2024-03-21 05:55

SINGAPORE, March 21 (Reuters) - Innovation and policy changes are urgently required to tackle climate-warming emissions from the cement sector, with an infrastructure boom in developing countries set to drive up production for decades, a research group said on Thursday. Cement is considered a "hard to abate" sector, generating huge volumes of carbon dioxide not only from the coal used to heat kilns, but also during the conversion of limestone into clinker, a key part of the production process. If the cement industry were a country, it would be the fourth biggest source of CO2 behind China, the United States and India, but there are still no mature and cost-competitive solutions for decarbonising production, said the Rhodium Group , opens new tab, a U.S.-based think tank. The sector is responsible for around 6% of global CO2, and while emissions could peak this decade as demand from China and elsewhere falls, there is still a risk of further increases of up to 17% by 2050 as emerging countries embark on a building spree, the group said. "The projected long-term rise in demand for cement and other basic materials in developing countries really highlights the need to make clean, efficient technologies readily available outside the OECD and China," said Emma Rutkowski, analyst with the Rhodium Group and lead author of the report. Some progress has been made through efficiency gains, substituting coal with biomass and waste fuels and by tweaking traditional production processes, but they are unlikely to deliver the deep cuts required, she said. Other technologies are under development in the sector, including carbon capture, hydrogen and electric kilns. Some initiatives are also substituting limestone with mine slag, tailings or clay to make less carbon-intensive building materials. The dramatic shift in production towards regions such as Africa could allow new production methods to be deployed from the beginning, rather than retrofitting old and inefficient plants. But widespread adoption will require significant investment and policy support, said Rutkowski. "Successful decarbonisation will likely rely on both pushing for solutions available now, as well as continuing to innovate and test new technologies so we can continue making progress in the future," she said. Ian Riley, chief executive of the World Cement Association, told Reuters in February that getting the industry to "zero emissions" would take a long time, with technologies like carbon capture "not fully developed". New low-carbon building materials were also "a long way from being competitive". But there are gains that could be made immediately, including the use of alternative fuels, he said. "Cement has a path to significant improvement that is already reasonably clear. If we place too much emphasis on (carbon capture) then our progress in the interim will be less than it might have been," he said. The Reuters Daily Briefing newsletter provides all the news you need to start your day. Sign up here. https://www.reuters.com/sustainability/climate-energy/developing-nations-booming-cement-demand-may-drive-up-co2-emissions-research-2024-03-21/

2024-03-21 05:38

PERTH, March 21 (Reuters) - China boosted inventories of crude oil in the first two months of the year, a move that gives refiners options to trim imports in coming months if they deem prices have risen too high. The addition of crude to stockpiles also undermines the market narrative that oil demand in the world's biggest crude importer is strengthening as it shows that refiners didn't process all the oil available to them. A total of 570,000 barrels per day (bpd) were added to strategic or commercial inventories in the January-February period, according to calculations based on official data. China doesn't disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of crude processed from the total of crude available from imports and domestic output. The total volume of crude available in the first two months was 15.02 million bpd, consisting of imports of 10.74 million bpd and domestic production of 4.27 million bpd. Refineries processed 14.45 million bpd in the January-February period, leaving a surplus of 570,000 bpd available for commercial or strategic storages. China combines January and February data into one release to smooth out the impact of the Lunar New Year holidays, which can fall in either of the first two months or across both. The prevailing market narrative is that China's crude oil imports had a strong start to 2024, with the evidence being the 5.1% increase in arrivals in the first two months compared to the same period a year earlier. However, on a barrels per day basis, the increase was only 3.3%, given the extra day this year in February for the quadrennial leap year. In volume terms, China imported about 340,000 bpd more in the first two months of 2024 over the same period last year. However, if 570,000 bpd were added to storage, this undermines the view that China's fuel demand was strong. PRICE IMPACT It's also important to look at what was happening with crude oil prices at the time when cargoes that landed in January and February were being arranged. Most of the cargoes that arrived in the first two months of the year would have been secured around two months prior, at a time when oil prices had been retreating. Global benchmark Brent futures dropped to a six-month of $72.29 a barrel on Dec 13, having been trending lower since hitting the 2023 high of $97.69 on Sept. 29. This means Chinese refiners were buying oil for January and February delivery at a time when prices had been falling, which would have encouraged them to buy more than they anticipated refining to add to their stockpiles buffer. Since the December low, crude prices have been climbing amid geopolitical tensions in the Middle East and ongoing moves by the OPEC+ group of exporters to curb output. Brent reached $87.70 a barrel on March 19, the highest in nearly five months and it has been above $80 since Feb. 9. The rise in Brent prices is unlikely to show up in China's March imports, which are forecast to be a relatively strong 11.22 million bpd by LSEG Oil Research. But the higher prices, coupled with the inventory builds of the first two months, may encourage China's refiners to trim imports from the second quarter onwards. The recent pattern of China's crude imports and stockpiling suggest that refiners have become more price-sensitive buyers and more willing to dip into or add to inventories in an effort to smooth out the impact of any move higher in oil prices. The irony is that both OPEC+ and the Chinese refiners would likely claim that they want to see some level of price stability and a well-supplied crude oil market. Where they are likely to differ is what the base price level should be, with OPEC+ probably thinking a figure around $90 a barrel, while China would likely believe a price around $75 is more appropriate currently. Until that gap narrows, it's likely that the current market dynamic of China stocking up crude when prices retreat, and then trimming imports when prices rise, will continue. The opinions expressed here are those of the author, a columnist for Reuters. Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here. https://www.reuters.com/markets/commodities/china-boosts-crude-oil-stockpiling-higher-prices-may-see-import-pullback-russell-2024-03-21/

