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Euro Advanced Despite ECB Warning on Volatility

Euro soar higher on optimism that the ECB would soon taper its QE program while the dollar dropped on weak economic data and as another major hurricane is set to hit the United States.

In the day’s most anticipated event, the European Central Bank refrained from changing policy although some analysts were expecting an announcement regarding the tapering of its asset purchase (QE) program. 

 

Despite the dovish outcome, euro/dollar rose sharply, rising north of 1.20 to 1.2058, just shy of the previous week’s 1.2069, which was its highest level since December of 2014. Trading in the pair was volatile today, moving between 1.1920 and 1.2050.

During the press conference that followed the announcement, ECB President Mario Draghi warned against excessive volatility in the euro as he showed some signs of displeasure from the recent surge in the single currency. 

 

The market pretty much ignored Draghi’s concerns and pushed the euro higher. Euro/pound also rallied to only briefly pierce the 0.92 mark but dropped back to around 0.9175. The euro also rose to trade above the 131 level against the yen, in a broad move higher for the currency.

Draghi also upgraded the ECB’s growth forecast to 2.2% this year, while also downgrading the inflation forecasts of the next two years to 1.2% and 1.5% for 2018 and 2019 respectively. While promising to keep the 60 billion euros a month pace of QE steady until the end of the year, Draghi said there would be an update on what would happen to QE next year when the ECB next meets in late October. 

This probably more than anything set off speculation that tapering would be announced during that meeting and gave the euro bulls an excuse to push the currency higher.

Dollar was easy target for the strong euro. In an indication of the distorting impact of Hurricane Harvey on US economic statistics, weekly initial jobless claims climbed to 298 thousand compared to 236 thousand the previous week. 

According to analysts, US economic statistics during the next 2-3 months will be influenced by the storm and with Hurricane Irma also closing in on Florida, the impact of hurricanes could be pronounced during the last four months of the year. The hurricanes are expected to have only a temporary impact on the US economy but they could also make the Fed’s task of raising rates again this year tougher. 

 

The dollar found little support from the previous day’s surprise deal between President Trump and Congressional Democrats for a 3-month extension of the Treasury’s debt ceiling combined with aid for hurricane victims. The dollar was under pressure against the yen as it dropped to around 108.60, while the pound climbed to briefly trade above the 1.31 level against the greenback. 

This was a fresh 1-month high for pound/dollar. The loonie, which made significant gains after yesterday’s Bank of Canada rate hike but then returned a portion of those gains, managed to slightly take out those lows of USD/CAD today as it traded at 1.2137 a 27 month low.

In commodities, gold rose to as high as $1347 an ounce a 1 year high as the precious metal took advantage of the dollar’s weakness and the uncertainty over North Korea’s possible new missile test over the weekend. Oil was a little lower at $48.86 a barrel.

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China Agreed to Loan Guinea $20 Billion in Exchanged of Aluminium Ore

China agreed to loan Guinea $20 billion over almost 20 years in exchange for concessions on bauxite, an ore of aluminium which the West African country has in abundance, the mines minister said.

The projects guaranteed by the loan included China Power Investment Corp’s (CPI) planned alumina refinery and Aluminium Corp of China’s (Chalco) bauxite mine and another bauxite project by China Henan International Cooperation Group, all of them in the northwestern town of Boffa.

 

According to the Mines Minister Abdoulaye Magassouba, that those are the three projects targeted as priorities for the first phase. The revenues of the projects will serve as reimbursement for the loans.

The minister said the money would be spent on badly needed infrastructure Guinea is one of the world’s least developed countries a roads for minerals formula that China often uses to gain access to Africa’s resources.

Projects earmarked included roads in the capital Guinea and highways upcountry, a project for extending the port of Conakry, an electric transmission line and the building of a university, Magassouba said.

Chalco said last month it plans to invest $500 million in the project in Boffa, about 200 kilometres from the capital Conakry, which was abandoned by BHP Billiton in 2013. The $6 billion CPI alumina project has been on the cards since at least 2012.

Guinea, Africa’s leading bauxite producer, holds some of the world’s richest bauxite and iron ore deposits, including the Simandou iron ore deposit, in its remote east, which is mired in legal disputes but has nevertheless attracted intense interest from China. 

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Asian Stocks Weighs Higher after Wall Street Equities Surged

Asian stocks weighs higher after Wall Street equities rose as investors weighed a U.S. deal that ensures the funding of its government through mid-December against persistent geopolitical tensions. The yen stayed lower after an overnight drop.

Most industry groups advanced, lifting the MSCI Asia Pacific Index by 0.4 percent. China trade figures are anticipated to show another month of solid export growth, while FX reserves probably continued to rise on stricter capital controls, robust growth and a stronger yuan.

