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US bonds and dollar are battered by a'sell America" trade that is heating up
The global markets were hammered on Wednesday, as President Donald Trump's 104% tariffs against China went into effect. A savage sale of U.S. Bonds sparked concerns that foreign funds are fleeing U.S. Assets. The markets have been roiled by a crisis of unprecedented volatility this week, with stocks losing trillions in value and commodities and emerging market markets being hit hard. The dollar and U.S. Treasuries, the two mainstays of the global financial systems, were at the epicenter of Wednesday's rout. Many fear that Trump's tariffs are so severe they will trigger a recession, forcing the Federal Reserve to cut interest rates. So, many sold their Treasury holdings and drove up yields when bond prices fell. Investors rushed to gold and Swiss franc as the dollar, the ultimate safe-haven during times of turmoil, fell. This accelerated the flight away from industrial commodities and stocks. The benchmark 10-year U.S. note yield rose 12 basis points today to 4.38%. This brings its increase over the past three days up to almost 40 bps. It is one of the fastest increases in recent years. Chris Beauchamp is the chief strategist of IG. He said, "Last Week was an equity story, but as always, it has moved from an equity to a more important bond story." The plumbing in the system has clearly begun to seize. The auction of 10-year notes, which followed a disappointing three-year note sale the previous day, could add to the pressure. It would be a litmus test for investor appetite towards U.S. Government debt. The ING economists said that "this seemingly'sell America trade' is now dominating the theme of rising recession risks that would normally have pushed yields downward." COSTLY "GAME OF CHICKEN" Washington confirmed overnight that the 104% duty on imports from China will take effect as planned at 12:01 am Eastern Time (0401 GMT). This deadline has passed without any new developments in trade. Ting Lu is the chief China economist for Nomura. She said, "Both sides seem unwilling to give in." Financial markets have been shook by the volatility caused by the shifting headlines about tariffs, and the threat of a long-term trade war between two of the world's largest economies. S&P 500 index experienced one of the largest reversals since at least 50 years. The benchmark index lost 4.2 percentage points after a positive start and ended in a negative direction. The S&P 500 index lost $5.8 trillion of stock market value in just four days, which is the biggest drop since the index was first created in 1950. This week, the VIX index (a measure of stock volatility) reached its highest level since August. The STOXX 600 in Europe fell by nearly 3.5%. This brings the total loss of market capitalisation to $1.4 trillion since April 1, the day Trump announced his tariffs. U.S. Stock Futures are in negative territory today, with a drop of 0.3-0.7%. Trump claimed late on Tuesday that China was manipulating their currency to protect themselves against tariffs. He also said he believed China would reach a deal with him at some point. Analysts at JPMorgan thought that the rapid escalation of U.S. Tariffs against China would be disruptive enough to send the global economy into a recession. In a client note, they stated that "given the import bill from China the China tariff is equivalent to a whopping tax hike of $400bn on U.S. businesses and households." "The currency will likely be a release for China's policymakers." The dollar fell 0.8%, to 145.09 Japanese yens and 0.7% to 0.8407 Swiss Francs. The oil price fell by almost 5%, as concerns about the global energy market outweighed geopolitical worries. Brent crude futures fell 4.6% to $59.90 per barrel. Gold gained 1.9% to $3,040 an ounce.
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Tata Steel cuts around 20% of Dutch workers
Tata Steel announced on Wednesday that it would cut 1,600 jobs from the Netherlands in order to improve profitability amid fierce competition with China and increasing U.S. tariffs. Tata will reduce its Dutch workforce by around 20%. This is primarily at the large IJmuiden steel plant, located on the coast to the west of Amsterdam. Tata stated that the reorganisation will primarily affect management and support staff at IJmuiden, with the goal of centralising the organisation and increasing its efficiency. The Dutch division suffered a loss totaling 556 million euro ($613,05 million) for the year ending March 31, 2024. This was due to high energy costs and increased competition from imports of cheap products from China. Now, the company faces higher tariffs for its exports to America. The company also struggles to reduce pollution from its plant which, according to authorities, causes the life expectancy for people who live near it to be 2.5 months less than the average in the Netherlands. Tata and the Dutch government have been discussing subsidies for the IJmuiden factory, which is one of the worst polluters. Cihan Lacin, a spokesperson for the FNV union, said that one of the main pillars in these discussions is the employment guarantees the government demands. Lacin stated that "this announcement does not align with the discussion about Tata's Future." It is incomprehensible.
