The Financial Daily : 2020-09-05

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Saturday- Sunday, September 5- 6, 2020 Russia rate cut in question after Novichok claim hobbles ruble RUSSIA: Bank of Russia's easing run is looking more and more like a thing of the past. The poisoning of Russian opposition leader Alexey Navalny with a military- grade nerve agent has triggered the strongest threat of new sanctions against Russia in months, battering the nation's bonds and currency. While half the economists surveyed by Bloomberg forecast a quarter- point cut on Sept. 18, the weak ruble is adding to the reasons for Governor Elvira Nabiullina to keep interest rates on hold. "Geopolitic­al headlines, such as the Navalny case, as well as the likely increased turbulence ahead of U. S. elections, will continue to weigh on the ruble and local curren- cy bonds," said Jens Nystedt, a New York- based senior portfolio manager at Emso Asset. Only the Turkish lira has performed worse than the ruble in the past t hree months. Even before Germany called for a coordinate­d response to Navalny's poisoning, investors were on edge over the possibilit y of Russia i nterveni ng i n neighborin­g Belarus, where protesters have called for an end t o President Alexander Lukashenko's 26- year rule. And the prospect of a win for Joe Biden in the November presidenti­al vote could mean a tougher approach to Russia from Washington. "If the ruble stays at the current level of 75.5- 76 per dollar, then there is an increasing chance the central bank will remain on hold," Renaissanc­e Capital Chief Economist Sofya Donets said by phone from Moscow. Russia's bond and derivative­s markets have hinted at the end of easing for weeks. A rally in local debt, which took yields to a record low, ended in late May. Since the last central bank decision in July, when Nabiullina delivered her smallest cut in months, forward- rate agreements have shown rates almost unchanged over the coming three months. Beyond the geopolitic­s and weak ruble, there are positive arguments for a pause. Si nce the last meeting, the Economy Ministry has improved its 2020 outlook and Kremlin economic aide Maxim Oreshkin has said Russian business should recover without new state support. Gauges of manufactur­ing and services industries beat forecasts by a wide margin this week. Inflation, while still below target, is predicted to have continued accelerati­ng in August. The economic r ecovery, and accompanyi­ng rebound in oil prices since April, are a reminder that the nation's fundamenta­ls are strong. While t he ruble's drop on Wednesday was its biggest since the peak of the market rout this year, any easing in tensions, or internatio­nal penalties that ar e deemed mild, could spark a rebound. Polish coal demand expected to fall by seven million tonnes next year Dollar set for biggest weekly rise in two and a half months Hungary signs gas deal with Shell, its first in the West BUDAPEST: Hungary will buy 250 million cubic metres of liquefied natural gas per year for six years from Royal Dutch Shell Plc. via Croatia's LNG port in Krk, Foreign Minister Peter Szijjarto said in a Facebook post on Friday. "Hungary signed a long- term gas supply agreement for the first time with a Western company," Szijjarto wrote. "Hungary will secure 10% of its gas supply from the West, which is a huge step in Hungary's energy diversific­ation." Hungary has relied mostly on Russian gas and has never had a long- term supply agreement with any supplier other than Russia's Gazprom, which has worked to expand its footprint in Europe with several new pipelines. Hungary has for years said it was open to procure gas from any source, including Western ones, once a route opens up, and it has complained that neighbouri­ng countries were not up to speed in securing the necessary infrastruc­ture. With the Krk terminal scheduled to begin operations in the next few months, Hungary has secured a lot of its capacity. In the meantime, it has also agreed on a 6.2 billion cubic metre deal with Gazprom and said it wanted a flexible longterm agreement with the company. LONDON: The U. S. dollar consolidat­ed gains on Friday but was set for its biggest weekly rise in 2- 1/ 2 months as an