2024-03-21 05:35

A look at the day ahead in European and global markets from Tom Westbrook Central bank meetings in Sydney, Washington and Tokyo concluded this week with, respectively, few surprises, little changed and a total but expected revolution in policy. Next up are Norges Bank, the Bank of England and the Swiss National Bank, of which the latter is perhaps the most likely purveyor of surprise given the strength of the franc . On the sidelines of the World Economic Forum in Davos, SNB chief Thomas Jordan told the Swiss press that the franc's appreciation was posing challenges for exporters. Analysis from the St Louis Fed , opens new tab shows the franc's broad effective exchange rate is the highest in at least 30 years. Markets price about a one-third chance of a rate cut, meaning it would likely trigger a noteworthy reaction if it happened. In Britain, inflation slowed in February and undershot forecasts, including those from the BoE. That might be enough of a signal that things are heading in the right direction to settle the two hawks who voted for a hike last month. Meanwhile investors were cheering the Fed's decision to stick with projections for three rate cuts this year. Rates were held steady, as expected, though price pressures persist. Wall Street stock indexes strode to record highs, gold prices spiked to a record in early Asia trade and equity benchmarks in Tokyo and Taipei made record peaks. The yen bounced and blowout job numbers in Australia rallied the Aussie . Beneath the hood of the Fed's projections, National Australia Bank's Taylor Nugent noted long-term rate expectations are creeping higher. The median long-term rate projection nudged from 2.5% to 2.6%. But there are now seven policymakers with a long-run projection of 3% or above, up from four in December. Turkey's central bank also holds a policy meeting on Thursday. It is expected to keep rates steady ... at 45%. Key developments that could influence markets on Thursday: Policy: Norges Bank, BoE and SNB meetings Earnings: BMW Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here. https://www.reuters.com/markets/global-markets-view-europe-2024-03-21/