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Sources: US trying to negotiate deal for reopening Alphamin tin mining in war-hit Congo
Four sources familiar with the negotiations said that the United States was trying to broker a deal which would guarantee a reopening of an important tin mine located in eastern Congo. Massad Boulos' recent trip to Kinshasa as the senior Africa advisor for U.S. president Donald Trump included a discussion on the fate of Alphamin’s Bisie Mine, according to the sources, even though Washington’s involvement dates back several weeks. Washington and Kinshasa are also in talks about a broader deal on critical minerals partnerships, after Congo pitched a minerals-for-security deal to the Trump administration. Bisie produced around 17,300 tons of Tin last year. This represents 6% of the global supply. Alphamin announced that it would temporarily stop operations at Bisie last month as M23 rebels backed by Rwanda advanced in the area, taking the strategic Walikale town and openly threatening to destroy the mine. M23 retreated from Walikale in the last week. The group described the move as an act of goodwill ahead of peace talks planned with the government, which will be mediated by Qatar. Sources told M23 that Washington was directly involved in Congo and Rwanda, which is why they made this decision. Washington, they said, demanded that M23 withdraw 150 kilometers from the mine. They also asked Congo's army to refrain from attacking the rebels. According to the United Nations and Western governments, Rwanda provided weapons and troops to ethnic Tutsi led M23. Rwanda denies backing M23, and claims its military acted in defense of Congo's army as well as a militia formed by the perpetrators who committed the 1994 genocide. Sources said Boulos would raise the matter with Rwandan president Paul Kagame on Tuesday during his visit to Kigali. Boulos told journalists in Kigali Washington hopes Alphamin "makes some announcements shortly regarding the resumption of their operations". The company has not responded to our request for comment. Boulos stated that "we definitely encourage them (to resume their operations) and we appreciate the ongoing dialogue." (Writing and editing by Ros Russell, with additional reporting by Philbert Corey-Boulet in Kigali)
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Erdogan: Turkey does not expect negative trade and export situation following tariffs
The President of Turkey, Tayyip Erdoan, said that the tariffs imposed by Donald Trump on Wednesday will not have a negative impact on its trade, production, and exports. Turkey is one of the few countries that have escaped the "reciprocal tariff" of the United States of 10%. It is seen as a potential winner amongst a small group of nations. Erdogan told his ruling AK Party lawmakers that Turkey's economic program had made the country resilient to external shocks, and that they expected a stronger economic growth on a medium-to-long term compared with peer countries. Erdogan stated that there was a lot of uncertainty in the world but that there was a solid economic program which illuminated Turkey's way. We believe that this will be a period we can overcome more easily than other countries, since we are a low-tariff country. He said that Turkey’s disinflationary process is continuing, and that the spending and saving measures that the government implemented last year will be continued this year. The Turkish economy, which suffered from the earlier U.S. duties on iron, steel, and aluminum, is now set to gain as other traders around the world face even higher tariffs. (Reporting and editing by Huseyin Haatsever, Ezgi Erkoyun)
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Official: Madagascar faces the loss of 60,000 textile jobs due to U.S. Tariffs
An industry official said that Madagascar's textile sector could lose around 60,000 jobs due to President Donald Trump’s 47% tariff against the country. The latest U.S. Tariffs were calculated using a formula that meant low-income countries such as Madagascar, which imported small quantities of U.S. products, faced the highest tax rates. According to an ILO report from 2023, the textile and clothing industry in Madagascar employs approximately 180,000 people. It accounts for about one-fifth the gross domestic product of the country. In 2024, the country of 31,000,000 people will export $733 million worth of goods to the U.S. Most of this is under the African Growth and Opportunity Act. (AGOA) which grants duty-free access to U.S. markets for many African goods. In a late-night statement, Rindra Andriamahefa (executive director of a lobby group for the industry) said that the decision to increase tariffs to 47 percent would affect around 60,000 jobs, both permanent and temporary. Beatrice Chan Ching Yiu is the president of the lobbying group