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Asian Indexes Jumped Following the Rally in Wall Street

Japan’s Nikkei 225 rose 0.59 percent to end a five-day losing streak. Across the Korean strait, the Kospi tacked on 0.16 percent, with technology stocks contributing to the gains: Samsung Electronics was up 0.77 percent and LG Electronics rose 2.77 percent.

Down Under, the S&P/ASX 200 held onto gains from the previous session. The index traded higher by 0.06 percent, as a rise in the energy sub-index was offset by losses in the utilities and information technology sub-indexes.

 

Mainland China markets bucked the trend and edged down. The Shanghai Composite slid 0.24 percent and the Shenzhen Composite declined 0.247 percent in early trade.

Meanwhile, morning trade for Hong Kong markets was cancelled as tropical cyclone Hato approached. A number 10 typhoon signal the most severe in the Hong Kong warning system was issued by the Hong Kong Observatory at 9:10 a.m. HK/SIN. The full day’s trading will be completely cancelled if the typhoon warning signal is not lowered below number 8 by noon, the Hong Kong Exchange said in a news release.

 

Overnight moves on Wall Street were attributed to talk that the Trump administration was moving ahead with its tax reform policy proposals. President Donald Trump’s aides and congressional leaders were reportedly in broad agreement over how corporate and individual tax rates could be reduced, according to a Politico report.

Despite the pick-up in risk appetite overnight, market sentiment remained rather fickle. Sentiment is yo-yoing in thin summer markets ahead of the Jackson Hole symposium.

The U.S. currency extended gains after climbing against a basket of currencies overnight, with the dollar index standing at 93.602 at 9:38 a.m. HK/SIN. That was above the 93.533 seen in the last session and off a low of 92.997 seen on Monday. The greenback also strengthened against the Japanese currency to fetch 109.66 yen, compared to levels around the 108 handle seen at the beginning of the week.

Some market watchers attributed the firmer dollar to reduced geopolitical tensions between the U.S. and North Korea: U.S. Secretary of State Rex Tillerson said on Tuesday that restraint demonstrated by North Korea over its missile tests was a welcome development.

 

In corporate news, China Unicom was back in the spotlight after the telecommunications operator’s Hong Kong unit entered into a share subscription agreement with Unicom BVI, according to a release on the Hong Kong Exchange. Unicom BVI, controlling shareholder of China Unicom Hong Kong, will subscribe for a maximum of 6.65 billion subscription shares at a price of HK$13.24 per share.

Market movers during the day included Toshiba, which has started talks with Western Digital as it attempts to secure an agreement for the sale of its flash memory arm. Toshiba shares rose 4.64 percent in early trade.

 

In economic news, Indonesia’s central bank lowered its benchmark interest rate by 25 basis points to 4.5 percent in a surprise move. A Reuters poll had found that 19 out of 20 economists surveyed had expected rates to remain on hold. The rate cut was Bank Indonesia’s first since October.

Meanwhile, oil prices slipped after climbing overnight. Brent crudefutures declined 0.48 percent to trade at $51.62 a barrel and U.S. crudefutures shed 0.38 percent to trade at $47.65.

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Dow Jones Closed Higher Amid U.S. tax reform Renewal

The Dow Jones industrial averagerose 196.14 points to 21,899.89, with Boeing contributing the most to the gains. The Dow also posted its biggest one-day pop since April.

A big chunk of the gains are related to speculation that the White House and Republicans are making progress on tax legislation or on at least a repatriation plan that would involve infrastructure spending.

 

They were looking for a rebound rally to begin with. Markets are extraordinarily thin. The buying is light. A little bit of buying has a disproportional affect. 

The Trump administration and key lawmakers had found common ground on how to approach tax reform. The prospects of tax reform were one of the major catalysts for the market after Trump’s win in November.

 

Equities have had a stellar year, but have lost some of their appeal this month. The S&P is up about 9 percent year to date, but has fallen 0.7 percent in August. Stocks closed well off session lows on Tuesday.

Boeing’s stock rose 1.7 percent after the company received a government contract for intercontinental ballistic missile system replacements. The stock also followed other defense companies higher after President Donald Trump’s speech on the Afghanistan war.

 

Defense stocks rose broadly following Trump’s remarks, with the iShares U.S. Aerospace and Defense ETF (ITA) rising 1.2 percent.

The Nasdaq composite outperformed, rising 1.4 percent to close at 6,297.48. The index also snapped a three-day losing streak, along with the Technology Select Sector SPDR exchange-traded fund (XLK).

The benchmark 10-year Treasury note yield rose more than 2 basis points to 2.2 percent, while the two-year yield advanced to trade at 1.329 percent. Investors have been following the bond market as they prepare for a key meeting between central bank officials later in the week.

Federal Reserve officials are expected to be joined by European Central Bank President Mario Draghi and Haruhiko Kuroda, the Bank of Japan governor. Investors will be on the lookout for any commentary related to global monetary policy.

 

Central bankers will begin gathering on Thursday night in one of the most highly anticipated Jackson Hole symposiums in recent memory. However, most analysts do not expect Janet Yellen or Mario Draghi to break any new ground with monetary policy when speaking at the conference. 

Shares should therefore regain their footing as we close out August and head into September albeit neither the Fed nor the ECB has enough sugar in the cupboard to make the medicine each will soon administer go down easily.

The Fed is expected to start rolling off its massive $4.5 trillion balance sheet next month, but investors are split on when the next rate hike will arrive. 

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Iron Ore Price Boost, Up 47% in Two Months

The Northern China import price of 62% Fe content ore jumped again on Tuesday as the country’s steelmakers stoke production ahead of mandated cuts going into winter. According to data supplied by The Steel Index the steelmaking raw material advanced 4% to exchange hands for $78.10 per dry metric tonne, the highest since April 7.

The iron ore price is now trading up a whopping 47% from its 2017 lows struck just two months ago as Chinese anti-pollution crackdown on its heavy industries force the country’s steelmakers to chase high quality imports and avoid domestic producers which contend with Fe content in the 20%-range.

 

Iron ore’s latest rally comes after another furious day of trading on ferrous derivates markets in China ahead of new curbs on trading going into force tomorrow to dampen speculative activity.

In Shanghai rebar futures the world’s most traded steel contract gained  3.6% near 4½-year highs. Dalian coking coal futures rose 3.6% while iron ore contracts closed 6.6% higher, bringing gains over the past three sessions to 11%.

China’s steel production last month rose more than 10% compared to last year to a record 74m tonnes as traders worry about a steel supply crunch going into the new year. Beijing wants to cut output by as much as 50% during winter months to fight smog, particularly in its capital city and surrounding areas.

In Hebei province, China’s key producing region, steelmakers said they will comply with stringent new emissions regulations by the September 1 deadline. Some 120 million tonnes of low quality steel capacity were shuttered during the first six month of the year.

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Nasdaq Extends its Losing Streak

The Nasdaq composite lagged, slipping 0.05 percent to close at 6,213.13. The index also posted a three-day losing streak. Technology has been the best-performing sector this year, advancing more than 20 percent in that time period. Financials, meanwhile, have spiked nearly 5 percent over the past three months after a slow start to 2017.

The S&P and the Dow notched their longest weekly losing streak since May on Friday, as Wall Street navigates a part of the calendar that’s typically bearish for stocks.

 

According to data from Bespoke Investment Group, the S&P 500 has posted a median return of 0.04 percent in the two weeks between Aug. 21 and Sept. 9 over the past 10 years. During the past two years, however, the S&P has declined 0.2 percent and 2.5 percent, respectively.

Stocks have pulled back from record highs this month, with the three major indexes falling at least 1 percent in the period. And while the Dow, S&P and Nasdaq are still at least 2.3 percent off their all-time highs, the market is showing other signs of cracking.

 

Investors also paid attention to geopolitics on Monday. President Donald Trump is set to lay out a U.S. strategy for the war in Afghanistan and engagement in the South Asia region. The U.S. and South Korea are also set to kick off war games on Monday.

Tensions between the U.S. and North Korea escalated earlier this month after a war of words between Trump and the North Korean government raised concerns of a nuclear attack in Guam, a U.S. territory.

 

In economic news, there were no data released and no Federal Reserve officials were scheduled to speak. However, investors looked ahead to Friday, when key Fed Chair Janet Yellen is set to speak on monetary policy.

Expectations for tighter monetary policy in the U.S. have been dampened recently by lackluster inflation data. Market expectations for a rate hike in December are just 41 percent.

 

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China Debt Swaps Reach $116 Billion in Q2

China unveiled guidelines for debt to equity swaps in October, part of measures to trim the world’s biggest corporate debt loads. The idea was that healthy firms would use the program to cut interest bearing borrowings, while bloated companies would be shunned. 

But it hasn’t always worked out that way, even as the total value of swaps reached $116 billion in the second quarter when volumes jumped to a record. 

 

While China’s State Council said in October that zombie firms may not take part, 55 percent of the swaps last quarter were in the coal and steel industries, which are plagued by overcapacity. The stakes are high for lenders and even individual investors, some of whom buy wealth management products repackaged from the swaps.

The absence of a clear definition of zombie is part of the problem, according to Fitch Ratings. Views vary on whether further guidelines on the program released this month by the banking regulator will help address these issues.

 

The program is attracting bad companies because they see debt to equity swaps as a way to get a bailout, said Chi Lo, Greater China senior economist at BNP Paribas Asset Management. “You can imagine the zombie companies will be just like cancer cells that eat into the system.”

A bank agrees to take over a company’s debt from its original lenders. The bank sets up a unit which has other shareholders that help share risk. The unit assumes the debt and conducts a transaction with the company to convert it into equity. It can then dispose of the stake.

In the most recent draft guidelines released earlier this month by the China Banking Regulatory Commission, a bank is required to own no less than a 50 percent stake in the unit conducting the swaps. The guidelines also say that the units can sell bonds and borrow from the interbank market.

Among struggling companies that have signed swap agreements are Sinosteel Corp., which received support from the Chinese government to avoid defaulting on its debt in 2015.

Another firm, Shandong Gold Group, signed a debt to equity swap agreement with Industrial & Commercial Bank of China Ltd. in December. Shares of its listed unit Shandong Gold Mining have dropped about 13 percent since then, compared with a 1 percent gain for the broader Shanghai Composite Index in that period.

 

The growth in such swaps has also prompted concerns that risks are being shifted to individual investors, as funds repackage equity stakes into wealth management products. Households are being harmed.

China Construction Bank Corp. raised capital by repackaging swapped debt of Yunnan Tin Group and Wuhan Iron & Steel into wealth management products aimed at individual investors, according to S&P Global Ratings.

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Asian Stocks Set to Open Higher as Investors Prepare for Global Central Bankers Meeting

Asian stocks look set to open higher today as investors prepare for a key meeting of global central bankers and recover from a tumultuous week in Washington that culminated in the departure of a controversial Donald Trump adviser.

Japan and Hong Kong equity-index futures were higher during early trades, while those in Australia and South Korea declined. Oil extended gains and the yen fell.

 

Investors pulled $1.3 billion from equity funds in the week ending Aug. 16 as tensions over the Korean peninsula escalated, according to EPFR Global data. Outflows from U.S. stock funds were triple that, suggesting doubts about Trump’s stimulus plans are an additional worry. Heightened terror fears added to the malaise after at least 13 people died when a van plowed into pedestrians in Barcelona Thursday. 

Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi are among central bankers gathering at Jackson Hole, Wyoming, later this week for their annual meeting where investors are looking for any significant policy statements. The theme this year is “Foster a Dynamic Global Economy,” with discussions likely to touch on growth, inflation and prospect for the Trump trade.

