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MORNING BID EUROPE - So, is it a framework to a deal?
Wayne Cole gives us a look at what the future holds for European and global markets. They have a concept for a proposal for a framework to end the latest U.S. China trade impasse. This was all because President Trump tweeted that Beijing had violated the old agreement. The deal must now be approved by Trump, Chairman Xi and implemented. The Chinese thought that the talks were "rational", so this was a positive step. The details were scarce, but the U.S. team claimed that they would remove China's restrictions on magnets and rare earth minerals. Beijing's return is still unclear. It was not clear whether the truce would continue longer than before, and this could be the reason why the initial market reaction was not very enthusiastic. The U.S., European and Asian stock futures all fell between 0.2% to 0.6%. Asian shares were modestly stronger. The question of whether or not the levies on April 2 are legal remains. A federal appeals court has allowed the tariffs to continue in place while it reviews the lower court ruling that blocked them. Dollar and Treasuries are little changed, as the U.S. CPI is due later today. Any upside surprise will fuel stagflationary concerns to the detriment both markets. Analysts expect lower energy prices to keep the headline at 0.2% while the core will rise by 0.3%. The focus will be whether tariffs are reflected in the prices of goods, although their full impact may not appear until June. Investors are not prepared for high numbers, so any number that is in line with expectations will be welcomed. Treasuries are also subject to a 10-year sale, and the emphasis is on the amount of money that foreign central banks have bid. In May, the latter took 71% of all sales. Primary dealers received just 8.9%. We would welcome a repeat performance. The following are key developments that may influence the markets on Wednesday. * ECB wage tracking. Gabriel Makhlouf, Piero Cipollone, Philip Lane and Claudia Buch of the ECB Council; Yiannis Stournaras (policymaker) The British Finance Minister Rachel Reeves releases a spending review * U.S. CPI for May
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Scientists from the EU say that May was the second hottest month on record.
Scientists said that the world experienced its second warmest May in history, and climate change was responsible for a heatwave record in Greenland. The EU's Copernicus Climate Change Service said that last month was Earth's 2nd-warmest may on record. Only May 2024 will surpass it. This brings the northern hemisphere to its second-hottest spring ever. C3S reported that global surface temperatures were 1.4 degrees Celsius warmer last month than they were in 1850-1900, the pre-industrial period when humans first began to burn fossil fuels at an industrial scale. This ended a period of extreme heat in which the average global temperature was 1.5C higher than pre-industrial levels for 21 of the 22 previous months. Scientists warned that this break would not last. "While this may be a temporary respite for our planet, we expect that the 1.5C threshold will again be exceeded in the near future because of the continued warming climate system," stated C3S Director Carlo Buontempo. The burning of fossil fuels is the main cause of global warming. The planet experienced its hottest year ever in 2018. Separately, a study published on Wednesday by the World Weather Attribution Group of climate scientists found that climate change caused a record-breaking Heatwave in Iceland and Greenland, last month, to be about 3C warmer than it would have otherwise been. This contributed to an additional melting of Greenland’s ice sheet. Sarah Kew is a researcher and co-author of the Royal Netherlands Meteorological Institute's study. The Paris Climate Agreement states that countries will try to limit global warming to 1.5C to avoid the worst effects of climate change. Technically, the world hasn't yet reached this target. It refers to a global average temperature of 1.5C per decade. Scientists have stated that this goal is no longer achievable and urged the government to reduce CO2 emissions more quickly to avoid overshoot, as well as to fuel extreme weather. C3S records date back to 1940 and are cross-checked against global temperature records dating back to 1850. (Reporting and editing by Alex Richardson; Kate Abnett)
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Tower Resources Lines Up ADES Jack-Up Rig for Cameroon Drilling Op
Tower Resources, the AIM-listed oil and gas company focused on Africa, has issued a Letter of Award (LoA) to Advanced Energy Systems (ADES), an affiliate of Saudi firm ADES Holding, for the provision of a jack-up rig for drilling job in Central Africa.The rig proposed under the LoA is ADES’ Admarine 510, which will be put in charge of drilling the NJOM-3 well on Tower's Thali license in Cameroon in the fourth quarter 2025.The Admarine 510, a GustoMSC CJ-46-X100-D triangular design three-legged jack-up unit, built in 2019, and capable of operating in water depth up to 375 ft, is just completing its five-yearly recertification project in Bahrain.The rig has also recently been awarded a contract with Addax Petroleum for operations in Cameroon, to start in late 2025, and it is intended that the rig will drill the NJOM-3 well for Tower before beginning operations with Addax Petroleum.ADES Secures Jack-Up Drilling Rig Contract in AfricaThe commercial terms of the ADES proposal to TRCSA are confidential, but the fact that the Admarine 510 was already committed to move to Cameroon for other operators has facilitated the discussions with the rig owner and resulted in more favorable terms than the owner could have offered otherwise.The terms are well in line with the company's previous projections and compare very favorably to offers received from other rig owners earlier this year and last year.The LoA is subject to contract and usual conditions precedent, including receipt of government approvals in Cameroon and completion of TRCSA's farm-out to Prime Global Energies Limited as announced on in January 2025."We are delighted to make this award, and are looking forward to working with ADES on the NJOM-3 well this year. Our rig selection process has been made a little more complex by the opportunity to coordinate our timing with that of other nearby oil and gas companies, including Addax Petroleum in particular, however I believe it has resulted in a very good commercial outcome for all parties,” said Jeremy Asher, Tower Resources Chairman and CEO.
