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Take Five: Lots to talk about, lots of technology
Next week, investors will be focusing on three major issues: the war in Iran and the interest rate path. Five of the "Magnificent Seven" U.S. technology giants are reporting their earnings. Four of the top central banks in the world meet to discuss how long they will be able to'realistically' look past the rise in energy prices caused by the blockage of the Strait of Hormuz. Marc Jones, Dhara Ranasinghe and Lewis Krauskopf in New York will give you all the information about this week's financial markets. Rae Wee is in Singapore. 1/CORRIDOR POWER The next week will be dominated by a question of whether progress can be made on the Iran War and the reopening of the Strait of Hormuz - the naval chokepoint which is the main power play in this conflict. Iran has shown off its increased control over the shipping route. While there is some relief in the fact that Washington, Tehran, and Israel and Lebanon extended their respective ceasefires it shows what the markets are thinking. Diplomacy, signs of back-channel discussions, and the social media posts by U.S. president Donald Trump and Iran’s Supreme Leader Ayatollah Khamenei will continue to fuel volatility. This is especially true now that Trump has said he won't rush into a deal because he wants a "everlasting" agreement. The long-term?conflict has also widened the rift between the U.S.A. and NATO. Trump has repeatedly criticized the members of NATO for not supporting his attacks against Iran. According to officials, Washington is now considering punishing "difficult countries" such as Spain. 2/KA-POWELL! On Wednesday, the Federal Reserve is expected to maintain U.S. rates, which means that the focus will be on its signals in the months ahead, given the fact that most economists believe cuts are not an option for the time being. A subplot that is intriguing is whether this will be Jerome Powell’s last meeting as Fed governor, or if he will attend in the future. His tenure, which extends until 2028, is also being attacked. This should be his swansong as the 73-year old's tenure as Fed chairman is set to end in a month. A key U.S. Senator has pledged to block Trump's choice for Powell's replacement - former Fed Governor Kevin Warsh – until an investigation into Powell's renovations at the Fed's HQ is dropped. Also, there will be some important data to take in. On Thursday, the Fed will release both the first-quarter GDP as well as a personal consumption expenditures (PCE) price index for March. 3/BIG WEEK'S BIG TECH Next week, five of the "Magnificent Seven", or megacap companies, will report their first-quarter results. The announcement comes at a moment when investor optimism is almost unshakeable about AI-driven profit, which provides a crucial support for equity indexes that are nearing record highs. Alphabet is due to report on Wednesday, followed by Microsoft, Amazon, and Meta. These four "hyperscalers", who spend billions of dollars each year on high-tech infrastructure and data centres, are all expected to release their reports. Apple, the iPhone maker, reports the next day, just a few days after it announced that Tim Cook would be replaced by John Ternus, a long-time hardware executive, 15 years after Steve Jobs, Apple's cofounder, took the helm. But it's not only tech. Next week, more than a third of the S&P 500 will report, including oil giant Exxon Mobil, weight-loss drugmaker Eli Lilly and credit card company Visa. 4/ OPTIONALITY The European Central Bank (ECB) and Bank of England (BoE) are expected to keep their key interest rates at 2% and 3.75 percent respectively on Thursday. Both banks have deliberately downplayed bets of a preemptive rate hike over the past two weeks. Money markets expect both to have risen twice by the end of this year, despite the shaky ceasefire in 'Iran. The watchword will be flexibility. ECB chief Christine Lagarde is going to be pressed about the likelihood of a hike before summer. She will be keen to avoid a repeating of Jean-Claude Trichet's mistake of raising rates too early, just before the outbreak of the eurozone crisis. Andrew Bailey, the Governor of the BoE London, has already warned that markets are getting ahead themselves. Given how nervous domestic politics have made gilt markets, Bailey is also walking a fine line. 5/GOING SLOW The Bank of Japanese?completes a list of major central bankers in action. The Bank of Japan's meeting on February 2nd will kick off the process and, like in the U.S., and Europe, it now appears that the window for a rate increase has closed. Sources say that Kazuo Ueda, and his co-workers will need more time to assess the aftermath of the Middle East conflict. However, observers believe they'll leave the door open to a hike for June. Some people worry that they are falling behind. Even the Asian Development Bank's head has warned that the yen may be further impacted if the markets believe the BOJ to be too slow in light of inflationary risks. For the time being, the Japanese yen continues to hover around 160 per dollar. Investors have long considered this level as a possible trigger point for FX Market intervention. But they are still waiting.
