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Eastman Chemical cuts spending in the face of market uncertainty and forecasts a quarterly profit that is below expectations
Eastman Chemical said Thursday that it will cut expenses to respond to the market volatility caused by President Donald Trump's tariff plans. In extended trading, shares of the company fell 3.5% to $78.00. Chemical companies are facing a weak market and high input prices, especially in Europe where the regulatory environment is challenging. This has forced them to rethink strategies. Trump's unpredictable trade policies have added to the uncertainty in the chemical industry. On Thursday, Dow Jones said that it expected earnings to be further pressured due to the persistent uncertainty. LSEG data shows that the company expects its second-quarter adjusted profits to range between $1.70 to $1.90 per common share. This is below Wall Street's expectations of $2.18. Eastman said that it would also increase its cost-reduction target to $75 million net of inflation and reduce capital expenditures for 2025 to $550 million, as opposed to its previous forecast of $850 million. The chemical company beat its first-quarter profit expectations, thanks to a strong performance at Kingsport and increased selling prices for its products. Eastman Kingsport in Tennessee uses advanced technology to recycle plastic waste into monomers that can be used to create new plastic products. The facility can recycle approximately 110,000 metric tonnes annually. According to LSEG data, the company reported a profit adjusted of $1.91 for the quarter ending March 31 compared with an average analyst estimate of $1.89.
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Stocks rise with tech shares, but dollar falls after recent gains
The major stock indexes rose Thursday as investors waited for further developments in U.S. China trade conflict. Meanwhile, the dollar fell after recent gains. The S&P 500 Technology sector rose 3.5% in one day, which is the highest of any sector within the benchmark index. After-hours trades for Alphabet, the parent company of Google, saw shares rise more than 3% following its release of first-quarter earnings. These results included earnings that exceeded analysts' expectations. The stock closed the regular session with a 2.5% gain. This earnings season will still bring us more results from the top U.S. technology companies. Donald Trump, the U.S. president, said that on Thursday trade talks were underway between the U.S.A. and China. This was in response to Chinese claims that there had been no discussion about easing the ongoing trade conflict. Beijing said that earlier, the U.S. would have to remove "all unilateral tariff measures" against China if they "truly wanted" the solution of the trade dispute. On Wednesday, the White House signaled that it would be open to reducing tariffs against China. Trump's tariff plan has caused a lot of volatility in the markets over the past few weeks. Thomas Martin, Senior Portfolio Manager at GLOBALT Atlanta said: "There is still a great deal of volatility. But add to that a market that has been oversold in virtually every measure." The first-quarter earnings report has been mixed. Businesses across industries have said they are increasing prices and are uncertain about the future because of Trump's policies and trade war. Unilever, the maker of Dove soap, pointed to a deteriorating consumer confidence in the United States. Meanwhile shares of International Business Machines plummeted after the company announced that 15 of its government contract were shelved as part of a cost-cutting initiative by the Trump Administration. The Dow Jones Industrial Average rose 486.63 points or 1.23% to 40,093.40. The S&P 500 increased 108.91 or 2.03% to 5,484.77. And the Nasdaq Composite increased 457.99 or 2.74% to 17,166.04. The MSCI index of global stocks rose by 11.65 points or 1.44% to 819.86. The pan-European STOXX 600 closed at 0.36%. Japan's Nikkei rose 0.5%. Ryosei Acazawa, the Japanese tariff negotiator, was reportedly making final preparations to travel to the United States on April 30 for a second round with his counterpart. The economic data released on Thursday revealed, among other things that the number of Americans who filed new claims for unemployment benefits increased marginally in the last week. This suggests the labor market is still resilient. Treasury yields in the United States fell amid expectations of lower tariffs than expected. Investors weighed up the possibility of the Federal Reserve cutting interest rates for the first time in June. Beth Hammack, President of the Fed Bank of Cleveland, called on Thursday for patience in monetary policy, given the high level of uncertainty. However, she did not exclude a rate cut by June depending on economic indicators. The yield on the benchmark U.S. 10 year notes dropped 7.8 basis points from 4.387% to 4.309% late Wednesday. In the past week, Trump made verbal criticisms of Fed Chair Jerome Powell and then withdrew calls for his resignation. The Treasury Department issued the final coupon debt of the week, $44 billion worth of seven-year notes on Thursday. The Tuesday two-year auction was a soft one, but the Wednesday five-year sale saw a good response. The dollar weakened against major currencies. The dollar was down 0.63% to $1.1383. The dollar fell 0.58% against the Japanese yen to 142.61. The dollar rose on Wednesday but has been one of the worst victims of Trump's tariffs. It was expected to decline for the entire month. Gold prices rose after falling by more than 3% the previous session. Spot gold increased 1.4% to $3333.90 per ounce. Investors also weighed the weaker U.S. Dollar when determining oil prices. Brent crude futures increased 43 cents or 0.7% to settle at $66.55 per barrel. U.S. West Texas Intermediate crude (WTI), which settled at $62.75, rose by 52 cents or 0.8%.
