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EU agrees stronger price controls for new carbon market
The European Parliament announced early Thursday that it had agreed to stronger measures to regulate?prices on its new carbon markets, in response to concerns from governments that the initiative to reduce emissions could increase fuel costs. Negotiators from the?EU and the European Parliament agreed that if the price of permits on the new carbon markets exceeds EUR45 ($52), then 40 million permits from the "stability reserves" will be released to the market to regulate the supply. This is an increase from the previous 20 million. Under the Wednesday evening changes, the reserve can be activated twice per year. This means that 80 million additional permits?can be issued each year. The reserve will be extended to 2030 and beyond, rather than ending in that year. The EU's second emission trading system (ETS), which will be implemented in 2028, will place a price on CO2 emissions from heating and transportation fuels. This is to encourage the shift to electric vehicles and more efficient home heating systems. The ETS will require that fuel distributors and suppliers purchase CO2 permits to cover their own emissions. The proceeds from this scheme will go towards helping people to pay their bills, purchase electric cars, and make energy-saving renovations in homes. The new scheme, known as ETS2, will cover heating and transportation emissions separately from the existing EU emissions trading system that covers heavy industry and power plants. ETS2 price regulation is stricter after governments such as France and the Czech Republic warned that it could stoke opposition to climate change policies if perceived to increase fuel prices. The revisions include a more gradual release from the'stability reserve' of market permits, with smaller quantities becoming available as soon as the number of permits falls below 260 millions, rather than releasing 100,000,000 permits all at once once the total drops below 210,000,000, according to the parliament. Before 2028, the agreement must be?adopted by the European Parliament?and?EU member countries?. In July, the European Commission will likely present a more comprehensive review of ETS2.
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US strikes on Iran boost oil as shares retreat, techs suffer losses.
Asian stocks dropped on Thursday due to a Wall Street sell-off following a higher-than-expected U.S. inflation reading. Meanwhile, renewed U.S. attacks on Iran fueled a rise in oil prices. MSCI's broadest Asia-Pacific share index outside Japan fell 0.9%. The drop was led by a 3% decline in South Korea's KOSPI. S&P 500 e-mini futures ?were ?0.3% lower. The United States launched a new round of attacks against multiple targets within Iran on Wednesday. This came after President Donald Trump had threatened to launch more strikes if a peace agreement was not reached. Iran responded by closing the Strait of Hormuz. Brent crude rose by 2% to $94.93 per barrel after trading resumed in Asia. Analysts believe that Asian stocks, which had been the strongest performers in the last two months, are likely to continue their recent declines as markets question whether or not the high expectations of earnings growth can be sustained. In a client note, Rupal Agarwal is Asia quant strategist for Bernstein in Singapore. She said that given the already stretched valuations of these extreme bullish expectations, they set a vulnerable background for momentum in Korea and Taiwan, as well as in the Asia tech sector. She added that it would be prudent to reduce the stock positions, noting that "the reescalation of the war front could accelerate this unwind." The S&P 500 fell 1.6% on Wednesday and the Nasdaq Composite was 2.0% lower. Data showed that U.S. Inflation accelerated at its fastest rate since April 2023 last month, although in line with expectations. Brent crude prices ended at $93.10 per barrel, an increase of $1.65, or 1.8%. This was after U.S. president Donald Trump warned that he would resume his attacks against Iran. The U.S. Dollar Index, which measures the strength of the greenback against a basket six currencies, has held steady at 100.03 and remained within the trading range that it's been in for the last week. The global reserve currency has reached its highest levels since early April, when the U.S. began negotiating with Iran for a ceasefire. Market expectations for the timing of the rate hike have moved closer but remain very balanced. Fed funds futures now price an implied 51.6% chance that the Federal Reserve will hike rates at its two-day October 28 meeting, compared with a 50.1% probability a day before that it would stay on hold until December. The yield of the U.S. 10 year?Treasury Bond was up 2.6 basis point at 4.564%. Bitcoin fell 0.5% to $61,445.19 while ether dropped 0.6% to $1,619.04 as the upcoming SpaceX IPO prompted a rotation away from cryptocurrencies and speculative investments. Gold fell 0.3% to $4,059.59. (Reporting and editing by Jacqueline Wong; reporting by Gregor Stuart Hunter)
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China's control of indium phosphide threatens AI data center rollout