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North Sea O&G Operators Opt for Flylogix Drones to Tackle Methane Emissions
Flylogix, the operator of next generation unmanned aerial vehicles (UAVs), has secured contracts with several leading oil and gas operators to help tackle the industry’s methane emissions.Worth seven figures accumulatively, the contracts include a multi-year deal for Shell’s offshore and onshore assets serving the North Sea, alongside other major installations including the Ithaca Energy-operated Cygnus, one of the UK’s largest-producing gas fields.New deals, which also include the one with Equinor, will see drone flights for 16 U.K. oil and gas platforms and onshore terminals.Flylogix operates long distance ‘mini planes’ from sites in Aberdeenshire and Fareham, using its UAV technology to monitor methane emissions.“These awards are testament to the industry’s commitment to tackle offshore emissions on the path to net zero while meeting the U.K.’s vital energy needs.“Flylogix’s solution allows operators to receive timely data without the cost, emissions, or safety implications of sending crews offshore,” said Charles Tavner, Flylogix CEO.The work has been awarded to Flylogix as a revolutionary new airspace trial is set to take place with the Civil Aviation Authority (CAA).The year-long trial, due to begin this summer, will allow for long-distance drones to fly more freely in North Sea airspace, alongside other aircraft including helicopters. “The potential for this technology will only grow as we gear up for the CAA trial this summer, allowing our drones to fly more frequently to support oil and gas, defence, and renewables,” added Tavner.
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Oil prices fall as markets evaluate the outcome of US-China trade talks
The oil prices in Asian trade fell on Wednesday, as the markets assessed the results of U.S. - China trade talks that have yet to be reviewed and analyzed by President Donald Trump. Weak Chinese demand for oil, along with OPEC+'s production increase, weighed on the market. Brent crude futures fell 19 cents or 0.3% to trade at $66.680 per barrel. U.S. West Texas intermediate crude dropped 16 cents or 0.3% to $64.82 as of 0318 GMT. U.S. officials and Chinese officials have agreed on a framework for re-establishing their trade truce and resolving China's export limitations on rare earth minerals, magnets and other materials. This was announced by U.S. Secretary of Commerce Howard Lutnick on Tuesday after two days of intensive negotiations in London. "The current price corrections are a combination of technical profit-taking, and caution in the lead-up to (the official) announcement between US-China," said Phillip Nova. Senior market analyst Priyanka Sahdeva. Lutnick said that Trump would be informed of the results before giving his approval. Tony Sycamore is a market analyst at IG. He said, "I think that it will remove some downside risks for crude oil. This includes the Chinese economy, and it will stabilize the U.S. economic ship. Both of these should support crude oil demand and price." OPEC+, on the other hand, plans to increase its oil production in July by 411,000 barrels a day as it seeks to undo production cuts for a 4th consecutive month. However, some analysts do not expect regional demand to absorb these excess barrels. Hamad Hussain, climate and commodities analyst at Capital Economics and a noted expert on oil prices, said that a greater oil demand in OPEC+ countries - notably Saudi Arabia – could offset the additional supply of the group and support the oil price. Brent crude will still fall to $60pb at the end of the year, despite any seasonal boost in demand. The Energy Information Administration (the statistical arm of U.S. Department of Energy) will release its weekly report on U.S. crude oil inventories on Wednesday. According to sources citing American Petroleum Institute data on Tuesday, crude stocks dropped by 370,000 barrels in the past week. On Monday, analysts polled by expected that U.S. crude stockpiles would fall by 2 million barrels during the week ending June 6, but distillate and gasoline stocks are likely to rise.
