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Russian Urals oil is discounted as Asian demand declines, say sources
Four trade sources said that the price of Russian Urals crude had flipped from a premium to a discount against dated Brent in Indian and Chinese ports due to a drop in demand by Asian refiners. Since March, Urals, Russia’s “flagship” oil grade, has traded at a higher price than Brent in India, China and other major markets. This is because the Middle East conflict disrupted oil supplies globally and increased demand for cheaper alternatives. Sources said that the demand for 'Russian crude' has fallen now, but Asian refiners had 'drawn down their inventories, found alternative alternatives, and in some cases, cut back on runs. Sources said that urals cargoes for delivery to India between July and August were traded this month at discounts of $2 and $3 per barrel compared to Brent dated, as opposed to a premium of $7 to $8 per barrel in April and may. Urals oil prices fell by $7 to $8 per barrel during the winter months in the northern hemisphere when U.S. sanctions were tightened and reduced Russian oil production. From June to August of last year, discounts were around $1 to $3 per barrel. China's reduced purchases have a wider impact on all grades, even though the Chinese and Indian markets are closely linked. It purchases less Urals crude than India but more lighter Russian grades, such as?ESPO blend, Arctic and Sakhalin crude. One source reported that in some cases Chinese buyers refused to accept Russian oil cargoes for delivery in June, making sellers vulnerable during price negotiations. Teapots, or'small independent refiners' in China, have reduced production due to lower crude oil prices and weaker margins. Reporting in Moscow by Nidhi Verm, New Delhi by Siyi LIu, Singapore by Siyi Liu, editing by Barbara Lewis.
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McGeever: The $500 billion T-bill fix by ROI-Treasury is not a problem yet.
The U.S. Treasury issues more than half a billion dollars in T-bills each?week. For now, this spike in short-term funding is not a concern, but it could be if U.S. lending costs continue to rise. Trump's administration has a good reason for favoring the short end of the curve. The term premium has been pushed up by persistently large?budgets deficits, and high inflation that has exceeded the Federal Reserve's target of 2% for over five years. This is what investors are paying for long-term bonds. It makes short-term loans more appealing. The problem of rolling over $500 billion in bills each week is not an urgent one. Cash-like instruments are a huge market, and they're essential for overnight and short term collateral and liquidity management. The Fed and money market funds in the US have a combined balance of $8 trillion dollars, which is enough to absorb the new issuance. Even the demand for high-quality collateral can't last forever. Eventually, flooding will reach a level where it's impossible to absorb without a dangerous increase in money market interest rates. Treasury's interest bill may present a more immediate problem. Bills are affected by the impact of rolling notes and bonds over at higher interest rates in a matter of months, not years. The fiscal impact is already being felt, as the federal interest bill is on track to exceed $1 trillion in this fiscal year. Fed rate hike expectations are also increasing. 25% THRESHOLD Are we approaching the tipping point of too many bills issued? The current share of bills in the outstanding federal debt is just under 22.4%. This is slightly below the historical norm of 22.4% but well above the range of 15% to 20% recommended by the Treasury Borrowing Advisory Committee. The trend appears to be towards 25%, which is a threshold that many analysts believe should be watched. Lou Crandall is the chief economist of Wrightson ICAP. She said that it's difficult to pinpoint a specific tipping point, but once you reach a level of 25% of a growing?net borrowing requirement, the Treasury must look at more likely sources of demand. It's not a line that, when crossed, will instantly reduce demand for bills. In recent years, however, the share of bills in government debt was only 25% or higher during financial crises and economic recessions. And so, borrowing policies seen only in the pandemic of 2020 and the financial crisis of 2008 could become the norm. It is not known how the market will react to this over time. 1 TRILLION BARRIERS Treasury is currently facing record interest costs, both in nominal terms as well as when viewed by the percentage of GDP and revenue. The federal government's cumulative interest costs in the first four months of the year totaled $616 billion. This is an increase of more than $100 billion compared to the period January-April two years ago. According to the Congressional Budget Office (CBO), total interest payments will surpass $1 trillion in this fiscal year. They are expected to reach 3.3% of GDP, and 18.6% revenue, both records. This bill is expected to grow, particularly if the Fed decides to raise interest rates from their current range of 3,50-3.75% in the next few months. Rate hikes would not only increase short-term borrowing costs, but they could also threaten economic growth. Treasury would be in a weaker position, as it already borrows at the low end of the curve, and pays high interest rates. This could reduce investor interest and drive yields higher even if Fed policy was loosened to promote growth. Martin Tobias is the U.S. Rates Strategist at Morgan Stanley. Recession doesn't seem to be on the horizon anytime soon. A stock market correction or economic slowdown is not ruled out by a rise in borrowing costs. The $500 billion T-bills that are renewed every week will be scrutinized if this happens. You like this column? Check out Open Interest, your new essential source for global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Gold gains as oil prices fall and US interest rate hike fears cap gains