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Indian court extends the detention of Reliance executive and aviation official in bribery cases
A 'Indian court extended Friday the pre-trial detention of an aviation regulator and a 'Reliance Industries executive?until May 6, in connection with a bribery probe relating to drone import approvals. India's top criminal agency announced on Sunday that it had arrested Mudavath devula, deputy director general of Directorate General of Civil Aviation and Bharat mathur, senior vice president of Reliance, for accepting a $16,000 bribe in order to clear drone import requests by Asteria aerospace, an?unit of billionaire Mukesh ambani-led Reliance. The agency didn't disclose the source of the imports. Two men dressed in formal shirts appeared briefly at a district court in New Delhi on Friday, accompanied with officials from the Central Bureau of Investigation. Both were ordered to be held in custody until the 6th of May by the judge. After the hearing, K. Kiran Kumar and Ashish Batra (Mathur's attorney) were told that their clients denied all allegations. Reliance said Mathur was engaged as a consulting and that the company did not know of or approve "any such unauthorized transactions". Mathur's attorney requested access to certain medications during Friday's hearing. Meanwhile,?Devula asked for limited access to his computer. Asteria is a subsidiary of Reliance’s digital arm Jio Platforms, and describes itself as "a drone technology company that provides 'actionable intelligence from aerial data. Asteria?s revenue grew to 400 million rupees (4.2 million dollars) in fiscal 2024, from 11 million rupees during fiscal 2020. (Editing by Aditya K. Kalra and Mark Potter).
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German Parliament approves voluntary 1,000 euro worker relief bonus
The German lower house of Parliament approved on Friday a relief bonus of up to 1000 euros ($1,169.30). This was part of a package to'soften the impact of the high gas prices caused by the Iran War. The AfD, the Left Party and the Greens abstained. Companies can pay an 'unique bonus' to their employees under the plan until June 30th 2027. Payments?will be deductible by employers and tax-free for workers. The bonus is voluntary, which creates uncertainty about how many companies are going to participate in the weak economy. Coalition estimates that the measure will result in a loss of?tax revenues of at least 2.8 Billion Euros. The tobacco tax will be increased this year to help fund the initiative. The bonus is part of a larger?relief package following a dramatic rise in gas prices. Business groups have criticised the government's?shifting of the burden to support households onto employers. Germany implemented a similar bonus of up to 3,000 Euros during the energy crisis in 2022 that followed Russia's invasion.
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CORRECTED: World stocks and oil are on the edge as US-Iran tensions weigh.
Oil prices were above $100 per barrel and global stock markets fell on Friday as investors worried about a possible?military conflict in the Middle East. European shares opened lower, but Japan's blue-chip Nikkei rose almost 1% and U.S. stocks futures moved up a little. The oil price, which was trading at around $107, has been under renewed pressure since Iran released video footage of commandos board a cargo vessel in the Strait of Hormuz, and reported that Tehran's Air Defences have engaged "hostile target". The price of oil has increased by more than 17% in the past week. This is the biggest weekly increase since the beginning of the war, back in March. It's a sign the hopes for an end to the conflict quickly are fading. Rory McPherson is the chief market strategist of financial planning firm Wren Sterling. He said that "the week ended with an increase after a de-escalation, and this has taken away some of the edge from sentiment." Trump stated that he ordered the Navy to "shoot down and kill" Iranian boats who were laying mines on the waterway. He also said the demining activities would be increased. Trump's remarks came only days after he announced that he would extend indefinitely a ceasefire of two weeks with Iran, to allow for future peace talks. MSCI's World Stock Index was slightly lower than the previous day's highs, but still not far off from records set last week. McPherson said, "We know that the markets have had a strong rally from the March lows and we will focus on the fundamentals which look strong." "You've got markets like Europe and Japan that are highly sensitive to oil and sectors like semiconductors in the United States which are strong." The S&P 500 Tech Index has risen 16% in April, and it is on track to have its best month ever. Jim Caron said that investors could underestimate the upside potential of the stock market by focusing on the downside risk, due to the uncertainty created by the Iran War, and he is the chief investment officer for the Portfolio Solutions Group, Morgan Stanley Investment Management. He said: "I don't think people talk enough about the positive aspects of the market, and there is an upside?tail risk," he said. "Earnings are strong." The Yen at the Cusp of 160 On the currency markets, dollar is on course for its first gain in three weeks on dampened expectations for an immediate ease of Middle East tension. The yen was hovering around?160 per dollar, and traders were worried about any intervention from the Japanese government to boost their currency. Satsuki Katayama, Japanese Finance Minister, reiterated verbal warnings on intervention. Authorities could take "decisive action" against speculative movements in the foreign exchange markets, after saying Japan has a "free-hand" to intervene, and that previous interventions have been effective. The euro was little changed today at $1.1684, whereas sterling was a bit firmer at $1.3473. Investors are eagerly awaiting the policymakers' comments about the impact of the war on inflation and economy. Next week, the Bank of Japan will also meet. However, it is expected that the central bank will keep interest rates unchanged. Carl Ang is a fixed income analyst at MFS Investment Management. He said that lower?market?liquidity during Golden Week, directly following the BOJ meeting may provide an opportunity for FX interventions and a knee-jerk increase in the yen between 150-160. Golden Week, a holiday that includes a number days of market closures, continues into early May. Spot gold fell just 0.1%, to $4,688 per ounce.