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Analysts' reactions to the US-China Trade Agreement
U.S. commerce secretary Howard Lutnick stated that restrictions on magnets and rare earths should be resolved as a result of a framework for trade and implementing plan with China agreed in London. Li Chenggang, Vice Minister of Commerce in China, said that the two teams agreed to implement their Geneva consensus. They would then take the framework agreed upon back to their respective leaders. Market reaction: The dollar and share markets were cautious, with S&P futures down by 0.3%. They awaited more details and to see if the decision would last. QUOTES: CHRIS WESTON HEAD OF RESEARCH PEPPERSTONE MELBOURNE The devil is in the detail, but the lack reaction indicates that this outcome was fully expected. The Geneva agreement is a good thing, but the fact that there was no reaction on S&P500 Futures and only small movements in CNH and AUD suggests the outcome was expected. Details matter, particularly the amount of rare earths going to the US and the freedom of US chips to go East. But for now, as long as headlines about the talks between the parties are positive, risk assets will be supported. The reaction of Chinese equity markets could be telling, and I suspect US equity Futures will closely track the developments today." LIN GENGWEI is the co-founder and CEO of RAIN TREE PARTNERS in Singapore. Both sides are willing and under pressure to reach a deal. The Sino-U.S. Rivalry will continue to persist despite the temporary success of these talks. The U.S. may ease restrictions on chip exports from China in response to both pressures from Beijing and the domestic semiconductor industry. MARK DONG, CO-FOUNDER OF MINORITY ASSET MANAGEMENT, HONG KONG: This is good news for the market. There's now a bottom-line that neither side will cross. Both sides will work to reduce the trade deficit. MICHAEL McCARTHY, CHIEF OFFICER MOOMOO AUSTRALIA SYDNEY "I will be watching how bonds trade on this day in light of it." Currency markets seem to be taking this in stride and equity markets have returned to their all-time highs. Since weeks, the market has been anticipating this deal. It will be positive for the market, as a result of a weaker dollar and higher equities. But it is not a major change. CAROL KONG CURRENCY STRATEGIST, COMMONWEALTH BBANK OF AUSTRALIAN, SYDNEY "I believe in this climate...any hints of progress on a possible trade agreement will be beneficial for the markets. Although details are scarce, I believe that markets will be pleased as long as both sides are in communication. "It's going to be hard for both sides and take a very long time before they can reach a comprehensive agreement." This type of comprehensive agreement usually takes years to reach, so I am skeptical that the framework agreed upon at the London meeting will be comprehensive. "Tensions may have de-escalated temporarily, but will escalate in the coming months." RAY ATTRILL HEAD OF FOREX STRATEGY, NATIONAL AUSTRALIA BANK SYDNEY "The devil will be in the detail of what I call a handshake deal and, more importantly, if this can help to reestablish the trust between President Xi, and President Trump which was clearly broken since the Geneva Agreement has been published. It's too early to declare that we are in the process of creating a new, cast-iron US-China trading agreement. "The entire year was littered by positive omens of reaching agreements, but we haven't seen any real progress. Or we've seen a backsliding in things that seemed to be agreed. "Our view remains that, whatever is agreed upon in the next few weeks and months will result in a global situation that is worse than what existed before Trump was elected president. We'll still have a tariff climate that we believe is detrimental to global growth." TONY SYCAMORE MARKET ANALYST IG SYDNEY If we maintain the terms of the Geneva Agreement we will see US tariffs for Chinese goods remaining at 30% for some time, and Chinese tariffs for US goods remaining at 10%. This is a reduction from 145% and 125%, respectively. This would be amazing. "That was the consensus for me...and people are now trying to decide whether they want to buy or sell the US Dollar and I think that is a reflection of this indecision. I thought that Geneva would be extended and it appears we are getting what I expected. This is why the U.S. equity market has held up at this time. They still seem overcooked to me and I think they should pull back. We've had a great run, and now we're pushing up against our February record highs. For me, I think it's a good idea for them to take some time off. It has not exceeded expectations and it is also not below expectations. It's exactly where I expected we would land, and that's the reason I think there's now a bit of uncertainty in US equity futures."