Gold prices rose on Tuesday, aided by lower oil costs as tensions in the Middle East?easened?. However, concerns over U.S. rate hikes before this week's key inflation data capped gains. As of 1156 GMT, spot gold was up by 0.3% to $4,340.31 an ounce. In the previous session, gold fell to its lowest since March 23. U.S. Gold Futures for August Delivery?were unchanged, at $4.364.90. "Gold prices stabilised following a two-day decline that saw them break below the key technical support... "However, the rising expectations of more U.S. interest rate increases continue to create a difficult backdrop for bullion," Saxo Bank's Ole Hansen said. Oil prices dropped after Iran and Israel announced that they had stopped their attacks against each other in response to an appeal by U.S. president Donald?Trump. The rise in crude oil prices increases the risk of inflation and higher interest rates. Gold is often viewed as a hedge to inflation but in an environment of high interest rates, gold tends not to be so attractive. Investors are now awaiting the May U.S. Consumer Price Index data (CPI) on Wednesday and Producer Price Index data (PPI), on Thursday, for clues about the Federal Reserve's future moves. A robust jobs report released last week boosted bets that a rate -hike would happen this year. Hansen stated that "tomorrow's U.S. CPI is expected to surpass 4% for almost three years and the 17th?June FOMC Meeting remains crucial as the market looks for comments and intentions from the new fed chair." According to the CME FedWatch tool, traders are now pricing a 68% probability of a Fed interest rate hike in December. Since October 2023, spot gold has traded below the 200-day moving average. Citi analysts said that the breakout below the 200-dMA was viewed as a negative technical signal. This indicates further downside potential in near term. Silver spot rose 0.6%, to $68.56 an ounce. Platinum gained 0.9%, to $1,769.83. Palladium increased 2.9%, to $1,238.66. (Reporting and editing by Janane Vekatraman, Jonathan Ananda, and Noel John from Bengaluru)
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Indonesia's Trade Ministry faces a barrage of questions about new export control plans
On Tuesday, officials from Indonesia's trade ministry were bombarded with questions from?exporters? of coal, ferroalloys and palm oil who were concerned?about the impact of a controversial export control plan that aims to maximize profits from Indonesia's natural resources. Businesses expressed concerns about the implementation of the new rules in an online forum hosted by the government. This was despite the fact that the detailed rules were published earlier this week. Last month, President Prabowo revealed a plan that would channel all exports of Indonesia's key commodities through a state-owned firm. The goal was to increase government revenue and tighten controls on the sale of Indonesia's natural resources. The government released 11 pages of regulations earlier this month that outlined the implementation schedule for new controls. The?trade ministry released this week more detailed guidelines on three of the strategic products that are subject to the new rules which came into effect on June 1st. In the first phase of this new law, exporters will be required to report their entire export activity to Danantara Sumberdaya Indonesia. Exporters expressed concerns during an online awareness campaign held by the Trade Ministry about the integrity long-term contracts and the commercial mechanism of exporting products that are affected by the new regulations. Producers also don't know who pays for their product if all exports go through the government. "Starting January 1, we will be selling through DSI... Is the sale to DSI recognised as an export (paid in) U.S. dollar, or as a sale locally with payments made in Indonesian rupiah?" One company representative asked about currency risks associated with U.S. Dollar loans. He asked if the payment for the goods would be made by the customer or before the goods are exported. This is a crucial issue for a business's cash flow. Ministry officials deferred the majority of questions to DSI. DSI did not attend 'the event and merely'said that contracts would be executed on a business-tobusiness basis. Several participants asked how to contact DSI. At the time Prabowo announced his announcement, DSI had only one employee - its CEO. Indonesia's sovereign fund Danantara stated that its new unit would initially be backed by civil servants of several ministries. However, DSI will hire and develop the technologies for export monitoring. A participant asked who would be responsible for negotiating the prices with end buyers during the transition period and up until December 31, 2026. Danantara has said that it will examine the prices of existing export contracts in order to ensure they do not fall below market level. Prabowo stated last month that the under-priced commodities have cost the country almost a trillion dollars in the last 34 year.
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Since May, a cholera outbreak in Nigeria’s Borno has killed 74 people and infected thousands.