Malaysia’s central bank will probably hold its benchmark rate at 3 percent at meeting. Australian retail sales were unchanged in July from June, while the nation’s trade surplus in July came in less than economists expected.

In stocks, the Topix index rose 0.6 percent as of 11:03 a.m. Tokyo time, while the Kospi index in South Korea was up 1 percent and Australia’s S&P/ASX 200 Index added 0.3 percent. Hong Kong’s Hang Seng Index gained 0.4 percent. 

Chinese indexes fluctuated. S&P 500 Index futures slipped less than 0.1 percent after the underlying gauge rose 0.3 percent.

 

On the other hand, Japanese yen was steady at 109.13 per dollar after falling 0.4 percent Wednesday, when it had earlier traded near its highs for the year.

The Aussie dollar was back below 80 U.S. cents after the retail sales and trade data.  Australia’s 10-year yield rose four basis points to 2.64 percent

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Platinum Price Plummet 10% Compared Last Year Amid Oversupply of the Commodity

The price of platinum took a breather from its recent rally but managed to stay above the $1,000 an ounce level and in positive territory for the year. Platinum, down 10% compared to this time last year, is under performing the precious metals complex and specifically palladium which is sporting 2017 gains of more than 37% and looks set to top its sister metal for the first time since 2001.

A new report by the World Platinum Investment Council (WPIC) shows the platinum market moved back into surplus during the second quarter as a rise in refined supply and a drop in automotive and industrial demand erased the previous quarter’s 305,000-ounce deficit.

 

WPIC is still predicting a small platinum market deficit for the whole of 2017, but the industry body expects the market to be broadly in balance compared to earlier predictions of a 120,000-ounce deficit this year.

Following a 2016 deficit of 270,000 ounces, 2017 would be the sixth consecutive year that global platinum consumption has outstripped supply primarily as the result of declining mining output and low prices discouraging recycling.

Overall supply is expected to contract further in 2017, due to closures of uneconomic mining at current market prices, with total platinum supply expected to decrease by 2% year-on-year to 7,795 koz. Secondary supply is forecast to slip by 3% when compared to 2016, with a reduction in jewellery recycling outweighing increased autocatalyst recycling.

On the demand side of the equation, conditions remain lacklustre. Nevertheless, it is encouraging to observe the continued resilience of platinum demand from the automotive sector, which is counter to many negative commentaries on the sector. The full-year forecast for the segment is 3,360 koz, down just 2% on 2016 (3,435 koz) and very close to overall automotive demand in 2015 and 2014, despite a further reduction in diesel market share in Western Europe.

 

A bright spot for the platinum market is continuing strength in investment demand. Global investment demand came in at 90,000 ounces during Q2 with bars and coins and exchange-traded funds seeing gains, while exchange stocks remain unchanged. 

This marks the sixth consecutive quarter of positive investment demand according to WPIC and indicates that overall investment growth in 2017 is likely to be greater than expected.

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Shares in Asia Declined as North Korea Tensions Continue to Raves Up

Shares in Asia declined today as investors remained jittery about North Korea. Japan’s Nikkei 225 declined 0.3 percent as the dollar remained soft. Across the Korean Strait, the Kospi slipped 0.28 percent.

In Australia, the S&P/ASX 200 fell 0.24 percent, with the 1.07 percent fall in the financials sub-index weighing on the broader market. Gold mining and energy stocks made moderate gains. Greater China markets were also pressured. The Hang Seng Index was down 0.88 percent. On the mainland, the Shanghai Composite shed 0.44 percent and the Shenzhen Composite slipped 0.223 percent.

 

In economic news, Australia second-quarter GDP rose 1.8 percent compared to the previous year. The Australian dollar fell to trade at $0.7998 from levels around $0.8017 after the release of GDP data. The Aussie dollar fetched $0.7993 at 9:53 a.m. HK/SIN.

Stocks in the U.S. fell as markets re-opened for trade after the Labor Day holiday, with the Dow Jones industrial average tumbling 1.07 percent, or 234.25 points, to close at 21,753.31.

Yields of the U.S. Treasurys were also lower. The yield of the 10-year Treasury note stood at 2.06 percent at the end of the U.S. trading day, around its lowest levels since Nov. 10. Bond yields move inversely to their prices.

The dollar fetched 108.75 yen at 9:54 a.m. HK/SIN after earlier falling as low as 108.49, close to its lowest levels since mid-April. The dollar index, which tracks the dollar against a basket of currencies, stood at 92.338, compared to the 92.2 handle seen on Tuesday.

Although risk aversion weighed on the dollar/yen, “an unabashedly dovish Brainard was unquestionably the reason” for the deeper move into the 108 level, Stephen Innes, APAC head of trading at OANDA, said in a note.

