an indicator of economic expectations, hit its steepest level since July 2022 following the Fed's cut. It was last at 7.8 basis points. Sterling , the best performing G10 currency of the year, rose 0.28% at $1.3200. The yuan strengthened against the dollar at 7.0780 per dollar in offshore trading, making it the strongest since June 2023. "The market was pretty much 50-50 going into the decision. So it surprises obviously half the market," said Brad Bechtel, global head of FX at Jefferies in New York. "And clearly the Fed is trying to get out in front of the slowdown in the U.S. economy and provide support. But so far, the reaction in the market isn't overly crazy." Sign up here. https://www.reuters.com/markets/currencies/dollar-catches-footing-ahead-fed-2024-09-18/

2024-09-17 23:52

CFIUS extends timeline to review Nippon Steel's US Steel bid National security decision likely delayed at least to December, source says Nippon bid opposed by presidential candidates, US Steel's union Nippon says merger offers much needed capital for US Steel WASHINGTON/TOKYO, Sept 18 (Reuters) - The U.S. national security panel reviewing Nippon Steel's $14.9 billion bid for U.S. Steel let the companies refile their application for approval of the deal, a person familiar with the matter said, delaying a decision on the politically sensitive merger until after the Nov. 5 presidential election. The move offers a ray of hope for the companies, whose proposed tie-up appeared set to be blocked when the Committee on Foreign Investment in the United States (CFIUS) alleged on Aug. 31 the transaction posed a risk to national security by threatening the steel supply chain for critical U.S. industries. CFIUS needs more time to understand the deal's impact on national security and engage with the parties, the person said on Tuesday. Refiling sets a new 90-day clock to review the proposed tie-up and make a decision. The review was expected to take close to the full 90 days, another person familiar with the matter said. Japanese public broadcaster NHK reported on Wednesday that Nippon Steel had refiled an application with the CFIUS for its U.S. Steel acquisition plan by Wednesday, quoting people familiar with the matter. Nippon Steel declined to comment. CFIUS and U.S. Steel did not immediately respond to requests for comment from Reuters. "Extending the timeline takes some pressure off the parties and, importantly, pushes the decision past the election in November," said Nick Klein, a CFIUS lawyer with DLA Piper. The deal has become a political hot potato. This month, Vice President Kamala Harris, the Democratic presidential nominee, said at a rally in Pennsylvania, the swing state where U.S. Steel is headquartered, that she wanted U.S. Steel to remain "American owned and operated," echoing a view held by President Joe Biden. The White House reiterated that position on Tuesday. Harris' Republican rival Donald Trump has pledged to block the deal if elected. Both candidates have sought to woo union votes. Postponing the decision to after the U.S. elections will "dial down" the political temperature but does not guarantee approval, said David Boling, a former U.S. trade official who is now an analyst at Eurasia Group. "Regardless of the CFIUS review, Nippon Steel still must reach an agreement with the United Steelworkers," Boling said. "Without that, it's very hard to see this deal happening." The United Steelworkers Union, which vehemently opposes the deal, said on Tuesday "nothing has changed regarding the risks that Nippon's acquisition would pose to national security or the critical supply chain concerns that have already been identified." The deal is being closely watched in Japan, a close U.S. ally and its biggest foreign investor. "Further strengthening economic relations, including expanding mutual investment between Japan and the U.S ... are essential for both countries," Deputy Chief Cabinet Secretary Hiroshi Moriya told reporters on Wednesday. Nippon Steel shares were 1.1% up in afternoon trade in Tokyo. U.S. Steel shares closed 0.4% down on Tuesday. STEEL SUPPLY CONCERNS CFIUS is concerned Nippon Steel's merger could hurt the supply of steel needed for critical transportation, construction and agriculture projects, it said in its August letter to the companies, exclusively obtained by Reuters. It also cited a global glut of cheap Chinese steel, and said that under a Japanese company, U.S. Steel would be less likely to seek tariffs on foreign steel importers. Nippon's decisions could also "lead to a reduction in domestic steel production capacity," it said. In a 100-page response letter to CFIUS, also exclusively obtained by Reuters, Nippon Steel said it will invest billions of dollars in U.S. Steel facilities that otherwise would have been idled, "indisputably" allowing it to "maintain and potentially increase domestic steelmaking capacity in the United States." The company also reaffirmed a promise not to transfer any U.S. Steel production capacity or jobs outside the U.S. and would not interfere in any of U.S. Steel's decisions on trade matters, including decisions to pursue trade measures under U.S. law against unfair trade practices. The deal, Nippon added, would "create a stronger global competitor to China grounded in the close relationship between the United States and Japan." Robust CFIUS reviews take 90 days but it is common for companies to withdraw their filings and resubmit them to give them more time to address the panel's concerns. According to CFIUS's 2023 annual report, 18% of companies seeking deal approval refiled their applications last year. Nippon Steel and U.S. Steel filed for the review in March, and CFIUS allowed them refile in June, starting a second 90-day clock that runs out on Sept. 23, Reuters reported on Friday. In December, CFIUS could approve the deal, possibly with measures to address national security concerns, recommend that the president block it, or extend the time table again. Sign up here. https://www.reuters.com/markets/deals/us-decision-nippons-bid-us-steel-pushed-back-until-after-election-2024-09-17/

