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Greek Central Bank Chief Warns Bailout Delay Risks Rerun of 2015

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  • Greek Central Bank Chief Warns Bailout Delay Risks Rerun of 2015

Greece must immediately reach an agreement with creditors on the release of bailout funds or risk another recession and even more austerity measures, the country’s central bank chief said.

“Any further delay in completion beyond this month will feed a new circle of uncertainty,” Bank of Greece Governor Yannis Stournaras told lawmakers in Athens on Monday, saying this could make reaching a deal harder. “Such a vicious cycle could return the economy to recession and a rerun of the negative developments that took place in the first half of 2015.”

Prime Minister Alexis Tsipras is heading toward a reprise of the antagonistic relationship with Greece’s creditors that previously almost knocked the nation out of the euro. Over the weekend, he lashed out again at the International Monetary Fund, one of the institutions monitoring Greece’s rescue, after auditors insisted on legislation that would trigger further budget cuts if fiscal targets are missed.

Greece “significantly” beat its 2016 fiscal target, the European Commission said Monday, achieving a budget surplus before interest of 2.3 percent of gross domestic product, compared with a goal of 0.5 percent. The surplus will widen to 3.7 percent in 2018, in line with targets, provided the government implements the terms of its 86 billion-euro ($91 billion) bailout program, the Commission said.

That’s at odds with the IMF’s view that the surplus won’t get above 1.5 percent without more cuts.

The EU projections underpin the government’s frustration with the IMF’s stance. European Economics Commissioner Pierre Moscovici will visit Athens on Wednesday for talks with Tsipras and Finance Minister Euclid Tsakalotos to find a way to break the impasse, he told reporters in Brussels Monday.

Germany and the Netherlands have threatened to end the Greek program if a deal isn’t reached that included the IMF. German Finance Minister Wolfgang Schaeuble’s vocal insistence gave the IMF leverage when lobbying for its demands, according to a European official involved in the discussions.

“Tsipras’ room for action is very limited,” said Patrick Esteruelas, head of research at Emso Asset Management. “He can either comply with the creditors’ latest requests and attempt to spin them positively, or call new elections in the knowledge that he will lose them and he will be out of government. He has no other options.”

The yield on Greece’s two-year notes rose 33 basis points to 9.2 percent at 4:02 p.m. on Monday after reaching a five-month high on Thursday. The benchmark Athens Stock Exchange rose 0.7 percent.

The German government’s goal is to complete the Greek bailout program with the IMF on board, Chancellor Angela Merkel’s spokesman, Steffen Seibert, said in Berlin on Monday.

EU officials set an informal Feb. 20 deadline for Greece to complete the review, before the start of a busy national election season that will make additional negotiations with Tsipras’s government politically difficult. Failure means Greece may not be able to repay about 6 billion euros of bonds it has coming due in July.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Gold

Gold Steadies After Initial Gains on Reports of Israel’s Strikes in Iran

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Gold, often viewed as a haven during times of geopolitical uncertainty, exhibited a characteristic surge in response to reports of Israel’s alleged strikes in Iran, only to stabilize later as tensions simmered.

The yellow metal’s initial rally came on the heels of escalating tensions in the Middle East, with concerns mounting over a potential wider conflict.

Spot gold soared as much as 1.6% in early trading as news circulated regarding Israel’s purported strikes on targets in Iran.

This surge, reaching a high of $2,400 a ton, reflected the nervousness pervading global markets amidst the saber-rattling between the two nations.

However, as the day progressed, media reports from both countries appeared to downplay the impact and severity of the alleged strikes, contributing to a moderation in gold’s gains.

Analysts noted that while the initial spike was fueled by fears of heightened conflict, subsequent assessments suggesting a less severe outcome helped calm investor nerves, leading to a stabilization in gold prices.

Traders had been bracing for a potential Israeli response following Iran’s missile and drone attack over the weekend, raising concerns about a retaliatory spiral between the two adversaries.

Reports of an explosion in Iran’s central city of Isfahan further added to the atmosphere of uncertainty, prompting flight suspensions and exacerbating market jitters.