 

In corporate news, the sale of Toshiba’s memory chip business returned to the spotlight after Western Digital offered to leave a consortium in talks to buy the unit from Toshiba. Instead, Western Digital would strengthen its position in its existing joint venture with Toshiba. The company shares were up 3.21 percent despite most other Japanese tech stocks sliding in early trade.

Other market movers in the session included stocks affected in the annual review of the Nikkei Stock Average. Japan Post Holdings and Recruit Holdings rose 2.5 percent and 7.35 percent respectively after being added to the index, while Hokuetsu Kishu Paper and Meidenshatumbled 7.65 percent and 7.09 percent after being removed.

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Gold Price Jumps Higher as Hedge Fund Bulls Soar

Gold price jumps higher hitting levels last seen a year ago as safe haven buyers seek refuge amid escalating tensions on the Korean peninsula and weakness on equity markets see investors rotate back into gold.

Gold for delivery in December, contract on the Comex market in New York gained nearly $20 an ounce hitting a high of $1,349.70 in afternoon trade before settling at $1,344.50. Year to date gold is up 17%.

Volumes were some of the highest recorded for the Comex with futures contracts equivalent to more than 56m ounces or some 1,750 tonnes exchanging hands. That’s more than 85% above average daily volumes during August which was already a record trading month. 

The all time high for trading volumes on the exchange was set on the day after Donald Trump was elected president when nearly 90m ounces swopped owners.

 

The North Korean hydrogen bomb test over the weekend that resulted in a break between the great powers involved in the standoff sparked the latest rally in the metal.

President Trump’s warnings that the US will stop trading with any country that does business with the rogue nation drew scorn from Beijing. Yesterday US Ambassador to the United Nations Nikki Haley said Kim Jong Un  was “begging for war” which prompted Moscow on Tuesday to warn of a “global catastrophe” if  "military hysteria" is not replaced with diplomacy.

 

Managed money investors such as hedge funds which abandoned the gold market for equities and other yield-producing investments in what became known as the Trump trade even before the latest geopolitical escalation, have been returning to the precious metal market in droves.

Hedge funds added to their exposure to the yellow metal for the sixth straight week according to trader positioning data supplied by the government. Net longs bets that gold will be more expensive in the future – rose 18% to the equivalent of 23.2m ounces, the highest since September.

A trading note from Saxo Bank points out that the ratio between longs and short positions has jumped from 1 to almost 19 in the past few weeks. That’s the highest ratio since December 2012.

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DAX Slumps 0.17% as Sentix Investor Confidence climbed to 28.2 HIgher than Expected

The DAX index has started the week with small losses. In the Monday session, the DAX is currently trading at 12,123.50, down 0.17% on the day. On the release front, there are no major events on the schedule. 

Eurozone Sentix Investor Confidence climbed to 28.2, above the forecast of 27.4 points. Eurozone PPI continues to improve, coming in at 0.0%, short of the estimate of 0.1%.

 

The eurozone economy continues accelerate, as economic indicators point upwards in the second half of 2017. The Sentix Investor Confidence rose in September, as investors and analysts like what they see from the euro-area economy. 

Germany, the largest economy in the bloc, continues to look very strong, but other countries such as France and Italy have also posted better numbers in 2017. In August, the German and eurozone manufacturing sectors continued to show strong expansion, buoyed by domestic demand as well as a stronger global economy which has increased demand for German and European exports. 

A stronger economy has raised questions as to what monetary moves the ECBhas planned will it finally taper its ultra-accommodative monetary policy? The bank’s asset purchases program is scheduled to end in December, and analysts expect the ECB to withdraw stimulus in early 2018. 

Still, the ECB has not provided much guidance as to its plans. ECB President Mario Draghi was mum on monetary policy at last week’s meeting of central bankers at Jackson Hole, following the lead of Federal Reserve Chair Janet Yellen. 

However, the ECB head will not get another free pass this week, as the ECB holds its next policy meeting on Thursday. Any discussion about tapering the ECB’s asset purchase program could have a strong effect on the euro’s movement.

 

Global markets are keeping a close eye on key numbers in the US, as the guessing game continues with regard to a rate hike by the Federal Reserve. US employment numbers were unexpectedly soft on Friday, but the dollar shrugged off the weak numbers and managed to post gains against the euro. 

Nonfarm employment change slowed to 156 thousand, well below the estimate of 180 thousand. This marked a 3-month low. However, with the US labor market still close to capacity (the unemployment rate is just 4.4%), the markets can be forgiving over a softer nonfarm payroll report

Wage growth, or the lack of it, is a more pressing concern. Average Hourly Earnings posted a small gain of 0.1%, missing the estimate of 0.2%. This was down from 0.3% in the previous report, and matched the weakest gain seen in 2017. 

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Bitcoin Price Drops After a Ban on Raising Funds Using ICOs

Bitcoin price fell sharply after Chinese regulators announced a ban on organizations from raising funds using initial coin offerings (ICOs).

