2024-01-09 12:01
LONDON, Jan 9 (Reuters) - The British pound was softer against the dollar on Tuesday but wasn't far from a five-month high hit late last year on expectations that the Bank of England would cut interest rates later than the Federal Reserve. The pound was last down 0.25% against the dollar at $1.2718. It hit its highest level since August on Dec. 28 last year at $1.2825. "The ultimate test is whether the market is right in its assumption that the Bank of England cuts interest rates five times this year," said Bank of America senior G10 rates strategist Kamal Sharma. "The house view is no rate cuts this year but risks are for the easing cycle commencing in the second half of the year." Markets currently expect the BoE to begin cutting interest rates by the May meeting, while the Fed, in contrast, is expected to begin loosening policy as early as March as inflation is stickier in the UK. Consumer price inflation was at 3.9% in the UK in November, the highest in the G7 group of countries, although that is down from a peak of 11.1% in November 2022. A survey last week showed Britain's economy ended 2023 on a stronger footing than previously thought, the latest sign that the BoE's tightening cycle to date might not trigger a recession. A reading on UK gross domestic product (GDP) is due later in the week, which could provide further clues on how robust the economy is and by how much the BoE could loosen policy this year. Charu Chanana, Saxo head of FX strategy, said the hawkish stance of the BoE, and the European Central Bank, could be challenged if economic data weakens in the first quarter. "This could pressure the EUR and GBP, particularly if markets push forward the rate cut expectations for these central banks," Chanana said. The pound was down 0.1% to 85.99 pence per euro after earlier hitting a three-and-a-half-week high. https://www.reuters.com/markets/currencies/sterling-slips-remains-close-5-month-high-2024-01-09/
2024-01-09 11:59
Goldman Sachs, Macquarie among banks using CME lithium - sources Potential for lithium contracts' liquidity growth is huge -Citi Lithium market faces surplus in 2024-2027 - BMI LONDON/BEIJING, Jan 9 (Reuters) - A surge in hedging activity by the lithium industry and traders after the recent price slump has benefited CME Group (CME.O) which saw volumes on its lithium contract soar last year. Growing demand for lithium from the electric vehicle (EV)sector means increasing exposure to price volatility of the material used in the batteries that power these vehicles. The CME's lithium hydroxide contract is cash-settled, therefore easy to use as hedgers do not need to worry about taking delivery of unsuitable grades. Volumes for CME lithium, launched in 2021, climbed to 20,307 metric tons in 2023 from 468 tons in 2022. Open interest, the number of outstanding contracts held by the market, soared 34 times to 14,522 tons in 2023. Banks including Goldman Sachs and Macquarie are active users of CME lithium due to clients wanting to hedge price risk, according to sources familiar with the matter. Goldman Sachs (GS.N) and Macquarie (MQG.AX) declined to comment. "Small shifts in lithium supply and demand balance can have a significant impact on prices, creating risks that need to be managed," said Jin Hennig, CME global head of metals. Lithium prices have come under pressure over the past year due to electric vehicles sales lagging expectations as global economic growth slowed. Prices for lithium in the world's top consumer and producer China are down 85% from records in November 2022 when supplies started to ramp up and demand slowed. Benchmark Mineral Intelligence (BMI) expects large lithium surpluses from 2024 to 2027 before a deficit of nearly 400,000 tons of lithium carbonate equivalent appears in 2030. "Lithium hedging strategies are becoming increasingly important to traders and automaker procurement teams, given the (price) volatility ... over the last few years," said Daisy Jennings-Gray at BMI. Helping the CME's contract gain traction is the Guangzhou Futures Exchange's (GFEX) physically-settled lithium carbonate futures launched in July, which boosted arbitrage trading. Arbitrage trading refers to traders buying and selling similar contracts to benefit from price differences. GFEX's contract is for Chinese firms only, but overseas firms can trade it via local brokers or through a China-registered entities. "We see enormous potential for liquidity growth in exchange-traded lithium contracts underpinned by consumer desire to hedge price risks and producer demand to finance supply growth," Citi said in a November note. https://www.reuters.com/markets/commodities/cmes-lithium-contract-volumes-thrive-after-price-slump-2024-01-09/
2024-01-09 11:59
