Iron ore plunge sinks Aussie budget

Good morning. Here's what happened overnight and what you need to know today.

1.

Budget blues: The plunge in iron ore prices amid a longer and more severe downturn than expected in China’s steel industry is putting the Australian federal budget under pressure, Treasury said. The price of the steel-making material fell 7.5% last week to USD81.80 a tonne, its lowest since November 2022 and well below the USD83 a tonne assumed in the budget. That could lead to a $3 billion shortfall in tax receipts over the forward estimates, a Treasury analysis shows. The iron ore price is tied to the broader economic performance of major trading partner China, but the Asian country’s real GDP growth in the June quarter came at a lower-than-expected 0.7% or 4.7% over the year. “Softness in the Chinese economy and the recent fall in iron ore prices are another reminder that we are not immune from volatility and uncertainty in the global economy,” Treasurer Jim Chalmers said. (Capital Brief)

2.

Trader fired: ANZ has fired a trader following an investigation into workplace misconduct, The Australian Financial Review reported citing sources, marking the first time an employee has been terminated as a result of the external cultural review launched into the bank’s markets division earlier this year. Last month, the bank also suspended two traders as part of a different investigation into potential market manipulation currently under inquiry by ASIC. The sources said ANZ has frozen the bonus shares of at least two staff members of its markets team who were implicated in alleged inappropriate trades during a $14 billion government bond sale. The paper said ANZ's inaccurate data reporting to the AOFM, the government’s debt issuer, has resulted in the bank being sidelined from future government bond mandates. (AFR)

3.

Brazil X-it: Elon Musk’s media platform X announced the immediate closure of its operations in Brazil, citing "censorship orders" from a Supreme Court judge Alexandre de Moraes. According to X, De Moraes secretly threatened to arrest Rachel Nova Conceicao, an X legal representative, if they did not comply with orders to remove specific content. The company shared a document allegedly signed by De Moraes, which mentioned a daily fine of 20,000 reals ($5,478) and an arrest decree. In the post sharing the “secret order”, the company said that “to protect the safety of our staff, we have made the decision to close our operation in Brazil, effective immediately." The service remains accessible in the country. De Moraes had ordered X to block certain accounts, accusing them of spreading fake news and hate messages during the government of the far-right former president Jair Bolsonaro. (Capital Brief)(Reuters)

4.

Recession relief: Goldman Sachs has lowered the likelihood of a US recession within the next year from 25% to 20%, following upbeat retail sales and jobless claims data last year. The August jobs report, due September 6, could further reduce the recession probability to 15%, according to a client report by Goldman economists led by Jan Hatzius. The data underscored the resilience of the US economy and spurred the strongest stock market week of the year. Goldman now expects the Federal Reserve to cut interest rates by 25 basis points at its September meeting, with a potential 50 basis-point cut if job data underwhelms. The bet trim comes ahead of Fed Chair Jerome Powell’s Jackson Hole keynote address on Friday, where economists expect him to give stronger hints of future rate cuts. (Bloomberg)

5.

Nuclear danger: Safety in Ukraine's Russia-occupied Zaporizhzhia nuclear power plant is deteriorating after intense military activity this week and a drone strike near the facility this weekend, the International Atomic Energy Agency (IAEA) said. On Saturday, a drone exploded close to essential cooling water sprinkler ponds about 100 meters from the only 750-kilovolt line still supplying power to the plant, the IAEA statement said. “I remain extremely concerned and reiterate my call for maximum restraint from all sides,” IAEA Director General Rafael Grossi said. The plant, under Russian control since February 2022, has faced repeated attacks, with both Ukraine and Russia trading accusations. (Capital Brief)(The Guardian)

6.

Texting fines: The US Securities and Exchange Commission (SEC) is intensifying its probe into asset managers and rating agencies for using personal devices and unofficial channels to discuss company business, potentially leading to more fines and sanctions, the Financial Times reported. The SEC has collected over USD2 billion ($3 billion) in penalties from Wall Street firms for employees using personal devices and apps like WhatsApp for work-related discussions without preserving records. Last week, the SEC announced nearly USD400 million in fines on 26 Wall Street firms over similar violations. Initially targeting investment bankers, the years-long probe now includes asset managers and others, with firms like BlackRock, Blackstone, Invesco and Moody's disclosing their involvement and setting aside millions to cover potential fines. Industry advocates argue the SEC may be overreaching, while the regulator stresses the importance of record-keeping for future investigations. (The Financial Times)

7.

Harris’ DNC: The Democratic National Convention (DNC) kicks off Monday in Chicago, where Vice President Kamala Harris will be officially named the Democratic nominee for President following Joe Biden's late-July withdrawal from the race. The convention, themed ‘For the People, For Our Future’ is expected to draw around 50,000 attendees, including 5,000 delegates. Biden will speak on the convention's opening night before handing over the spotlight to his successors as he steps back as the outgoing president. Michelle Obama will address the convention on Tuesday night, according to Axios. Former Presidents Barack Obama and Bill Clinton, as well as former Secretary of State Hillary Clinton, are also slated for prime-time spots throughout the week. Harris and her running mate, Minnesota Governor Tim Walz, will address the event on the final and penultimate nights of the DNC, respectively. (Axios)(NPR)

8.

Ukraine tactics: Ukraine destroyed two bridges in Russia’s Kursk region, hampering Russian military logistics and consolidating its positions, according to media reports. Air Force officials released videos of the airstrikes over the weekend, which also targeted Russian weapons depots and supply lines, the Financial Times reported. The objective of the surprise incursion that Ukraine began on 6 August is to leverage the captured territory for negotiations, presidential adviser Mykhailo Podolyak said Friday. Russian President Vladimir Putin vowed an "appropriate response" and over the weekend launched more aerial attacks on Ukraine. But the country’s forces have failed to push back Kyiv’s. Meanwhile, Belarusian President Alexander Lukashenko said nearly a third of his armed forces had been deployed along the country’s southern border with Ukraine in response to its neighbour’s stationing of over 120,000 troops there. Lukashenko, a staunch ally of Vladimir Putin, said the Belarusian-Ukranian border had been mined “as never before”. (The Financial Times)(Reuters)