Medecins Sans Frontieres, an aid group, said that a cholera outbreak in Nigeria's Borno state, which began in early May, has caused the death of at least 74 individuals and infected over 7,000 others, overwhelming local health facilities. MSF reported 7,850 suspected cases across 14 local governments areas by June 7, citing data from the state health ministry. Infections were increasing 'dramatically each day,' according to MSF. The outbreak strains an already fragile healthcare system in a area at the center of a 17 year Islamist insurgency. There are also problems with water and sanitation and mass displacement. MSF has, in collaboration with the Ministry of Health, set up a cholera-treatment centre in Maiduguri, the capital, to help support the response. Bienfait Tombola is the MSF medical coordinator of the surge response for Maiduguri. MSF reported that it had treated 7,439 patients on average, with 230 admissions a day. More than 500 cases were recorded just on June 5, the most since the response started. The 'waterborne disease' cholera thrives in places without clean water or sanitation. MSF reported that authorities are planning a vaccination program, as the aid group continues to increase treatment, hygiene, and surveillance in order to contain the outbreak. (Reporting from Adewale Klawole, Maiduguri. Writing by Elisha B. Gbogbo. Editing by Alex Richardson.)
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Karen Braun: The role of China in US agriculture has changed.
Last month, the prospect of renewed Chinese demand for U.S. agricultural products sparked excitement on?grain market. However, enthusiasm has faded and no immediate purchases have been made. It was not surprising that the initial reaction was bullish. China has been a driving force in U.S. agricultural growth, helping to drive record soybean exports and grain prices, as well as emerging as a major purchaser of everything from beef to corn. The trade agreement last month, which included at least $17 billion of U.S. agricultural sales beyond existing soybean agreements, revived hopes that China could once again be a major driver of growth for American farm exports. The dynamics have changed over the years due to trade tensions, and South America’s growth. China's importance to U.S. agricultural production remains high, but its contribution varies depending on the commodity. SOYBEANS: China left the U.S. market, not the soybeans China's dependence upon U.S. soyabeans has declined dramatically over the past few years, but its influence on the global soybean markets has not. Since nearly two decades, the Asian buyers' share of global imports remained fairly constant at around 60%. Chinese purchases of U.S. soya beans have dropped sharply from record levels earlier in this decade, as Brazil increased production and exported more. According to the U.S. Department of Agriculture, the volume of U.S. soyabean exports to China in the 2025/26 crop season that ends on August 31 is expected to drop by almost 50% compared to the previous year, to a record low of 19 years. Industry estimates show that by the end May, China had met more than 90% its needs for 2025/26. This pace is on par with the previous year, thanks to an increase in South American purchases. Recent trade deals suggest that U.S. soyabean exports to China may double in 2026/27. However, the overall picture of soybean exports is not as rosy. The USDA projections indicate that U.S. exports of soybeans to other countries would drop to a record low in 2026/27 if China's assumed share is excluded. This could be because the demand for U.S. beans from one partner might impact the demand from the others. CORN: HEALTHIER IF CHINA IS NOT INCLUDED? It couldn't have been more different in the case of U.S. corn imports. Chinese purchases accounted for nearly one-third (or 2,75 billion bushels) of U.S. Corn shipments in 2020/21. Many at the time considered China to be crucial for furthering export growth. This record was broken without Chinese participation in 2024/25, and 2025/26 is expected to see shipments reach a new high of 3.3 million bushels. Mexico, for example, is a reliable long-term buyer of corn from the United States. USDA's forecast does not indicate that China will be a significant buyer of corn in 2026/27. This doesn't mean that the Chinese demand is no longer important or that it would not have positive market implications. If China were to return as a major buyer of corn, would the total U.S. exports increase further or would higher prices displace existing demand as it appears to be happening for soybeans. BEEF: TRADE DEAL WEAKNESSES EXPOSED Beef is a product that falls between corn and soybeans, but presents different tradeoffs. China was a major customer of U.S. beef importers just a few short years ago. U.S. officials want to bring that business back after the recent trade agreement. The U.S. beef market has reached "record" highs and the cattle herd in the United States is at a low level not seen for 75 years. U.S. officials have highlighted China's appetites for lesser-valued