Jim Anderson, the CEO of Coherent, a chipmaker backed by Nvidia in an earnings call early in May, warned about a shortage of Indium Phosphide. A U.S. delegation of businessmen accompanied President Donald Trump to China. Three sources with knowledge of the matter said that Anderson's trip was to highlight the delays in China's licensing for the export of the high-speed optical chip needed in the manufacturing of AI data centres. According to two U.S. officials and a person who was briefed about the talks, the issue was also raised during the Seoul talks between the top 'trade negotiators' of the two countries in advance of Trump's summit with China President Xi Jinping on May 14-15. Indium phosphide, or InP as it is commonly known in the industry, has become a powerful weapon that Beijing can use to disrupt the global roll-out of AI data centers. Konrad Wang is a SemiAnalysis research analyst. He said that InP was one of many supply chain bottlenecks that collectively limit AI data center buildouts. InP, a material that is essential to the new data center technology, which uses light via optical fibres or photonics instead of electrical signals transmitted through copper wire, is in high-demand. Nvidia announced in March that it would invest $2 billion each into U.S. companies Coherent, Lumentum and Lumentum Photonics. Custom-chip maker Marvell Technology acquired semiconductor startup Celestial AI to take advantage of its photonics work last year. Export restrictions by China on InP, which began in February 2025 have become a major obstacle?in the race to design fastest and most energy-efficient components?for AI data centres. The Chinese commerce ministry has not responded to a request for comments sent by fax. Beijing's control of InP shows that it is ready to extend its export restrictions on rare earths. These have been disrupting global supply chains for automotive, semiconductors and aviation since last year, as a result of Washington's tariff disputes. Paul Triolo is a partner with Albright Stonebridge Group. It is better to slow down or limit the export of upstream materials, such as metals, compounds and substrates. This will allow the optical-module eco-system to scale rapidly enough to meet hyperscaler demands. According to the U.S. Geological Survey, China will be the top indium producer by 2024. Its production will account for 70% of the global total. RIPPLE EFFECT AXT, which is the second largest InP substrate manufacturer in the world and a major Coherent supplier, said that "InP Export Permits represent the greatest challenge we face at the moment." The company said that its Chinese subsidiary, which manufactures the majority of its InP substrates in China, only received its first permits for export last June, and it has a large backlog of orders. SemiAnalysis Wang stated that "the restrictions ripple throughout the entire optical supply chains" beyond AXT or Coherent. He said that despite a quadrupling of production, Lumentum was sold out until 2028, and optical product makers VPEC, LandMark Optoelectronics, as well as Taiwanese VPEC, were experiencing InP substrate disruptions due to AXT permit delay. Since China introduced export controls on InP, a 6-inch InP Wafer's average price has risen 250% to $5,000. Sources familiar with the situation say that two of the largest U.S. chip manufacturers have asked for assistance with export licenses due to rising costs and disruptions. U.S. firms in the photonics industry are also attempting to manufacture their own InP and source them from non-Chinese sources, such as Japan's Sumitomo Electrical Industries. Analysts said that capacity additions were low and slow. It takes about two to three years for new plants to be brought online. Coherent announced in May that it will double its InP wafer production capacity at its Texas facility this year, and plan to do so again by 2027. AXT Coherent Lumentum VPEC LandMark and LandMark have not responded to requests for comments. LandMark signed a long term InP supply agreement with Sumitomo in April. Sumitomo said that the Chinese InP export controls have not had any effect on its production so far. According to a person familiar with China’s photonic chip sector, Sumitomo consumes most of its InP substratum output internally. This means that the global market is undersupplied. Market leaders?AXT, Sumitomo and JX Advanced Metals together account for nearly 80% of the global InP substrate production. CHINESE COMPETITORS China's export restrictions has created an opportunity for local manufacturers to produce InP substrates. Yunnan Germanium, Guangdong Xiandao, and Zhuhai Dingtai Xinyuan, are the leaders in this field. Many of these Chinese companies are rapidly increasing production capacity. Yunnan Germanium announced in April a 189-million-yuan investment ($28-million) to increase production capacity to 450,000 InP wafers per year. In its 2025 annual report, the company reported that shipments of InP Wafers increased by 74%. Guangdong Xiandao launched a new project through its subsidiary Guangdong Xianrui this year. The company expects to produce 40 tons of InP Crystals per annum, which is the raw material required for substrates. Sources at a Chinese InP manufacturer have confirmed that Yunnan Germanium, Guangdong Xiandao, and other Chinese InP manufacturers are currently in discussions with Chinese officials about export approvals. However, if they are approved, their shipments abroad will likely be limited. Source: The company is focusing on the domestic market in the short term. There's no evidence that the Chinese government will favour local players over AXT, which wants to export InP from China. The person added that companies like Coherent and Lumentum - which are primarily supplied by AXT and Sumitomo - would be unlikely to easily switch suppliers, since moving to a different supplier involves lengthy qualification cycles. No response was received from either Yunnan Germanium or Guangdong Xiandao to faxed comments.
