David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Biden 'Confident' on Reaching Debt Deal as GOP Bashes Japan Trip

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    President Joe Biden expressed confidence that negotiators would reach an agreement to avoid a catastrophic default, even as House Speaker Kevin McCarthy criticized his decision to travel to Japan for an international summit.

    “I’m confident that we’ll get the agreement on the budget and that America will not default,” Biden said Wednesday at the White House, shortly before departing to Hiroshima, Japan for a Group of Seven leaders summit.

    On Capitol Hill, McCarthy and other Republican lawmakers criticized Biden for his decision to travel, with the House speaker labeling the president “a big obstacle” to an agreement.

    “Mr. President, stop hiding, stop traveling,” McCarthy said.

    On Tuesday, Biden and congressional leaders agreed to a new narrower round of staff-level talks with hopes of reaching a bipartisan deal to avoid an unprecedented US default. The US president also announced he was canceling planned stops in Australia and Papua New Guinea, and would return to Washington by the beginning of next week for continued negotiations.

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    Automakers Speeding Platinum Substitution Push Market to Deficit

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    Automakers are accelerating the substitution of platinum for pricier palladium in catalytic converters,
    putting the market for the metal on track for a deficit for the first time in two years, according to Johnson Matthey Plc.

    Demand from automakers will exceed 3 million ounces for the first time since 2018 as platinum is increasingly preferred over palladium, which will continue to see its usage decline, the firm wrote in a report on Monday. Both precious metals are used to cut emissions from car exhausts.

    The car industry’s switch has taken years, but is finally having a sizeable impact on the fundamentals of platinum group metals. While palladium has traded at a premium to platinum since 2017, the gap has narrowed to near the smallest in more than four years.

    “Just as substitution benefits platinum, it disadvantages palladium,” said Rupen Raithatha, market research director at Johnson Matthey. “These are all incremental trends.”

    Investors are increasingly eyeing risks to platinum supplies from South Africa, the world’s top miner, as power blackouts threaten to cripple its output. So far, the country’s miners have limited the impact by idling processing plants, allowing mining to continue, though more severe outages could hit overall production, according to Johnson Matthey.

    The firm sees platinum in a small deficit of 128,000 ounces in 2023, following two years of large surpluses. That compares to the record shortfall forecast by the World Platinum Investment Council.
     

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    Scottish Mortgage Writes Down Private Company Holdings by 28%

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     “An important influence over the last year has been the closing of the IPO market,” Burns said in the statement. “We had fourteen companies go public in 2021 but as the IPO market closed in 2022 companies postponed their plans with no private holdings going public.” 

    During the year the fund invested £281 million into private companies for follow-on investments as well as two new investments in UPSIDE Foods and Climeworks, Burns said. Private holdings made up 28.6% of the portfolio at March 31.

    “We will continue to closely monitor the proportion of the company invested in private companies throughout the year recognising that the proportion can be volatile,” he added.

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    Brazil's New Fiscal Proposal Becomes Stricter in Congress

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    Brazilian lawmakers introduced changes to President Luiz Inacio Lula da Silva’s proposed spending rules to include automatic penalties in case the administration is unable to meet fiscal goals set in the bill.

    The government would be forced to reduce spending in case revenue comes in below its estimates, including delaying some payments, freezing the salary of public workers and halting the hiring of new ones, according to the text of the bill released on Tuesday by lawmaker Claudio Cajado, the bill’s rapporteur.

    “Party leaders’ reaction to the new text is very positive,” Cajado told reporters, adding that the plan is to take the bill to a floor vote on May 24. “We made room for different opinions and I hope there will be no more changes to the bill.”

    The new fiscal framework proposed by Finance Minister Fernando Haddad includes small but growing primary budget surpluses, which don’t take into account interest payments, in order to stabilize public debt. It’s part of government efforts to assuage investors worried about Brazil’s finances under Lula and to help the central bank lower interest rates, considered by the president as the main impediment to growth.

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    The Green Energy Transition Has a Chilean Copper Problem

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    Codelco’s production is down by about a fifth from only six years ago. After a double-digit-percentage drop in 2022, it’s expected to fall as much as 7% this year, to 1.35 million metric tons.

    Ore quality is deteriorating around the world as existing deposits are depleted and new ones are more difficult and costly to develop. “There’s no easy mining left—not in Chile nor the rest of the world,” said Sougarret at a shareholders meeting on May 2.

    Because Codelco is the world’s biggest copper supplier, its production wobbles have greater impact on a market where warehouse inventories are near their lowest levels in 18 years. The company’s travails also have tremendous impact on Chile’s economy: Copper accounts for more than half of the country’s exports and a significant share of the government’s income. President Gabriel Boric’s administration is budgeting a 40% drop in tax revenue from Codelco in 2023 at a time when it’s trying to boost social spending.

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    Zombie Cull Begins as Rate Hikes Take Toll

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    “One could characterize many of them as companies that have long needed to address their capital structures,” Damian Schaible, co-head of restructuring at law firm Davis Polk, said referring to the firms that filed in the last couple of days. “And there’s a bunch more on the horizon.”

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    Turkey Set for Runoff as Erdogan Falls Just Short of Victory

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    Turkey will hold a runoff election, with President Recep Tayyip Erdogan just failing to secure enough votes for a first-round victory.

    The 69-year-old, looking to extend his two decades in power, will face Kemal Kilicdaroglu, 74, in another vote on May 28 after doing better than polls predicted.

    Turkish stocks and bonds dropped, while the cost of insuring the government’s debt against a default spiked, as the results wrong-footed investors betting on a quick end to Erodogan’s unconventional economic policies, which include keeping interest rates well below the level of inflation.

    “This is a major disappointment to investors hoping for a win for opposition candidate Kilicdaroglu and the reversion to orthodox economic policy he promised,” said Hasnain Malik, a strategist at Tellimer in Dubai.

    Erdogan won 49.5% of the votes, while Kilicdaroglu secured just under 45%, with nearly all the ballots counted, Turkey’s High Election Board said on Monday. Another contender, Sinan Ogan, received 5.2% and was eliminated from the race.

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