cuts and variety meats, implying that Chinese consumers buy products Americans do not consume as often. This portrayal is incomplete and leaves out important details. In the past, U.S. exports of beef to China were largely products that were consumed domestically, as is also seen in other U.S. buyers. China is a major buyer of U.S. cuts and offal. Although the Chinese demand for lower-value cuts may benefit U.S. ranchers in some ways, it also increases competition for limited supplies. It may be worth examining the idea that beef exports to China could increase without impacting on the domestic market. NEW MARKET, OLD THINKING? Soybeans and corn, as well as beef, help explain why China’s role in U.S. Agriculture cannot be defined with a single narrative. But grain markets react to Chinese purchases as if the effects are universal across all sectors. Even though purchase commitments are not a guarantee, they can still cause sharp movements in futures and speculative positions. The prospect of renewed Chinese purchases helped to push speculators’ combined positions in U.S. grain and oilseeds at record bullish levels. This was a logical reaction: a stronger Chinese economy has usually led to better prospects for U.S. agricultural production for the last two decades. Now, however, the impact is less clear. The markets will continue to react to China related developments. However, the most important question is not whether China matters but rather where it matters. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Buy the chip for MORNING BID AMERICAS
What's important in the U.S. and international markets today by Mike Dolan Editor-at-Large of?Finance and Markets Relief rally, dip buying or dead cat bounce? Whatever you call Wall 'Street's modest recovery on Monday, it is clear that the gains were concentrated in tech megacaps which have been at the forefront of the AI boom. Yesterday, 60% of S&P 500 closed in the red. In terms of Monday's individual moves, Marvell Technology saw its stock rise by 9% after it was included in the S&P 500. Below, I will go into more detail. Check out my most recent column about whether AI can become a utility. Listen to the Morning Bid podcast. Subscribe to the Morning Bid daily podcast and hear journalists discussing the latest news in finance and markets seven days a weeks. What does Monday's rebound mean for us? With all the IPO hoopla, it's difficult to ignore the AI juggernaut. Elon Musk’s SpaceX will list by the end of this week. OpenAI announced on Monday that it has also?confidentially' filed for an IPO. The market will absorb a record amount of issuance this summer with Anthropic and SpaceX also expected to list. China's overnight May trade data showed that it was?riding on the AI boom, as its export growth exceeded expectations and jumped almost 20% year-onyear. The huge demand for tech and memory chips, as well as the high prices of those memory chips are to blame. This is the flipside of the AI boom. It's potential inflationary fallout, and the way it complicates things for the Federal Reserve and other central bankers. The ECB is expected to raise interest rates this week and the Bank of Japan will likely follow suit this month. Iran and Israel have both announced that the latest missile exchange has been suspended for the time being. This allowed oil prices, which had risen up to 5% in the morning, to lose some of their gains. It also took some edge off of Fed rate hike bets. This also helps to explain the modest stock recovery on Monday. On Tuesday, Asian shares rallied, and U.S. Futures edged up before the bell while oil prices continued to fall. The focus of today's data diary will be on housing. Wednesday, the U.S. consumer prices and Oracle results will follow after the bell. Chart of the Day SpaceX plans to raise $75 billion this week in its debut equity listing. It is aiming for a valuation of $1.75 trillion, which would put it among the 10 most valuable U.S. listed?firms. However, only 7%?of?its listed?shares will be freely tradable when launch takes place on June 12th. S&P Global, which last week decided not to change its criteria, including the requirement that a company be profitable, excluded SpaceX from the S&P 500 despite the fact that the sale was reportedly oversubscribed by two times and had reserved as much as 30 percent, or $22.5billion, for retail investors. MSCI, the index provider, confirmed Monday that it would continue to apply its existing rules regarding early inclusion of large IPOs into its Global Standard Indexes. This will likely allow SpaceX to 'join. Watch today's events EDT), May existing home sales (10 a.m. EDT), May existing home sales (10 a.m. EDT) * U.S. 3-year note auction (1 ?p.m. EDT) Want to receive Morning Bid every morning in your email? Subscribe to the newsletter by clicking here. Follow us on LinkedIn, X and ROI. The opinions expressed by the author are their own. These opinions do not represent those of News. News is bound by the Trust Principles to maintain integrity, independence and neutrality. (By Mike Dolan).
