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ASML's MORNING BID EUROPE - Big Blue's bad Day raises the bar
Tom Westbrook gives us a look at what the future holds for European and global markets. The AI rally is experiencing some speed wobbles as Europe's?valuable? company and top supplier of chip making equipment?reports Wednesday. ASML is the only manufacturer of the lithography machines that cost $300 million and are used to create the circuitry for cutting-edge chips. LSEG estimates show that it is expected to report an 8.8% increase in the second-quarter's net profit of 2.61 billion euro ($2.99 billion), on a revenue growth of 14% at 8.8 billion euro. Analysts also expect the company's revenue forecast for the full year to increase from 36 billion to $40 billion euros. IBM is the latest example of how AI is "upending business models" in software and computing, and how the markets can be fickle when it comes to picking winners and losers during the boom. IBM SHEDS? A QUARTER of its Value "Big Blue" claimed that it failed to keep up with the shift in corporate spending from software towards data-centre infrastructure. The market expected $3.02 for its adjusted earnings per share forecast, but IBM's projection of $2.93 was based on a revenue increase of only 1%. IBM shares fell by 25% as a result. South Korea's volatile KOSPI jumped 8% in Asia. A surprise slowdown in U.S. Inflation cooled bets on rate hikes and gave investors a good reason to smile. Brent crude futures remained above $85 per barrel but fell short of new peaks, as investors wait to see how long oil tankers will be unable to pass through the Strait of Hormuz. Data revealed that?China’s economic growth slowed down to 4.3% in first half of the year, which was below expectations. There was still little reaction because the theme of "export strength and domestic weakening" is well-worn and because investors are hoping the slowdown will lead to a fiscal stimulus. Bank of Canada expected to keep interest rates the same on Wednesday. Markets could be affected by key developments on Wednesday * Earnings: ASML, BNY, Blackrock, Johnson & Johnson, Morgan Stanley, United Airlines * Economics: Eurozone industrial production, U.S. PPI * Bank of Canada holds rates at $1 = 0.8744 Euros (By Tom Westbrook, edited by Christopher Cushing).
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As hostilities in the Middle East worsen, oil prices are rising.
Oil prices rose on Wednesday after?President Donald Trump reimposed his naval blockade against all Iranian ports and Tehran launched attacks on U.S. Infrastructure in the region. Brent futures rose?99 cents or 1.2% to $85.72 per barrel at 0400 GMT. West Texas Intermediate futures rose 64 cents or 0.8% to $79.98 per barrel. Tuesday, oil prices rose 2% to a new one-month high as attacks intensified a supply disruption along the Strait of Hormuz. This is where a fifth of all the world's liquefied gas and oil passed before the U.S./Israeli war on Iran. "While the physical market for oil is adequately supplied, a further escalation in the Strait of Hormuz, or any additional'sanctions' on Iranian exports, could quickly tighten the market sentiment, and add more risk premiums," stated Priyanka?Sachdeva, a senior market?analyst with Phillip Nova. The U.S. military announced that early on Wednesday the U.S. began a new round of strikes to "continue degrading Iranian capability used to attack commercial shipping in the Strait of Hormuz." Tehran has closed the Strait again after hostilities erupted between Iran and the U.S. last week. This has weakened a fragile ceasefire reached in June following several months of fighting. Trump said in a Fox News interview that aired on "Special Report With Bret Baier" Tuesday night, "I'll leave the energy targets until last but we'll ultimately hit energy targets". Iran's Army said that early on Wednesday it had launched drone strikes against U.S. positions at Jordan's Azraq Base. Pentagon has not yet responded to the report. The Iranian Islamic Revolutionary Guard Corps claimed that they had targeted weapons and storage in Bahrain? and Kuwait. Could not verify the reports immediately. The recent flare-up has raised doubts about whether a memorandum signed last month will lead to an end to the war that has enveloped Iran's neighbours. Tim Waterer is the chief market analyst for KCM Trade. He said that Brent prices could remain between $75 and $80 per barrel if diplomatic efforts were made to reopen the Strait. "For now, the risk premium is still there, but it's no one-way bet, given that both sides have incentives to find a diplomatic resolution." Helen Clark reported from Perth, and Jeslyn Lerh from Singapore. Editing was done by Lincoln Feast and Thomas Derpinghaus.