Economic releases this week include Thailand second-quarter GDP, sales of new U.S. homes in July, Taiwan July industrial production, Malaysia July CPI, U.K. second-quarter GDP, New Zealand July trade data and Japan July CPI.

Indonesia is among central banks to hold monetary-policy meetings. U.S.-South Korea military drills are scheduled to begin. 

 

Philippines markets are closed for a holiday today. The main moves in markets Nikkei 225 Stock Average futures rose 0.2 percent, while contracts on the Kospi index declined 0.2 percent and those on Australia’s main gauge fell 0.1 percent. Contracts on Hong Kong’s Hang Seng Index rose 0.2 percent.

Futures on the S&P 500 were 0.2 percent higher as of 7:19 a.m. in Tokyo. The underlying gauge ended down 0.2 percent, while the Dow Jones Industrial Average dropped 76 points and the Nasdaq Composite Index declined 0.1 percent.

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Gold Surged after Federal Reserve Hinted on Slow Interest Rate Increase

Gold rose for a second day after Federal Reserve officials hinted that U.S. interest rates could rise more slowly than expected. The minutes of the Fed’s July 25-26 policy meeting showed some policymakers wished to halt further rate increases until it is clear the trend of soft inflation is transitory.

Gold is sensitive to rising interest rates because they push up bond yields, raising the opportunity cost of holding non-yielding bullion, and tend to strengthen the dollar, in which gold is priced.


Spot gold rose 0.30 percent at $1,286.51 an ounce after rising 0.9 percent Wednesday. Gold futures in the U.S for December delivery settled up $9.50 at $1,292.40 an ounce.

Demand for gold as a safe haven also resurfaced after South Korea warned North Korea against “crossing a red line” and the United States said it would go ahead with joint military drills despite pressure from China.

Gold is likely to breach USD 1,300/oz as the market prices in a less hawkish Fed, particularly in a risk-off environment. Gold would struggle to rise above $1,295 after failing three times this year.

The precious metal has been supported by physical buying, with holdings in the largest gold backed exchange traded fund, New York’s SPDR Gold Trust, 275,663 ounces, or 1.1 percent, higher on Wednesday than Friday’s levels.

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Copper Price Jumped as Hedge Funds Place Billions in Bet

Copper futures trading on the Comex market in New York raced ahead as global supply disruptions come back into view and large-scale speculators place huge bets on rising prices. In massive volumes of than 3 billion pounds of copper for delivery in September jumped to a high of 2.9795 a pound ($6,569 per tonne), up more than 3%.

Copper’s 2017 year to date gains in percentage terms now top 18% and the red metal has recovered 54% in value after falling to six-year lows below $2.00 a pound in January last year.

 

On the copper derivatives market hedge funds built long positions bets on higher prices in future to a new record high last week according to the CFTC’s weekly Commitment of Traders data. So called managed money investors’ net longs now total over 112,000 lots, the equivalent of 2.8 billion pounds or nearly 1.3m tonnes worth around $8.3 billion at today’s prices.

It shatters the previous peaks achieved mid-2014 when the copper price was above $3.20 a pound and represents the equivalent of $11.8 billion swing from 2016 second quarter net short position (bets that copper can be bought back cheaper in future) of 1.2 billion tonnes.

 

On the London Metal Exchange, hedge funds have also increased their bullish bets in recent weeks and according to LME data released yesterday net longs total over 74,000 lots. LME contracts are for 25 tonnes which translates into more than 1.8m tonnes worth some $12.2 billion on Wednesday.

After a relatively uneventful supply environment in 2016, several outages at some of the world’s biggest mines including a 43-day strike at BHP’s Escondida mine in Chile which ended in March and ongoing strike action at Freeport McMoRan’s Grasberg operations in Indonesia have underpinned prices.

Freeport said flash floods at Grasberg destroyed roads, bridges and water lines and one worker remains unaccounted for. The impact on operations have not been quantified but a spokesperson for the Indonesian unit said the main processing mill at the extensive complex may also be affected.

Freeport’s temporary exporting licence is coming up for renewal in October, a bargaining chip used by Jakarta as it negotiates with the Phoenix-based company about divesting a majority stake in its Indonesian subsidiary.

 

Zambia, Africa’s top copper producer, this week reduced power supply to mines operated by Glencore and First Quantum Minerals in the country over a pricing dispute. While Glencor’s Mopani was taken off line, the impact on FQM appears minimal at this stage the power cuts coincided with a maintenance shutdown at Kansanshi and power supply had been redirected to the Canadian miner’s Sentinel mine.

Last month Chile’s Antofagasta narrowly avoided labour strikes which would have been the first in the London-listed company’s history at its Zaldivar and Centinela mines in the South American nation. Together the two mines produce more than 280,000 tonnes of copper per year.

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H1 Profit of QBE Insurance Surged 30%

QBE Insurance has posted a 30% increase in net profit to $435 million, despite poor performance in its emerging market business. QBE confirmed it plans to activate its previously announced $1 billion buyback during the second half, but plans to split ts poorly performing emerging markets unit into two separate divisions focused on Latin America and the Asia Pacific.

Adjusted net profit after tax increased by 76% to $464 million on a one-off pretax charge. The insurance company reported an adjusted results due to the UK government’s controversial change to the Ogden discount rate which is used in determining personal injury damages awards.

On the same adjusted basis the group’s combined operating ratio increased slightly to 95.3%, from 94.5% in the prior year, consistent with revised guidance provided to the market in June.

Cash profit for the half year to June 30 was also up by 30 per cent to $374 million from $287 million for the 2016 half. Shares in QBE dropped more than 10 per cent when it flagged that there would be a claims blow out in its emerging markets division in June, declared a partially franked interim dividend of 22 cents, compared to a fully franked 21 cents a year ago.

The insurer, which generates almost three-quarters of its premiums abroad, said in February it expected the market to remain challenging in 2017 though there were indications of a modest improvement.

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Stocks Closed Higher as Feds Release Future Monetary Policy

U.S. equities closed higher. The S&P 500 gained just 0.1 percent to close at 2,468.11, with materials outperforming. The index rose as much as 0.4 percent. The Dow Jones industrial average closed 25.88 points higher at 22,024.87, with Home Depot and United Technologies contributing the most gains. The Nasdaq composite advanced 0.2 percent to 6,345.11 as shares of Apple hit a record high.

Stocks briefly popped after the Federal Reserve released the minutes from its July 26 meeting at 2 p.m. in New York. The minutes showed Fed officials were split over the path of future monetary policy. Some officials preached caution while another raised concern over delaying the normalization process.

 

Investors largely expect the central bank to start unwinding its massive $4.5 trillion bonds portfolio which it accrued trying to stem the economic downturnfrom the financial crisis in September.

But the market is also split as to whether the Fed will raise rates once more this year. According to the CME Group’s FedWatch tool, the market expectations for a December rate hike were about 43 percent.

U.S. Treasury yields traded lower after the minutes’ release, with the benchmark 10-year yield trading at 2.234 percent and the two-year yield at 1.33 percent. Equities have risen sharply this year, with the S&P 500 advancing about 10 percent year to date and hitting record highs. But stocks suffered their second-worst week of the year last week as geopolitical tensions rose.

Investors also digested weaker-than-expected housing data, as housing starts and permits fell unexpectedly last month. Stocks ended flat in the previous session, as a drop in retail stocks capped gains. The SPDR S&P Retail exchange-traded fund fell 2.7 percent as shares from major retailers dropped following the release of their quarterly results.

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Amazon Priced $16 billion Private Debt Offering to Fund Whole Foods Acquisition

Amazon priced $16 billion private debt offering to fund its planned acquisition of Whole Foods Market. It is the fourth-largest high-grade debt offering this year. It will be broken into seven parts ranging from three-year notes to 40-year notes. Bank of America Merrill Lynch, Goldman Sachs and JPMorgan Chase are the lead underwriters of the deal.

Moody’s on Monday assigned a Baa1 rating to the company’s proposed offering of up to $16 billion in senior unsecured notes. The ratings agency also changed Amazon’s rating outlook to positive from stable.

 

According to Moody’s Vice President Charlie O'Shea, that the change in outlook to positive reflects their view that despite the increase in debt, the Whole Foods

acquisition is an immediate credit positive for the company on a variety of fronts, he noted the deal gives Amazon greater scale and crucial brick-and-mortar presence in a segment where it has been trying to grow.

Jeff Bezos’ e-commerce giant announced on June 16 it would acquire John Mackey’s organic foods supermarket chain for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market’s net debt. The deal, Amazon’s largest in its history, is expected to close by the end of the year.

In an 8-K filing with the Securities and Exchange Commission in June, Amazonsaid it expected to finance the deal with debt. On Friday, S&P Global Ratings assigned an AA- rating to the proposed debt offering. Amazon previously issued bonds in 2012 and 2014 and has $8.75 billion in outstanding debt.

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High Grade Rare Earths Confirmed at Burundi Mine in East Africa

Rainbow Rare Earths has made significant progress to date on its Gakara rare earths project in Burundi, including the release of some high-grade drill results. Laboratory testing recently undertaken in respect of its ‘main vein’ at Gasagwe has returned an average Total Rare Earth Oxide (“TREO”) grade of 62.17%.

Gasagwe is the area within the Company’s 39km2 mining licence which is expected to provide ore for the first two years of production, which is targeted to commence in Q4 2017. The grade compares extremely favorably to the average grade of 57% contained within mineralised veins across the Company’s Gakara Rare Earths Project in Burundi (“Gakara”) as disclosed in the Competent Person’s Report compiled by MSA contained in Rainbow’s IPO Prospectus published in January 2017.

 

The IPO raised $8 million and about $6 million has been invested into the project so far. The company expects first production in the final quarter of this year, starting with 3,900 tonnes of concentrate during the first two years and ramping up to 5,000 tpa thereafter.

The Gakara project was mined on a small scale from the 1930s to the 1970s, according to CEO Martin Eales. Rainbow received its first exploration license in 2011 and in 2015 was granted a 25-year license from the Burundi government, which holds a 10% share in the project. The company has also secured a 10-year offtake agreement with metals trader thyssenkrupp Raw Materials.

Total in-situ are earth oxides are estimated to be in the range of 47 to 67%, which would make it one of the highest-grade rare earth projects in the world. According to a project page Rainbow Rare Earths is targetting 20,000 to 80,000 tonnes of “vein material with upside potential” and has identified 408 veins to date on its 135 square kilometres of licenses. The veins contain bastnaesite and monazite minerals.

The $2.5 million project, including processing plant and truck fleet, would process the run-of-mine ore at Kabezi, about 20 kilometres away. The concentrate would be exported either from Mombasa or Dar es Salaam.

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Bitcoin Forecast to Rise $500 More

The digital currency is riding a fifth wave of an impulsive rally that could run as high as $4,827 in the short term, technical analyst said. However, once a full five-wave sequence is in place, the market should in theory enter a corrective phase. 

This can last at least one-third of the time it took to complete the preceding advance and retrace at least 38.2 percent of the entire move. At the time of the report’s publication, the correction could take bitcoin down to around $2,221.

 

Bitcoin  is nearing its target for the “fifth wave” that theoretically leads to a correction. Bitcoin hit a record high of $4,348.23 on Monday, according to CoinDesk, quadrupling in value for the year. That leaves just 11 percent in gains for bitcoin before hitting the high end.

Already at above $4,300, bitcoin trades well beyond the $4,133 price a level from which to watch for signs of a near-term consolidation. The five-wave principle of technical analysis is known as the Elliott Wave. 

Other analysts predict bitcoin can climb into the tens of thousands in the next few years. They expect that growing investor interest in a digital currency with a limited circulation of 21 million coins should naturally drive prices higher.