overnight drop in high- flying U. S. technology stocks fuelled a bout of ri sk aversion i n gl obal markets. The dollar's bounce this week comes after weeks of losses which saw the greenback fall to a April 2018 low of 91.74 on Tuesday after the U. S. central bank overhauled its policy framework last week, which would allow it to keep rates lower for longer periods, a negative for the dollar. "The dollar's loss- making momentum has stopped a litt le bit and the recent ECB comments on the euro has also helped but the broader direction of monetary policy making will be a key factor going ahead," said Ulrich Leuchtmann, analyst at Commerzban­k. Against a basket of currencies = USD, the dollar was trading at 92.774 i n early London trading. On a weekly basis, it was up 0.6%, it s biggest weekly rise since mid- May. "Near- term, if this correction in big tech continues, it will impact overall risk and fuel further demand for the dollar," Mizuho strategist­s said in a note. The Nasdaq le d the pullback with a decline of almost 5% a day after it and t he S& P 500 posted r ecord clos i ng highs. It was the third- biggest one- day fall from a record close and t he big losses boosted demand for the greenback's safe- haven status.[. N] Data due later on Friday is expected to show U. S. non- farm payrolls grew by 1.4 million in August, which would be slower than t he 1.763 million jobs created in the previous month. There are si gns t he la bour market recovery from t he depths of t he pandemic is faltering, with financial support f r om t he government vi r t u al l y depleted. The dollar's downtrend will continue for at le ast another three months due to the outlook for t he Fed's monetary policy, a Reuters poll of analysts showed on Friday. The dollar's bounce clipped t he wings of the soaring euro EUR= EBS which briefly hit more than 2- year highs above $ 1.20 this week. It was trading broadly flat at $ 1.1845 on Friday. The Antipodean currencies initia lly fell slightly, tracking the broader loss of investor confidence as a sell- off in U. S. te ch shares hit Asian stocks and a closely- watched measure of market volatility hit a 10- week high. The Australian dollar AUD= D3 steadie d at $ 0.7277, supported after local retail sales accelerate­d i n July. WARSAW: Poland's demand for coal is expected to fall by around 7 million tonnes next year, or more than 10% of annual hard coal production, after a drop in demand for electricit­y, Deputy Minister of State Assets Artur Sobon said on Friday. Poland generates most of its electricit­y from burning coal, which has become costly due to rising prices of carbon emission permits. The industry has also struggled with falling demand for coal, which accelerate­d during the COVID- 19 lockdown because the country used less power. "The situation in coal mining is not easy ... We have a fall in electricit­y production and a fall in production of electricit­y from coal. We should expect that this is a sustained trend," Sobon said during a discussion panel on energy transforma­tion during the European Economic Congress i n Katowice, the heart of Poland's coal region. He said data provided by power stations showed that next year demand for coal would likely shrink by around 7 million tonnes. Speaking at the same panel, Tomasz Rogala, chief executive at Poland's biggest coal producer, state- run PGG, said the group had to adjust its output to the demand from Polish utilities, as it would not find new markets for its products. PGG produces around 30 million tonnes of coal a year, but its output is expected to drop this year due to falling demand and the COVID- 19 pandemic. The company's management prepared a restructur­ing plan, which assumed the closure of two of its coal mines, but the proposal was rejected by the trade unions in July. Since then, the government, PGG and unions have been working on a new restructur­ing scheme. "The biggest challenge today is to design this change in such a way that it is as acceptable as possible," Rogala said, adding that figures reflecting the market trends could not be ignored. Spaniards buy old, polluting cars amid recession and COVID fears Sterling to weaken by end- year before regaining lost ground Tanker with 2 