ICOs allow start-ups to raise investment by selling new cryptocurrencies, which are similar to bitcoin, in return for cash. However, the People’s Bank of China says this practice, which has become popular around the world as well as in China, constitutes illegal fundraising.

 

Despite bitcoin’s price falling, some expect this move to be shortlived. While the ban on ICOs does not directly affect bitcoin, the news created negative market sentiment which is weighing on the prices of several virtual currencies.

Bitcoin’s price fell from $4,584 shortly before the announcement to around $4,350 per bitcoin. It was trading around the $4,429 level. 

The move by China is not the first time the country’s regulators have attempted to crack down on the cryptocurrency space. In January and February, the central bank warned several digital currency exchanges they would be shut down if they violated anti-money laundering rules.

Furthermore, while bitcoin dropped sharply on the news, its price has been trending down since hitting the $5,000 milestone at the weekend. 

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Japanese Yen Climbed Up While Stocks Plummet

The dollar was marked down as deep as 109.22 yen at the opening, off a whole yen from late on Friday, but there was no follow-through selling and it was last at 109.84. 

Japan is the world’s largest creditor nation and traders tend to assume Japanese investors would repatriate funds at times of crisis, thus pushing up the yen. Many wonder, however, if Japanese assets would really remain in favor if an actual war broke out in Asia.

 

Japan’s Nikkei did not take the news well, losing 0.9 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan. South Korea’s main index .KS11 down 0.6 percent.

Futures on 10-year U.S. Treasuries climbed 5 ticks, while yields on Japanese 10-year government debt rallied to their lowest since last November. E-Mini futures for the S&P 500 dipped 0.3 percent, though U.S. markets will be closed on Monday for the Labor Day holiday.

The dollar slipped to 0.9610 Swiss francs from 0.9646, and was off 0.15 percent against a basket of currencies at 92.674. Gold hit a 10-month high and was last up 0.6 percent at $1,332.20. 

The euro was a shade firmer at $1.1880 with investors wary ahead of a European Central Bank meeting on Thursday. There have been reports some at the ECB are unhappy with the euro’s strength and are in no rush to signal the start of a tapering in its massive balance sheet.

 

In the oil market, prices were mixed as shutdowns of U.S. production following Hurricane Harvey were balanced by an expected downturn in crude demand as the storm knocked out refineries along the Gulf of Mexico.

Brent crude eased 29 cents to $52.46, while U.S. crude gained 14 cents to $47.43 a barrel.

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Nuclear Test in North Korea Signifies Trouble for Stocks in September

September is a much dreaded month or much maligned, depending on what you believe, for investing in the stock market.

Those who indulge in crystal ball gazing based on historical data will point out that this month is the only one out of the 12 in a year in which the Dow Jones Industrial Average has been lower on average over the past 20, 50, and 100 years.

 

What is clear though is that this September has got off to a wobbly start, thanks to the bellicose of North Korea. The country conducted sixth nuclear test that generated tremors five to six times as powerful as its previous nuclear test. This came just hours after Pyongyang claimed it had developed a hydrogen bomb that could be loaded into a long-range missile.

With the Kim Jong Un regime escalating tensions with the United States, nervous investors are apt to sell risky investments and seek safe havens in US Treasuries or the Japanese yen. This is likely to trigger a global selloff in equities and bonds when market resumes today.

Last week, US equity markets rebounded fairly quickly after Mr Trump did not pronounce any radical action against North Korea following its launch of a missile that flew over Japan beyond saying that all options are on the table.

On the economic front, the investment temperature is rather more benign, judging by last Friday’s labour and manufacturing data in the US. While US non-farm payrolls have come in well below expectations - with 156,000 jobs added last in August after two straight months of strong gains - the pace of the increase is enough to prod the Federal Reserves to start trimming its bloated balance sheet.

Moreover, the key US manufacturing sector accelerated in August at its fastest pace in six years, driven by gains in output and employment. A rollback of the Fed balance sheet will drain the financial system of excessive liquidity that has kept interest rates artificially low since the 2008 global financial crisis.Higher interest rates are thought to be good for banks.

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Asian Equities Edged Higher

Asian equities edged higher today. MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.2 percent. Australian shares added 0.35 percent and South Korea’s KOSPI advanced 0.25 percent. Japan’s Nikkei climbed 0.4 percent.

The dollar’s recent advance slowed as rate hike expectations were dented. The greenback was up 0.15 percent at 110.130 yen having gone as high as 110.675 overnight, its strongest in two weeks. The euro was steady at $1.1909 after plumbing a one-week low of $1.1823 overnight.

 

In commoditiescrude oil prices stood tall after rallying overnight as traders scrambled to reroute millions of barrels of fuel with almost a quarter of U.S. refining capacity remaining offline. 