Bitcoin would also have to fall under $2,935 to signal that a top is already in place. Dramatic price swings of several hundred dollars or more are not uncommon in the digital currency world. 

 

In the month after hitting a prior record of $3,025 in mid-June, bitcoin lost more than $1,000, before rallying to all-time highs in the last two weeks.

Analysts attributed the gains to investor optimism about bitcoin after the uneventful bitcoin split on Aug. 1 into bitcoin and bitcoin cash, as well as greater interest from institutional investors.

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Europe Markets Close Higher amid Easing Geopolitical Concerns

European stocks  closed higher after senior U.S. officials sought to play down risks of a military conflict with North Korea. The pan-European Stoxx 600 ended 1.08 percent higher with all sectors and major bourses in positive territory.

Europe’s banking index was among the top performers, up by more than 1.4 percent, with every firm in the sector trading higher. Standard Life Aberdeen rose 1.7 percent after the completion of the merger of Standard Life and Aberdeen Asset Management. 



Looking at individual stocks, shares of French food group Danone were over 1.5 percent higher after the New York Post reported that the firm could be a takeover target. A spokesperson from Danone said they had no comment to make in regards to the article.

Fiat took over the top of the European benchmark up by 8.15 percent after reports that a Chinese automaker has made at least one bid to buy the firm. 

U.K. mid-cap Ladbrokes Coral was among a handful of fallers after Credit Suisse downgraded the stock to under-perform from neutral. Its shares slipped 1.6 percent.

Meanwhile, in the U.S. stocks moved higher too as traders saw geopolitical tensions easing. The Dow Jones industrial average rose about 130 points at the open, with Goldman Sachs contributing the most gains.

 

Geopolitical concerns appeared to fade on Monday as U.S. Secretary of Defense Jim Mattis and Secretary of State Rex Tillerson wrote that the Trump administration would continue to seek diplomatic resolutions with Pyongyang. 

On the data front, industrial production in the euro zone dipped by 0.6 percent in June, slightly worse than the 0.5 percent fall analysts had forecast. It did rise 2.6 percent on an annual basis, according to statistics office Eurostat.

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ETF Rapidly Increase this Year as Investors Move to Low Cost Funds

Demand for ETFs has accelerated sharply this year, as a growing number of investors move into low-cost funds that track an index, and out of traditional actively managed funds in protest at inconsistent performance and high fees.

According to a London-based consultancy, investors have ploughed $391 billion into ETFs in the first seven months of 2017, already surpassing last year's record annual inflow of $390 billion.

The ETF industry has attracted almost $2.8 trillion in new business since the start of 2008, coinciding with one of the longest bull runs in US stock market history. The US benchmark S&P 500 index hit an all-time high on August 8, up 267% since its post financial-crisis low in March 2009. 

The rise of ETFs has prompted a growing chorus of criticism from some of the world's most influential money managers, who complain about the effect of passive funds on asset prices and the potential for a liquidity squeeze in times of market stress.

Demand for passive funds has been supercharged by governments manipulation of asset prices. This has created the illusion that simply holding stocks and bonds in their index weights and sitting back, arms folded, is the perfect investment strategy.

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Iron Ore Price Surge to a New High

The Northern China iron ore import price of 62% Fe content ore jumped 1.6% to exchange hands for $76.10 per dry metric tonne according to data supplied by The Steel Index. It’s the highest price since early April and the steel-making raw material is now trading 43.6% up from its 2017 lows struck in June.

Iron ore’s latest rally comes after Shanghai rebar futures the world’s most traded steel contract jumped to the highest level since March 2013 on Thursday reaching $601 a tonne on Thursday.

 

Chinese traders are worried about a steel supply crunch as Beijing steps ups efforts to crack down on polluting plants. The country wants to cut output by as much as 50% during winter months.

In Hebei province, China’s key producing region, steelmakers have until September 1 to comply with stringent new emissions regulations or would be shut down. Some 120 million tonnes of low-quality steel capacity were shuttered during the first six month of the year.

Beijing’s policies to clean up and consolidate the domestic steel industry is  playing into the hands of iron ore exporting countries with low grade furnaces – particularly those that use scrap – being forced out of business. Authorities are also clamping down on pollution from sintering plants, a necessary extra step when using low grade ore to make steel.

A worry for the industry has been high stockpiles in China and inventories at the country’s ports remain near all-time highs dipping to 139.2 million tonnes last week compared to the record set June 23 at 141.5 million tonnes according to Steelhome data. 

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Gold Rally for the First Time in 2 Months

Gold is on its way to top $US1300 an ounce for the first time this year as investors shift into bullion to protect their wealth amid the heightening war of words between US President Donald Trump and North Korea.

The spot price of gold rose 0.6 per cent to a two-month high of $US1285.53 an ounce overnight and is currently fetching $US1286. The metal has risen 6 per cent from its early July low and is now 12 per cent higher year to date.

 

Overnight, US hedge fund manager Ray Dalio recommended, in a post on his Linkedin page, to shift assets into gold because “prospective risks are now rising and do not appear appropriately priced in” because of a backward look at risk, high corporate leveraging and because past risks have been low.

“When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble,” Dalio wrote. “We know that we don’t have a unique insight that we’d choose to bet on.

"Most importantly, we aim to stay liquid, stay diversified, and not be overly exposed to any particular economic outcomes,” he added. “We like to hedge our bets, though we are never completely hedged. We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit, so if you don’t have 5-10 per cent of your assets in gold as a hedge, we’d suggest that you relook at this.

Separately Capital Economics’ Simona Gambarini overnight said the recent rise in geopolitical risk could lift the price of gold "beyond $US1350 an ounce”, which would be the first time it has topped that level since the UK Brexit referendum in mid 2016.

 

Any “surge” in the price of gold however would be seen by Gambarini as temporary. “We remain of the view that theglobal macroeconomic backdrop is not supportive of higher prices. And if the situation calms down, we would not be surprised to see the gold price retreat from its current level as investors’ focus returns to Fed tightening.”

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Global Stocks Plummet Sharply Overnight

Stocks around the world fell sharply overnight and investors moved into the yen, gold and other safe-haven assets amid an escalation of verbal barbs between the United States and North Korea.

The S&P 500 dropped the most since May and MSCI’s gauge of stocks across the globe lost 1.1 per cent in its third straight day of declines, as it pulled further back from all-time highs.

 

The Japanese yen hit an eight-week high against the US dollar, and US-traded Nikkei stock futures dropped 2 percent to their lowest since mid May. Spot gold reached a two-month high.

Rising geopolitical tensions were heightened further when US President Donald Trump warned Pyongyang it should be “very, very nervous” if it even thinks about attacking the US or its allies, after Pyongyang said it was making plans to fire missiles over Japan to land near the US Pacific territory of Guam.

“We’re not very oversold yet so the market still has more downside left to it. What we’re seeing today is political tensions over North Korea and the United States … making people nervous,” said Robert Pavlik, chief market strategist at Boston Private Wealth.

“We’re still close to the all-time high so that makes people a little nervous too, so they might say now might be the time to take a little bit of money off the table.”

 

The Dow Jones Industrial Average fell 204.69 points, or 0.93 per cent, to close at 21,844.01, the S&P 500 lost 35.81 points, or 1.45 per cent, to 2,438.21 and the Nasdaq Composite dropped 135.46 points, or 2.13 per cent, to 6,216.87.

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Asian Markets Edge Higher, Mild Recovery from Previous Session

Asian stock markets are mostly edging higher today, recovering from the previous session’s losses after investors fled to safe haven assets amid rising tensions between the U.S. and North Korea.

The Australian market is modestly higher, extending gains from the previous session despite the weak cues from Wall Street. Oil and mining stocks are mostly advancing. In late-morning trades, the benchmark S&P/ASX 200 Index is adding 26.20 points or 0.45% to 5,791.90, off a high of 5,795.50. The broader All Ordinaries Index is up 23.60 points or 0.41% to 5,840.00.

 

In the mining industry, BHP Billiton is rising 0.4% and Fortescue Metals is edging up less than 0.1%, while Rio Tinto is losing almost 2%. Gold miner Newcrest Mining is rising more than 2%, while Evolution Mining is down 0.4% after gold prices rose on safe-haven appeal.

Commonwealth Bank is rising 0.4% and Westpac is edging higher by less than 0.1%, while ANZ Banking is declining 0.1% and National Australia Bank is edging down less than 0.1%.

 

AGL Energy reported a turnaround to profit for the year to June 30 and said its underlying profit could cross A$1 billion in the current financial year. The energy retailer’s shares are advancing more than 1%. Aristocrat Leisure said it will buy Israel-based social gaming company Plarium Global for $500 million. The gaming machine maker’s shares are gaining almost 5%.

Virgin Australia reported a loss for the year to June 30, while revenues rose 0.5%. However, the airline’s shares are rising almost 3%. AMP’s first-half statutory profit declined 15%, while its underlying profit rose 4%. The financial services provider’s shares are losing more than 3%.

In the currency market, the Australian dollar is slightly lower today against the U.S. dollar. In early trades, the local unit was trading at $0.7882, down from $0.7887 on Wednesday. 

The Japanese market pared gains and is flat following the weak cues from Wall Street and as investors digested data showing a fall in core machinery orders for the month of June. In late-morning trades, the benchmark Nikkei 225 Index is adding 5.35 points or 0.03 percent to 19,744.06, off a high of 19,829.88 earlier.

 

Among the major exporters, Sony is losing more than 1%, Mitsubishi Electric is down 0.6% and Panasonic is lower by 0.4 percent, while Canon is adding 0.2%. Among automakers, Toyota is rising 0.6% and Honda is up 0.2%. 

In the banking sector, Mitsubishi UFJ Financial and Sumitomo Mitsui Financial are losing more than 1%. Oil industry, Inpex is adding 0.4% and Japan Petroleum Exploration is advancing almost 1%. Among the other major gainers, Shiseido is gaining 14%, Mitsui Mining & Smelting is rising almost 13% and Taiheiyo Cement is higher by more than 6%.

 

On the flip side, Chiyoda is losing almost 11 percent, Dowa Holdings is down 8 percent and Dentsu is lower by 5 percent.

On the economic front, the Cabinet Office said that core machine orders in Japan skidded a seasonally adjusted 1.9 percent on month in June, standing at 790.0 billion yen. That was well shy of forecasts for an increase of 3.6 percent following the 3.6 percent decline in May.

 

The Bank of Japan said that producer prices were up 0.3 percent on month in July. That exceeded expectations for an increase of 0.2 percent following the upwardly revised 0.1 percent gain in June.

Elsewhere in Asia, Shanghai, Singapore, New Zealand, Indonesia and Malaysia are modestly higher. Taiwan and Hong Kong are lower by more than 1 percent each, while South Korea is down 0.7 percent.

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First Quantum Plans to Suspend its Nickle Mine Operation in Australia

First Quantum Mineral plans to suspend operations at its Ravensthorpe nickel mine in Western Australia at the beginning of next month due to persistently weak nickel prices, sending its shares lower.

The mine will be placed on care and maintenance, which is expected to take effect in early October.

 

According to the mining company, its decision is disappointing blaming continuing depressed nickel market conditions, over some years. Shares in First Quantum, which also produces copper, ended down 4.6% at $13.41 on the Toronto Stock Exchange.

Nickel prices, weighed down by a supply glut, are off by nearly two-thirds since early 2011, the year Ravensthorpe resumed operations after it had been shut down by its previous owner BHP Billiton Ltd in 2009, when nickel prices also dropped.

Vancouver-based First Quantum said the latest shutdown would cost an estimated $10 million. Subsequent annual maintenance is expected to cost around $5 million.

