- Trump’s Infrastructure Plan a Boon for Iron Ore, Cormann Says
U.S. President Donald Trump’s plan to upgrade the nation’s roads, ports and bridges will drive demand for steel and support iron ore prices, Australia’s Finance Minister Mathias Cormann said.
“The U.S. and the Trump administration has put out a very ambitious infrastructure investment program” and the steel will have to come from somewhere, Cormann said in an interview in Washington. “So global demand for steel, we believe, will continue to require significant exports of Australian iron ore.”
The price of iron ore has slumped almost 30 percent since Chinese Premier Li Keqiang last month signaled plans to cut his nation’s steel capacity. The world’s No. 2 economy is Australia’s biggest trading partner and iron ore exports account for more than 3 percent of Australia’s gross domestic product.
Iron ore has had a volatile 18 months. It slumped to a low of just over $38 in December 2015 then steadily rebounded until it reached a peak of just under $95 in February this year before retreating back to around $65.
Cormann played down fears that Trump would upend the global economy by unleashing a wave of punishing tariffs or erecting other barriers in an effort to shrink the nation’s trade deficit.
“It’s early days in terms of the U.S. administration,” he said. “Freer, more open trade helps to lift living standards. It helps domestic business to get access to markets around the world and it helps consumers get access to competitively priced, higher-quality products.”
New Growth Cycle
Global finance ministers and central bank governors gathered in Washington this week for the International Monetary Fund’s spring meetings where the mood was upbeat.
“Across the world the global economic outlook is improving,” Cormann said. “We hope that this is the beginning of a new growth cycle.”
For the domestic economy, Cormann played down fears that the nation’s two biggest cities are experiencing a property bubble. Strong demand is driving house price gains and the government is working on measures to boost supply, Cormann said.
“We are considering a range of options on how we can appropriately provide incentives and working with the states to provide the appropriate avenues to increase supply,” he said. Further details will be unveiled in the nation’s annual budget set to be announced in May.
Australia’s regulators have been ratcheting up curbs on mortgage lending amid growing concern about the risks posed by soaring house prices. Last week the Reserve Bank of Australia warned that one-third of mortgage holders have either no buffer or less than one month’s repayments. While record low interest rates, buoyant population growth and investor demand have pushed up prices, wage growth has failed to keep up, resulting in the income to price ratio becoming increasingly stretched.
The property boom is being led by Sydney, where average home values surged nearly 20 percent in the past 12 months, stoking concerns that home ownership is increasingly being pushed out of reach for younger Australians and those on moderate incomes. Treasurer Scott Morrison has signaled that next month’s budget will include measures to address housing affordability but indicated the government intends to move cautiously. “Dealing with housing affordability must involve a scalpel, not a chainsaw,” Morrison said in a recent speech.
Oil Posts 2% Gain for the Week Despite India Virus Surge
Oil prices steadied on Friday and were set for a weekly gain against the backdrop of optimism over a global economic recovery, though the COVID-19 crisis in India capped prices.
Brent crude futures settled 0.28% higher at $68.28 per barrel and U.S. West Texas Intermediate (WTI) crude advanced 0.29% to $64.90 per barrel.
Both Brent and WTI are on track for second consecutive weekly gains as easing restrictions on movement in the United States and Europe, recovering factory operations and coronavirus vaccinations pave the way for a revival in fuel demand.
In China, data showed export growth accelerated unexpectedly in April while a private survey pointed to strong expansion in service sector activity.
However, crude imports by the world’s biggest buyer fell 0.2% in April from a year earlier to 40.36 million tonnes, or 9.82 million barrels per day (bpd), the lowest since December.
In the United States, the world’s largest oil consumer, jobless claims have dropped, signalling the labour market recovery has entered a new phase as the economy recovers.
The recovery in oil demand, however, has been uneven as surging COVID-19 cases in India reduce fuel consumption in the world’s third-largest oil importer and consumer.
“Brent came within a whisker of breaking past $70 a barrel this week but failed at the final hurdle as demand uncertainty dragged on prices,” said Stephen Brennock at oil brokerage PVM.
The resurgence of COVID-19 in countries such as India, Japan and Thailand is hindering gasoline demand recovery, energy consultancy FGE said in a client note, though some of the lost demand has been offset by countries such as China, where recent Labour Day holiday travel surpassed 2019 levels.
“Gasoline demand in the U.S. and parts of Europe is faring relatively well,” FGE said.
“Further out, we could see demand pick up as lockdowns are eased and pent-up demand is released during the summer driving season.”
Lagos Commodities and Futures Exchange to Commence Gold Trading
With the admission of Dukia Gold’s diversified financial instruments backed by gold as the underlying asset, Lagos Commodities and Futures Exchange is set to commence gold trading.
According to Dukia Gold, the instruments will be in form of exchange-traded notes, commercial papers and other gold-backed securities, adding that it will enable the company to deepen the commodities market in Nigeria, increase capacity, generate foreign exchange for the Nigerian government to better diversify foreign reserves and create jobs across the metal production value chain.
Tunde Fagbemi, the Chairman, Dukia Gold, disclosed this while addressing journalists at Pre-Listing Media Interactive Session in Lagos on Thursday.
He said, “We are proud to be the first gold company whose products would be listed on the Lagos Futures and Commodities Exchange. The listing shall enable us facilitate our infrastructure development, expand capacity and create fungible products.
“This has potential to shore up Nigeria’s foreign reserve and create an alternative window for preservation of pension funds. A gold-backed security is a hedge against inflation and convenient preservation of capital.”
“As a global player, we comply with the practices and procedures of London Bullion Market Association and many other international bodies. Our refinery will also have multiplier effects on the development of rural areas anywhere it is located,” he added.
Mr Olusegun Akanji, the Divisional Head, Strategy and Business Solutions, Heritage Bank, said the lender had created a buying centre for verification of quality and quantity of gold and reference price to ensure price discovery in line with the global standard.
Oil Nears $70 as Easing Western Lockdowns Boost Summer Demand Outlook
Oil prices rose for a third day on Wednesday as easing of lockdowns in the United States and parts of Europe heralded a boost in fuel demand in summer season and offset concerns about the rise of COVID-19 infections in India and Japan.
Brent crude rose 93 cents, or 1.4%, to $69.81 a barrel at 1008 GMT. U.S. West Texas Intermediate (WTI) crude rose 85 cents, or 1.3%, to $66.54 a barrel.
Both contracts hit the highest level since mid-March in intra-day trade.
“A return to $70 oil is edging closer to becoming reality,” said Stephen Brennock of oil broker PVM.
“The jump in oil prices came amid expectations of strong demand as western economies reopen. Indeed, anticipation of a pick-up in fuel and energy usage in the United States and Europe over the summer months is running high,” he said.
Crude prices were also supported by a large fall in U.S. inventories.
The American Petroleum Institute (API) industry group reported crude stockpiles fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters. Gasoline stockpiles fell by 5.3 million barrels.
Traders are awaiting data from the U.S. Energy Information Administration due at 10:30 a.m. EDT (1430 GMT) on Wednesday to see if official data shows such a large fall.
“If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January,” Commonwealth Bank analyst Vivek Dhar said in a note.
The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe.
Euro zone business activity accelerated last month as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth.
“The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise,” Commerzbank analyst Eugen Weinberg said.
This has offset a drop in fuel demand in India, the world’s third-largest oil consumer, which is battling a surge in COVID-19 infections.
“However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment,” ING Economics analysts said of the situation in India.
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