PARIS, Jan 9 (Reuters) - Sweden has reported an outbreak of the highly pathogenic H5N1 bird flu virus on a farm in the southern part of the country, the Paris-based World Organisation for Animal Health (WOAH) said on Tuesday, as the disease spreads in Europe. The virus killed 1,316 birds, with the rest of the 47,938-strong flock slaughtered, the WOAH said, citing a report from the Swedish authorities. https://www.reuters.com/world/europe/sweden-reports-bird-flu-outbreak-southern-part-country-woah-2024-01-09/
2024-01-09 11:46
KYIV, Jan 9 (Reuters) - Ukraine's power grid operator said on Tuesday severe winter weather left more than 1,000 towns and villages without electricity in nine regions and urged residents to conserve power as the energy system has been weakened by Russian strikes. Electricity consumption was at this week's highest levels as temperatures fell to about -15 °C in many parts of the country, grid operator Ukrenergo said. "The consumption level continues to grow due to the considerable drop in temperature across the country," it said on the Telegram messaging app, adding that electricity consumption in the morning was already 5.8% higher than the day before. "As of this morning due to bad weather - strong winds, ice power was cut off in 1,025 settlements." The weather caused significant damage to distribution networks with strong winds, frost, and a thick layer of ice on equipment, which delayed repair works, Ukrenergo said. Vitaliy Kim, governor of southern Mykolaiv region where 215 towns and villages have been cut off from electricity, said ice on electricity cables was over 5 cm thick. Ukrenergo said the power system was already working at maximum capacity and urged residents to save electricity as much as possible and avoid using several electrical appliances simultaneously to help the system cope. "Currently, electricity is enough to supply all commercial and household consumers. But a big increase in consumption creates an additional load on power plants, which are already operating at maximum, and they need to increase generation very quickly and considerably and that can lead to technological disruptions," Ukrenergo said. Ukraine had to import electricity from neighbouring Romania and Slovakia to be able to meet the demand, it said. Ukrenergo said that Ukranian thermal power plants were still recovering from last winter's massive Russian strikes and solar power plants could not work at full capacity due to dense clouds and bad weather. Last winter Russia targeted the Ukrainian power system with thousands of missiles and drones, causing frequent blackouts for millions of people. Thermal power stations accounted for about a third of all electricity produced in Ukraine before the war. Ukrenergo also reported more damage to electricity networks in Donetsk, Kharkiv, and Kherson regions which are near to the frontline and within the reach of artillery shelling. https://www.reuters.com/world/europe/more-than-1000-ukrainian-towns-lose-power-due-extreme-winter-weather-2024-01-09/
2024-01-09 11:11
NEW DELHI, Jan 9 (Reuters) - Two Indian state refiners are seeking to boost imports of Saudi crude oil after the kingdom cut the official selling price of its key export grade for February to the lowest in 27 months, company sources said. Indian Oil Corp (IOC.NS), the country's top refiner, and Bharat Petroleum Corp (BPCL.NS), are looking at lifting an additional 1 million barrels of oil each from Saudi Aramco (2222.SE) in February, the sources said. Saudi Aramco typically notifies Asian buyers of their monthly crude allocations by the 10th of every month. Indian oil companies and Saudi Aramco did not immediately respond to Reuters emails seeking comments. IOC is seeking more oil from Saudi Arabia and West Africa partly as it is facing problems in buying Russian light sweet crude Sokol because of challenges in payments, one of the sources said. India, the world's third-biggest oil importer and consumer, has been gorging on Russian crude, sold at a discount after western nations shunned purchases from Moscow. That led to Russia becoming top oil supplier to India, knocking Iraq and Saudi Arabia to second and third place, data obtained from trade sources showed. Washington last month sanctioned ships and vessel operators for the sale of Russian oil at above the $60-per barrel cap set by the Group of Seven nations and tightened rules, including heightened scrutiny by banks and service providers to ensure that cargoes do not breach the price cap. Following the sanctions, several tankers meant to deliver Sokol crude to India have been diverted in the past two months depressing India's Russian oil imports in December to an 11-month low. India's oil minister Hardeep Singh Puri recently said that the decline in India's import of Russian oil was due to unattractive prices and not payment issues. IOC used to receive 6-7 cargoes of Sokol oil every month under its annual deal with Rosneft (ROSN.MM). The refiner may ask for additional supplies under its term deals with West African producers Nigeria and Angola to make up for loss in Russian oil supply, the source said. https://www.reuters.com/markets/commodities/indian-refiners-set-ask-extra-saudi-oil-after-sharp-price-cut-2024-01-09/
