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Shares in precious metals producer Fresniro rose 4% in early trading, tracking the rise in gold prices.
This moved Fresnillo to the top of the FTSE 100 leaderboard.
News of China’s interest rate cuts also supported the mining sector, with Antofagasta (+1.9%) and Glencore (+1.4%) gaining.
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Gold hits record high
Gold prices continue to rise, hitting new highs early this morning.
Spot gold prices rose 0.4%, or about $10 per ounce, to $2,732.73 per ounce, representing an increase of more than 32% during 2024.
Analysts say the uncertainty surrounding the Middle East conflict and the U.S. presidential election is pushing investors toward safe-haven assets such as gold.
Expectations of further interest rate cuts by major central banks are also supporting the price of gold (which does not provide investors with yield).
Chart showing gold price Illustration: LSEG
Ricardo Evangelista, senior analyst at ActivTrades, explains that several factors are pushing up gold prices, including Donald Trump’s likely victory in next month’s presidential election.
“Geopolitical instability, slower economic growth in key regions, a shift in central bank policy toward lower interest rates, and more recently uncertainty surrounding the US presidential election have all contributed.”
“Rumors that Donald Trump may be on the verge of winning the election have further stimulated demand for gold, pushing it to historic highs. Faced with the possibility of a second term for the Republican candidate, markets are are focusing on gold as the ultimate safe haven asset.”
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In Germany, overall inflation fell more than expected.
German industrial producers reduced the prices of their products by 0.5% during September, meaning they were 1.4% lower than a year ago.
The main reason for the decline in PPI rates was the decline in energy prices. September 2024 was 6.6% lower than September 2023, including a 14.4% decline in mineral oil product prices.
The fall in producer prices could impact consumer prices in stores and give the European Central Bank confidence to cut interest rates again in December.
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Saudi Aramco CEO: Bullish on China
The head of oil giant Saudi Aramco has declared that the company is quite bullish on China and oil demand, especially given the Chinese government’s stimulus package.
Speaking on the sidelines of the Singapore International Energy Week conference, Aramco CEO Amin Nasser said:
“We see increased demand for jet fuel and naphtha, particularly in crude-to-chemical projects.”
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Iron ore futures prices are rising, partly due to China’s lower lending rates today.
The January iron ore contract, the most traded on China’s Dalian Commodity Exchange, rose 1.5% to trade at 770 yuan (83 pounds) per tonne.
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Introduction: China lowers lending rates with recent growth boost
good morning. Welcome to our regular coverage of business, financial markets and the global economy.
Chinese banks have slashed borrowing costs in the latest attempt to stimulate growth across the country’s economy.
The People’s Bank of China (People’s Bank of China) announced today that it will cut two benchmark lending rates by a quarter of 1%.
China’s one-year loan prime rate, the standard for lending to businesses and consumers, fell to 3.1% from 3.35%.
The five-year LPR, the mortgage benchmark, was cut from 3.85% to 3.6%.
The LPR rate is set by China’s major banking groups, and today’s cut shows it is passing on last month’s rate cut by the People’s Bank of China.
Becky Liu, head of China macro strategy at Standard Chartered, said:
“The significant rate cut confirms the People’s Bank of China’s stance to ease monetary policy more quickly and reflects the Politburo’s statement to cut interest rates more forcefully.”
🚨 China lowered its one-year loan prime rate from 3.35% to 3.10% and lowered its five-year LPR following the central bank’s late-September rate cut aimed at restoring economic growth and stabilizing the housing market. has been lowered from 3.85% to 3.60%. pic.twitter.com/8oKsFM9zKW
— BigBreakingWire (@BigBreakingWire) October 21, 2024
The Shenzhen SE Composite Index rose about 1.4% today as some stocks rebounded after the rate cut was announced.
Chinese stocks expand their gains as the People’s Bank lowers LPR
The Shanghai Composite rose 0.2% to around 3,270 on Monday, and the Shenzhen Composite rose 1.3% to 10,490 on Monday, extending gains from the previous session after the People’s Ban.
Learn more: https://t.co/NQnnRvWDqr pic.twitter.com/4nbD6Zlw7d
— Trade Economics (@tEconomics) October 21, 2024
Stephen Innes, Managing Partner at SPI Asset Management, said:
To be sure, the rate cut was not shocking, but markets are banking on the idea that the combined effect of all recent policy will at least stem the economic hemorrhage.
In reality, however, the Chinese Communist Party appears desperately trying to exploit the wealth effect of local stocks to keep morale high. This is a classic case of “hope floating around” until actual economic recovery begins, whenever that may be. Just look at what happened on Friday, when Xi Jinping dispatched Ban Gongsheng, the president of the People’s Bank of China, to give a pep talk to energize the markets. It worked.
Listed stocks on the mainland and Hong Kong soared, and the Chinese government was banking on this.
This is the latest in a series of attempts to stimulate the world’s second-largest economy after growth slowed to an 18-month low last week. China announced a wide range of measures last month, including lowering interest rates and increasing liquidity in the banking system.
The Chinese government is trying to strike a difficult balance as it attempts to revive growth while implementing structural reforms and managing financial stability risks.
China’s real estate sector remains depressed, with sales falling sharply this year despite efforts to boost sentiment.
And while lower lending rates may help to some extent, it will be difficult unless Chinese consumers feel confident enough to borrow with consumer confidence near an all-time low. Deaf….
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