2024-09-17 23:27

SYDNEY, Sept 18 (Reuters) - Australia's central bank has decided to prioritise work on a wholesale central bank digital currency (CBDC) as its economic benefits are judged to outweigh those of a retail version, a top policymaker said on Wednesday. In a conference speech, Reserve Bank of Australia (RBA) Assistant Governor Brad Jones announced the launch of a three-year digital money work plan for the RBA and Treasury called Project Acacia. The project would include industry and focus on opportunities to lift the efficiency, transparency and resilience of wholesale markets through tokenised money and new settlement infrastructure. Subsequent phases could well involve cross-border applications with regional central banks, Jones said. The RBA and Treasury would still reassess the merits of a retail CBDC over time and plan a follow-up paper in 2027. If a retail version were to be adopted, the Australian government would have to make the decision and it would almost certainly require legislative change, he added. "Our assessment is that the potential benefits of a retail CBDC generally appear modest or uncertain at the present time, relative to the challenges it would introduce," said Jones. The benefits of a wholesale CBDC include reducing counterparty and operational risks, freeing up collateral, increasing transparency and auditability and reducing costs for institutions and customers. Around 134 countries representing 98% of the global economy are now exploring digital versions of their currencies, research by the U.S.-based Atlantic Council think-tank showed this week. Sign up here. https://www.reuters.com/markets/currencies/australias-rba-prioritise-wholesale-cbdc-work-over-retail-2024-09-17/

2024-09-17 23:07

SYDNEY, Sept 18 (Reuters) - Barrick Gold (ABX.TO) , opens new tab has suspended operations at its Porgera gold mine in Papua New Guinea until Thursday after tribal violence in the region killed at least 20. Papua New Guinea has granted police emergency powers, including the use of lethal force, to contain the violence in Porgera between illegal settlers squatting near the gold mine and local landowners, newspapers Post-Courier and The National reported late on Sunday. "The Porgera gold mine has suspended the majority of its operations until 19 September for the protection of its employees while the government restores law and order in the surrounding region," a spokesperson said in a statement late on Tuesday. Two of its employees were killed in the violence, the spokesperson added. Home to hundreds of tribes and languages, the Pacific nation to the north of Australia has a long history of tribal warfare. Violence has increased over the past decade as villagers swapped bows and arrows for military rifles and elections deepened existing tribal divides. Sign up here. https://www.reuters.com/markets/commodities/barrick-gold-suspends-operations-papua-new-guinea-mine-after-violence-kills-2024-09-17/