Hurricane Harvey, which brought record flooding to the U.S. oil heartland of Texas, has shut down at least 4.4 million barrels per day of refining capacity, according to company reports.

U.S. crude was slightly lower at $47.01 per barrel after surging 2.8 percent overnight. Gold hovered near a 9-½-month high, supported as the dollar came off its recent highs and by lingering concerns over tensions in the Korean Peninsula. 

Spot gold was steady at $1,321.10 an ounce after gaining 1 percent overnight. The precious metal was on track to gain 2.4 percent this week, during which it touched $1,325.93 an ounce on Tuesday, its highest since early November.

 

Economists expect U.S. nonfarm payrolls increased by 180,000 jobs in August after surging 209,000 in July and average hourly earnings to have increased 0.2 percent after rising 0.3 percent in July.

The dollar index against a basket of six major currencies was a shade lower at 92.629.The index slipped about 0.2 percent on Thursday and was poised to end 0.1 percent lower on the week in which it hit a 2-½-year low of 91.621 on geopolitical tensions before bouncing back.

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Global Markets Surged Overnight

Global Markets climbed overnight, the last day of August, with all eyes on today’s US jobs numbers.

TD Securities on the pending US jobs report: “We expect August nonfarm payrolls to moderate to a 175k pace after registering a robust 209k gain in July, which left the six-month average little changed at 179,000.

 

The S&P 500 Index erased a monthly loss with its fifth straight advance. The S&P 500 added 0.6 per cent to 2471.41 at 4pm in New York. Its five-day winning streak is the longest since May.

"There’s no doubt that the market is still in an uptrend,” said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee. “We’ve been throwing all sorts of bricks into the wall of worry and it’s still reaching for the sky.”

The Dow Jones Industrial Average rose 0.3 per cent to cap a fifth straight monthly advance. The Nasdaq 100 Index ended the month at an all-time high.

European shares rose for a second day on Thursday, with the pan-European STOXX 600 up 0.8 per cent, but posted a third straight month of decline. A profit warning from Carrefour sank the retail sector.

 

Hong Kong’s Hang Seng index fell 0.4 per cent, to 27,970.30, while the China Enterprises Index lost 0.7 per cent, to 11,295.44 points.

Japan’s Nikkei share average rose to two-week highs, after bright US economic data pushed up the greenback against the yen, which in turn lifted cyclical stocks such as auto makers and financial companies.

 

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Rio Tinto Opened its 16th Iron Ore Mine in Western Australia

Rio Tinto formally opened its 16th iron ore mine in the Pilbara region of Western Australia. The Silvergrass mine is due to be commissioned during the final quarter and the $338 million brownfield development is set to produce 10m tonnes of low-sulphurous ore a year.

The company said that Silvergrass was a great example of its value over volume approach, as the mine would provide low cost, high grade material to maintain the quality of the miner’s brandname Pilbara Blend.

 

Silvergrass is located adjacent to Rio’s Nammuldi mine and ore would be moved to the Namuldi plant by a 9-km conveyer system currently under construction. The initial phase, with a five million tonne per annum capacity, began production in the fourth quarter of 2015. 

Final capacity could be in excess of 20m tonnes per year, but most of Silvergrass output would replace depleting resources elsewhere.

 

Rio is also moving ahead with its $2.2 billion Koodaideri iron ore project in Western Australia, 110km west-north-west of Newman. The project would begin construction in 2019 and enter production two years later.

Rio Tinto said it shipped its five billionth tonne of iron ore last year after 50 years of operations in the Pilbara and has invested some $20 billion in Western Australia over the past decade.

Last month, the Melbourne-based giant cut back guidance for iron ore output in 2017 by up to 10m tonnes to around 330m tonnes. Iron ore accounts for just less than half Rio’s earnings.

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U.S. Stocks Surged as Technology Climbed Higher

The S&P 500 surged 0.46 percent to close at 2,457.59 with information technology leading eight sectors higher. The S&P also posted a four day winning streak.

Nasdaq composite climbed 1.05 percent to 6,368.31, leading other major U.S. indexes, and notched a three-day winning streak. Lifting the index higher were shares of Netflix, which advanced more than 3 percent after analysts at Bernstein said that Disney pulling its content from the platform wouldn’t hinder Netflix’s stock performance.

 

Shares of Apple also contributed to the Nasdaq’s gains, rising 0.2 percent to hit a record high earlier in the session. Other major stocks in the sector also rose, including Facebook and Google-parent Alphabet. Tech is by far the best-performing sector this year, advancing more than 20 percent.

The Dow Jones industrial average, meanwhile, rose 27.06 points to close at 21,892.43, with Goldman Sachs contributing the most to the gains.