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Oil prices rise $2 after Iran announces the closure of Strait of Hormuz as a result of US strikes
Oil prices rose?more than?$2 a barrel on Thursday after Iran closed the Strait of Hormuz - a critical energy chokepoint - following the U.S.'s additional strikes against Iran. Brent futures rose by $2.30 or 2.47% to $95.40 per barrel. Meanwhile, U.S. West Texas Intermediate crude (WTI), which is a derivative of WTI, rose by $2.60 or 2.89% to $92.63. U.S. crude futures gained over $3 in the early part of the session. Iran's top Joint Military Command announced on Thursday that the Strait of Hormuz would be closed to all vessels, including commercial and oil tankers, with the warning that any vessel attempting to pass through will be fired upon. The U.S. Military said on X Wednesday that commercial'ships' continue to transit the strait. Iran's state-run media had reported that missiles and drones were used to target U.S. warships near the waterway. U.S. forces launched additional strikes at multiple targets in Iran, starting at 5:15 pm EDT (21.15 GMT). This is the latest of a series of attacks that have escalated and 'threatens to reignite full-scale warfare. Iran's months-long blockade, which usually carries a?fifth of?the?global oil?and?gas shipments, has kept oil prices high. The EIA reported that U.S. crude oil inventories dropped by 7.2 million bbls. to 426.5 million bbls. in the week ending June 5. This was compared to analysts' expectations, which were based on a poll, of a 4 million barrel draw. Since the Iran War began on February 28th, U.S. crude inventories, including those in strategic reserves, have fallen by 79,000,000?barrels as the world's biggest producer has stepped up to fill the supply gaps caused by the closure of the Strait. (Reporting and Editing by Shri Navaratnam.)
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Venezuelan troops deploy against illegal gold miners in the key gold belt
Venezuelan troops have been deployed to target illegal groups that control 'key gold deposits', local residents and human rights activists claim. The government is trying to bring foreign investment into the mining sector, which has long lagged. Residents and activists monitoring the area report that troops have been deployed in Las Claritas, a town located in southern Bolivar State. The town is located in the Orinoco Mining Arc - a mineral-rich area near Venezuelan borders with Guyana, Brazil and Brazil. The Venezuelan Communications Ministry has not responded to a comment request immediately, nor has the government publicly addressed this operation. Five residents reported hearing explosions and gunfire. This caused many people to stay off the street and forced businesses to close. A 45-year old resident reported that "Bombs and gunfire were heard in the jungle". There are mines around those areas. "This is bad, you can't leave." A shopkeeper in Las Claritas reported that drones flew over his store for several hours at night. The residents refused to give their names out of fear for safety. According to non-governmental organizations, and U.N. investigators, much of the mining in the area is controlled by armed groups and organized crime. In a recent post, the rights group Provea stated that "the Venezuelan Army has deployed a massive operation at Km 88 and Las Cristinas in Bolivar State." "We warn against the possibility of extrajudicial executions, and arbitrary detentions of civilians in the region." Operation comes as Venezuela's newly formed government attempts to reopen areas that were previously closed to foreign investment. U.S. troops captured Venezuelan President Nicolas Maduro in January. Delcy Rodriguez was left to assume the position on an interim basis. Since then, Washington and Caracas have been discussing steps to revive investment in oil and mining. Venezuela adopted a new mining legislation in April to encourage foreign investment, while the U.S. Interior Secretary Doug Burgum stated that the government has pledged security guarantees for incoming firms. Crystallex, a Canadian mining company, had planned to develop a gold project at Las Cristinas until Hugo Chavez, the former president, stopped the project as part of his nationalization drive that included electricity, telecommunications and cement, steel, and oil. Foreign investment in mining was limited after?those takesovers. Experts now see potential for a recovery in gold exports within the next few years, but caution that massive investment and renewed exploration will be required. (Reporting and Writing by Daina-Beth Solomon; Editing Jamie Freed).