2024-09-17 23:00

LONDON, Sept 17 (Reuters) - Russian president Vladimir Putin's suggestion that Moscow should consider capping exports of nickel in retaliation for Western sanctions has been greeted with a collective shrug by the market. The London Metal Exchange (LME) three-month price has managed a weak bounce through the $16,000-per metric ton level but the momentum is already fading. This is a far cry from February 2022, when Russia first invaded Ukraine. Fears that metal from Russian giant Norilsk Nickel might have sanctions imposed generated a monster rally in 2022 that morphed into a full-blown meltdown of the LME nickel market. But two and a half years is a long time in the nickel market. Instead of an acute supply deficit, there's now a massive surplus. Prices have fallen to levels that are forcing many higher-cost operators out of business. Even Norilsk's high-purity refined nickel is rapidly being displaced by a new generation of Chinese and Indonesian producers. FROM SCARCITY... Back in 2022 the potential loss of Russian metal threatened to create a supply chain disaster for many Western consumers. Not only was Norilsk Nickel a significant player with annual output of over 200,000 tons, but its Class I refined nickel was in heavy demand as the primary product for conversion into battery-grade nickel sulphate. The scramble for high-purity nickel units had seen LME stocks fall steadily over the closing months of 2021 and available tonnage had dwindled to just 39,000 tons by the end of February 2022. Although Indonesia was rapidly emerging as the world's biggest nickel supplier, the country's production was still largely in the form of intermediate products such as nickel pig iron that were better suited to stainless steel production than electric vehicle batteries. ...TO GLUT Things have changed dramatically over the last two years after Chinese producers made the processing leap of converting Indonesia's relatively low-grade ore into Class I refined metal. The LME has listed five new brands of Chinese nickel as "good delivery" against its contract. The first Indonesian brand was approved in May. The effect has been a rapid rise in LME inventories, which have almost doubled since January to 123,726 tons. Another 65,000 tons were sitting in off-warrant storage at the end of July, according to the LME's most recent monthly report. The Russian component of on-warrant LME stocks has held steady at around 24,000 tons this year, while Chinese-brand inventory has mushroomed from 6,400 tons at the end of December to 42,738 tons at the end of August. The first Indonesian metal has also started arriving at LME warehouses after the May listing of the "DX-zwdx" brand produced by PT CNGR Ding Xing New Energy. There were 3,186 tons of registered Indonesian metal at the end of August. As a result, global exchange stocks have climbed to their highest level since September 2021 and there's no end in sight to the near daily inflows at LME warehouses in South Korea and Taiwan. PRODUCER PAIN The flood of surplus nickel has caused LME prices to trade at their lowest levels since early 2021. The impact outside of Indonesia has been a lengthening list of price casualties. BHP Group (BHP.AX) , opens new tab announced in July the suspension of activities at its Nickel West mines in Australia, operations that were once touted as the country's new battery metals hub. New Caledonian producer Koniambo shut down its furnaces at the start of this month as talks with potential buyers for Glencore's (GLEN.L) , opens new tab stake in the company continue to drag on. Madagascar's Ambatovy nickel project, majority owned by Sumitomo Corp (8053.T) , opens new tab, has just filed , opens new tab a debt restructuring plan and Anglo American (AAL.L) , opens new tab has hired financial advisors in a bid to off-load its Brazilian nickel mines. The nickel market landscape has changed beyond recognition since early 2022. And with so much metal washing around the globe, who's going to miss Russian supply? PERFECT STORM Norilsk itself has been caught up in what CEO Vladimir Potanin described as "a perfect storm" of low prices, higher interest payments on debt instruments and cross-border payment problems. The company's revenue fell 22% to $5.6 billion in the first half of 2024, while its core earnings decreased 30% over the same period to $2.35 billion. Its nickel has already had sanctions imposed in the United States and Britain though not yet in the European Union. Norilsk has responded by pivoting to Asian markets and is in talks with several Chinese entities about building a new nickel refinery in the country. But does even China need more nickel? The country became a net exporter of refined nickel in the first half of this year for the first time this century. Putin's warning about capping exports wasn't just about nickel. Titanium, uranium and diamonds were also mentioned, all with the key caveat that "we just mustn't do anything to harm ourselves". Nickel's reaction to the news suggests Russia may want to consider one of the other options if it wants to retaliate against the West without hurting its own producers. The opinions expressed here are those of the author, a columnist for Reuters Sign up here. https://www.reuters.com/markets/commodities/nickel-market-no-longer-afraid-losing-russian-supply-andy-home-2024-09-17/