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UN weather agency: El?Nino could return as soon as May and impact global weather patterns.
WMO said that the return of El Nino weather conditions is expected as early as this May, and could affect?global temperatures, and a?rainfall pattern. El Nino, as defined by the WMO, is a periodic increase in sea surface temperature over the eastern and central Pacific Ocean. It typically lasts nine to twelve month. It said that a clear'shift' has been observed, with sea surface?temperatures rapidly rising, indicating a high probability of El Nino developing between May and July. Wilfran Moufouma OKia, WMO's Chief of Climate Prediction, said in a press release that "after a period neutral conditions, the climate models have 'now aligned strongly and there is high confidence on the onset El Nino followed by further intensity in the months to follow." The WMO stated that while models suggest a strong El Nino this year, forecasts are less reliable during spring and a greater degree of confidence can be gained after April. It is well known that the weather pattern can disrupt regional climates. It could?bring increased rainfall to southern South America and the?southern United States?, as well as parts of the Horn of Africa?and central Asia?, while causing droughts in Australia, Indonesia?and southern Asia?. The WMO also said that it can have an effect on global climate. (Reporting and editing by Kirstiknolle, Olivia Le Poidevin)
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Spain's industrial price rises at the fastest rate in a full year, as energy costs bite
The National Statistics Institute (INE), which released the figures on Friday, said that a spike in energy prices caused Spanish industrial 'prices' to increase?at their quickest?rate?in a year after falling for 4 consecutive months. Industrial prices increased by 3.4% over the past 12 months, which is a significant increase from the revised 6.9% decline in February. As companies pass on higher costs to customers, industrial prices tend to change before consumer prices. The rate was distorted by the energy prices which increased at a 7.9% rate. This was 30 percentage points higher than the decrease of 22.1% in February. INE reported that this was mainly 'due to a 46.3% spike in petrol prices month-over-month, as well 'as a lesser increase of electricity distribution - and gas -prices. The price of crude futures is about 45% higher than it was before the start of the 'war in the Middle East. Fears of a new military escalation are growing. INE reported that industrial prices increased?6.5% from February. Reporting by Javi Larranaga, Editing by Emma Pinedo, Topra Chopra
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India's Asteria is the Reliance unit that has been at the center of a corruption scandal
India's federal crime fighting agency launched a bribery probe into the drone technology company Asteria Aerospace. It is a lesser-known subsidiary of Mukesh Ambani's Reliance Industries. The Central Bureau of Investigation (CBI) arrested officials of India's aviation watchdog and Reliance Industries this week on allegations of bribery to?secure? approvals for certain drones imports. Reliance previously stated that it had not authorized or been aware of such transactions. However, the lawyer representing the official from the Aviation Watchdog has opposed his custody. DRONES BUSINESS Since Prime Minister NarendraModi's government liberalised drone policy in?2021, India's drone sector has seen a steady growth. India has 39,000 drones that are permitted and used for public initiatives, such as village surveys, crop monitoring, and village surveys. Asteria Aerospace describes itself as a drone company that offers "actionable intelligence derived from aerial data". According to its website, it helps companies capture accurate information?and perform AI-based visualisation through the use geospatial images captured by drones. Asteria offers services in the agriculture, construction, telecommunications, and oil and gas sectors with its more than 400 drones. Asteria’s drone?services for Reliance BP Mobility?for instance, analysed road traffic and measured vehicle speed to help finalise a location for a retail outlet. FOUNDERS and RELIANCE AQUISITION Nihar Vartak & Neel mehta founded the company in 2011, in India's tech hub Bengaluru. Reliance acquired it in 2019 for $2.45million. Reliance said that the acquisition was part the group's initiative to explore emerging technologies. Reliance Jio Platforms (the group's digital division) controls 74% Asteria according to data from March 2024. Reliance Jio Platforms also plans to launch an IPO in what could be India's largest-ever stock market offering. Asteria reported a surge in revenue?from 11 millions?rupees (117,000 dollars) in fiscal 2020, to 400 million rupees (4.24 million dollars) in fiscal 2024. GOVERNMENT APPROVALS According to the Drone Rules of 2021, an unmanned aircraft system cannot operate in India without having a certificate. Asteria claims to be the first "Indian drone manufacturer" to receive three different types of certifications from the aviation safety regulator. Asteria's indigenous drone AT-15, was exhibited at the 77th Republic Day Parade earlier this year. The bribery case was brought by the police after a tip that the Reliance executive had agreed to pay $16,000 for the processing of three drone import applications from Asteria Aerospace.