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Malaysia: Higher energy prices will support subsidies
Malaysia announced on Wednesday that higher global energy prices have boosted its petroleum revenue enough to cover part of the rising costs for 'fuel subsidies. This has eased pressure on the government's finances. The government said that it may spend as much as 40 billion ringgits ($9.83 billion), far more than the 15 billion ringgits initially allocated?in the budget for 2026, on fuel subsidies in 2019. This is due to higher energy prices related to the Middle East conflict. * Each $1 change in crude oil prices is estimated to affect federal petroleum revenues by?about 300 million ringgit, not including the dividends paid to Petronas. Liew Chin-Tong, Deputy Minister of Finance, told the parliament. This?increased revenue can offset some of this additional pressure on fuel subsidy spending. "The government monitors'revenue -collection regularly to ensure that it can meet federal operating expenses,"?Liew added. Liew stated that if necessary, a review of the fiscal targets for 2026 will be announced as part of 'the federal budget next year', which is due to be presented to parliament in October.
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Asian stocks benefit from the drop in US inflation rate
Stock markets in Asia rallied Wednesday, after a surprising slowdown in U.S. Inflation lowered expectations for interest rate increases. Meanwhile, oil prices took a break as the U.S. canceled a plan to levy shipping across the Strait of Hormuz. South Korea's volatile KOSPI Index surged by 7% before the next test of the AI rally. Earnings are due from ASML, Europe's largest company and world's leading supplier of equipment to make AI chips. The Nikkei 225 index in Japan rose by 1%, while the MSCI broadest Asia-Pacific share index outside Japan rose by 2.4%. IBM's stock price dropped by 25% overnight after its?revenue estimate missed analyst expectations. This shows how stretched the rally for AI-related stocks is. The S&P 500, Nasdaq, and U.S. Futures all rose on Tuesday, thanks to the stellar profit made by Wall Street banks. The U.S. Dollar was lower in terms of currencies, except against the stubbornly low yen. Short-term bonds also rallied. Two-year Treasury yields fell 11 basis points, to 4.19%, from a 17-month high near 4.3% on Tuesday. In the U.S., the headline consumer price index fell by 0.4% in June. This was its first drop since COVID-19. Core inflation, however, rose to 2.6% annually, versus expectations of 2.8%. In a note to clients, J.P. Morgan analysts stated that "for market bulls, this is even better than Goldilocks would have imagined." "Inflation is lower when earnings are growing positively. This should ease any concerns about a rate hike in July and could also calm fears for September. This allows the market to rise and broaden at the same time. The market price for the likelihood of an interest rate increase in July has been halved, to 16%. CHINA GROWTH MIS Official data released on Wednesday showed that China's economic growth had slowed to just 4.3% for the second quarter. This was below analysts' expectations due to weaker domestic demand, the oil shock caused by the war in the Middle East, and a lack of exports. Investors have a positive outlook on the Chinese retail sales rebounding in June, a relatively strong nominal GDP and the hope that authorities will respond. Woei Chen, economist at UOB, said: "I do not think they will be concerned?enough to?announce any big'stimulus. But it will be targeted. They are aware that the growth is only in the tech areas, whereas the overall economy continues to underperform." The yuan of China traded at an all-time high of 6.7635 per dollar. The euro was stable at $1.14, and the Australian Dollar held on to its 0.8% gain. Brent crude futures remained at $85.80 per barrel after gaining almost 13% on the back of a flare-up in Middle East conflict. U.S. president Donald Trump reimposed on Tuesday a naval blockade against Iranian ports and threatened to attack power plants and bridges if Iran did not resume negotiations with the United States in order to end their conflict. He also scrapped his plan for a 20 percent fee on shipping through Hormuz. BNY, Morgan Stanley and Johnson & Johnson report their earnings in the U.S. before the morning bell, and United Airlines reports after the market close. (Reporting and editing by Christopher Cushing; Tom Westbrook)