In addition to geopolitical tensions, gold’s rally in recent months has been underpinned by other factors, including expectations of US interest rate cuts, sustained central bank buying, and robust consumer demand, particularly in China.

Despite the initial surge followed by stabilization, gold remains sensitive to developments in the Middle East and broader geopolitical dynamics.

Investors continue to monitor the situation closely for any signs of escalation or de-escalation, recognizing gold’s role as a traditional safe haven in times of uncertainty.

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Commodities

Global Cocoa Prices Surge to Record Levels, Processing Remains Steady

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Cocoa futures in New York have reached a historic pinnacle with the most-active contract hitting an all-time high of $11,578 a metric ton in early trading on Friday.

This surge comes amidst a backdrop of challenges in the cocoa industry, including supply chain disruptions, adverse weather conditions, and rising production costs.

Despite these hurdles, the pace of processing in chocolate factories has remained constant, providing a glimmer of hope for chocolate lovers worldwide.

Data released after market close on Thursday revealed that cocoa processing, known as “grinds,” was up in North America during the first quarter, appreciating by 4% compared to the same period last year.

Meanwhile, processing in Europe only saw a modest decline of about 2%, and Asia experienced a slight decrease.

These processing figures are particularly noteworthy given the current landscape of cocoa prices. Since the beginning of 2024, cocoa futures have more than doubled, reflecting the immense pressure on the cocoa market.

Yet, despite these soaring prices, chocolate manufacturers have managed to maintain their production levels, indicating resilience in the face of adversity.

The surge in cocoa prices can be attributed to a variety of factors, including supply shortages caused by adverse weather conditions in key cocoa-producing regions such as West Africa.

Also, rising demand for chocolate products, particularly premium and artisanal varieties, has contributed to the upward pressure on prices.

While the spike in cocoa prices presents challenges for chocolate manufacturers and consumers alike, industry experts remain cautiously optimistic about the resilience of the cocoa market.

Despite the record-breaking prices, the steady pace of cocoa processing suggests that chocolate lovers can still expect to indulge in their favorite treats, albeit at a higher cost.

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Crude Oil

Dangote Refinery Leverages Cheaper US Oil Imports to Boost Production

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The Dangote Petroleum Refinery is capitalizing on the availability of cheaper oil imports from the United States.

Recent reports indicate that the refinery with a capacity of 650,000 barrels per day has begun leveraging US-grade oil to power its operations in Nigeria.

According to insights from industry analysts, the refinery has commenced shipping various products, including jet fuel, gasoil, and naphtha, as it gradually ramps up its production capacity.

The utilization of US oil imports, particularly the WTI Midland grade, has provided Dangote Refinery with a cost-effective solution for its feedstock requirements.

Experts anticipate that the refinery’s gasoline-focused units, expected to come online in the summer months will further bolster its influence in the Atlantic Basin gasoline markets.

Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at Wood Mackenzie, noted that Dangote’s entry into the gasoline market is poised to reshape the West African gasoline supply dynamics.

Despite operating at approximately half its nameplate capacity, Dangote Refinery’s impact on regional fuel markets is already being felt. The refinery’s recent announcement of a reduction in diesel prices from N1,200/litre to N1,000/litre has generated excitement within Nigeria’s downstream oil sector.

This move is expected to positively affect various sectors of the economy and contribute to reducing the country’s high inflation rate.

Furthermore, the refinery’s utilization of US oil imports shows its commitment to exploring cost-effective solutions while striving to meet Nigeria’s domestic fuel demand. As the refinery continues to optimize its production processes, it is poised to play a pivotal role in Nigeria’s energy landscape and contribute to the country’s quest for self-sufficiency in refined petroleum products.

Moreover, the Nigerian government’s recent directive to compel oil producers to prioritize domestic refineries for crude supply aligns with Dangote Refinery’s objectives of reducing reliance on imported refined products.

With the flexibility to purchase crude using either the local currency or the US dollar, the refinery is well-positioned to capitalize on these policy reforms and further enhance its operational efficiency.

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