The permitting process for the Shoemaker Levy orebody at Ravensthorpe would continue along with regular reviews of market conditions for a potential restart of the mine. First Quantum bought Ravensthorpe from BHP in 2010 for $340 million.

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Morgan Stanley Beat Goldman Sachs as the Most Profitable Foreign Securities Firm in Japan

Morgan Stanley beat Goldman Sachs as the most profitable foreign securities firm in Japan last fiscal year after it boosted structured-product sales and managed the two biggest initial public offerings.

Net income at Morgan Stanley MUFG Securities Co. rose 32% to 29 billion yen in the year ended March 31, the most among 10 large global banks that submitted annual financial statements.

 

The venture with Mitsubishi UFJ Financial Group Inc. and controlled by the New York-based firm posted its biggest revenue in three years as Japan’s introduction of negative interest rates prompted clients to seek assets with better returns than government bonds. It also underwrote the debut share sales of Kyushu Railway Co. and Line Corp., the largest in Japan last year.

Morgan Stanley’s fees for fixed income-related sales and trading, a category that includes structured products, climbed 22% to 43.7 billion yen.

Goldman Sachs generated the second-highest revenue as well as profit, which totaled 22.1 billion yen in the year ended Dec. 31. The firm’s headcount dropped by 46 over the 12 months, bringing it roughly level with JPMorgan Chase & Co.

This year, Goldman Sachs is advising Toshiba Corp. on the sale of its memory-chip business, a transaction that may fetch about $19 billion, and it’s working with the Ministry of Finance on its sale of an additional stake in Japan Post Holdings Co.

 

JPMorgan posted the third-largest profit, followed by Deutsche Bank AG, while BNP Paribas SA had the third-biggest revenue. The French bank has also been growing in structured products, hiring about 30 people in Tokyo since January, and it plans to recruit more this year, people with knowledge of the matter said earlier this month.

UBS Group AG was among three firms that posted losses in part because of one-time charges. The Swiss bank incurred a goodwill impairment charge of 41.9 billion yen as it restructured its business model.

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Wall Street Closed Lower After a Late Afternoon Selling Spree

Wall Street closed lower after a late afternoon selling spree as investors fled for safety after U.S. President Donald Trump vowed to respond aggressively to any threats from North Korea.

After scaling back from record highs earlier in the session, Wall Street’s three major indexes dipped after Trump said North Korea will be met with fire and fury like the world has never seen if it threatens the United States.

 

Japan said it was possible that North Korea had already developed nuclear warheads and warned of an acute threat posed by its weapons programs as Pyongyang’s continues missile and nuclear tests in defiance of U.N. sanctions.

Investors, who took the North Korea report from Japan in their stride earlier in the day, lost their appetite for risk after Trump’s comments to reporters during his vacation at his golf club in New Jersey.

The Dow Jones Industrial Average ended down 33.08 points, or 0.15% at 22,085.34, snapping a 9 day streak of closing records.

The S&P 500 lost 5.99 points, or 0.24% to close at 2,474.92 and the Nasdaq Composite dropped 13.31 points, or 0.21% to 6,370.46.

The CBOE Volatility Index .VIX, better known as the VIX and the most widely-followed barometer of expected near term stock market volatility.

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Hedge funds Becoming Bullish on Oil Prices as Investors Seen Signs of Re-Balancing

Hedge funds and other money managers are becoming bullish again about oil prices as investors conclude the market is showing clear signs of re-balancing. They raised their combined net long position across the five major futures and options contracts linked to petroleum prices by 135 million barrels in the week.

The combined weekly increase in net long positions across Brent, WTI, U.S. gasoline and U.S. heating oil was the largest since Dec. 6, immediately after OPEC announced it was cutting production.

 

For the first time in months, the increase in the net long position was driven primarily by the creation of new long positions rather than covering of old short ones. Hedge funds raised their combined long position across the five major contracts by 95 million barrels to 951 million barrels, the highest level since April 18.

Fund managers cut their combined short position across the five contracts by 40 million barrels to 239 million barrels, which was the lowest level mid-April. The same pattern of new long building and continued short covering was apparent across all the individual crude and fuel contracts.

Hedge funds raised their combined net long position in ICE Brent and NYMEX and ICE WTI by 99 million barrels to 649 million barrels. Long positions were raised by 70 million barrels while short positions were trimmed by 30 million, according to regulatory and exchange data.

Fund managers have boosted their net long position by more than 290 million barrels since the end of June to the highest level for more than three months. The fund now holds almost 4.5 long futures and options positions in Brent and WTI for every short position, up from a recent low of 1.95 at the end of June.

 

Fund managers have also built up a large net long position in U.S. gasoline, a smaller one in U.S. heating oil, and a record net long position in European gasoil.

The petroleum markets have seen an enormous shift from extreme pessimism at the end of June to fairly hearty bullishness at the start of August. The sentiment shift has helped lift benchmark Brent futures prices by almost $7 per barrel or 15 percent over the last six weeks.

 

There are some sound fundamental reasons for optimism, with signs oil stocks drawing faster than normal for the time of year and shale drilling leveling off in response to lower oil prices since the first quarter. And Saudi Arabia has pledged to cut its exports sharply in August to accelerate the draw down in global oil inventories and market rebalancing.

The net long position in the five major crude and fuels contracts, at 712 million barrels, is still much lower than in April, when it peaked at 850 million barrels, or February, when it hit a record 1,025 million barrels. But with so many short futures and options positions now covered, and many new longs established, it may prove tough to sustain the recent upward momentum in crude and product prices.

 

Crude prices are now almost back to the level at which shale producers could be tempted to start adding rigs again and hedging their output for next year by selling the calendar strip for 2018.

Hedge funds and banks have already been burned twice this year, bidding up prices, only to see shale firms sell into the resulting rally, add more drilling rigs and production, and send prices tumbling.

 

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Lucara to Consider a Partnership in Selling the 2nd Worlds Largest Diamond

Lucara Diamond, the company who unearthed the world’s second largest diamond has failed to sell it, is considering a partnership to sell the giant stone if a buyers is not found within the next six to eight weeks.

William Lamb the CEO of the company said the Vancouver-based miner has “one or two” options for an outright sale, but such bids have failed to materialize, starting with the first attempt at a sale last summer at a Sotheby’s auction.

 

Bidding for the now historic 1,109-carat “Lesedi La Rona,” which means “our light” in the Tswana language spoken in Botswana, stalled at around $61 million short of the expected $70 million.

The amount for a single buyer to pay is indeed daunting.

“Everybody on the call will most fully would know one or two wealthy people who, on the weekend, could go out and buy a Lamborghini at $250,000,“ Lamb said. "What the company is asking for, for the stone, is for a company to go out and spend the equivalent of 280 Lamborghinis.”

Lucara would probably have to cut the tennis-ball-sized diamond in order for it to sell. Discovered at Lucara’s Karowe mine in Botswana in November 2015, the only diamond larger is the 3,106.5-carat Cullinan, which was cut into 105 diamonds, including several British Crown Jewels.

The CEO recently said that another challenge to fetch what Lesedi La Rona is worth, is the fact that the polishing itself is risky.

The unsold diamond weighs heavily on the company’s shares, which are down more than 30% from late 2016.

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Global Steel Price Boosts Value of Western Australian Listed Companies

The global steel price increase has boosted the value of Western Australianbased listed companies, with the 2017 financial year closing at $152.6 billion, a 13.5% increase from the previous year.

The financial gains were driven by the increased global steel price, caused by both Chinese and US Government infrastructure development commitments that supported bulk commodity markets.

 

Despite some periodic turbulence, commodity markets showed strong growth across the board, with a more optimistic outlook from last year. The performance this year are more closely represents a re-balance of pricing as markets come to terms with uncertainty and volatility representing a new normal.

The demand for mining services often acts as a lead-indicator for the overall health of the energy and resources sector. This signals optimism for increased mining investment and activity over the coming year.

This year it is encouraging to see a number of top movers and shakers being service providers to the extractive industries. Strategic consolidations, capability diversification and the continued drive for innovation and technology-led solutions all played a role in advancing the market capitalization of the highest movers, underpinned by general commodity price recovery.

The Index also found that coal delivered the strongest result in the 2017 financial year, as government policy and poor weather impacted supply of both coking and thermal coal.

 

The top three movers in the WA Index top 20 in terms of market capitalisation growth were Monadelphous Group with an increased its market capitalisation by 88% from $699m to $1,313m followed by South32 surged by 71% from $8,199m to $14,002m and Fortescue Metals Group has increased 49% from $10,898m to $16,233m.

The WA Index also found that Coking coal finished the year 61.1% higher than June 2016 at $145.00 per tonne, despite volatility in the year and thermal coal finished the year 42.1% higher at $80.95 per tonne.

However, uranium struggled, with prices finishing 25.6% lower than the start of the year at $20.10/lb. The fall in price follows significant withdrawals from nuclear power generation in America and Europe, despite supply cuts initially increasing the price.

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World's Largest Physically Backed Gold Fund Dropped as Investors Dumped Bullion

SPDR Gold Trust holdings drop more than 7% in July, as investors dumped bullion for other assets like equities and led it to its biggest monthly decline since April 2013. Holdings in the exchange traded fund (ETF) dropped about 55 tonnes in July, leaving volumes at 791.88 tonnes of bullion worth about $32 billion.

Other factors hitting gold-backed ETFs include the rate hike by the U.S. Federal Reserve in June and the European Central Bank potentially tightening monetary policy later in the year. Gold prices are currently hovering near seven week highs, but non-yielding bullion may come under pressure if the Fed raises interest rates later in the year.

Wall Street's Dow Jones Industrial Average on Tuesday broke the 22,000 barrier for the first time in its 121 year history. The index has outperformed gold this year with an 11.4% gain compared to gold's roughly 10% rise.

Analyst are still positive on global growth this year and next year. Hence, there should not be too much support from safe-haven buying for gold until the end of 2018. While most of the outflows in July were concentrated in SPDR, overall holdings in gold ETFs, including COMEX Gold Trust, fell about 4% last month.

 

These kinds of outflows are quite surprising to see in an environment where gold has been benefiting from a weaker U.S. dollar and improved market sentiments.

However, any renewal of concerns about global financial markets or geopolitical stability could restore gold's appeal. The last few years show that sentiment among investors can change quickly. Gold ETFs posted massive inflows in H1-2016 as a result of financial market turmoil and political risks.

 

 

 

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Commonwealth Bank Summon on a Widespread Breaches of Money Laundering

Commonwealth Bank of Australia was summon by the Australian government on Thursday regarding of a widespread breaches of money laundering and counter terrorism financing rules.

Financial intelligence agency AUSTRAC said it had initiated civil penalty proceedings in the Federal Court against CommBank for “serious and systemic non-compliance”, in the biggest case of its kind in Australia and the first against a major bank.

 

Commonwealth Bank was reviewing the allegations and will file a statement of defence. According to the bank they would never deliberately undertake action that enables any form of crime. Australia’s biggest mortgage lender failed to report suspicious matters either on time or at all involving transactions sums up over $77 million.

AUSTRAC alleged 53,700 contraventions of the anti-money laundering and counter-terrorism financing Act, particularly with regards to so-called intelligent deposit machines, or IDMs. The biggest such case before this came earlier this year against Australia’s top bookmaker Tabcorp Holdings, with only 108 alleged breaches. Tabcorp paid A$45 million in fines, the biggest civil penalty in Australian corporate history.

There had been significant growth in the use of CommBank’s IDMs since their rollout in May 2012, AUSTRAC said. Cash deposits in the six months to June 2016 surged to $5.8 billion compared with $89 million in the first six months after CommBank introduced the machines. Cash was deposited using fake names with proceeds going to drug importation syndicates, AUSTRAC alleges in its court filings.