million barrels oil catches fire off Sri Lanka MADRID/ GDANSK: Fearful of catching the coronaviru­s while also feeling the pinch from recession, Spaniards are increasing­ly shunning public transport and turning to cheap old cars, industry data shows, in a trend that risks more toxic emissions. Sales of vehicles older than 20 years jumped 31% year- onyear in July and August to nearly 44,000 cars, according to data from the Institute of Automotive Studies. The average price of those purchases was around 1,400 euros ($ 1,655.36), vehicle sales portal Sumauto said, with some cars going for as little as 500 euros. As sales for old cars jumped, sales of new units rose a modest 1.1% year- on- year in July and fell 10% in August. At the same time, public transport traffic plunged 40% during the summer compared with the same period last year, Sumauto added, quoting the associatio­n of public transporta­tion operators. With the economy set to shrink at least 9% in 2020 and unemployme­nt ticking up in August after a brief recovery in July, many Spaniards are looking to save money. But more use of old cars could be negative for the environmen­t and respirator­y health. "Old cars, even when they were new, contaminat­ed more as environmen­tal rules were much less strict 15 or 20 years ago," said Adrian Fernandez, a transport expert at Greenpeace Spain. After many years on the road these cars are now even more polluting, he added. "It's a step backwards on air quality. This means negative consequenc­es for respirator­y ailments, of which COVID- 19 is one." Spain has recorded 488,513 cases of the virus, more than any country in Western Europe, and is suffering a second wave. On Thursday the Health Ministry reported 3,607 new cases, down from a peak of around 10,000 last Friday. It also reported another 13 deaths, pushing total fatalities up to 29,234. LONDON: Sterling will lose some of its recent gains against a weaker dollar as year- end approaches, hur t by Brexit uncertaint­y and fears surroundin­g the coronaviru­s pandemic, a Reuters poll showed on Friday. The pound GBP= hit an eight- month high against the greenback on Tuesday of over $ 1.34 but has since drifted lower after Bank of England policymake­rs warned that Britain's economy could suffer more damage than anticipate­d. Britain has suffered the highest number of deaths from COVID- 19 in Europe and lockdown measures imposed to try to stop the virus spreading further meant the economy contracted a record 20.4% in the last quarter. The level of Britain's economic output would permanentl­y be about 1.5 percentage points lower than it would have been without t he pandemic, BoE Deputy Governor Dave Ramsden said on Wednesday and he warned the number could be higher. To support the economy, like many its global peers, the central bank has slashed borrowing costs to a record low and ramped up its bond purchases. On t he f li pside, t he U. S. Federal Reserve has signalled its willingnes­s to keep interest rates low for a prolonged period, weakening the dollar's outlook. So while according to the Aug. 28- Sept. 3 Reuters poll of more than 60 foreign exchange strategist­s, cable would be trading at $ 1.31 in a month compared to t he $ 1.33 i t was hovering near on Thursday it would be back at $ 1.34 in a year. That is higher than the $ 1.31 median forecast in an August poll but highlighti­ng the uncertaint­y the 12- month forecast range was wide, going from as low as $ 1.20 all the way up to $ 1.47. "The UK is under pressure from all sides - Brexit, COVID- 19 and structural capital outflows," noted strategist­s at Jyske Bank. "However, GBP remains undervalue­d, UK equities are heavily underweigh­ted, and our main scenario is ultimately a limited, 11th- hour trade agreement with the EU." Alongside trying to recover from the damage from the pandemic, Britain faces the added challenge of trying to agree a t rade deal with the European Union before a transition period following its departure from the bloc finishes at the end of this year. Successive Reuters polls have said a deal will be reached but the talks have been fractious and little progress has been made so at the end of November, a month before the transition period ends, sterling will be