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Brazil's All-Powerful Sugar Industry Sours the Country on EVs

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So far, Lula’s government is trying to support both technologies in a precarious balancing act. To appease the sugar industry, it will keep incentives for ethanol in place while simultaneously courting electric-car makers from China scouting new overseas factory sites with a compelling sales pitch: proximity to local battery-metal deposits, a growing domestic middle class and access to other Latin American markets with their own discretionary incomes to spend. It has worked, with at least two of China’s biggest carmakers — BYD Co. and Great Wall Motor Co. — planning to bring their vehicle production to the country’s shores. But even they plan to add some ethanol-fueled hybrids to their Brazilian lineups in what looks like a friendly — and savvy — gesture.

The discussion about electric cars is “very important for Brazil and for the world,” said Renan Filho, Brazil’s transport minister. But ethanol should be part of the conversation, too, he said. “Ethanol emits much less.”



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European Power Prices Fall Below Zero With Green Power Boom

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Electricity prices across Europe are set to fall below zero this weekend as the continent experiences a
surge of summer winds combined with the peak season for solar generation.

The sub-zero prices are a preview of what’s to come for European power markets if a flood of planned renewable power production isn’t met with a shift in demand. The hope is that eventually larger electric car fleets, smarter grids and better battery technology will catch up, but for now the mismatch is a headache for policy makers and companies. 

The risk is that a prolonged slump in prices could undermine the case for future investments, add costs for consumers and waste energy that could be used to cut demand for polluting alternatives.



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Richemont Drops on Signs Luxury Demand Is Weakening in US, China

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Richemont led luxury-goods stocks lower amid concerns that demand in the US and China, two of the biggest markets for the industry, is starting to sputter.

The Swiss owner of Cartier reported a surprise drop in revenue from the Americas in the three months through June.

While Richemont’s sales from Asia rose sharply, China reported slower-than-expected economic growth Monday, signaling signs of a possible pullback in consumer spending.

Richemont fell as much as 8.2%, the steepest intraday decline in more than year. LVMH dropped as much as 3.7% and Hermes fell as much as 4.2%.

The luxury-goods industry has been counting on a rebound in China after that country’s reopening would make up for weakness in the US market. Now Richemont and its peers are contending with the prospect that its two main growth motors are weakening.

Last week, Burberry Group Plc said the low end of the luxury market in the US softened.



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Turkey Agrees to Back Sweden's NATO Bid in Boost to Alliance

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The about-face comes after months of arduous negotiations over Turkey’s demands and on the eve of a critical two-day NATO summit where leaders including US President Joe Biden are eager to show a united front and signal to Vladimir Putin that his war on Ukraine has only strengthened the alliance.

NATO’s northern enlargement heralds one of the most prominent changes in the European security landscape after Russia’s aggression led to shifts including a ramp-up of defense spending in Germany and plans to bring back conscription in France. The early 2022 attack on Ukraine prompted an almost overnight change in public opposition to membership in NATO in Finland and Sweden.

“Completing Sweden’s accession to NATO is a historic step that benefits the security of all NATO allies at this critical time,” Stoltenberg said in Vilnius. “I will not give you the exact dates for that. But this is a clear commitment.”



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Goldman Analysts' Bearish China Bank View Draws Fresh Rebuke

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At stake was a report published by Goldman analysts including Shuo Yang last Tuesday, which highlighted margin risks and potential credit losses from banks’ exposure to local government debt. Yang, a former official at the China banking regulator, estimated that the “implied loss ratio of credit portfolio in debt investment book” could reach 25% for Merchants Bank, compared with 6% on average for lenders under its coverage.

A representative for Goldman declined to comment.

Shares of Merchants Bank have lost 12% in Hong Kong since Goldman cut its target price for the second time in three months with a neutral rating. The US bank now has one of the lowest target prices for the Chinese lender, according to data compiled by Bloomberg.

Merchants Bank argued that Goldman’s report is “illogical” in the way it calculates the potential losses, “lacks basic common sense,” and also overestimates its exposure to the local government financing vehicles. 



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Russia confirms BRICS will create a gold-backed currency

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"Talk of BRICS gold backed currency seems like an echo chamber. They do not have the gold to back a currency meaningfully," said Marc Chandler, managing director of Bannockburn Global Forex. "Have we not learned anything from the EMU experience of monetary union without fiscal union. Color me profoundly skeptical."