2024-03-21 05:10

Gold hits all-time high of $2,222.39 per ounce Dollar slips to 1-week low after Fed verdict Fed stands pat on rates and view on 2024 cuts March 21 (Reuters) - Gold prices on Thursday hit record highs for the fifth time this month after the U.S. Federal Reserve signalled it would press ahead with three rate cuts in 2024 despite elevated inflation. Spot gold was up 1.1% at $2,209.65 per ounce at 1035 GMT after hitting an all-time high of $2,222.39 earlier in the session. U.S. gold futures soared 2.4% to $2,212.40. "The rally was started by yesterday's Federal Reserve comments, basically confirming their intention to eventually start cutting U.S. interest rates," said Julius Baer analyst Carsten Menke. "The mood in the gold futures market is very bullish. So your hedge funds or any other short-term traders or trend followers are positioned for higher prices, and I think this is the segment that is in the driving seat while the physical gold market is rather soft." Despite recent high inflation readings, Fed chair Jerome Powell said the U.S. central bank is still likely to reduce interest rates by three-quarters of a percentage point by the end of 2024, but that it also depends on further economic data. Fed funds futures traders are now pricing in a 74% probability that the Fed will begin cutting rates in June, up from 60% before the rate decision, according to the CME Group's FedWatch Tool. The dollar slipped to a one-week low against its rivals, while benchmark U.S. 10-year Treasury yields also dipped. Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making greenback-priced bullion more appealing for other currency holders. Spot gold may retest resistance at $2,222 per ounce, a break above which could lead to a gain into the $2,228-$2,234 range, according to Reuters' technical analyst Wang Tao. Spot silver fell 0.4% to $25.51 per ounce, platinum rose 0.6% to $912.10 and palladium dropped 0.9% to $1,012.22. Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here. https://www.reuters.com/markets/commodities/gold-sprints-record-high-fed-sticks-2024-rate-cut-view-2024-03-21/

2024-03-21 05:03

May 24 (Reuters) - The U.S. Securities and Exchange Commission adopted a rule in February 2023 to shorten the settlement cycle for securities transactions from two business days after the trade to one, beginning on Tuesday. Dubbed T+1, the move, which spans equities and corporate bonds, is expected by regulators and market participants to bring several benefits such as a reduction in counterparty risk and an increase in capital and margin efficiencies. Participants in much of the rest of the world are still settling on T+2. Participants in the U.S. securities market will need to follow the new standard to settle trades the next business day after the trade. Settling trades more quickly will lower credit, liquidity and market risks as the current two-day practice means broker dealers must tie up a lot of capital, especially during times of volatility, to ensure they can clear and settle their clients' transactions, regulators and market participants say. Here are some facts about the move to T+1 and how other markets are responding. US, CANADA AND MEXICO The U.S. is ensuring faster settlement of securities transactions prompted by the 2021 events surrounding the "meme stock" GameStop. The U.S. stepped up faster settlement in 2017, moving from a three-business-day settlement cycle to the existing standard almost four years after the euro zone did so. While compliance with T+1 takes effect in the U.S. on May 28, some countries such as Canada New Tab, opens new tab and Mexico New Tab, opens new tab will begin settling trades in one business day effective May 27. EUROPEAN UNION The European Union is also looking to follow the United States' move to T+1 but the timing has not been announced. The European Securities and Markets Authority is exploring the best path forward and has been consulting with New Tab, opens new tab its market participants to better understand the issues, costs and benefits of making the move. It aims to publish a final report later this year. Financial services experts believe the EU's move to next day settlement will be more complex because of the fragmented nature of stock trading in the region. Trade body European Fund and Asset Management Association has warned about the potential for market disruption while the continent adapts to U.S. T+1, flagging FX risk as a major concern New Tab, opens new tab. UK Britain is also looking to speed up settlement in its markets with expectations that a switch could happen between 2025 and 2026. Authorities in the UK set up a task force early last year to look at the benefits and challenges of potentially having next day settlement. An interim report is expected in the first half of this year, with a final one to arrive by end-2024. ASIA Trades in India are currently being settled one day after the trade, after the country's Securities and Exchange Board completed its phased-in transition in January 2023. Now India has set its sights on same-day settlement. It joins China where stock settlement is T+0 and T+1 for cash settlement. Most other markets in the region remain on T+2, assessing and waiting to see how markets that have already made the leap get on. Sign up here. https://www.reuters.com/markets/us/us-moves-towards-faster-stock-settlement-where-are-other-countries-2024-03-21/