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Farmers in Northern Mexico fight drought after water dispute with US
This cattle ranching community in northern Mexico has a lot of dead animals scattered around the town. The drought, which has been going on for years, is forcing local farmers to think about moving to another area to find water and land. According to data from the government, more than 64% Mexico's land is suffering from some form of drought. The northern states, especially Chihuahua with its most severe levels of drought, are hardest hit. Mexico and the U.S. have been in heated negotiations about Mexican delays in delivering water quantities laid out in 1944's treaty. Donald Trump threatened to impose tariffs and sanctions if Mexico did not increase its water deliveries, which U.S. officials claim have devastated Texan Farmers. Mexico's government claims that drought has affected its ability to comply. Farmers in the Chihuahua town of Julimes are worried about their future. "I don’t think we'll hold out for much longer," said Leopoldo Ochoa 62 as he rode his granddaughter behind his herd on horseback. A lack of grass and water has forced farmers in northern Chihuahua to relocate their herds from the mountains where they usually graze. Ochoa is a resident of Valle de Zaragoza which depends on the La Boquilla Dam. If there isn't any more water, then we will need to look for another ranch. Imagine leaving this ranch at 60 years old, where you have lived your entire life, said Manuel Araiza. He added, "It's sad but the truth is that this will all come to an end." While diplomats in Mexico negotiate water deliveries to the U.S.A., Chihuahua farmers consider their future. Estreberto Monje, 57, said: "My children told me that this was no longer profitable. I should sell my animals." "The truth is that we've never experienced anything like this." (Reporting by Jose Luis Gonzalez, writing by Cassandra Garrison, editing by Sandra Maler)
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Stocks rise with tech shares, dollar falls after recent gains
The major stock indexes rose Thursday as investors awaited more developments in the U.S. China trade dispute, and the dollar fell after recent gains. Alphabet is expected to release its quarterly results after the closing bell. Alphabet has been up by 1.9%. S&P's technology sector led all other sectors in the S&P index with gains of about 3%. Donald Trump, the U.S. President, said that on Thursday trade talks were underway between the U.S.A. and China. This was in response to Chinese claims that there had been no discussion about easing the ongoing trade conflict. Beijing said that earlier, the U.S. would have to remove "all unilateral tariff measures" against China if they "truly wanted" the solution of the trade dispute. On Wednesday, the White House signaled that it would be open to reducing tariffs against China. Trump's tariff plan has caused a lot of volatility in the markets over the past few weeks. Thomas Martin, Senior portfolio manager at GLOBALT Atlanta said: "There is still a great deal of volatility. But add to that a market that has been oversold in virtually every measure." The first-quarter earnings report has been mixed. Businesses across industries have said they are increasing prices and are uncertain about the future because of Trump's policies and trade war. Unilever, the maker of Dove soap, pointed to a deteriorating consumer confidence in the United States. Meanwhile, shares of International Business Machines plummeted after the company announced that 15 of its government contract were put on hold as part of a cost-cutting initiative by the Trump Administration. The Dow Jones Industrial Average increased by 414.12 or 1.05% to 40,021.52, while the S&P 500 gained 95.32 or 1.78% to 5,471.18. Meanwhile, the Nasdaq Composite grew 395.37 or 2.37% to 17,103.42. The economic data released on Thursday revealed, among other things that the number of Americans who filed new claims for unemployment benefits increased marginally in the last week. This suggests the labor market is still resilient. The MSCI index of global stocks rose 10.45 points or 1.29% to 818.66. The pan-European STOXX 600 closed up by 0.36%. Japan's Nikkei rose 0.5%. Ryosei Acazawa, the Japanese tariff negotiator, was reportedly making final preparations to visit the United States on April 30 for a second round with his counterpart. Investors also considered the possibility that the Federal Reserve would cut interest rates for the first time in June. Beth Hammack, President of the Fed Bank of Cleveland, called on Thursday for patience in monetary policy, given the high level of uncertainty. However, she did not exclude a rate cut by June depending on economic indicators. The yield on the benchmark U.S. 10 year notes dropped 7.8 basis points from 4.387% to 4.309% late Wednesday. In the past week, Trump made verbal criticisms of Fed Chair Jerome Powell and then withdrew calls for his resignation. The dollar weakened against major currencies. The dollar was down 0.63% to $1.1383. The dollar fell 0.58% against the Japanese yen to 142.61. Gold spot prices rose, and oil prices rose too as investors took into account the falling dollar. Brent crude futures gained 43 cents or 0.7% to settle at $66.55 per barrel. U.S. West Texas Intermediate crude (WTI), which settled at $62.75, rose by 52 cents or 0.8%.