2024-01-09 11:08
A look at the day ahead in U.S. and global markets from Mike Dolan Wall St stocks shook off their new year torpor with the best day in almost two months on Monday - as tech fizzed again and disinflation signals mounted even as Boeing's woes acted as a drag on the blue chip Dow Jones index. But sustaining the buzz looks tricky as investors face several big hurdles over the remainder of this week alone. And despite the valiant 1.4% rally on Monday, the S&P500 (.SPX) remains marginally negative for the first five trading days of the year - frequently a pointer to its full-year fortunes. Still acting as a drag, last month's rate cut euphoria seems absent from the bond market - with 10-year Treasury yields stuck above 4% and even the more dovish Federal Reserve officials pushing back against bets of rate cuts as soon as March. Futures markets are now not fully priced for a first quarter-point cut until May. What's more, some $110 billion of Treasury coupon sales kick off later on Tuesday with a $52 billion 3-year note auction - and 10- and 30-year paper comes up for grabs later in the week. Even though Congress appears to be making some progress on averting a government shutdown later this month, a recurring election year theme is likely to be how markets absorb new debt sales - with total Federal debt topping $34 trillion for the first time last week. U.S. Treasury Secretary Janet Yellen said on Monday she believes a top-line federal spending deal reached by congressional leaders over the weekend is consistent with last June's debt ceiling agreement but could not say whether a government shutdown could be avoided as current funding lapses. Better news for the Treasury market comes from Fed indications it will look at mapping out when it should slow the pace of its balance sheet rundown, or so-called quantitative tightening policy of shedding bonds from its accounts. And the disinflation picture continues to be encouraging both in the United States and abroad. U.S. households' inflation expectations over the short run fell to the lowest level in nearly three years last month, the New York Fed's survey showed on Monday. The big data point of the week is Thursday's release of U.S. consumer price updates - with annual core inflation expected to fall below 4% for the first time since May 2021. Core inflation in Japan's capital slowed for the second straight month in December, meantime, taking pressure off the Bank of Japan to rush into exiting ultra-loose monetary policy. And there were few signs of renewed price pressures in Europe either. German industrial production unexpectedly fell in November compared to the previous month - marking a sixth straight month of declines. Oil's retreat this week on Saudi crude price cuts help that disinflation picture - although prices stabilised on Tuesday amid supply concerns and tense geopolitics. Aside from the Middle East conflict, this weekend's Taiwan elections is another major concern amid China's political and military stance around the island. Taiwan's government issued an island-wide alert on Tuesday, saying a Chinese satellite had flown over its southern airspace - in what Taiwan's foreign minister described as part of a pattern of harassment days before a pivotal presidential vote. Despite Monday's rally on Wall St, China stocks continued to struggle today - eking out just a 0.2% gain despite a strong 1% surge in Japan's Nikkei (.N225) European stocks and Wall St futures were back in the red. The dollar (.DXY) was a touch higher in line with Treasury yields. In stock sectors, tech led the charge on Monday. Shares of Nvidia (NVDA.O) surged to a record high close after the world's most valuable chipmaker unveiled new desktop graphics processors taking advantage of artificial intelligence. The fourth-quarter earnings season looms, meantime. Shares in JPMorgan Chase (JPM.N), Wells Fargo (WFC.N), Bank of America (BAC.N) and Citigroup (C.N) slipped ahead of updates on Friday. Key diary items that may provide direction to U.S. markets later on Tuesday: * U.S. Dec NFIB small business survey, Nov international trade * Federal Reserve Vice Chair for Supervision Michael Barr speaks; Bank of France chief François Villeroy de Galhau speaks * U.S. Treasury auctions $52 billion of 3-year notes * US Secretary of State Antony Blinken in Israel to meet Israeli government leaders as part of Middle East tour https://www.reuters.com/markets/us/global-markets-view-usa-2024-01-09/