The agency declined to comment on possible penalties facing CommBank or whether other banks could be in the agency’s firing line. The maximum penalty for contravening the anti-money laundering and counter terrorism financing law is $18 million per breach. 

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Pound Plummet after Bank of England Downgrade UK Outlook

The pound was the worst performing major currency in European session as it tumbled after the Bank of England downgraded its growth and inflation forecasts. The euro was steady against the US dollar but surged against the pound, while the greenback came under pressure in forex markets from a weak ISM PMI.

The Bank of England decided to hold rates unchanged at 0.25% at the end of its two-day policy meeting today. The Bank also published its quarterly inflation report where they revised down their forecasts of GDP growth and inflation for 2017 and 2018.

 

The pound fell over 100 pips against the dollar to plunge to $1.3118 from a fresh 10-month high of $1.3264 hit just a few hours prior to the Bank's announcement. Sterling was earlier boosted by stronger-than-expected services PMI out of the UK. The Marki/CIPS services beat expectations of 53.6 to rise to 53.8 in July from 53.4 previously. 

However, the Bank's less optimistic outlook and a less hawkish MPC vote weighed on the British currency with traders ignoring Governor Mark Carney's warning in his press conference that it would be appropriate to withdraw more stimulus than the market currently has embedded. Most analysts now expect a rate hike to arrive in the second half of 2018.

The euro also surged against the pound, breaking above 0.90 pounds for the first time since November 2016. It last stood 0.8% firmer at 0.9031, while against the dollar, it was steadier, hovering around $1.1850 for much of the session.

The single currency found support today from better-than-expected retail sales data for the Eurozone. Retail sales in the euro area jumped by 0.5% month-on-month in June, which was well above forecasts of 0.1% and compares with 0.4% in May. 

On an annual basis, retail sales were up 3.1% versus estimates of 2.6%. This offset somewhat disappointing final PMI readings. The Eurozone's final composite PMI for July was revised down by 0.1 to 55.7.

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Shale Producers Are Hedging Again

After OPEC and its allies agreed to cut production late last year, U.S. producers hedged in droves, turning the oil market’s structure upside down as they sold later contracts to lock in their output. Banks including Societe Generale SA said that this activity had stopped when prices entered a bear market in June. Now, producers are at it once again, adding to the specter of a rising supply outlook in the market. 

Demand for put options that producers use to lock in prices has jumped over the last two weeks. An indicator known as the skew that compares put option and call option prices has shot up for December 2018 Brent and WTI contracts, indicating that producers are guaranteeing sales for next year. 

 

There was also a 32% increase in the number of West Texas Intermediate contracts for June 2018 last month, PVM Oil Associates analyst Stephen Brennock wrote in an emailed report Wednesday. 

The improving price backdrop has provided U.S. producers with a timely opportunity to lock in selling prices for future production that will help safeguard the U.S. shale boom. As a result, WTI is unlikely to venture too far north from the $50 a barrel level. 

Demand for the contracts that producers use to guarantee price levels soared after 2018 West Texas Intermediate crude returned to $50 a barrel. At the same time a raft of trades were reported to U.S. regulators last week that showed some producers hedging at levels as low as $45 a barrel. 

Several large trades were reported to U.S. regulators last week that were also typical of producer hedging. Among those, one saw 4 million barrels of supply locked in at $45 a barrel.

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Wells Fargo Hit by a New Class Action

A new lawsuit accuses Wells Fargo of racketeering violations and fraud after the bank admitted to charging several hundred thousand borrowers for auto insurance they did not ask for or need, causing many delinquencies.

The proposed class action filed on Sunday in San Francisco federal court deepens the fallout from the latest bad practice at Wells Fargo. It follows the scandal in which the third largest U.S. bank has said employees created as many as 2.1 million unauthorized customer accounts to meet sales goals.

 

Wells Fargo said late last week it would refund about $80 million to an estimated 570,000 customers who were wrongly charged for auto insurance, including roughly 20,000 people whose vehicles were repossessed.

The San Francisco-based bank made its announcement less than three hours after The New York Times wrote about an internal report prepared for executives that detailed improper charges.

Wells Fargo said it halted the charges last September after customers expressed concerns. But according to the lawsuit, refunds to defrauded customers are not enough.

The company has long lost the right to decide what is best for its customers, Roland Tellis, a lawyer for the plaintiffs, said in an interview.

 

Refunds don’t address the fraud or inflated premiums, the delinquency charges, and the late fees, he added. It will be up to a jury or court to decide the appropriate remedy.

The lawsuit is led by Paul Hancock, a 34 year old marketing consultant from Indianapolis. He said Wells Fargo charged him $598 for insurance though he repeatedly told the bank he had coverage from Allstate, and imposed a late fee after the unnecessary policy took effect.

 

The lawsuit seeks unspecified damages, which could be tripled under federal racketeering law, for borrowers nationwide and in California and Indiana.

Wells Fargo’s accounts scandal resulted in $185 million of regulatory penalties and a $142 million settlement of private litigation.

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Tech Shares Surge to a Record High

The US tech giants continue to defy nay sayers with stellar sales and seemingly endless higher market valuations, with Apple’s latest results poised to drive the Dow Jones through the 22,000 point mark.

The Dow came within 10 points of the 22,000 mark overnight before ending the session up 0.3 per cent at a record closing high of 21,963.92. It’s up more than 11 per cent this year. The S&P 500’s information technology subindex is up 22% this year for a year return of 27.7%.

 

With shares of the most valuable public company in the world, Apple, surging 6.1 per cent in after-hours trade after reporting better than expected fiscal third-quarter results, it’s difficult to see what would stop the Dow from at least opening sharply higher tomorrow. Dow futures are up 0.3 per cent.

The iPhone maker’s market cap stood at $777.1 billion at the closing bell on Tuesday, up 1.3% on the day. A potential 6.1% opening leap tomorrow would add another $47.4 billion to its overall valuation.

Amazon shares lost some ground after its latest results highlighted continuing high operating costs with no sign they will slow anytime soon despite rising revenue. Alphabet’s shares also have been hit somewhat by concerns over rising costs. 

Facebook’s value surged after it reported an unexpected leap in mobile sales ads. Netflix crushed expectations on subscriber targets. Microsoft’s profit exceeded expectations on the strength of its Cloud computing business.

 

There’s little sign that technology companies are dramatically overvalued. The key difference between today and the dot com bubble of the late 1990s and early 2000s is that the recent strength appears justified by improved earnings, both actual and projected.

The price estimated operating earnings ratio of the US technology sector today was in line with that of the stock market as a whole, in contrast to the dot com bubble, when it was far higher.

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Bitcoin Cash Surge Nearly 50% then Plummet After Splits.

Bitcoin traded slightly lower as digital currency miners completed a split of the digital currency and worked to create more of the new, split-off coin called bitcoin cash.

A Bitcoin block was just mined that’s invalid for Bitcoin Cash nodes. Means the chain has now forked. Bitcoin Cash is one block behind.

 

According to CoinMarketCap, futures for the new bitcoin cash an alternative version promoted by a minority of developers, gave back all of an initial 48% jump to $422 to drop about 26 percent and trade near $214.

Trading in bitcoin cash was available on some exchanges, but remained a fraction of bitcoin’s price.

 

Kraken Exchange, which has about 10 percent of U.S dollar bitcoin trade volume, showed on its website that trades for bitcoin cash were pricing the new coin around $197.

Within six hours of the split, digital currency mining and trading firm ViaBTC one of the few supporters of bitcoin cash showed on its website that miners had completed three blocks for the new digital coin. 

The block is part of the blockchain technology on which digital currencies like bitcoin are based, and the initial lag in block completion had worried some digital currency enthusiasts.

Miners could give up on trying to mine bitcoin cash, halting its development. However, the bigger question was whether bitcoin has solved its long-term governance issue or kicked the can down the road.

 

Bitcoin split was planned by a few who disagreed with a more popular upgrade proposal called SegWit2x, which is set to fully implement this fall.

Bitcoin traded 4 percent lower near $2,754 after dropping to a low of $2,670 earlier in the morning. The digital currency rose more than 10 percent in July and has more than doubled in value this year.

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Rio Tinto Unearth the Largest Red Diamond in Australia's Argyle Mine

Rio Tinto’s Argyle mine, located in the remote East Kimberley region of Western Australia, produces enough gems to allow the company to host annual showcases of its rarest diamonds.

This year, the first exhibition took place at a Chelsea skyscraper in New York in front of a selected group of collectors and connoisseurs.

 

The Argyle Everglow, a 2.11 carat polished radiant cut diamond that was assessed by the Gemological Institute of America as a notable diamond with a grade of Fancy Red VS2.

According to a press release, in the 33-year history of the Argyle Pink Diamonds Tender -as the show is called- there have been less than 20 carats of Fancy Red certified diamonds sold.

The price of the Everglow, however, was not disclosed. Still, The New York Times reports that the record auction price for a fancy red diamond is $5 million, paid three years ago in Hong Kong.

In total, there were 58 diamonds in the 2017 Tender weighing a total of 49.39 carats. Among them, there were four Fancy Red diamonds, four Purplish Red diamonds, two Violet diamonds, and one Blue diamond.

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Dow Jones Industrial Average Closed to a New Record High

The Dow Jones Industrial hit a record closing high, helped by Boeing, while selling in Facebook, Alphabet and other technology companies checked the S&P 500 and pulled the Nasdaq lower.

The S&P 500 information technology .SPLRCT dipped 0.53 percent, with Facebook falling 1.86 percent and Alphabet Google’s parent company, down 1.34 percent.

 

Boeing rose 0.49 percent and hit a record high of $242.46 after JPMorgan raised its price target on the world’s biggest plane maker to $280 per share.

In July, the S&P 500 rose 1.9 percent, the Dow added 2.5 percent and the Nasdaq gained 3.4 percent. Apple Inc  which is expected to report quarterly results after the market close on Tuesday, dipped 0.51 percent.

Investors have been counting on earnings to support high valuations for equities. S&P 500 earnings are expected on average to have grown 10.8 percent in the second quarter.

The Dow Jones Industrial Average rose 0.28 percent to end at 21,891.12 points and the S&P 500 lost 0.07 percent to 2,470.3. The Nasdaq Composite dropped 0.42 percent to 6,348.12.

Just four of the 11 major S&P sectors rose, with the financial index’s .SPSY 0.62 percent rise leading the gainers.

 

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Industrial Output in Japan Rebounded Suggest Stable Growth

Japan factory output rebounded in June from a decline in May as production of cars and industrial chemicals increased, suggesting economic expansion may be on a more stable footing.

Industrial output rose 1.6 percent in June from the previous month, just below the median estimate for a 1.7 percent increase and following a 3.6 percent decline in May.

 

Manufacturers forecast a steady increase in output in coming months, offering further evidence that firm overseas demand and gains in consumer spending could support overall growth in Japan’s economy.

Output in the transport sector rose 4.2 percent in June, rebounding from a 13.0 percent tumble in the previous month, as output of passenger cars and automobile recovered. Output of chemicals rose 3.4 percent in June, also a rebound from a 2.2 percent decline in May.

Manufacturers surveyed by the ministry expect output to rise 0.8 percent in July and 3.6 percent in August.

The positive output reading follows data last week showing the biggest increase in household spending in almost two years and an increasingly tight labor market, building optimism that the economy will maintain its upward momentum.an industrial output increase hints at more stable growth .

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Glencore Purchase Half of Hunter Valley Coal Mine in Australia

Glencore acquires Rio Tinto’s former coal assets in Australia's Hunter Valley, located in the New South Wales region.