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Copper prices rise as US inflation falls, boosting demand
Copper prices rose on Wednesday as lower than expected U.S. inflation supported demand and lifted sentiment, even though the Middle East crisis continued to weigh. The benchmark three-month 'copper contract on the London Metal Exchange? was up 0.05% to $13,650 per metric ton at 0300 GMT. The Shanghai Futures Exchange's most traded copper contract was up 0.64% at 104,770 Yuan ($15480.89) per ton. Data released on Tuesday showed that U.S. consumer prices slowed down more than anticipated in June. This eased fears about higher interest rates and a possible slowdown of economic activity. Daniel Hynes said in a ANZ note that the fading?prospects for a rate increase boosted sentiment throughout the base metals industry. The U.S. Dollar slipped, boosting prices of commodities denominated in the greenback by making them more affordable for buyers who use other currencies. The market digested?economic data coming from China, the world's largest consumer. The GDP growth of the country slowed to a low not seen in 3.5 years, and missed forecasts. Yangshan Copper Premium The, which tracks the buying interest in China remained strong. It was trading at $90 per ton, its highest level since May 2025. Fighting continued between the U.S.A. and Iran. This undermined hopes for peace negotiations and affected the macroeconomic outlook. Aluminum edged up on LME, adding?0.33%. On SHFE it remained unchanged. Prices have been supported by a disruption in supply from the Middle East, which represents around 9% global capacity for aluminium smelting, as well as dwindling inventories. The consumers are also seeking out alternative sources of supply and purchasing larger shipments from China, who exported an unprecedented volume of unwrought aluminum and its products last month. Nickel rose 0.15%, tin 0.24% and zinc 0.35%. Zinc gained 0.53% on SHFE. Lead dropped 1.8%. Nickel slipped 0.29%. Tin rose 1.68%.
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Asian stocks benefit from the drop in US inflation rate
The Asian markets rose on Wednesday, after a surprise drop in U.S. consumer inflation reduced market expectations of interest rate increases. Oil prices also dipped as the U.S. canceled a plan to tax shipping through the Strait of Hormuz. Investors also cheered the stellar earnings of Wall Street banks, though a 25% decline in IBM's stock price after the company missed its revenue forecast showed just how stretched the market has become. In early trading, South Korea's chipmaker heavy KOSPI soared 6% and Japan's Nikkei gained 0.4%. MSCI's broadest Asia-Pacific share index outside Japan rose by 1.7%. The U.S. Dollar fell in?currencies except for the stubbornly low yen. Short-end bonds rose, bringing two-year Treasury yields down to 4.19%, from a 17-month high near 4.3%. Annualised core inflation was 2.6%, compared to expectations of?2.8%. In a note to clients, J.P. Morgan analysts said: "For bulls on the market this is better than Goldilocks ever could have imagined." "Inflation is lower with positive earnings growth. This should ease any concerns about a rate hike in July and could also calm fears for September. This allows the market to rise and broaden at the same time. The market price for a U.S. rate hike in July has been halved from 36% to 16%. The Australian dollar, which was testing $0.70, held on to its 0.8% gain. Brent crude futures remained at $85.50 per barrel after gaining more than 12% in the past week due to a flare up of fighting in the Middle East. U.S. president Donald Trump reimposed on Tuesday a naval blocade of Iranian ports and threatened to strike power plants and bridges unless Iran resumes their negotiations to end the conflict. However, he canceled a plan to impose a 20% surcharge on shipping through Hormuz. Overnight, the Nasdaq rose 0.9% while the S&P 500 gained 0.4%. U.S. Futures were slightly higher Wednesday. ASML's earnings, Europe's most valuable company and data on Chinese industrial production, retail sales, and gross domestic product will be the focus of 'Asian trade' before ASML's earnings, which is the world's largest supplier of AI chips. BNY, Johnson & Johnson, and Blackrock will report their earnings in the U.S. before the morning bell, and United Airlines, after the market close. (Reporting and editing by Christopher Cushing; Tom Westbrook)