down at $ 1.30, the poll showed. SRI LANKA: An oil tanker loaded with two million barrels of Kuwati crude sailing toward India's Paradip refinery caught fire Thursday morning off Sri Lanka's coast, raising concerns about an oil spill. The fire in the engine room of New Diamond, a very large crude carrier, was caused by an explosion, said Sri Lanka Navy spokesman Indika de Silva. The fire spread to other parts of the vessel, according to Sri Lanka Navy. Parts of the blaze have since been doused, the Indian Coast Guard said in a Twitter post on Friday. A crack of about 2 meters has been seen 10 meters above the waterline in the rear of the tanker's port side, it added. Sri Lanka Navy deployed two vessels for rescue operations, Indian Coast Guard diverted three ships and an aircraft, while clean tanker Helen M was also pressed into service. The fire hasn't reached the cargo area, de Silva said on Friday. While, there have been no reports of large- scale oil l eakage, Sri Lankan authoritie­s are deploying equipment to prevent pollution. The area is south of a belt well known for whale sightings, and any oil spill could threaten marine life in the region. New Diamond was about 65 kilometers ( 40 miles) off the east coast of Sri Lanka when it caught fire, according to shiptracki­ng data compiled by Bloomberg. The cargo was loaded at Mina al Ahmadi on Aug. 23 and scheduled to arrive at Paradip on Sept. 5. The tanker has drifted closer and was positioned about 24 nautical miles from the Sri Lankan coast at 5: 30 a. m local time, said Dharshani Lahandapur­a, chairperso­n of Sri Lanka's Marine Environmen­t Protection Authority. "We are analyzing the situation. It will be huge disaster if the spill occurs." All but one of the 23 New Diamond crew, from Greece and the Philippine­s, have been rescued, while one person is missing, presumed dead, de Silva said. Daily opening & closing rates Metals, Energy, COTS/ FX and US Indices On Thursday, PMEX traded value of Metals, Energy, COTS/ FX and indices was recorded at PKR 9.732 billion and the number of lots traded was 13,144. Major business was contribute­d by Gold amounting to PKR 4.651 billion, followed by NSDQ 100 ( PKR 2.107 billion), Silver ( PKR 1.039 billion), Currencies through COTS ( PKR 639.993 million), Copper ( PKR 493.621 million), DJ ( PKR 217.896 million), Natural Gas ( PKR 167.027 million), Crude Oil ( PKR 155.691 million), Platinum ( PKR 131.671 million) and SP500 ( PKR 127.487 million). In agricultur­e commoditie­s 2 lots of Soybean value at PKR 16.010 million and 5 lots of Cotton amounting to PKR 2.674 million were traded. PMEX Index 5,066 Total Volume ( Lots): 13,144 Traded Value ( Rs): 9,732,030,249 Commodity Price Quotation Open Close Commodity Price Quotation Open Close GOLDEURJPY ( COTS) GOLDGBPJPY ( COTS) GOLDCHFJPY ( COTS) GOLDAUDJPY ( COTS) GOLDEURCAD ( COTS) GOLDEURAUD ( COTS) GOLDEURCHF ( COTS) GOLDGBPCHF ( COTS) GOLDAUDCAD ( COTS) DJ NSDQ100 SP500 JPYEQTY ICOTTON ICORN IWHEAT ISOYBEAN RED CHILI JPY ¥ JPY ¥ JPY ¥ JPY ¥ CAD$ AUD$ CHF CHF CAD$ Index Value Index Value Index Value Index Value US Cents per pound US Cents per bushel US Cents per bushel US Cents per bushel Rs Per Kg 125.868 141.762 116.596 77.914 1.5460 1.615 1.0800 1.216 0.9570 29086 12,411.50 3578.75 23510 64.82 358 557 960 273 125.847 140.996 116.736 77.224 1.5560 1.6300 1.0780 1.2080 0.9550 28316 11,784.75 3458.50 23080 64.23 353.75 552.75 963.50 273 WTI CRUDE OIL BRENT CRUDE OIL NATURAL GAS SILVER GOLD GOLD MTOLAGOLD TOLAGOLD PLATINUM COPPER PALLADIUM GOLDEURUSD ( COTS) GOLDGBPUSD ( COTS) GOLDUSDJPY ( COTS) GOLDAUDUSD ( COTS) GOLDUSDCAD ( COTS) GOLDUSDCHF ( COTS) GOLDEURGBP ( COTS) $ Per Barrel $ Per Barrel US $ Per mmbtu $ Per Ounce $ Per Ounce Rs Per 10 gms Rs Per Tola Rs Per Tola $ Per Ounce US $ per pound $ Per Ounce US$ US$ JPY ¥ US$ CAD$ CHF GBP 41.58 44.39 2.489 27.640 1,950.0 104,967 117,980 117,980 910.8 3.030 2,269.5 1.1850 1.3350 106.194 0.7340 1.3040 0.9110 0.8880 41.32 44.01 2.484 26.710 1,936.6 103,439 117,239 117,239 890.2 2.977 2,324.4 1.1850 1.3280 106.178 0.7270 1.3130 0.9100 0.8930 PRINTED AND DISTRIBUTE­D BY PRESSREADE­R PressReade­r. com + 1 604 278 4604 O R I G I N A L C O P Y . 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