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LME stock tightens up as copper prices rise, dollar falls
The dollar fell on Tuesday after Israel and Iran agreed to stop their attacks against each other. Meanwhile, visible metal inventories outside of the United States tightened further. The benchmark three-month copper price on the London Metal Exchange increased 0.8% by 0951 GMT to $13,728 per metric ton, but was hampered by the 21-day moving median at $13,735. The U.S. Dollar Index was down by 0.2%. However, the markets are waiting for Wednesday's U.S. Inflation data to get clues about the Federal Reserve. Dollar-priced materials become more appealing to buyers who use other currencies when the U.S. dollar is weaker. COMEX copper contract prices are also higher than the LME benchmark, which is a result of the premium. This was done to support copper prices before the Department of Commerce made a possible recommendation on import tariffs. The premium is driving inflows into COMEX stocks in the U.S. while stocks available in LME-registered warehouses are not. According to the daily LME data they were at 228,650 tonnes, which is the lowest level since February 19. Analysts at Morgan Stanley expect that President Donald Trump will make a decision about U.S. import tariffs in the second half 2026 after receiving an update from domestic markets by June 30. A 15% tariff announced in advance for January 2027 will drive COMEX copper and LME spreads higher, and tighten LME margins. Morgan Stanley stated that if tariffs are not implemented, they would remove about 2.5% of global annualized copper demand from the U.S. Analysts estimate that the U.S. has "over-imported" copper by 260,000 tons in the past year. The country holds over a year's worth of "normal" refined copper imports. Aluminium fell by 0.8% on the LME to $3,575.50, after having hit a low of $3.570.5 in three weeks, despite Iran and Israel agreeing to stop their attacks. Tehran continues to block shipping through the Strait of Hormuz. Zinc rose by 1.1% to $3575.50. Goldman Sachs stated that Boliden’s Garpenberg Mine could "structurally re-set to a lower?level of production for longer" after a seismic event in March. Lead dropped 0.1% to $1987. Nickel was down 0.6% to $18,230. Tin rose 1.4% to $50,880. Nickel and lead hit their lowest levels since May 21 and respectively April 23 earlier in the session. (Reporting and editing by Jonathan Ananda; Additional reporting by Solomon Cefai)
Oil slips as stocks rally, investors return to tech
Investors rushed to purchase the latest dips in tech stocks on Tuesday, while oil prices fell after Israel and Iran agreed to?halt their attacks against each other for the time being. In Europe, ASML and Infineon led the way with a 0.7% rise in the 'STOXX 600. U.S. Stock Futures rose between 0.5% and 0.8% as Meta, Eli Lilly, Goldman Sachs and other shares grew in pre-market trade. OpenAI, the maker of ChatGPT, filed a confidential U.S. IPO on Monday, just days before SpaceX made its highly anticipated debut in the market this week. Wall Street CEOs and bankers are ecstatic about these mega-cap listing. Kathleen Brooks, XTB's research director, said that on the street "there is some caution" setting in.
"Although the SpaceX IPO is expected to be a success, it is not the most interesting event. What is more interesting is the future earnings reports of SpaceX, which must be impressive to justify a valuation of 56 times forward earnings."
Oracle's results on Wednesday will be the next major test for technology.
Borrowing Costs
Investors are also concerned about the rising risks of borrowing costs. U.S. Treasury 10-year yields are over 4.5%, and 30-year yields spent more 'days north of 5% in this year than any other year since 2007, according LSEG data.
The Middle East is a hotbed of tensions. And maritime traffic in the Strait of Hormuz is well below the normal level. This keeps oil prices at $90 per barrel.
Bank of America analysts said that "Inflation is still sticky enough to cause 46 of 68 central banks around the world to exceed their targets. This helps explain why bonds are being repriced for a tighter policy and why long-duration investments, private credit and some EM currencies struggle."
Our Global Breadth Rule indicates that nearly half of the equity markets are already overbought. Leading the way is Korea, Taiwan, and Finland.
Bonds have been hit by the prospect that the Federal Reserve will raise rates to combat inflation. The dollar has gained 2% over the past four weeks. The May payrolls report released on Friday helped to cement the idea that at least one rate hike is possible this year. The U.S. Consumer Price Report, which is due on Wednesday, will likely show that energy prices continued to drive headline inflation up in May.
Futures prices indicate that a Fed rate hike could happen as early as October. A quarter-point increase is also almost fully priced in for December. The markets are fully priced in for the European Central Bank to raise the rate by a quarter point, from 2.25%, when they meet on Thursday. They also see the key interest rate at 2.5% or even 2.75%.
The dollar remained stable at 160.2 yen, well above the 160 yen mark that many believed could lead to more Japanese buying.
Satsuki Katayama, the Finance Minister, said on Tuesday that officials were "always ready to take decisive actions." The euro last rose 0.3% to $1.157. This was just above the nine-week low at $1.15. Meanwhile, the pound climbed nearly 0.5%, reaching nearly $1.34 after a three-week low. Brent crude futures fell 2.1% to $92.3 on the commodity markets. Oil prices have fallen from the four-year highs of late April, but they are still 30% higher than in late February. Futures for delivery of crude oil in six months time is 21% above these levels.
(source: Reuters)