2024-03-21 05:02

NEW YORK/LONDON, March 21 (Reuters) - The looming introduction of a shorter settlement cycle for U.S. securities is causing headaches for international fund managers, who face staffing problems, the prospect of holding more cash and raised foreign exchange risk as they prepare to comply. Introduced to lessen the risks of unsettled trades after periods of volatility, the coming change will see securities transactions settle one business day after the trade, or T+1, rather than two. The move, which came after the 2021 plunge in GameStop (GME.N) , opens new tab, is due to take place on May 28 , opens new tab in the U.S. However, it places the country at odds with much of the rest of the world where the typical cycle is T+2. As a result, market participants have been rethinking their processes to avoid transaction failures and higher trading expenses, according to custodians, traders and consultants. "(The transition) is not going to be without its costs," said Ben Springett, head of European electronic and program trading at Jefferies. "You'd ... expect there to be a requirement for a greater amount of cash balances in funds to bridge any potential gaps, and cash mismatches," said Springett. "So, that will come at a detriment to fund performance." The Depository Trust & Clearing Corporation (DTCC) , opens new tab, which provides securities clearing and settlement in U.S. financial markets, has been working to prepare with industry bodies including the Investment Company Institute (ICI). Tom Price, managing director and head of technology, operations and business continuity at Securities Industry and Financial Markets Association said that while T+1 was a "complicated and complex initiative" there were "risk reduction and operational benefits" for the industry. RJ Rondini, director of securities operations at ICI said that for the U.S. securities market, "the overall reduction in capital far outweighs the actual absolute value of the increases in risk in all of these other areas." DTCC declined comment. A paper it published on Feb. 28 said market participants must accelerate their preparations , opens new tab. TRADING HOURS The shortened cycle could cause operational challenges such as potential dislocation in FX trades. Foreign investors have to buy dollars to fund U.S. securities transactions. Nathan Vurgest, director of trading at Record Financial Group said he is looking at whether FX costs would increase if more trades are done in the late U.S. period should liquidity move away from the London morning. The European Funds and Asset Management Association (EFAMA) said earlier this month that faster U.S. settlement posed a "systemic risk" to Europe, noting the very limited window that non-U.S. market participants will have to access to CLS, the world's largest multi-currency settlement system for FX trades. According to EFAMA, asset managers trading up to the U.S. close have just two hours to confirm those trades and submit them to CLS. EFAMA members polled said they expected to have to settle $50-70 billion of daily FX trades outside the safety of CLS, leading to calls to extend the CLS cut-off time. Jefferies' Springett said some non-U.S. participants were weighing contingencies including setting up outposts in the U.S. or working U.S. hours. Shortening the cycle could have other knock-on effects such as increasing demand for short-term financing. Typically, some investors must wait to receive cash from one market before they can buy securities in another, but those who sell international securities to buy into the U.S. may find themselves with a cash shortfall for a day. This could increase the use of the overnight repurchase agreements but shift credit risk - the danger that a counterparty cannot pay its obligations on time and in full - onto banks in that space, said Adam Watson, head of commercial product for custody services at BNY Mellon. "That is going to force portfolio managers to start thinking about 'do I go to the overnight repo market, or ... are my custodians able to extend me the credit overnight?'" said Watson. Custodians, safekeepers of client assets, typically provide clients with short-term credit in the form of intraday liquidity, and on an exceptional basis overnight funding, to help settle across different systems and time zones. But this type of lending is usually limited to the processing of clients' securities or payment transactions and is not generally committed, and is therefore not a guaranteed extension of credit, Watson said. KNOCK-ON EFFECTS There could be other consequences. Global index funds such as exchange-traded funds with a significant mix of assets having mismatched settlement could also face disruption, managers said. Steve Fenty, head of currency management at State Street Global Markets, said that when there is disharmony across a fund's settlement cycle and its underlying assets, managers might consider splitting up settlement cycles between funds that have a high proportion of U.S. assets underlying versus more diversified global funds. The change could also reduce liquidity in equities markets, said Josh Galper, managing principal at capital markets consultancy Finadium, as a shortened time frame in the U.S. could decrease the time to recall securities that were loaned to short sellers. "It is often overlooked how much liquidity short selling and securities lending delivers to equity markets," Galper said. "It's the type of thing that you know it when its gone." (This story has been refiled to fix broken hyperlink in paragraph 10) Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here. https://www.reuters.com/markets/us/looming-us-stock-changes-could-cause-headaches-international-funds-2024-03-21/