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Oil prices rise after US-Iran hostilities flare up again with attacks on energy targets
Oil prices rose Wednesday after President Donald Trump reimposed his?naval ban on all Iranian ports, and Iran launched a retaliatory strike on U.S. facilities in the region. Brent closed at its highest level since 'June 12' and West Texas Intermediate?at its best since june 15 for the second consecutive session. Both prices rose on Wednesday morning trade. Brent climbed $1.46 or 1.72% to $86.19 per barrel at 0029 GMT, while WTI rose $1.11 or 1.4% to $80.40. Oil prices rose 2% on Tuesday to an all-time high, as the supply disruptions in the Strait of Hormuz - where one-fifth of world oil and LNG transited before the start of the war - were intensified. The U.S. began a new round of strikes early on Wednesday to "continue degrading Iranian capability used to attack commercial ships in the Strait of Hormuz", the U.S. Military said. Tehran claims it has 'closed the Strait again after hostilities between Iran & the U.S. re-ignited last week, fraying a fragile?truce already reached in June following several months of fighting. Trump said in an interview with Fox News that aired on "Special Report With Bret Baier" Tuesday night, "I'll leave the energy targets until last but we'll ultimately hit energy targets". Early on Wednesday, the Iranian army announced that drones had been used to attack U.S. positions in Jordan's Azraq base. Pentagon has not yet responded to the report. The Iranian Islamic Revolutionary Guard Corps claimed that they had targeted weapons and storage in Bahrain and Kuwait. ? The reports could not be verified immediately. The recent flare-up has raised doubts about whether a memorandum signed last month will lead to an end to the war that has engulfed Iran’s neighbors. Tim Waterer is the chief market analyst for KCM Trade. He said that Brent prices may remain at $75-$80 per barrel if diplomatic measures are successful in reopening the Strait. "For now, there is still a risk premium, but this is not a one way bet, as both sides are motivated to find a diplomatic resolution." (Reporting and editing by Helen Clark)
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Scientists study the glacier melting risk in Greenland
This week, an international team of 80 scientists and crew will embark on the RSS David Attenborough to sail for Greenland in order to determine whether the melting glaciers on the island could affect the climate and currents in the Atlantic Ocean. The mission, which will last five to six weeks, leaves Britain, after Western Europe and Britain experienced their warmest month of June on record. This caused power outages, closed schools, and increased deaths. Kelly Hogan, marine geophysicist with the British Antarctic Survey, which is leading this mission, said in an interview aboard the vessel that the heatwaves in Europe and the UK in recent months had really made it clear how difficult it was for us to adjust to even small changes in climate. The expedition is a part of a PS20million project called GIANT – Greenland Ice Sheet to AtlaNtic Tipping Points - that aims to better understand the melting and breaking down of glaciers into the ocean, and their impact. Scientists worry that the melting of freshwater may disrupt a rotating ocean current system which regulates Europe's climate. This could lead to extreme weather conditions and higher sea levels. Matt Neill is a ship captain who has made several trips to Antarctica, including his first as a cadet in 2011. He says he's seen first-hand the effects of climate change. "Lots are of glaciers all?receding extremely quickly and more than you think." He said that it is more important now than ever to collect data and improve models during these dynamic times. BOATY MBOATFACE Officially, the ship was named after veteran naturalist Attenborough. But to many Britons, it will forever be "Boaty McBoatface" after this suggestion won a 2016 public poll. Named instead for a high-tech submersible that will be on the vessel, it will dive to 1500 meters below the glacier mixture - a mix of sea ice & snow that forms where the glacier meets the sea. It will map its geometry and how it affects the glacier. Sam Smith, an operations engineer with the National Oceanography Centre said that it would be collecting data never before collected. The data collected will be used to create next-generation climate model and a system of early warning for glacier failure.