The ADP report is often used by traders as a preview to the government’s monthly jobs report, which is set for release on Friday. Meanwhile, the second estimate for gross domestic product data in the second quarter showed the U.S. economy grew by 3.0 percent, more than the expected increase of 2.7 percent..

Market expectations for a rate hike in December were at 41 percent on Wednesday, up from 34 percent on Tuesday, according to the CME Group’s FedWatch tool.

 

The two-year note yield, which is the most sensitive to changes in Fed monetary policy, climbed higher to about 1.33 percent. As of Wednesday afternoon, just over 13 billion shares had been traded for the week. At that rate, the weekly volume is on track for its lowest level since the week of last Christmas.

Equities closed higher after rebounding from the concern of further escalation in tension between the U.S. and North Korea. The Dow opened more than 130 points lower before closing 57 points higher

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Billabong Plummet to a $77.1 Million Loss after Slashing Value of Brands

 

Billabong has plunged to a $77.1 million loss after slashing the value of brands. The non-cash impairment charges and other one-off costs disguised an otherwise slightly improved operating result, with underlying earnings before interest tax depreciation and amortisation rising 0.3 per cent to $51.1 million.

Chief executive Neil Fiske said EBITDA rose 50 per cent in the June-half, the strongest performance since Billabong’s $385 million recapitalisation in 2013, underpinned by a strong performance in the Americas, which offset weak retail trading in the Asia Pacific region.

 

Nevertheless, the underlying EBITDA result fell short of market consensus forecasts around $56 million. It also fell slightly short of Billabong’s guidance of $52 million to $57 million, which was revised downwards in February to adjust for the $60 million sale of Tigerlily to private equity group Crescent Capital. Billabong used the proceeds from the Tigerlily sale to reduce debt.

The bottom line loss also included impairment charges of $11.7 million after Billabong terminated a contract with omni-channel solutions provider Netsuite after technical problems delayed the global rollout of a consolidated e-commerce platform.

Billabong is pressing ahead with its omnichannel strategy and expects to launch the first of its e-commerce sites, for Surf Dive N Ski e-commerce sitebefore Christmas. Group sales fell 8.8 per cent to $974.7 million, or by 4.7 per cent excluding Tigerlily and Sector 9, which was sold in July last year.

However, comparable retail revenue from bricks and mortar and online stores rose 0.1 per cent for the year after falling 1.2 per cent in the first half. Ecommerce sales rose 22 per cent. Inventories fell 7.5 per cent and gross margins improved 90 basis points.

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Largest Private Hospital Operator in Australia Posted a 12.7% Increased Profit

Ramsay Health Care posted a net profit growth of 12.7 per cent to $542.7 million. Driving the result was growth in admissions and earnings in its Australian business, while its international divisions suffered amid tariff reductions.

The $14.5 billion company said that group revenue was virtually flat at $8.7 billion, or up 4.1 per cent in constant currency terms. Group EBIT was up 5.2 per cent to $943.4 million. Core EPS was up 13 per cent to $2.314.

 

In February Ramsay upgraded guidance tipping 12 per cent to 14 per cent core net profit and core earnings per share growth for 2016-17, up from 10 per cent to 12 per cent previously stated.

New chief executive Craig McNally - the former chief operating officer and a 29-year company veteran - said while the Australia remains the powerhouse of Ramsay’s operations posting strong earnings growth, its European businesses delivered on expectations.

The company declared a fully franked dividend of 81.5 cents, payable September 28 up from 72 cents a year ago. Total dividends for the 2017 year were $1.335. They is tipping core EPS growth this new 2018 fiscal yearof 8 per cent to 10 per cent, supported by strong growth in its Australian hospitals business.

Revenue at its French unit was nearly flat at €2.2 billion, and EBITDAR also was virtually flat per cent to €448.3 million, after two years of tariff reductions. Ramsay’s Générale de Santé is now France’s largest private hospital operator with 124 facilities after buying another nine hospitals in Lille in 2016.

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Global Market Sheds Lower

US crude shedding more than 3 per cent and Brent, the global benchmark, falling more than 1 per cent as the refinery sector in Texas was battered by Hurricane Harvey.

It remained unclear at this point how much damage has been done as the focus for authorities was on rescuing residents amid historic flooding. Numerous refiners shut operations, likely for weeks, in the nation’s refining and petrochemical hub.

 

The S&P 500 and Dow ended little changed on Monday as energy and bank shares traded lower, while tech and healthcare gave a light boost to the Nasdaq.

In the wake of Hurricane Harvey insurers were among the biggest decliners Monday in the S&P 500 Index, with Travelers Cos dropping 2.6 per cent and Progressive Corp down 2.3 per cent.

Market analysts said despite the human drama and infrastructure devastation, the market may be able to take solace in the likelihood that a massive rebuilding effort would mostly offset the negative economic consequences of the flooding.