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Ukraine's Marchenko: We are working as fast as we can to seal the US Minerals Pact
Ukraine and the United States have yet to resolve issues before signing a crucial minerals agreement. But Kyiv officials continue to work to close a deal as quickly as possible, Ukrainian Finance Minister Serhii Marenko said on Thursday. Marchenko, along with other Ukrainian officials, met on Wednesday with U.S. Treasury Sec. Scott Bessent to discuss the deal as well as ongoing questions regarding Russian assets that have been frozen and held in the West ever since Russia invaded Ukraine in February 2022. A memorandum was signed by the two countries a week earlier as a first step in achieving an agreement to expand economic cooperation. This includes the development of minerals resources in Ukraine. However, this has been elusive. Donald Trump, the U.S. president, has been promoting this deal ever since he began his second term as president in January. Both sides were ready to sign an agreement on natural resources in February, but the deal was delayed and then revised after a heated Oval Office discussion between Trump and Ukrainian president Volodymyr Zelenskiy. Trump said last week that he expected a deal to be completed on Thursday. But Marchenko stated he didn't expect one this week. He and other senior Ukrainian officials are currently in Washington attending the Spring Meetings for the International Monetary Fund (IMF) and World Bank. Marchenko told an audience at the Ukrainian Embassy that "there was progress" and that now, our teams work very closely together. He said that "there are still questions we are discussing", without giving any further details. He said later that day: "We're working as quickly as we can to finalize the agreement." However, he did not give a specific deadline for the signing of the contract. He insisted that the talks would continue despite the attacks by Russia on Kyiv over night, saying they were unrelated. Treasury announced the meeting on Thursday with Ukrainian officials, and stressed the importance of signing the economic partnership as soon as possible. Trump wants a deal that would give the United States exclusive access to Ukraine's minerals and natural resources. He sees this as recompense for military assistance provided by former president Joe Biden. Washington said that it would abandon efforts to broker a deal between Russia Ukraine unless clear signs of progress were seen soon. Marchenko said Bessent also wants the issue of Russian assets that have been frozen - and which Kyiv claims should be handed over to Ukraine as payment for war damages - to become part of wider discussions. (Reporting and editing by Karin Strohecker, Diane Craft and Andrea Shalal)
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Valero will close Benicia refinery because of high costs and a tough regulatory environment
Valero Energy on Thursday said it would cease operations at its 170,000-barrel-per-day San Francisco-area oil refinery next year amid worries about California's declining fuel supplies and high gasoline prices. The refinery in Benicia will be able to continue operating until the end of 2026, after the refinery based in San Antonio, Texas, announced last week its intention to "idle or restructure" the refinery by that date. Valero said that it recorded a pre-tax impairment of $1.1 billion for its California refineries. Valero CEO Lane Riggs said that the challenging regulatory and enforcement environments was the reason for Valero's decision to cease operations. Benicia is the latest refinery to close in California. Phillips 66 announced in October that it would close its refinery near Los Angeles by the end this year. Phillips 66 converted its Rodeo refining facility into a renewables-production facility last year. California has some of the highest gasoline prices in the nation due to its reliance on imported fuel to compensate for a declining supply. California Governor Gavin Newsom told state officials this week to increase efforts to ensure reliable fuel supplies for California. Riggs, who spoke on Thursday in a conference call with analysts, said that California has pursued policies to transition away from fossil fuels over the last 20 years. As a result, the regulatory and enforcement environments are the most strict and difficult anywhere else. Riggs said that the Benicia refinery is more expensive to maintain than Valero’s 135,000 bpd Wilmington refinery, located near Los Angeles. Benicia refinery is responsible for 9% of crude oil refining in the state. The refinery converts feedstocks to products such as gasoline, jet fuel, and asphalt. Rich Walsh, Valero's executive vice president, stated during a conference call with analysts that "our current intention is to shut the refinery." We've had meetings with CEC (California Energy Commission), and we are working together to minimize the impact of losing the refinery. Reporting by Nicole Jao, New York. Editing by Margueritachoy