The sickly trees that are destroying Europe's climate goals
The European Union's governments decided to lower their 2040 emission-cutting target this week due to concerns about Europe's degraded forests. EU countries endorsed a Wednesday target to reduce their net greenhouse gas emission by 90% from 1990 levels by 2040 - an aim designed to keep them in line with the EU's legally binding commitment to achieve net zero emissions by 2020. The agreement also included flexibility in various sectors. The 2040 goal could be reduced in the future if Europe's peat bogs, grasslands and forests are unable to store and absorb millions of tons carbon dioxide as compensation for industrial pollution. In recent months, many governments, from Sweden to France, warned that Europe's forest are absorbing much less CO2 than they hoped. This is due to wildfires, droughts, and climate change.
The agreement is a good achievement because it takes into account the uncertainties surrounding the CO2 uptake by forests, said Sweden's Environment minister Romina Pourmokhtari.
FORESTS FALLING BELOW CO2 TARGETS
Scientists have documented that climate change leads to more heatwaves, droughts, and slowing of tree growth. This sets the stage for wildfires as well as pest infestations. This year, wildfires charred more than one million hectares in the EU. It was the largest amount of land burned ever. According to the European Environment Agency, Europe's forests, land use and CO2 absorption has decreased by almost a third over the past decade due in part to climate change, but also because of increased logging.
According to the Natural Resources Institute Finland, since 2021 forests in Finland have emitted more carbon dioxide than they have absorbed. Sweden's CO2 sink from forestry has been more than halved in the last 20 year. According to EU diplomats, Sweden and Finland backed the EU’s goal of reducing emissions by 90% and resisted attempts from other countries to further weaken this target.
Both are equally important.
In September, they warned that they would not meet the EU forest emission targets for 2030. They also said that they could face "dire" consequences on their economics if they had to reduce wood harvesting to comply. Sari Multala, Finland's climate minister, said that 14 out of 27 EU member states are not on track to meet their 2030 land use, land-use change, and forestry targets. Around 70% of Sweden, and Finland is covered by forests. Around 10% of Sweden's total exports are wood products, and Finland is almost half that amount. In Sweden, the wood industry employs around 140,000 people.
In a letter sent to EU leaders last month, Ursula von der Leyen, President of the European Commission, promised to take measures to address the concerns about the 2030 LULUCF legislation. This was done to get their support for the 2040 climate target.
ACCORD PROVIDES FLEXIBILITY IN TARGETS The climate target for 2040, which was agreed upon after long-lasting negotiations in Brussels, and before the world leaders met on Thursday in Brazil at the U.N. COP30 Summit, provided a number of options to address these concerns. According to the EU agreement, one option was to introduce an emergency brake that would allow governments to reduce their 2040 climate targets if they realized forests and land-based activities were not absorption CO2 as expected. France proposed this option.
One option was to allow countries to purchase foreign carbon credits up to 5% to meet the 90% reduction goal. This could potentially reduce the domestic target by 5%.
From the automotive industry to the defense sector, industries have expressed concern that they could be liable for any shortfall in emissions if forests and wetland play a diminished role.
The final target stated that other industries would not be required to reduce emissions faster in order to meet the 2040 goal if natural eco-systems do not perform as expected.
POLITICAL CHALLENGES Ahead The Joint Research Centre of the EU has stated that climate risks in forests can be managed through a reduction in intensive logging or by planting more tree species which could enhance CO2 storage.
Sweden's Forestry Agency said that the best way to increase CO2 absorption from Sweden's forest was to reduce felling by 10%.
The Environmental Objectives Committee of Sweden, a government agency, has also recommended that forestry companies be encouraged to allow trees to grow longer and reduce the amount of tree felling.
The forestry industry is a major employer and generates thousands of jobs.
The Swedish Forest Industries Federation stated that the proposals of the government committee would result in a 5%-6% drop in production, worth 8 billion Swedish crowns (US$849.66m) and potentially cost 7,200 positions.
(source: Reuters)