European shares fell on Monday after the euro strengthened. European Central Bank chief Mario Draghi held back from expressing concern about a strong currency in a closely watched speech on the weekend.

The STOXX index for euro zone stocks fell as much as 0.7 per cent to a two-week low before paring its losses to end 0.4 per cent lower on the day. London was closed for a holiday, reducing activity.

 

In Asia, several missiles were fired by North Korea, NHK cites Japan’s government as saying. Missile likely landed off eastern coast of Hokkaido, NHK says.

Japan Prime Minister Shinzo Abe, speaking to reporters in Tokyo after the launch, said the North Korea missile appeared to have passed over Japan’s airspace and that the government was urgently collecting intelligence on the incident and doing everything to ensure the safety of its citizens.

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World’s First Diamond Futures Exchange in India has Started Trading

World’s first diamond futures exchange began trading in India on Monday, with the goal of providing producers a tool to better hedge price risks.

The Indian Commodity Exchange Limited (ICEX), which is backed by companies including Reliance Capital and MMTC, will start trading in 1 carat/100 cent contracts, to later add 50 cent and 30 cent contracts, according to a statement issued by ICEX.

 

About 90% of the global rough diamond supply is cut and polished in India, with the sector employing around 800,000 people.

Most of the rough gems come from mines operated by De Beers, the world’s top diamond producer by value, which owns a grading facility in the country since 2015.

Diamond sellers will have to be certified by International Institute of Diamond Grading and Research and will get credit in electronic form equivalent to the carat deposited.

ICEX kicked off activities with 20 well-known members, including Rosy Blue and Kiran Gems Pvt. The exchange expects about 45 sightholders of De Beers to transact on the online platform, it said.

India is the third-largest diamond jewellery market behind the US and China, accounting for about 8% of global demand.

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Asian Stocks Fluctuate after Fed Failed to Provide Clues on Monetary Policy

Asian stocks fluctuated after Federal Reserve failed to provide clues on monetary-policy tightening. Benchmarks in Tokyo swung between gains and losses, while they dropped in Seoul and Sydney with S&P 500 Index futures. 

Gasoline futures jumped as the wider impact of the storm that shut more than 10 percent of U.S. fuel-making capacity was becoming more evident. The euro traded near the highest since 2015 after European Central Bank President Mario Draghi refrained from talking down the common currency at Jackson Hole.

 

With the much anticipated central bank meeting now behind them, investors this week will be eager for signs of constructive progress in U.S. politics after comments on Friday from Gary Cohn, director of the National Economic Council, cut through much of the gloom that had been generated by recent White House scuffles. 

Treasury traders face a week headlined by Tuesday’s auction of bills that mature Sept. 29, the deadline Treasury Secretary Steven Mnuchin has called critical for raising the debt ceiling. They will then look forward to inflation and payrolls data that will be key for determining the Fed’s next moves. 

Federal Reserve Bank of Cleveland President Loretta Mester urged her colleagues to look past recent weak inflation data and to stick to their gradual pace of lifting interest rates.

Also at the Jackson Hole symposium on Friday, Bank of Japan Governor Haruhiko Kuroda said the recent pace of growth in the world’s third-largest economy is probably unsustainable and pledged to continue with very accommodative monetary policy “for some time” because the BOJ is far from its inflation target.

 

Japan reports jobs data on Tuesday and retail sales figures on Wednesday. Hong Kong reports on retail on Tuesday, while Australia is due to publish data on Wednesday detailing construction work done.

The main moves in markets, Japan’s Topix index was little changed as of 10:31 a.m. in Tokyo, while South Korea’s Kospi index fell 0.4 percent. Australia’s S&P/ASX 500 Index declined 0.7 percent. The Hang Seng Index in Hong Kong opened up 0.3 percent and the Shanghai Composite Index was trading 0.6 percent higher.

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OZ Minerals to Build a Copper Mine in Australia

OZ Minerals said on Thursday it would begin construction of its Carrapateena copper mine in Australia, the country’s largest undeveloped copper project, which it estimated would cost $916 million.

Copper is seen as one of the strongest growth commodities given its broad use in everything from plumbing and construction to appliances and electronics.

The world’s biggest mining companies, led by BHP Billiton and Rio Tinto, are actively looking to increase their exposure to copper.

OZ Minerals said Carrapateena, located about 160 kms from the Indian Ocean in South Australia state, would start producing in the fourth quarter of 2019, and yield an average of 65,000 tonnes of copper and 67,000 ounces of gold a year over 20 years.

“Carrapateena will be a robust, cash generating asset with expansion potential that sets OZ Minerals up for further growth,” OZ Minerals Chairman Rebecca McGrath said in a statement.

