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On August 28th, according to foreign media reports, sources familiar with the matter revealed that SoftBank Group is seeking a $10 billion loan to obtain more funds to refinance the debt it incurred for its investment in US tech giant OpenAI. The two-year loan will have an interest rate spread approximately 275 basis points higher than the benchmark Secured Overnight Financing Rate (SOFR), with Mizuho Bank acting as the designated lead arranger and bookrunner. This loan will be one of a series of recent debt financing activities related to SoftBanks bet on OpenAI. Sources indicated that part of the loan funds may be used to repay a $40 billion bridge loan SoftBank obtained earlier this year for its OpenAI investment. The deadline for loan commitments is August 31st, and several banks have already begun discussions to participate in the loan. SoftBank is also considering raising more funds through the bond market, considering issuing $10 billion to $20 billion in bonds to help refinance the bridge loan, while also planning a record 1 trillion yen retail bond issuance in the Japanese domestic market.Sources say SoftBank is seeking a $10 billion loan to refinance debt for its investment in OpenAI.On August 28th, Moodys analysts stated that large-scale investments in artificial intelligence could weaken the credit metrics of US hyperscale cloud service providers, but strong capital buffers can mitigate the pressure. With capital expenditures growing faster than operating cash flow, the free cash flow of US hyperscale cloud service providers is expected to decline in 2026-2027. Leverage pressures are expected to intensify further as companies like Meta, Alphabet, and Oracle increase bond issuance. However, hyperscale cloud service providers possess large cash reserves, and coupled with revenue and EBITDA growth, they can withstand 12 to 24 months of high capital expenditures without significantly impairing credit quality.French Finance Minister: The first batch of economic data released after the summer heatwave was "poor".On August 28th, as the trade dispute between the United States and Canada escalated, US President Trump signed an executive order on the 27th renaming Lake Ontario, located on the US-Canada border, as "Lake of the United States," stating that the order was "effective immediately." Many Canadians expressed dissatisfaction with the US governments renaming of Lake Ontario to "Lake of the United States," believing that the US action would only exacerbate tensions between the two countries.

Gold Price Prediction: XAU/USD bears at $1,650 on Fed hawkishness and China news

Daniel Rogers

Sep 19, 2022 14:34

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During early Monday morning in Europe, the gold price (XAU/USD) maintains a position close to the intraday low at $1,670. In doing so, metal prices endure the weight of a stronger U.S. dollar amidst a sluggish session caused by Japanese and British vacations. The cause may be related to the Fed's hawkish bets and China-related news stories.

 

US Dollar Index (DXY) reverses a two-day slump while posting intraday gains of 0.18 percent at 109.85 as of press time. Indicators of the U.S. dollar's value versus the six major currencies have recently been buoyed by the University of Michigan's September consumer sentiment report and the market's positive expectations on the Fed's next move. Consequently, the probability of a 75-basis-point (bps) rate hike by the Federal Reserve increased to 80%, while the market's estimates of a one-percentage-point increase in the Fed rate rose to 20% at the latest.

 

US President Biden stated elsewhere, "I'm more positive than I've been in a long time." The national leader also claimed that inflation will be brought under control. On the same line are the covid updates from China, which have unlocked Dalian and Chengdu while observing zero coronavirus cases in Beijing and one, as opposed to zero the day before, outside of Shanghai's quarantine zone. However, US President Biden's willingness to support Taiwan in the event that China assaults Taiwan and hawkish expectations for the Federal Reserve appear to weigh on the steel price ahead of the major monetary policy pronouncements.

 

In addition, the People's Bank of China (PBOC) reduces the 14-day reverse repo rate by 10 basis points to 2.15 percent. "With no maturing reverse repos on Monday, the Chinese central bank injects 12 billion yuan," reports Reuters. The same might have indicated that the dragon nation is not in recovery mode and requires more rate cuts than rate raises, which could have caused the gold price to plummet. The cause is China's position as one of the world's largest gold consumers.

 

In light of this, the S&P 500 Futures post modest losses while mirroring Wall Street's Friday close. Notably, the selling in Japan curbs bond movements in Asia, but yields are robust near the multi-day high due to fears of a recession and hawkish Fed views.

 

Moving forward, a light economic calendar and important market holidays may limit intraday XAU/USD price fluctuations. However, bears are expected to maintain control because to aggressive Fed expectations, which, if dashed, might defy the bearish chart pattern and spark the long-awaited rally.

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