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Indonesia will import 150 million barrels from Russia of crude oil this year, says deputy minister
Yuliot Tanjung, the Deputy Minister of Energy in Indonesia, said on Friday that Indonesia would 'import 150 millions barrels of crude from Russia this year. In response to energy shortages caused by the Middle East conflict, Southeast Asia secured crude oil and LPG from Russia. The announcement was made after President Prabowo Subianto and Russian President Vladimir Putin met in Moscow last Thursday. The government has agreed to import 150 million barrels of crude oil from Russia to meet the country's needs until the end the year. Yuliot stated that the volume of LPG imports from Russia is yet to be determined. Yuliot stated that Indonesia also seeks to obtain crude oil and LPG in other countries, including the United States. "We import around 1 million barrels a day.?So we can see that with these 150 million (barrels),?it's?still?short. He said that we are seeking additional supplies from other countries including the U.S. Indonesia has signed a contract to purchase oil and gas in the U.S., under the Agreement on Reciprocal Trade. Yuliot stated, "We hope to?meet the crude oil and domestic LPG requirements from various sources." (Reporting and writing by Bernadette Cristina; editing by David Stanway, Tom Hogue, and Ananda Teresia)
Gold to drop by a week as oil prices rise, fueling inflation fears
Gold prices fell on Friday, heading for a weekly decline, as?higher crude oil prices intensified fears of inflation and interest rates that would continue to rise, while U.S.-Iran talks were still stalled.
As of 0744 GMT, spot gold was down by 0.2%, at $4,685.23 an ounce. After a four-week streak of gains, the metal is down 3% this week.
U.S. Gold Futures for June Delivery fell by 0.5% to $4,700.50.
Brent crude prices are up about 17% this week, hovering above $105 per barrel. This is despite the fact that the Strait of Hormuz remains largely closed despite the extension of the Iran ceasefire.
According to Kelvin Wong, senior analyst at OANDA, as long as the risk of a prolonged closure of strait continues, oil prices will remain high, pushing gold prices down.
Increased crude oil prices can cause inflation by increasing transportation and production costs. This will increase the likelihood of interest rates going up.
Gold is a good inflation hedge. However, with high interest rates, yield-bearing investments are more appealing, and this reduces the appeal of bullion.
Wong stated that gold is stuck in a sideways range between the 50-day average of $4,900, and the 20-day average of $4,645 at the bottom. "Everything boils down now to what's happening in the Middle East," he said.
Iran showed off its increased control over the Strait of Hormuz on Thursday, with a video showing commandos storming a huge cargo ship in a speedboat. This was after the failure of the peace talks which Washington hoped would "open" one of the world's major shipping corridors.
Trump told reporters he thought Tehran was interested in a deal, but its leadership is?in turmoil. He said that he wasn't in a hurry to make a deal, but if Iran didn't want one "I will finish it militarily."
The U.S. Dollar is up 0.8% this week, making greenback priced bullion more costly for holders of other currencies.
The yields on the benchmark 10-year U.S. Treasury notes have increased by about 2% in this week. This increases the opportunity costs of holding non-yielding gold.
Silver fell by 1%, to $74.64 an ounce. Platinum lost 1.4%, to $1977.47. Palladium remained at $1468.18. (Reporting and editing by Subhranshu Sahu; Janane Venkatraman, Ronojojo Mazumdar and Subhranshu Sahu)
(source: Reuters)