Many analysts have been speculating about a new global currency to challenge the U.S. dollar's role as the world's reserve currency. In late March, Former Goldman Sachs chief economist Jim O'Neill wrote in a paper published in the Global Policy Journal that the U.S. dollar's dominance is destabilizing global monetary policies. He added that a BRICS currency, challenging the U.S. dollar's dominance, would bring stability to the global economy.

"Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequences on the value of the dollar and the knock-on effects have been dramatic," he said.



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String of Global Heat Records Raises Alarm on Climate Change

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Heat this summer has already put millions of people around the world at risk. China is experiencing a scorching new heat wave less than two weeks after temperatures broke records in Beijing. Extreme temperatures in India last month have been linked to deaths in some of its poorest regions, while last week saw a dangerous heat dome cover Texas and northern Mexico.

The extreme weather may put more pressure on global leaders to curb greenhouse gas emissions generated from burning coal, oil and natural gas that trap heat in the atmosphere. The effects of climate change are being exacerbated by the arrival of the first El Niño in almost four years.

It’s likely the world will exceed 1.5C of warming “in the near term,” with efforts on climate action still insufficient, the United Nations’ Intergovernmental Panel on Climate Change said in March in a report summarizing five years of its own research. Global greenhouse gas emissions need to be cut to 60% below 2019 levels by 2035, according to the report, and climate-related risks are rising with every increment of warming.



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Pakistan Stocks Surge Most in 15 Years After IMF Loan Deal

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Financial support from multilateral lenders has boosted investor confidence — and returns — across troubled emerging and frontier markets in recent months, as funds were approved or disbursed for countries including Kenya, Tanzania, Senegal, Ukraine, Ghana and Ivory Coast. Other sovereigns in Africa, including Egypt and Mozambique, are expected to have their loans approved soon.

Inexpensive valuations are helping Pakistan’s market as well. Concerns related to the slew of negative headlines recently ranging from political turmoil to the risk of a debt default and sinking rupee had sent investors fleeing, with the KSE-100 Index becoming the world’s cheapest equity benchmark.

“Overall, the valuations are dirt-cheap with significant room for rebound,” said Ali Raza, head of international equities trading at BMA Capital, in Karachi. 

Pakistan dollar bonds advanced, with the paper due in 2024 gaining 17 cents in the past week. The 8.25% 2024 bond was indicated 3.1 cents higher to trade at 73.6 cents on the dollar on Monday, a level last seen about a year ago in August. The gains come after dollar bonds notched their best-ever week. Pakistan’s currency market opens Tuesday.



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Brazil Central Bank Signals Rate Cut as Lula Piles Pressure

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Latin America’s largest economy is showing mixed signals, with stronger agriculture production while other sectors grow modestly, policymakers wrote in their minutes. With more resilient activity, central bankers raised their estimates for neutral rates, which neither stimulate nor restrict the economy, to 4.5% from 4% previously. 

“They are opening the door slowly, cautiously, given the uncertainty that remains around inflation targets,” said Cristiano Oliveira, chief economist at Banco Pine. “If current 3% goals are kept unchanged, rate cuts will begin in August.” 

Investors are awaiting a decision on long-term inflation targets later this week, when Campos Neto, Haddad and Tebet will meet to set the goal for 2026. 

“Decisions that induce the reanchoring of expectations and that raise confidence in inflation targets would contribute to a faster and less costly disinflation process, allowing monetary easing,” central bankers wrote in their minutes. 

Lula’s first two picks for the bank’s board are likely to participate in August’s rate decision meeting, with former deputy Finance Minister Gabriel Galipolo seen as an advocate for lower borrowing costs.



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Prigozhin Says He Didn't Plan to Overthrow Russian Government

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Wagner mercenary group chief Yevgeny Prigozhin released an audio recording in which he discussed the past weekend’s events and said his group didn’t plan to overthrow the Russian government.

March toward Moscow showed serious security problems in the country, he said in a recording released on Telegram that didn’t specify from where he was speaking.

Prigozhin said he launched march because he wanted to preserve Wagner as a military group and not come under the command of the Defense Ministry.

Belarusian President Alexander Lukashenko helped find a negotiated solution to the weekend’s events, he confirms.

Belarusian President Alexander Lukashenko earlier brokered a deal in which Prigozhin ended the revolt in return for Putin letting him travel to Belarus and dropping criminal mutiny charges, the Kremlin earlier said.



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