The Anglo–Swiss multinational announced that it signed agreements with Yancoal Australia, a subsidiary of China’s Yanzhou Coal Mining, regarding the acquisition of a 49 per cent interest in the Hunter Valley Operations coal mine and forming a joint venture following Yancoal’s acquisition of Rio’s Coal & Allied unit for $2.69 billion.

 

In detail, Glencore will buy out Mitsubishi, which owns 32 per cent of the mine, and acquire a further 16.6 per cent from Yancoal. Once the latter completes its acquisition of the Coal & Allied unit, the European giant will be entitled to its share of the profits of the Hunter Valley Operations.

Glencore, who first tried and failed to buy Coal & Allied in 2015 because it owns several other assets in the surrounding areas, has also agreed to subscribe for $300 million worth of shares in Yancoal’s equity raising. This means that Yanzhou’s subsidiary will not have to gather as much money as expected to close the transaction.

The backing also implies that Glencore gets to choose the management team that will run the mines and that it will also have the rights to market the coal in Japan, South Korea, and all other countries, excluding China, Taiwan (with certain exclusions), Thailand and Malaysia.

From now on, Glencore’s combined portfolio of mines in the Hunter Valley will have a production capacity of 69 million metric tons per year of high-quality energy coal which, the company states, is aimed at meeting Asia’s increasing demand.

 

 

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Amazon Profit Plunged 77% in Quarterly Income

Amazon profit plunged 77% in quarterly income and forecast a potential operating loss in the current quarter. The company’s shares, already up nearly 41% this year, were down 3% at $1,014.75 in after hours trading.

The world’s largest online retailer forecast an operating income of $300 million to a loss of $400 million for the current quarter. Analysts had expected operating income in the third quarter of $931 million.

 

While Amazon consistently posts blockbuster sales growth, its profit has often not kept pace due to thin retail margins and high investment to expand the company’s already vast reach in the U.S. economy.

From its origins as an online bookseller, Amazon has jumped into areas that historically had barriers to e-commerce, from apparel to appliances. The specter of Amazon’s disruption now hangs over a dizzying array of industries.

Yet this has come at a cost. Amazon said operating expenses rose 28.2% to $37.33 billion in the second quarter ended June 30.

The video content spend will continue to grow, both sequentially and quarter over quarter as it would help encourage shoppers to sign up for Amazon’s shopping club Prime.

 

The club, which offers fast shipping and video streaming for $99 per year in the United States, encourages shoppers to buy more goods, more often.

Amazon said net income fell to $197 million, or 40 cents per share, from $857 million, or $1.78 per share, a year earlier. Net sales rose 24.8% to $37.96 billion.

 

 

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Newmont Mining Shares Increases 7.7% in Quarterly Profit

Newmont Mining Corp handily beat quarterly profit estimates as production improved, more than offsetting the impact of lower realized gold prices, lifting the miner's shares as much as 7.7 percent to a five-month high.

The company also raised the lower end of its full-year production forecast on better yield from its mines in North America and Africa.

 

Chief Executive Gary Goldberg said during the earnings call that the improved margins at its newest mines are helping to offset more mature assets and continue to fund the high margin projects to sustain future production.

Newmont, which kicks off earnings for major gold miners, now hopes to produce 5 million to 5.4 million ounces of gold this year, up from its previous forecast of 4.9 million to 5.4 million ounces.

Newmont's all in sustaining costs, a key benchmark, fell to $884 per ounce in the second quarter ended June 30 from $913 per ounce in the same period last year.

The company expects to complete expansions at its Northwest Exodus project in Nevada and Tanami project in Australia next year, Goldberg said. They have been expanding its operations since the start of the year as gold miners initiate new exploration projects after five years of lull marked by a drop in gold prices.

 

A couple of months ago, Newmont invested $109 million for a 19.9 percent stake in Buritica gold project in Colombia, owned by Continental Gold Inc. Gold production grew 13.3 percent to 1.4 million ounces in the reported quarter. 

Newmont sold the precious metal at $1,250 per ounce on an average in the quarter, lower than $1,257 per ounce a year earlier. The company's adjusted net income rose to $248 million, or 46 cents per share, from $155 million, or 30 cents a share, a year earlier.

 

 

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China Securities Regulator to Expand Access to Capital Markets

China’s securities regulator pledged on Wednesday to expand access to capital markets for all types of investors, while encouraging more long-term institutional participation in the financial domain.

In a brief report on its website, the China Securities Regulatory Commission (CSRC) also said it would maintain normalization of initial public offerings, improve the mechanism for de-listing shares from stock markets and steadily expand the opening of China’s capital markets. It did not provide details.

The report on the CSRC’s broad plans follows a once-in-five-years meeting of financial regulators and top leaders in Beijing this month that established priorities for financial market development in the coming years and bolstered the central bank’s power to coordinate financial oversight.

Chinese leaders have long promised more financial market openness but have sought to balance the liberalization moves with efforts to limit risks, a priority this year after a sharp increase in leverage threatened to undermine the economy.

 

China approved roughly 250 IPOs in the first half, mostly by small and mid-cap companies, which investors say has contributed to a steady fall in share prices of small companies.

 

 

 

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Greece Return to Bond Market, Raised $3 Billion in it's First Tapped

Greece raised 3 billion euros in its first tapping of the bond market since 2014.

Investors welcomed the new Greek paper, which carried a 4.625 percent yield. The sale by the sub investment grade rated country drew 6.5 billion euros in more than 200 offers, said a Greek government official, requesting anonymity because the information is not public. 

 

Greece’s last five-year bonds in April 2014 priced at 4.95 percent. Greece sold the new bonds along with a tender offer for the notes due 2019.

With the sale, the government of Prime Minister Alexis Tsipras is seeking to chalk out a path for an exit from the current bailout program, which ends in August 2018, while also capping the country’s financing needs in 2019 -- expected to be about 19 billion euros. Greece decided to test the markets after it failed to convince creditors to immediately reduce its debt burden and was left out of the European Central Bank’s bond-purchase program.

The outcome was better than expected. There will be a second and a third bond sale to ensure the country exits its bailout program in August 2018.

A successful Greek exit from the aid program would also be a boon to European policymakers, who have long faced criticism about their approach to the Greek crisis and don’t want to ask their taxpayers for more cash when this bailout package expires next summer.

 

Greece’s euro area creditors agreed to release 8.5 billion euros in new loans on June 15 even as they postponed until mid 2018 a binding decision on what measures they will provide to ease the country’s burden. 

A successful second bailout review, an improved economy and greater support from euro area partners emboldened Greece to return to the market.

 

 

 

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Oil Extends Gains as Saudi Pledges to Curb Export

Oil prices extended gains on Tuesday after Saudi Arabia pledged to curb exports from next month and OPEC called on several members to boost compliance with production cuts to help rein in global oversupply and tackle flagging prices.

Gains were also supported by a warning from Halliburton's executive chairman that the growth in North American rig count was showing signs of plateauing, clouding a boom in U.S. shale oil production.

 

London Brent crude for September delivery was up 30 cents, or 0.6 percent, at $48.90 a barrel by 0206 GMT after settling up 1.1 percent on Monday.

U.S. West Texas Intermediate (WTI) crude futures were up 31 cents, or 0.7 percent, at $46.65.

 

In a ministerial meeting in St. Petersburg on Monday, Saudi Energy Minister Khalid al-Falih said the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC partners were committed to extending their existing deal to cut output by 1.8 million barrels per day (bpd) beyond March 2018 if necessary.

The Saudi minister added that his country would limit crude oil exports at 6.6 million barrels per day in August, almost 1 million bpd below levels a year ago.

OPEC also agreed that Nigeria would join the deal by capping or even cutting its output from 1.8 million bpd, once it stabilizes at that level from 1.7 million bpd recently. Nigeria had been exempt from the output cuts.

Russian Energy Minister Alexander Novak said that an additional 200,000 barrels per day of oil could be removed from the market if compliance with a global deal to cut output was 100 percent. The compliance was 98 percent in June, the group said.

 

These meetings were aimed at saving face and diverting the market's attention away from Iraq's poor compliance, shale's resilience, and Libya's and Nigeria's markedly higher output," Britain's Barclays bank said.

U.S. commercial crude oil inventories likely fell by 3 million barrels last week, a preliminary poll showed on Monday ahead of the data by the Industry group the American Petroleum Institute later in the day.

 

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Revenue of Alphabet Inc. Increase up to $26.01 Billion in Q2

Alphabet Inc revenue increases up to 21%, reporting its higher advertising sales across its platforms.

Earnings per share was $5.01, beating an average estimate of $4.49, and would have been $8.90 if not for the EU antitrust fine announced last month. Earnings per share was $7 in the second quarter of 2016.

 

But the company's shares, which closed up in regular trading on Monday, fell about 3%

Shares of Alphabet, the owner of the Google search engine and the YouTube video service, had gained nearly 26% this year.

 

One potential blemish in the earnings report was aggregate cost-per-click, which fell 23 percent year-over-year, but the impact on Google's ad business was not immediately clear.

EU antitrust enforcers last month hit Google with a record EUR2.4 billion fine for favoring its own shopping service, taking a tough line in the first of three probes of its dominance in searches and smartphone operating systems.

Revenue was boosted by robust demand for advertising on mobile and on YouTube.

Google's ad revenue, which accounts for a lion's share of its business, rose 18.4 percent to $22.67 billion.

 

The company faces intensifying competition from social media giant Facebook Inc for advertising dollars. The companies together dominate the online ad market.

According to eMarketer, this year Google is expected to generate about $73.75 billion in net digital ad revenue worldwide, a 17.8 percent jump from a year earlier.

 

 

 

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Nomura Holdings Soar to a Whooping 400 Billion Yen

Nomura Holdings, an equity fund in India has soar to almost 400 billion yen (U.S $3.4 billon) in just the past year. Japanese investors owned $13 billion of Indian stocks and bonds at the end of June, the most in data going back to 2012.

Investors are looking at where the growth will be in the medium to long term, without having to worry about short-term swings in the market.

 

India’s economy is expanding at about seven times the pace of Japan’s, buoyed by a burgeoning middle class and more one than million young people joining the labor force every month. 

Indian shares have hit multiple records this year amid optimism about Prime Minister Narendra Modi’s policies.

 

Global and local funds have pumped about $16 billion into its stock market this year alone, making the Sensex one of the world’s top performers in 2017 and sending the rupee up 5.6 percent against the dollar.

The combined assets of three India funds run by Nissay Asset Management Corp. have topped 100 billion yen since their launch 2015.

Modi has burnished India’s appeal through policy changes aimed at boosting growth, curbing corruption and improving public finances. The country’s 10-year bond yields 6.43 percent, the highest level among major Asian economies, versus just 0.07 percent in Japan.

While the Topix index of Japanese shares has surged 23 percent in the past year, the S&P BSE Sensex Index has gained 27 percent in yen terms.

 

Sumitomo Mitsui Asset Management Co. is picking smaller stocks to tap India’s growth. Its fund, co-managed with Kotak Mahindra Asset Management Co., boasts a three-year cumulative return of more than 70 percent.

Matsuno says the market could drop if Federal Reserve rate increases spur capital outflows, but he expects any pullback to be temporary, and no reason for the growing legion of Japanese India bulls to get cold feet.

 

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BHP to Commence Production of it's $2.5bn Copper Mine Expansion

BHP can go ahead with a $2.5 billion expansion of its Spence copper mine, in Chile’s Atacama desert, after the country’s environmental regulator (SEA) unanimously approved the project this week.

A decision on the plan, the second largest mining investment that was under evaluation in the country, won’t be taken until August.

 

Spence’s expansion contemplates the construction of a concentrator plant to increase production and extend the life of the deposit about 20 years. 