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ROI-Global trade in rude health? McGeever: Yes, with a catch
Global trade doesn't cool in the shadow of tariffs, wars on trade, real wars, and energy shocks. It's heating. How durable is it when the price, and not volume, is what's stoking up the flames? Recent trade data, from the U.S., China and other major economies, shows that cross-border commerce has grown at a faster rate than economists expected. In many cases the price increases were the primary cause of increased activity and surprising export figures. This reflects the spike in inflation caused by the Iran War, particularly on the oil and energy markets. This was especially true in the U.S. where exports reached a record of $327 billion last month, driven by shipments from a wide range of products. In fact, the goods surplus shrank to its lowest level since 2020. This is good news for the U.S. economic system, since the declining deficit could contribute to the growth of the economy in the second quarter. This could have been primarily due to the high prices of oil, fuel, and other energy products. This raises the issue of how durable this improvement is. It's clear that it isn't just the price that does all the work. The physical export volumes of Canada have returned to their previous levels before Donald Trump was elected to the White House by the U.S. in November 2024. This has sparked trade tensions with the neighboring countries. According to CIBC, the exports of April were only second to those in February last year when companies were preparing for Trump's looming duties. Base effects are another factor that may be affecting headline trade figures. The slowdown in trade during the first half of the year as Trump's tariff wars began is now used to compare year-over-year figures. This suggests that it's too early to predict a?trade revival. HAPPY CHIPS DAY! The price is also an important factor in Asia's trade boom. However, the soaring demand for AI is also fueling the sizzling numbers. China, the largest exporter in the world, saw its total exports rise 19.4% in May. Pantheon Macroeconomics says that sales of high-tech goods accounted for 12 percent of this. While the value of integrated-circuit exports has more than doubled in the last year, export volumes have only increased by 2%. This suggests that the headline figure is inflated because the price was high. The same thing is happening in other sectors. However, Beijing policymakers and critics will continue to focus on headline dollar figures, particularly the large one, China's total 12-month rolling trade surplus of more than $1 trillion. Taiwan's AI export surge was even more impressive. Exports rose in May more than expected to the second highest level by value ever, up almost 52% compared to a year ago. Price was again a major factor. TSMC, the world's largest manufacturer of advanced chips that power AI applications and a major global supplier to Nvidia and Apple, is located in Taiwan. Chips, computer equipment and software, as well as other high-tech products, have seen a surge in price over the last year, largely due to an explosion in demand. Goldman Sachs Global Institute estimates that AI-related investments will reach $7,6 trillion by 2031. SURPRISING RESILIENCE Global trade has shown a remarkable resilience, which few observers could have imagined possible in the face of volatile market conditions. Trump's "Liberation Day tariffs" triggered a global trade war, which may have ended decades of internationalization. Geopolitical rifts also threaten trade flows, notably in Middle East. The 'AI frenzy' is largely responsible for the booming global trade. The demand for these applications has been increasing, a large part of trade in AI products is cross-border and many have been exempted from tariffs. The question is, can this continue? Could the rise in AI compute costs curb demand eventually? Could major powers seek to reduce AI supply chains in order to minimize national security risks? The AI boom is unlikely to fade away, which suggests that trade activity may remain resilient, despite tariffs, protectionism and deglobalization. Everything seems to be dependent on the outcome of this tech story, just as it is with other parts of the global economic system. 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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South Korea demands fair treatment from EU on new steel import tariffs
His office reported that South Korean President Lee Jae Myung had asked the European Union to "consider" the Korean steel producers as the bloc prepares to raise import tariffs starting July 1. The president's office released a statement saying that Lee made this request at a meeting with European Council President Antonio Costa and European Commission Presiden Ursula von der Leyen in Belgium on Wednesday. The office reported that Lee requested the EU ensure that 'South Korean steelmakers' can access the'market of the bloc' on terms as favorable as those offered to their competitors. He cited South Korea's position as a strategic free trade partner to the EU. The European Parliament voted in 'May to reduce tariff-free imports of steel?by almost half, from levels in 2024?to 18,3 million metric tons per year. Tariffs of 50% will be applied to volumes above this level. This is an increase from the current 25%. Eurofer data shows that in 2024, South Korea will be the second-largest steel exporter into the EU, with 3.3 million tons of finished steel products.