Groupement des Entreprises Franches et Partenaires. She said that investors will turn to countries exporting goods, which only face a 10% minimum tariff imposed by Trump's administration. "The pandemic is one thing. Ching Yiu stated that the situation we face now is quite different. Unfortunately, temporary layoffs and dismissals are likely to be necessary. Madagascar has started consulting with other African countries that are adversely affected by tariffs in order to coordinate a position. The Foreign Affairs Ministry said that a constructive dialogue was underway with U.S. officials, which included technical discussions to understand the reasoning behind the decision. (Reporting and editing by Aaron Ross, Ed Osmond, and Hereward Holland)
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Sinopec and Saudi Aramco to expand Yasref Petrochemical Complex
Saudi Aramco announced on Wednesday that it had signed a contract with Sinopec of China to expand a petrochemicals facility operated by the Yasref joint-venture on the western coast of the Kingdom. Aramco has partnered with Sinopec in a number of ventures, as Saudi Arabia seeks to expand its refinery business. This can help offset the drop in crude oil price. The escalating US-China trade war following President Donald Trump’s sweeping tariffs raised fears of a global recession on the markets and sent crude oil prices down to their lowest level in four years. Aramco stated that the partners were aiming to build a steam cracker for mixed feed with a total capacity of 1.8 mtpa and an aromatics facility with a 1.5 mtpa. In a statement from Aramco, Sinopec President Zhao Dong stated that "the Yasref project represents an important milestone in our bilateral relationship and ushers in a new stage of deeper and further-reaching cooperation." The announcement coincides the 10th anniversary of Yanbu Aramco Sinopec Refining Company (Yasref), which is owned by Aramco 62.5% and Sinopec 37.5%. According to its website, it already processes 400,000 barrels of heavy Arabian crude oil per day to produce transportation products and other refined goods. Aramco's long-term strategy for liquids-to chemicals is to convert up to 4,000,000 barrels of crude oil per day into petrochemicals before 2030. In its annual report, published last month it stated that 53% of the crude oil produced upstream would be used downstream in 2024. This is up from 47% in the previous year. Sinopec announced in November that it had begun construction of a refinery in the southeast China province of Fujian, which Aramco has also joined. Aramco has a stake in Fujian Refining & Petrochemical Company which is owned by a Sinopec joint-venture. Aramco's chemicals subsidiary SABIC also has a Sinopec operational joint venture. (Reporting and editing by Barbara Lewis; Yousef Saba)
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China trade war adds to copper losses as it falls to an eight-month low
Copper prices in China reached an eight-month low on Wednesday as bargain hunters stopped buying after the U.S. imposed higher tariffs on China, a major metals consumer. By 0940 GMT, the benchmark three-month price of copper on London Metal Exchange (LME), was down by 0.1% at $8,650.50 a metric ton. LME copper prices have fallen by 20% after reaching their highest level in over nine months at $10,164.50 on March 26, 2016. Dan Smith, the head of research for Amalgamated Metal Trading, said: "There has been some dip-buying from China. But I think that the problem is the increasing prospect of an American recession." The "reciprocal tariffs" imposed by Donald Trump on dozens countries went into effect on Wednesday. These included massive 104% duties for Chinese goods. This deepened his global trade conflict and sparked a more widespread sale on financial markets. Smith stated, "I believe everyone was hoping Trump would back off on his aggressive tariffs. But I think this is going to take some time to work out." It's like a knife falling at the moment. I wouldn't try to buy dips by myself. The Shanghai Futures Exchange's (SHFE) most traded copper contract dropped by 1.8%, to 72,130 Yuan ($9,814) a ton. This is the lowest it has been since August 2024. The lower prices have attracted industrial users in China who require physical copper. A base metals trader stated that "Due Trump's unpredictable duties, copper prices may decrease further. However, the current price of below 75,000 yuan encourages some fabricators" to purchase. Yangshan Copper Premium Since late February, the price of copper in China has increased by more than two-thirds to $87 per ton. This is its highest level since December 2023. Other metals include LME aluminium, which fell by 1.2%, to $2320.50 per ton. Nickel also dropped 0.3%, to $14145. Zinc lost 0.3%, to $2554.50. Lead was down 1.0%, to $1850.50. Tin was down 2.2%, to $31,890.