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Iron ore prices rise as traders celebrate Sino-US trade progress
Prices of iron ore futures rose on Wednesday as progress was made in trade negotiations between the two world's largest economies. However, uncertainty about a final deal and a softening in steel demand limited further gains. After two days of intense negotiations in London, officials from the United States, the largest iron ore buyer in the world, and China, which is the second-largest consumer, have agreed on a framework that will put their trade truce on track. This has helped to boost prices by boosting the market sentiment. China buys over two thirds of the global seaborne supply. As of 0219 GMT, the most traded September iron ore contract at China's Dalian Commodity Exchange was up 0.86% to 706 yuan (98.24 dollars) per metric ton. The contract lost nearly 1% of its value on Tuesday. The benchmark July Iron Ore at the Singapore Exchange rose 0.55% to $94.9 per ton. Coking coal and coke, which are used to make steel, have both gained in value, rising by 1.35% and 0.67 percent, respectively. Steel benchmarks at the Shanghai Futures Exchange rose on higher raw material costs, but weak downstream demand limited gains. Rebar grew by 0.61%. Hot-rolled coil grew by 0.81%. Wire rod climbed 0.55%. Stainless steel fell 0.28%. Galaxy Futures analysts said that "Steel consumption is rapidly declining as we enter the off-peak season." The state-backed China Iron and Steel Association, which is concerned about the stability of the market, called for a boycott on Tuesday to stop the "rat race" style of competition. This was in response to spillover effects from the fierce price war between domestic automakers.
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Gold prices rise as US-China trade tensions persist and investors watch inflation data
The gold price edged up on Wednesday, as investors awaited key U.S. Inflation data to determine the direction of the market. As of 0153 GMT, spot gold was up 0.2% at $3,328.89 per ounce. U.S. Gold Futures rose 0.2% to $3349.80. U.S. officials and Chinese officials have agreed on a framework for re-establishing their trade truce and resolving China's export limitations on rare earth minerals, magnets and other materials. This was announced by U.S. Secretary of Commerce Howard Lutnick on Tuesday after two days of intensive negotiations in London. Lutnick stated that the U.S. delegation plans to present the framework for President Donald Trump's approval before implementation. The Chinese delegation will also seek President Xi Jinping's endorsement. "We know the U.S.-China negotiators are in agreement on a framework,' but uncertainty lingers until Trump or Xi give their approval. This uncertainty is causing gold to rise in the inflation figures, said Matt Simpson a senior analyst with City Index. In April, the U.S. imposed tariffs on China that were tit for tat. This sparked a trade conflict. Both nations agreed, following talks held in Geneva last week, to reduce tariffs from triple-digit levels. The World Bank slashed Tuesday its global growth projection for 2025 to 2.3% from 4.10 percent, citing higher tariffs and increased uncertainty as a "significant headwind". Investors could get more information on the U.S. Federal Reserve policy direction from the U.S. Consumer Price Index (CPI) due at 1230 GMT. Most economists polled believe that the Federal Reserve will hold interest rates for a couple more months. This is because there are still risks of inflation resurging due to Trump's policies. Palladium rose 0.3%, to $1063.62, while platinum was down 0.4% at $1216.42. (Reporting and editing by Harikrishnan Nair, Alan Barona, and Anmol Choubey from Bengaluru)
German wind power to drop on Monday
The market untraded the German and French power prices for the following Monday on Friday, as it weighed the expected decline in wind power in the region against the general decrease in demand.
LSEG data shows that the German and French baseload power prices for Monday were not traded by 1050 GMT.
According to LSEG, the German wind output is expected to decline by 6.4 gigawatts to 2.7 GW while France's was predicted to drop by 7.3 GW down to 1.8 GW.
Riccardo Paraviero, LSEG analyst, said that the German residual load increased week-over-week Monday due to a drop in renewable supply.
The French nuclear capacity fell by two percentage points, to 77% total, as the Paluel 3 Reactor went offline due to an unplanned shutdown.
EDF, the operator of Paluel 3, said that the reactor was taken off-line to test a pump that supplies the primary circuit.
LSEG data shows that power consumption in Germany will fall by 870 megawatts to 58.7 GW while in France, demand is expected to drop 2.5 GW to 51 GW.
The German power contract for the year ahead rose 2.6%, to 82.50 Euros per Megawatt Hour (MWh), whereas the French baseload contract for 2025 was not traded with a bid of 62.10 Euros/MWh.
The benchmark contract on the European carbon markets rose by 2%, to 68.69 euro per metric ton. (Reporting and editing by Forrest Crellin)
(source: Reuters)