It also includes an $800 million separate investment in a desalination plant at Mejillones port, located about 60 km north of Antofagasta city.

It’s estimated that the Spence project will generate about 4,100 temporary jobs and 220 permanent positions, and would add about 200,000 tonnes of copper a year to the company's output in its first decade.

BHP, already the world's second-biggest listed copper miner, decided last year to raise its annual exploration spending by 29%, allocating nearly all its $900 million budget to finding new copper and oil deposits. The mining giant is committed to make of those two commodities the pillars of its future growth.

 

Analysts believe the red metal is well placed to benefit from the increasing development of battery-powered vehicles, as they use more copper than regular cars.

If and when electric cars are massively adopted, experts say it will require a considerable increase in copper supply, which can’t be met by simply expanding existing mines. The gap will have to be filled by new projects, which only can go ahead when metals prices get considerably higher than today’s $6,035 per tonne.

 

 

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Gold Price Increase As USD Weakens

Gold prices jumped Friday, boosted by increasing weakness in the dollar.

Futures for August delivery climbed 0.75 percent to $1,254.90 per ounce. The gains lifted the precious metal above its 50-day moving average a key technical indicator for the first time since June 15 on an intraday basis.

 

The metal was also on track for its biggest weekly gain since May.
Gold futures since late April with 50-day, 200-day moving average


Gold is range bound between $1,200 and $1,300 and right now we’re in the middle of that range, said Michael Shaoul, chairman and CEO of Marketfield Asset Management

 

I think gold can get to $1,300 and run out of gas, but if it breaks above, then things get interesting.


Gold miner stocks followed the metal higher, with the VanEck Vectors Gold Miners exchange-traded fund (GDX) advancing 0.4 percent.

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Bitcoin Surge 15% to the Highest in a Month

Bitcoin rose more than 15 percent, to $2,675.67, its highest level since June 25, according to CoinDesk. As of 1:33 p.m. ET, the digital currency traded near $2,648. It’s up about 4 percent for July and more than 170 percent higher for the year.

Developers need to agree on activating an upgrade known as Segregated Witness by Aug. 1 in order to prevent the digital currency from splitting, or forking. Coinbase’s GDAX exchange has said it might pause bitcoin trading if the currency splits.

 

 “Bitcoin is rallying largely because the probability of Segregated Witness being activated is increasing as more miners signal that they will activate it,” said Ari Paul, CIO of BlockTower Capital, a cryptocurrency investment firm. Not every miner has to agree, but at least 80 percent need to.

The move higher also came amid increased interest in the digital currency world from Wall Street. Forbes reported Tuesday that bitcoin is a top holding of investor Bill Miller’s hedge fund.

 

Ethereum also jumped more than 18 percent, to near $230, its highest since Tuesday, according to TradingView charts of Coinbase data. Ethereum plunged below $200 over the weekend.

The gains in Ethereum came despite news Wednesday that hackers stole more than $30 million in Ethereum from wallets as the result of a security flaw. Earlier in the week, thieves stole more than $7 million in Ethereum by hacking the initial coin offering for CoinDash.

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Reserve Bank of Australia says there's no automatic reason to follow global rate hikes

The recent outbreak of hawkishness by policymakers in the western world does not automatically mean that interest rates need to rise in Australia, a top central banker said on Friday.

Canada’s central bank increased interest rates to 0.75 percent this month while the U.S. Federal Reserve has raised rates four times over the past two years. 


Policymakers in Europe have also shifted to a less dovish stance.
That led some investors to build long positions in the Australian dollar in anticipation the Reserve Bank of Australia (RBA) might echo its global peers. The local dollar surged to a two-year peak of $0.7992 this week. It last stood at $0.7934.

Just as the policy rate in Australia did not need to decline to the very low levels seen in other parts of the world, the fact that other central banks increase their policy rates does not automatically mean that the policy rate here needs to increase.

The Aussie also got a boost this week after the RBA’s minutes of its July policy meeting showed board members had discussed the neutral rate of interest.

The RBA sees the neutral policy interest rate which neither stimulates the economy nor retards it — at 3.5 percent compared to the official cash rate of a record low 1.50 percent. That was interpreted by some in the market as a hawkish message, a conclusion that Debelle rejected.


He pointed out that the policy rate in Australia was low because the neutral rate was lower than it used to be. That means the current policy setting was not as expansionary as a 1.50 percent cash rate would have been in 1990s or early 2000s.

Debelle also noted that a rising local currency could “counteract” the benefits of low cash rates and faster global growth.

 

 

 

 

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US. and Chinese will Try to Ease Trade Tensions

 US. and Chinese officials will try to ease trade tensions and bridge differences on Wednesday in annual economic talks that trade experts say will likely yield some small-scale agreements to grant U.S. firms more access to some of China’s markets.

But the talks are not expected to solve larger problems, such as U.S. complaints about China’s excess capacity in steel and aluminum and subsidies for state-owned enterprises, nor China’s complaints about U.S. refusals to sell Beijing advanced technology products.


China agrees to open up its markets more and which the U.S. can claim as victories,“ said Eswar Prasad, a professor of trade policy at Cornell University and a former China division chief at the International Monetary Fund.

U.S. Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross said on Tuesday they would be looking for China to agree to concrete steps with specific delivery dates to open markets, including more access for U.S. firms in the financial services sector.


The talks, rebranded by the Trump administration as the "U.S.-China Comprehensive Economic Dialogue,” come at the end of a 100-day effort by the two countries to craft an economic plan aimed at reducing the U.S. goods trade deficit with China, a gap that reached $347 billion last year and was up 5.3 percent through May this year.

China agreed in May to resume purchases of U.S. beef for the first time in 14 years and made commitments to buy U.S. liquefied natural gas and allow U.S. card payment services companies to operate in China. But while U.S. beef is now available in Chinese shops, it has taken longer for the other promised steps to be implemented.


Chinese Vice-Premier Wang Yang said on Tuesday that China has some concerns of its own to air at the talks, including “outdated” U.S. export controls for high-technology products.

In remarks to a business lunch, he said such Chinese purchases would reduce the U.S. trade deficit, noting that China imported $227 billion worth of integrated circuits last year, but only 4 percent of that came from the United States.


Prasad said the United States would be better served by focusing less on near-term steps but pushing China for bigger reforms such as opening major portions of its services sector to U.S. competition, relaxing corporate ownership rules, reducing subsidies for state-owned enterprises and clamping down on intellectual property theft.

Some U.S. officials said China was likely to push to turn the 100-day plan into a year-long effort, partly because China is viewed as unlikely to launch bolder economic reforms before its 19th Party Congress, a once-in-five-years event to set leadership, takes place this fall.


The annual summer dialogues, first launched in 2006, have focused in the past on China’s currency practices and what was once viewed as an undervalued yuan. But that issue has faded after the U.S. Treasury declined to follow through on Trump’s campaign threats to name Beijing a currency manipulator.

David Dollar, a former Treasury attache to Beijing who is now a senior fellow at the Brookings Institution, said that as in the past, the meeting is likely to focus more on process than substance, with the same complaints airing year after year.

 
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Oil Price Surge Above $46 as Demand Increases

Oil prices surge above $46 a barrel as optimism that demand will help shrink supplies outweighed an increase in U.S. rigs drilling for crude.

Futures were little changed in New York, after rising 5.2% last week. Stockpiles will drop at a faster pace worldwide this half of the year as demand rises and OPEC members comply better with an output-cut agreement.

 

While oil advanced last week, prices in New York are still below $50 a barrel on concerns expanded global supplies will offset output curbs by the Organization of Petroleum Exporting Countries and its allies as part of a deal to help re-balance the market.

The group’s output climbed last month to the highest this year as members exempt from the deal Nigeria and Libya pumped more and others slipped in delivering their pledged curbs.

West Texas Intermediate for August delivery was at $46.66 a barrel on the New York Mercantile Exchange, up 12 cents, at 11:37 a.m. in Seoul. Total volume traded was about 47% above the 100-day average. Prices gained $2.31 to $46.54 a barrel last week.

Brent for September settlement added 15 cents, or 0.3%, to $49.06 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 4.7% last week. The global benchmark crude traded at a premium of $2.18 to WTI.

 

The number of active oil rigs in the U.S. rose to 765. It’s the second week of renewed growth after drillers snapped a 23-week stretch of advances at the end of June.

Shale explorers have been the driving force behind a surge in U.S. production, more than doubling the rig count from a low of 316 in May 2016.

 

 

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Uranium Price Forecast to Rise by 40% by the End of 2018

Uranium was the glaring exception amid a broad-based rally in metals and minerals in 2016. The price of U3O8 fell 41% in 2016 with the industry tracker UxC's broker average price hitting 12-year lows below $18 per pound in November.

After top supplier Kazakhstan announced in the second week of January that it's cutting output by 5.2 million pounds, equal to 3% of global production, the price rallied, hitting $26.75 a pound by mid-February.

 

But Japanese utility TEPCO’s declaration of force majeure on a key uranium delivery contract from Cameco Corp., the world's top listed uranium producer, dampened enthusiasm.

And news in April that the US dept of Energy is making cuts to the amount of uranium that it disperses into the market (as much as 1.1m pounds per year less) did little to buoy sentiment, not to mention bad news surrounding nuclear power including the first new reactor to be built in the UK in a generation and risks to the US industry.

Last week Russian state nuclear corporation Rosatom suspended its Mkuju River uranium project in Tanzania for at least three years due to depressed uranium market.

Spot uranium rose to $20.75 this week but remains technically in a bear market, trading down more than 20% from its February peak. Despite the current negativity analysts surveyed in July predict a steady increase in the price from today's levels rising by 40% by the end of next year and over $40 a pound in 2020.

 

 

 

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16 ETFs in Hong Kong Closes Amid Plummeting Demands

Deutsche Bank’s asset management unit is closing multiple exchange traded funds (ETF) in Hong Kong amid low demand. The 16 Deutsche Bank X-trackers ETFs ceased trading who have assets of less than $40 million.

The closures highlight the challenge of operating ETFs in markets where investors have yet to be persuaded by their allure. 

 

While the $4.5 trillion global ETF market is setting new asset records almost every month, Hong Kong is bucking the trend. Investors have pulled money from ETFs this year even as equity prices in the former British colony climb to a two year high.

Hong Kong is at a slower stage of development and client needs are different. Distributing ETFs is harder in Asia and they may not have seen enough demand.  

Hong Kong’s ETF market is hampered by factors including use of a commission based fee model where banks or other distributors receive higher fees for selling active funds rather than ETFs.

Money flowing into U.S. equity ETFs increased by 7.5% or $177.6 billion this year. In Hong Kong, assets dwindled by 6.6%, or $2.3 billion. 

 

The ETF closures include 10 funds on China covering sectors including banks, health care, financials and energy. BlackRock has been shutting down funds in Hong Kong, most recently earlier this year. 

Six of those had also tracked sectors on the CSI300 index. BlackRock, the world’s largest money manager, and Deutsche Bank still operate ETFs in Hong Kong.

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U.S. Stock Market Indexes Surge at Record High

U.S. stocks market indexes surge at record high, led by modest gains in banks and technology companies.The latest gains were enough to nudge the Dow Jones industrial average to its second all time closing high in two days. 

The S&P 500 Index closed within five points of its record. The financial index was the best performer among the 11 major S&P sectors, ending up 0.61%. Quarterly earnings kick off later today with three of the biggest U.S. banks including JPMorgan Chase, Wells Fargo and Citigroup reporting results.

Analysts estimate Q2 earnings for S&P 500 companies rose 7.8% from a year ago, with financials projected to have had the third best profit growth among sectors.