2024-09-17 22:38

Microsoft gains after new share-buyback plan, dividend hike Intel gains following collaboration with Amazon's AWS Retail sales unexpectedly rise in August NEW YORK, Sept 17 (Reuters) - U.S. stocks closed nearly unchanged on Tuesday, giving up earlier gains that had vaulted the S&P 500 and Dow Industrial Average to record highs as investors braced for the first Federal Reserve rate cut in 4-1/2 years. The benchmark S&P 500 index touched 5,670.81 earlier in the session, after fresh economic data eased worries of a sharp slowdown in the U.S. economy. The latest report from the U.S. Commerce Department showed retail sales rose unexpectedly in August, after a decline in auto dealership receipts was offset by strength in online purchases, suggesting the economy was on solid footing through most of the third quarter. "Expectations were pretty well entrenched before calling into today's economic data and what they showed was generally a growth environment, but a relatively slow-growth environment," said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan. Price said the size of the cut could either stoke inflation fears or increase worries the Fed is moving too slowly to avoid a recession. "What you're seeing in this afternoon's trading is the way we pulled off of the all-time high ... because tomorrow somebody's going to be disappointed," he said. The Dow Jones Industrial Average (.DJI) , opens new tab fell 15.90 points, or 0.04%, to 41,606.18, the S&P 500 (.SPX) , opens new tab gained 1.49 points, or 0.03%, to 5,634.58 and the Nasdaq Composite (.IXIC) , opens new tab gained 35.93 points, or 0.20%, to 17,628.06. Markets are pricing in a 65% chance the Fed will cut borrowing costs by 50 basis points at the conclusion of its two-day meeting on Wednesday, according to the CME's FedWatch Tool , opens new tab. Market expectations on the cut's size have been volatile in recent days, with only a 34% chance of a 50-bps cut priced in as of last week. Microsoft (MSFT.O) , opens new tab, up 0.88%, was the biggest lift to the S&P 500, as shares rose after the AI frontrunner's board approved a new $60-billion share-buyback program and hiked its quarterly dividend by 10%. The blue-chip Dow hit a record intraday high for a second-straight day. The Russell 2000 index (.RUT) , opens new tab tracking small caps, which investors view as likely to benefit from a lower rate environment, outperformed the three major indexes, climbing 0.74% on the session. Energy (.SPNY) , opens new tab, up 1.41%, was the best-performing of the 11 major S&P sectors, buoyed by a climb in crude prices, while healthcare (.SPXHC) , opens new tab was the worst-performing with a decline of 1.01%. Among other movers, Intel (INTC.O) , opens new tab gained 2.68% after signing Amazon.com's (AMZN.O) , opens new tab cloud-services unit as a customer to make custom artificial-intelligence chips. Amazon.com shares advanced 1.08%. Advancing issues outnumbered decliners by a 1.55-to-1 ratio on the NYSE and on the Nasdaq, advancing issues outnumbered decliners by a 1.25-to-1 ratio. The S&P 500 posted 48 new 52-week highs and no new lows while the Nasdaq Composite recorded 147 new highs and 68 new lows. Volume on U.S. exchanges was 10.23 billion shares, compared with the 10.74-billion average for the full session over the last 20 trading days. Sign up here. https://www.reuters.com/markets/us/futures-inch-up-ahead-economic-data-feds-rate-cut-decision-2024-09-17/