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Morningstar reports record global outflows of sustainable funds due to Trump's agenda
Morningstar, a researcher, said that investors withdrew an unprecedented $8.6 billion in the first three months of the year from global sustainable funds. The outflows were attributed largely to Donald Trump's shift away from climate and social initiatives. Europe accounted for the majority of the global $3.16 trillion funds. In the first quarter of 2019, net withdrawals from European Sustainable Funds reached $1.2 billion, which is a significant change from the net deposits in the previous quarter. This was the first time since 2018 that the region has seen net outflows. Morningstar's report stated that Trump's return as president deprioritized sustainability in Europe and that his executive orders against diversity equity and inclusion (DEI), have created new legal risk. Morningstar reported that concerns about fund performance in areas such as clean energy helped to drive money out. The U.S. withdrew $6.1 billion from the market in the first three months of the year, marking the tenth quarter straight that the United States has seen withdrawals. In a report accompanying this quarter's report, Hortense Biy, Head of Sustainable Investing Research at Morningstar Sustainalytics said: "The quarter marks a change, not only in flows but also in how sustainable investments strategies are perceived and positioned on the market." Bioy stated that "we're seeing more signs of consolidation, product development and rebranding, amid an intensifying ESG reaction in the U.S., which is now affecting sentiments in Europe." In the first quarter of 2016, 54 new sustainable products were launched, which is about half the number that was launched in the previous quarter. Asset managers rebranded sustainable funds by changing or dropping their environmental, governance, or social terms in the first three months, which is more than double the number of the previous quarter. (Reporting and editing by Diane Craft; Ross Kerber)
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PG&E's lower expenses cause it to miss first-quarter earnings estimates
PG&E Corp. missed its first-quarter profit estimate on Thursday as it was hit by higher operating expenses and interest costs. Interest rates that are higher for longer increases the borrowing costs of utility companies. These companies need to borrow more money for their expenses, such as grid maintenance. PG&E's interest costs rose by 2.7% in the first quarter of this year, to $734 millions. In January, multiple wildfires scorched thousands of acres in Los Angeles. This is expected to be the costliest natural disaster in U.S. History. Electric utilities in the area have also been under increased scrutiny. The utility expects to upgrade its wildfire safety systems and install underground powerlines for nearly 700 miles between 2025-2026. PG&E reported that the average residential electric rate in March was lower than it had been a year before. It expects natural gas rates to stay flat until 2025. PG&E said on a call after earnings that 90% of the equipment it sources is from domestic suppliers. It also believes its tariff exposure to be "very manageable". LSEG data shows that the company's total revenue for the quarter was $5.98 Billion, which is less than analysts' estimates of $6.14 Billion. Total operating expenses for the quarter ending March 31 were up 3.8% to $4.76 billion. Oakland, California's utility announced that it has increased its data center pipeline to 8.7 gigawatts (from 5.5 GW) and added nearly 3,000 new customers to its electric grid in the last quarter. PG&E's adjusted profit per share was 33 cents, compared to the analyst average of 34 cents. (Reporting from Bengaluru by Pooja menon; editing by Maju Sam)
Trades to Make Europe Great Again are gaining momentum
Investors are recognizing that a more independent and less U.S. dependent Europe is emerging. These opportunities go beyond simply buying defence stocks.
There is good reason to be cautious, as the massive German expenditure on infrastructure and defence will not be felt for some time. Many are still playing the long-game.