Investors have more than doubled the amount of cash invested in a key financial sector fund in the last few days, betting that Q2 bank earnings will be strong.

 

The Dow Jones Industrial Average rose 0.1% to 21,553.09, the S&P 500 gained 0.19% to 2,447.86 and the Nasdaq Composite added 0.21% to 6,274.44.

About 5.8 billion shares changed hands on U.S. exchanges, below the 6.8 billion daily average for the past 20 trading days

 

 

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Asian Shares Rally Amid Fed Raise Rates

Asian shares scaled a two year top today as investors wagered that policy tightening in the United States would be glacial at best, lifting Wall Street to record peaks and lowering bond yields almost everywhere.

The star performer was the Canadian dollar, which rocketed to 1 -month highs after the country's central bank hiked rates for the first time in seven years and left the door wide open to further moves.

 

MSCI's broadest index of Asia Pacific shares outside Japan rose 0.45% to its highest since mid 2015. Japan's Nikkei firmed 0.4% and Australia's ASX index jumped 1%.

Stocks were underpinned by a drop in bond yields as Dr Yellen sounded cautious on inflation and noted the Fed would not need to raise rates, all that much further to reach current low estimates of the neutral funds rate.

Indeed, markets doubt even that modest tightening will ensue and imply only a 50-50 chance of a rise by December. Treasuries rallied in reaction, with yields on two year notes falling to three week lows, as did bonds in Europe.

The odd man out was Canada, where yields hit their highest since late 2013 after the Bank of Canada raised rates a quarter point, saying the economy no longer needed as much stimulus.

 

Against a basket of currencies, the dollar was holding just above nine month lows at 95.793. The drop in US yields benefited gold, which pays no interest, and nudged the precious metal up to US$1,218.35 and away from its recent trough of US$1,204.45.

Oil prices faded as a report showing hefty draw downs in US crude inventories was offset by data pointing to lackluster gasoline demand.

 

 

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Australia to Buy Back $262 million of Shenhua's Mining Licence in NSW

Australia will buy back half of a coal exploration licence from China Shenhua Energy as pressure from farmers and environmentalists opposed to mining on prime agricultural land.

The NSW state government had agreed to pay $262 million to buy back 51.4% of Shenhua's exploration licence on the Liverpool Plains 400 kms northwest of Sydney.

 

The exploration licence for Shenhua's $1 billion Watermark mine, granted in 2008, sparked a public backlash and split Australia's conservative ruling coalition into pro-mining and pro-farming camps.

Development has been delayed by assessments and modifications in response to concerns raised by farmers, and mining has not yet begun. Shenhua was disappointed by the government's move and would have mined the area responsibly but added the buyback was an acceptable financial outcome.

Anti-mining activists vowed to continue campaigning for a complete ban on mining in the region, including a coal mine proposed by Korea Electric Power Corp (Kepco).

Kepco is facing renewed resistance from farmers after the state's planning department endorsed its project, saying the impact on water supplies was outweighed by the economic benefits a mine would bring.

 

Last year, New South Wales agreed to buy back BHP Billiton's licence for the Caroona coal mine on the Liverpool Plains for A$220 million, ending a decade-long fight by farmers to shut down the project.

 

 

 

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Temasek Holdings Surged $275 billion SGD in Portfolio Value

Temasek Holdings reported that its portfolio value increased to $275 billion SGD. Its one year total shareholder return was 13%, reflecting the strong performance in equity markets around the world over the period from April 1, 2016, to March 31, 2017.

This measure includes dividends paid to its shareholder, the Finance Ministry, but not capital injections from the ministry. Temasek's shareholder did not make any capital injections in the last financial year. 

 

The boost in portfolio comes from a recovering global economy and strong stock markets which helped Temasek Holdings net portfolio value to a new all-time high. But the investment company warned in its annual review that the global economic recovery is still in its early stages and a host of uncertainties remain, both in the medium and long term.

It is also facing stiffer competition amid a difficult investing environment, yield hungry investors are driving up asset prices and making it tougher to find good deals.

Temasek invested $16 billion and divested $18 billion in the portfolio during the fiscal year, marking the first net divestment position since the end of March, 2009.

The report marks a sharp turnaround from the previous year, when Temasek reported its net portfolio value tumbled by around S$24 billion, or around 9 percent, to around S$242 billion as of March 31, 2016. It was the first time the portfolio had declined since 2009, which was during the global financial crisis.

 

The investment company has now continued to focus on new, long-term opportunities in areas including technology, life sciences, agribusiness, non-bank financial services, consumer and energy and resources.

While the company had previously looked to publicly listed investments, Temasek was focusing on private and negotiated opportunities such as equity market valuations.

 

 

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Gold Imports in India Spike Ahead New Sales Tax

Gold imports in India surged more than tripled from a year ago as retail demand jumped ahead of the new sales tax that prompted jewellers and bullion dealers to replenish stocks.

June gold imports climbed to an estimated 75 tonnes from 22.7 tonnes a year ago. For the first half of the year, imports rose to 514 tonnes, up 161% from a year ago.

 

The rush of buying by retail consumers will likely lead to lower July imports. That would put pressure on global gold prices that are already trading near their lowest level since mid March.

Demand was higher than normal in June as some consumers advanced buying to avoid paying higher tax. As part of a new nationwide sales tax regime, the goods and services tax on gold jumped to 3% from 1.2 percent previously.

Gold premiums in India jumped to $10 an ounce in the last week of June, the highest level in 7-½ months.

Imports would be significantly less in July compared to June. Right now demand is very weak due to monsoon. India’s gold imports in July could be less than 35 tonnes.

In July, gold demand usually remains weak in India due to fewer weddings and as farmers are busy sowing crops. Two-thirds of India’s gold demand comes from rural areas, where jewelry is a traditional store of wealth.

 

 

 

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Snap Inc. Shares Crashes, Falls Below its IPO Price

Snap Inc. shares falls below its initial public offering price (IPO) of $17 down 1.1% to $16.99 marking a new post IPO low for the social media upstart. The stock has fallen more than 30% so far this year, as concerns about Snap's future growth, profitability and rivalry with other social media. 

In May, Snap reported its first earnings as a public company and missed on all three of its most important metrics - earnings, revenue and user growth which did little to reassure nervous investors.

 

Credit Suisse analysts cut their price target for Snap to $25 from $30, although they kept their outperform rating. The analysts said they expect Snap to be volatile in the near term as more than 700 million shares potentially come out of their lock up period later this month.

However, advertisers still appear to be flocking to Snap Inc. as they were drawn to the platform's access to younger users and improving return on investment. This signify well for Snap, as advertising is the main revenue source for the company. 

In its most recent quarter, about $129 million of Snap's total $149.6 million in revenue came from advertising. Other deals, such as Snap's purchase of Zenly for $200 million in late March, could have indirect benefits for advertisers. 

Snap likely used the Zenly acquisition to build out its Snap Map product, which was released in late June and lets users share their location with friends inside an interactive map. Snap Maps could become a crucial part of the online to offline integrated advertising ecosystem.

 

Snap's recent declined was 42.4% below the record high of $29.44 reached in its second day of trading. The IPO breach came in Snap's 90th trading day on the public market. The stock had previously dipped to $17 in mid June.

Dipping below an IPO price is seen on Wall Street as a setback to be avoided by chief executives and their underwriters, but it is not uncommon for Silicon Valley companies.

 

The Snapchat messaging app is popular among people under 30 who enjoy applying bunny faces and vomiting rainbows onto their pictures. But many on Wall Street have been critical of Snap's high valuation and slowing user growth and the company has warned it may never become profitable. 

 

 

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China Hedge Funds Bounces after 5 Years Low

Greater China hedge funds added more than 13% on average in the first half of 2017 to rank among the top performing strategies in the world. Hedge funds from Greenwoods Asset Management, Springs Capital and SPQ Asia Capital were among standout performers with gains of 20% or more.

Hedge funds worldwide are struggling with investor redemption after central bank intervention suppressed volatility and sapped returns. China funds were a rare pocket of out performance as global hedge funds on average gained about 2.4% in the first half. 

 

China hedge funds bounced back after five years of worst performance.  Investors are taking notice that the majority of hedge funds in China saw inflows in May for the first time since 2015.

While Greater China equity funds overall benefited from surging Hong Kong listed shares and large cap stocks on the mainland, mainly bets on technology, Internet and consumer companies drove returns at some of the top performers. 

 

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong touched post October 2015 highs in the first half. The MSCI China Index added about 24% through June 30. China’s initiation into MSCI Inc.’s indexes has further boosted the outlook for the nation’s largest stocks.

Greenwoods’ $1.6 billion Golden China Fund made nearly 27% in the first half. Performance was boosted by bullish bets on consumer stocks listed in Hong Kong and China.

Other managers found opportunities in overlooked areas. Springs Capital’s China Opportunities Fund added more than 7.5% in June, with 2017 gains topping 24%.

Profit at the fund, one of the rare offshore stock hedge funds that focuses on yuan-denominated shares traded in China, was driven by gains in chemical materials, high-end manufacturing and healthcare stocks. It avoided large cap stocks most popular with foreign investors in the yuan shares market.

 

Large companies, including blue-chips and leaders of small industries, may outperform small and mid-cap stocks over the next three years as large companies gain share when China’s slowing economy spurs industry consolidation.

 

 

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MMG Sold its Nickel Mine in Tasminia for $25 Million to Dundas Mining

MMG has completed the sale of its Avebury nickel mine in Tasmanian to Dundas Mining for $25 million.

The Avebury mine, located 8km west of Zeehan in Tasmania’s West Coast has been in care and maintenance since 2009. MMG is confident that the sale will reinvigorate the Zeehan area, by providing new jobs and economic benefit to the region. 

 

The Tasmanian Government welcomed the sale and the resources minister Guy Barnett said it showed a positive sign of growing confidence in the state’s resource sector. 

MMG remains committed to Tasmania through its Rosebery operation and will continue to make social and economic contributions to the state and West Coast region. 

Dundas Mining is a privately owned exploration and mining development company based in Tasmania and their commitment to bringing the Avebury operation back into production as soon as possible is.

He added that jobs are the state government’s main priority and looks forward to the restart of the mine to create more employment.

 

 

 

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Host Plus to Invest 12% of Funds Capital in Infrastructure

Host Plus Pty Ltd. is seeking board approval to invest about 12% of the fund’s capital in infrastructure, from 10% ongoing. Australian funds managing retirement savings now hold $100 billion in infrastructure assets, double the amount four years ago. 

According to Preqin data, the soaring worldwide investor demand has pushed the average size of such deals to a record $519 million.

 

The Chief Investment Officer of Host Plus sees potential to acquire more stakes in attractive assets, which he views as offering steady, predictable income for his fund’s almost 1 million members. 

Host Plus which has stakes in airports and office buildings to water filtration plants and wind farms, beat its local peers with a 9.5% return over the three years ended May 31.

Prices for infrastructure assets reached eye watering levels as opportunities to invest dwindled. There were 650 sales in the six months ended June 30, from 1,110 a year earlier. 

While equities provide investors with dividend yields, volatility can be a deterrent. Infrastructure and real estate investments are good alternatives.

 

Last month, a group of senior executives from Australian retirement funds along with IFM Investors have visited the Vice President of U.S.A to canvass potential cross border infrastructure deals and explore ways pension money can be used to improve American roads and airports.

Discussions were centered around how pension funds can work as long-term financial backers as opposed to private equity funds, which typically sell their investments after making a profit.

About $800 billion of President Donald Trump’s touted $1 trillion infrastructure program is expected to come from states, cities and private capital, including pension money.

 

 

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Bank in Japan Planning to Raise $5 Billion through U.S Bonds