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French utility EDF and Centrica eye UK Government deal on Sizewell B Nuclear Plant Extension
A spokesperson for EDF said on Wednesday that the French company and UK-based Centrica were prepared to invest?about PS800 million ($1.07 billion) in order to extend the life of Britain's Sizewell B Nuclear Power Station to 2055, from 2035. Sizewell B, located on the North Sea Coast in Suffolk, supplies almost 1.2 gigawatts to the grid and is the only pressure-water reactor in Britain. A spokesperson for the French utility said that it was looking to?agree on a framework' with the UK Government. EDF said that the volatility in the energy markets has increased the need to secure a model suitable for reducing commercial risks, and enabling investment decisions. Centrica holds a 20% stake in the UK's nuclear generation business of EDF Energy, which includes Sizewell B. EDF's British branch had stated in January that a life extension of the plant was technically possible and that negotiations were underway with the UK for the necessary investment. Bloomberg News reported, citing a source, that EDF, Centrica and the government were close to negotiating a draft agreement to extend life of the plant. According to the report, companies are close to a heads-of-terms agreement with Department for Energy Security and Net Zero. An announcement is expected in the next few weeks. Bloomberg reported that under the terms discussed, Sizewell B would receive approximately PS70 per megawatt hour of electricity generated. The UK Department for Energy Security and Net Zero, as well as Centrica did not immediately respond to requests for comments on the report.
VEGOILS-Palm rises following gains in Dalian palm oil contract
Malaysian palm oil futures opened higher for the third straight session on Wednesday, supported by gains in the palm oil agreement on the Dalian Product Exchange.
The benchmark palm oil agreement for June delivery on the Bursa Malaysia Derivatives Exchange rose 49 ringgit, or 1.14%, to 4,361 ringgit ($ 918.11) a metric load, during morning trade.
PRINCIPLES
* The soyoil agreement on the Dalian Commodity Exchange gained 0.23%, while its palm oil contract was up 2%. Soyoil prices on the Chicago Board of Trade were down 0.12%.
* Palm oil is impacted by rate movements in associated oils as they complete for a share of the global vegetable oils market.
* India's palm oil imports hit a ten-month low in March to 481,000 tons, as the leading grease purchaser increased sunflower oil imports amid lower rates, traders stated.
* Exports of Malaysian palm oil items for March were seen rising in between 11.77% and 29.2%, freight surveyors Intertek Testing Services, AmSpec Agri Malaysia and Societe Generale de Monitoring (SGS) said.
* Palm oil might extend gains into a variety of 4,432 ringgit to 4,462 ringgit per metric load, as recommended by a. projection analysis, according to ' technical expert. Wang Tao.
MARKET NEWS
* Asian shares tracked Wall Street lower on Wednesday as. U.S. yields held near four-month highs, while a powerful. earthquake in the area raised concerns about possible. disruptions to the essential chip-making industry.
* Oil prices extended gains on Wednesday as a. larger-than-expected fall in U.S. crude stocks and. intensifying geopolitical stress raised investor stress over. tighter products.
DATA/EVENTS (GMT)
0145 China Caixin Services PMI March
0600 Russia S&P Global Providers PMI March
0900 Euro Zone HICP Flash YY March
0900 Euro Zone HICP-X F, E, A&T Flash YY, MM March
0900 Euro Zone Joblessness Rate Feb
1200 Brazil Industrial Output MM, YY Feb
1300 Brazil S&P Global Solutions PMI, Comp PMI March
1345 United States S&P Global Services PMI, Comp PMI March
1400 US ISM Non-manufacturing PMI March
1600 Russia Unemployment Rate Feb
1610 US Fed Chair Jerome Powell speaks on the
economic outlook before the Stanford
Company, Government and Society Forum
(source: Reuters)