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European Stocks Close Higher as Investors Awaited Monetary Policy Meeting

Europeans stocks closed higher on Thursday as investors awaited comments on monetary policy from the Jackson Hole meeting. The pan-European Stoxx 600 ended the day up 0.3 percent, with all major bourses in positive territory. Markets in the U.S., meanwhile, turned negative ahead of central bank policy announcements.

Construction and material stocks were one of the better performing sectors Thursday after CRH sold its U.S. business for $2.63 billion in cash to Beacon Roofing. CRH shares closed the day up 3.8 percent. However, household goods stocks outperformed their peers as investors bet on cyclicals. Hugo Boss ended 2.4 percent higher, while BAT was up 2.3 percent and Persimmon was 1.9 percent higher.

 

Provident ended the day at the top of the European benchmark, up 13 percent, after suffering losses of more than 66 percent earlier in the week on the news of its chief executive Peter Crook’s departure. Sunrise, the Swiss telecom firm, was also up by more than 7 percent after reporting strong second-quarter results.

Retail stocks closed in negative territory after a difficult morning of trade. Dixons Carphone remained at the bottom of the European benchmark, down more than 23 percent, after lowering its full-year profit on tougher market conditions. The firm forecast its headline pretax profit for the current year to come between £360 million and £440 million ($460-562 million) - lower than the £495 million. Meanwhile, data from the Confederation of the British Industry showed U.K. retail sales declining in the year to August.

European Central Bank President Mario Draghi, who is set to address the group on Friday, gave no indication on the future steps of the central bank in a speech in Germany on Wednesday. In terms of data, in the U.K., private consumption growth eased further than expected in the second quarter of this year. Nonetheless, the Office for National Statistics confirmed GDP at 0.3 percent for the second quarter of 2017.

In France, business sentiment hit a 10-year high in August, the country’s statistic office said Thursday. Industrial morale increased to 111 points the highest figure seen since before the financial crisis.

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Nickel Prices Surged to an Eight Month High

Nickel prices surged to an eight-month high overnight on expectations of strong demand from China, supply concerns and declining stockpiles.

Zinc touched its highest since August 2007, though new trading restrictions in China dampened gains, and aluminium rose to near three-year highs on speculation of Chinese capacity cuts.

 

Price gains across most industrial metals, however, slowed after rallies driven by a surge of speculative investment. “The buying is tiring,” said a trader in London.

Three-month nickel on the London Metal Exchange closed up 2.2 per cent at $US11,660 a tonne after touching $US11,690, the highest since December 7. The stainless steel ingredient has been supported by rising stainless output in China and concerns over supplies from top ore exporter the Philippines.

Benchmark aluminium closed 1.1 per cent higher at $US2097 a tonne, close to a three-year high of $US2112 reached last Thursday on expectations of capacity cuts in China.

Euro zone factories recorded their best month of growth in six-and-a-half years in August, while Japanese manufacturing expanded at the fastest pace in three months. Benchmark copper finished 0.2 per cent lower at $US6565, lead ended down 1.6 per cent at $US2377 and tin closed up 0.9 per cent up at $US20,525.

Output recovered at Escondida in Chile, the world’s largest copper mine, while Freeport McMoRan Inc looked set to agree with Indonesia on continuing to operate its giant copper mine in Papua.

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Gold Edge Up as Focus Shifts to Central Banker Meeting

Gold prices edged up, supported by jitters over political uncertainty in the United States ahead of a major central banking conference this week. Spot gold was up 0.44 percent to $1,289.90 an ounce, after shedding 0.5 percent in the previous session. U.S. gold futures settled at $1,294.70 per ounce.

The precious metal kind of hanging in before this Jackson Hole meeting. It is in a wait-and-see mode but we should have a better idea of direction by the end of this week. There can be an argument made for a bearish view on gold as this stage. If the dollar were to come back due to short covering and given the rally in U.S. stocks, the dollar denominated and safe haven metal could fall out of favour.

 

Markets are turning their focus to a meeting of central bankers in Jackson Hole, Wyoming, later in the week where Federal Reserve Chair Janet Yellen and European Central Bank chief Mario Draghi are set to deliver speeches on the outlook for monetary policy and interest rates.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. Most of the people are now looking for hints from the Jackson Hole meeting between the central bankers.

 

The most important thing is economic fundamentals, central banks are going to have tightening measures in monetary policies to have normalization. So there is not much higher upward momentum for prices.

The dollar inched lower after U.S. President Donald Trump raised the prospect of a government shutdown as he tries to force through his plans to build the wall along the border with Mexico. Gold usually fairs well in times of geopolitical uncertainty, while stocks and the dollar generally retreat.

 

Among other precious metals, silver rose 0.38 percent to $17.03 an ounce, while platinum fell 0.13 percent to $973.25. Palladium declined 0.03 percent to $932.25.

 

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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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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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China Securities Regulator to Expand Access to Capital Markets