Mark Dowding is the CIO of RBC's BlueBay Fixed Income team. He said that MAGA trades have now replaced MEGA trades. MAGA trades had lost their appeal. Mark was referring to President Donald Trump's Make America Great Again campaign.
DEFENCE FIRST
The German fiscal expansion and the Brussels plan to mobilize up to 800 billion euro ($866 billion) in rearmament means that defence stocks are still a fertile investment ground, even though they have risen since Russia invaded Ukraine 2022.
European aerospace and defense stocks are up 33% in the past year. The valuation multiples of these stocks now exceed those of their U.S. counterparts, reaching levels usually associated with high-tech or luxury goods.
This month, the tankmaker Rheinmetall briefly traded at a higher price than Ferrari, with a 44-fold multiple of its expected earnings. Investors are willing to pay more for this long-term trend.
Citi estimates that the average annual profit growth of defence companies is expected to range from 8% at BAE up to 32% at Rheinmetall by 2028.
It's not easy for the European Union to purchase more European weapons. Data from the European Commission shows that 78% of EU purchases have been made outside the EU since 2022. 63% went to the U.S.
Some caution after a large rally.
Markus Hansen, the Vontobel Fund Manager Markus Hansen believes that investors should concentrate on areas where there is a real and pressing need such as rebuilding depleted ammo stockpiles or infantry-related gear.
Defence supply chain companies and other sectors, including communications, could also benefit.
Eutelsat's stock has risen 260% in the last month on speculation that it could replace Elon Musk’s Starlink satellite to provide internet access to Ukraine.
Defence is not just about weapons. It's also about data, communication and logistics. Tomas Hildebrandt, portfolio manager at Evli, said that the value chain is a complex one where suppliers are important.
He said that examples could include the truckmaker Scania, Traton's Atlas Copco, which manufactures machinery for industrial and infrastructure projects, as well as construction companies.
Hey Bond
There will be more triple-A rated debts, whether they are joint EU bonds or German debt. This will help to maintain the status of the euro as a reserve currency.
The historic infrastructure and defense spending in Germany could amount to more than A
Additional debt of trillions of euros
Even the EU's supporters did not anticipate this move just a few months ago.
The SAFE bonds will add to the EU's debt of 650 billion euros.
This is a sign that the EU might be able to become a permanent borrower, as investors had long hoped. It would also mean it was ready to take on another challenge following its COVID-19 Recovery Fund.
However, the loans are only a small part of the 800-billion euro plan. The rest is left to the national governments.
3/ BINGING ON IT
The fiscal boost has brightened the economic outlook and European banks have surged by 26% in the first quarter of the year, their best since 2020.
Berenberg predicts that Germany's GDP will grow by roughly 1.4% between 2026 and 2027, after nearly four years of stagnation.
According to a March survey by BofA, the biggest sector overstretch in Europe is insurance and banks. Industrials are next.
Trevor Yates is a senior investment analyst at GlobalX and noted that the firm's DAX German stocks ETF has been receiving a lot of interest.
Investors expect European regulators to ease bank rules in light of the U.S. regulatory drive.
BlueBay Dowding stated that European bank capital bond were the firm's biggest overweight position in multi asset credit funds.
PERIPHERAL WINNS
Manish Kabra of Societe Generale's multi-asset strategist says that Spanish and Italian stocks are cheaper than those found in the core Europe. They could be poised to gain.
Southern European stocks also have a lower exposure to U.S. Tariffs than Germany and France, but they are heavily exposed to banks.
There are parallel developments. The German debt brake is one thing, but the MDAX (midcap) and the long euro are the other. "The two things that impact the banks are banking regulation and nominal GDP growth in Europe," Kabra explained.
The periphery provides exactly that.
5/ RENEWABLE
Analysts said that the push for Europe to become more independent in energy, starting 2022, will continue. Renewable energy and domestic power companies are expected to benefit.
The European Commission presented an Action Plan that aims to accelerate permits for renewable energy, change the way energy tariffs are calculated, and increase aid from state for cleaner industries and flexible power generation.
The German government plans to increase its spending by 100 billion euros, which will go towards climate and economic transformation.
Think tank Ember reports that solar generation will provide 11% of EU electricity in 2024 compared to 9.3% in 2030, and surpass coal.
Iberdola Endesa Enel, European utility companies have all rallied between 7-16% this year.
(source: Reuters)