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Volkswagen EV sales increase in Europe but plunge in China
Volkswagen Group sales of battery electric cars in Europe more than doubled during the first quarter, but dropped by more than one-third in China. This is a sign that the automaker has experienced divergent fortunes on the electric car market. China's electric vehicle market is fiercely competitive. New EV-only entrants are stealing market share away from foreign automakers. The total sales in China fell by 7.1% despite the fact that the carmaker maintained a 22% share of the market for combustion engines. Mercedes-Benz Porsche Also reported was a drop in sales from China. Volkswagen expects sales of its battery electric models to gradually increase in the coming months, as it launches new models such as ID.3 and ID.4X. The Shanghai Auto Show will be held in April. At this show, the automaker will debut the first model in series production of the new Audi brand, which is set to launch in 2019. Three VW models are also scheduled for release in 2026. Orders for Volkswagen vehicles in Europe (both electric and combustion engines) rose by 29% compared to the previous year. The European Automobile Manufacturers' Association reported that battery-electric vehicle sales in Europe have increased substantially this year despite a decline in total sales. This is due to the new EU emission targets and new model launches, which have driven demand after years with a slow growth. The sales in the U.S. increased by 6.2%. This could be a sign that customers are making purchases in advance of the 25% tariffs being implemented on imported cars. The VW brand is highly vulnerable to a brewing trade conflict because two thirds of its sales come from cars manufactured in Mexico. All of its Porsche, Audi and Lamborghini models are imported from Europe. Reporting by Victoria Waldersee and Amir Orusov, Editing by Jamie Freed Matthias Williams, Louise Heavens
Morgan Stanley hikes Brent projections on balanced oil market view
Morgan Stanley raised its quarterly outlook for Brent crude rates as it now expects a balanced oil market this year having expected a surplus previously.
Recent stock decreases suggest the oil market has been tighter than we initially anticipated, Morgan Stanley analysts composed in a note dated Monday.
The bank anticipates Brent to balance $82.50 per barrel in the first and 2nd quarters of this year, compared with $80 and $ 77.50 formerly. It raised forecasts for the last two quarters to $80 per barrel.
Brent futures were trading around $82 a barrel at 0900 GMT on Tuesday, while U.S. West Texas Intermediate (WTI). crude was at $77.
The bank lowered its forecast for non-OPEC supply development to. 1.5 million from 1.7 million barrels daily (bpd) and raised. its global demand development forecast to 1.5 million from 1.3. million bpd.
Supply has actually been lower than expected, partly due to OPEC. also due to the U.S.
Members of the Company of the Petroleum Exporting. Allies and nations including Russia-- collectively called. OPEC+ - agreed to voluntary output cuts of about 2.2 million bpd. for the first quarter led by Saudi Arabia rolling over a 1. million bpd voluntary reduction.
2 OPEC+ sources informed that OPEC+ will choose in. March whether to extend voluntary oil production cuts in. place.
As OPEC compliance has been encouraging so far, the oil. market is most likely to stay in balance in 2024, which should. support Brent in the $80-$ 85 per barrel variety, Morgan Stanley. added.
The experts noted that need stays robust, and upward. modifications to flight schedules indicate stronger-than-expected. jet fuel intake this summer season.
(source: Reuters)