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Powell's comments and data gauged the impact of Powell's comments on US yields, stock prices, and US stocks.
Investors weighed the latest economic data from the United States and remarks by Federal Reserve chair Jerome Powell in order to determine when interest rates will be cut. Powell said at a central bank conference in Sintra that he couldn't say whether July would be too soon for a rate reduction, but "it will depend on the data and we are going from meeting to meeting." According to CME's FedWatch Tool the market expectations for a rate cut in July briefly increased to 21,2%, up from 18,6% in the previous session. However, they then declined to 19,1%. The Dow Jones rose about 1% on Wall Street but the S&P 500, Nasdaq and Nasdaq remained in check after reaching record levels Monday. This was partly due to a nearly 6% increase in Tesla following President Donald Trump's threat to stop the federal subsidies worth billions that Elon Musk’s companies receive. The Dow Jones Industrial Average gained 427.24, or 0.99%, to 44,522.63. The S&P 500 increased 1.03, or 0.02% to 6,206.19. And the Nasdaq Composite dropped 107.68, or 0.5%, to 20,262.06. The MSCI index of global stocks rose 0.32 points, or 0.03% to 918.21, while the pan-European STOXX 600 closed down 0.21%. Concerns over the impact of the tariffs on the global economy were reignited as the deadline of July 9 by Trump drew closer. The Institute for Supply Management reported that U.S. manufacturing was still in contraction in June. The Job Openings and Labor Turnover Survey (JOLTS) report showed that the number of openings had increased by 374,000, to 7.769 millions, on the last day in May. However, a decrease in hiring suggested the market might have slowed. Brian Jacobsen is the chief economist of Annex Wealth Management, a company in Menomonee falls, Wisconsin. "Despite a big jump in job openings, the economy remains stuck in Powell's equilibrium, which says, 'no fire, no hire'. It's not an equilibrium that is stable and, if you look at the ISM Manufacturing data for the summer, it may be the case that the job market will become weaker. Investors are closely watching the key government payrolls data due out on Thursday, a day sooner than usual because of the Independence Day holiday. This report will help to shape their expectations about rate cuts by the Fed. After the data, U.S. Treasury rates reversed their course and moved higher. The yield on the benchmark 10-year U.S. notes rose 2.9 basis points to 4,255%. The yield on the 2-year note, which is usually in line with expectations of interest rates from the Federal Reserve (usually based on their forecasts), rose by 6.2 basis points, to 3.783%. Trump's tax-cut and spending legislation continued its advance, as the Republican-controlled U.S. Senate passed by the thinnest of margins, and now heads back to the House of Representatives for final approval. "It will create some problems for fixed income markets as we continue spending no matter which party in power is in office, and that, in the end, is a negative for stock market," Rick Meckler said, a partner at Cherry Lane Investments, in New Vernon, New Jersey. Investors are not worried about inflation and continue to purchase stocks. The dollar index (which measures the greenback versus a basket currencies) is on course to end an eight-session streak of declines. The euro fell 0.03% to $1.1782, while the pound fell 0.01% at $1.3732. The dollar fell 0.26% against the Japanese yen to 143.63. The Bank of Japan Tankan Index of Business Sentiment showed that the largest economies in the region are likely to be holding up despite tariffs. A separate survey of the private sector revealed that the manufacturing sector in Japan expanded for the first time since 13 months in June. U.S. crude oil rose by 0.4% to $65.37 per barrel. Brent was up to $67.05 a barrel, a 0.46% increase on the day.
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Stellantis could close its factories as a result of EU fines on carbon emissions
The head of Stellantis' European operations, a Franco-Italian company, said that the automaker may be forced to shut down factories as he fears hefty fines from the European Union for failing to meet CO2 emissions targets. As part of the EU's effort to curb the devastating effects of climate changes, European auto manufacturers must sell more electric cars to reduce CO2 emissions. Otherwise, they risk being penalized. The automaker industry successfully lobbied to extend the deadline for compliance, so that fines are based on emissions in 2025-2027 and not just 2025. Jean-Philippe Imparato, the Europe Chief of Stellantis, said that automakers were not able to reach their targets and his company could be fined up to 2,95 billion euros in "two-three" years. He said, at a conference held in the lower chamber of the parliament in Rome, that if there are no significant changes to the regulatory environment by the end this year, then "we will be forced to take tough decisions." Imparato explained that Stellantis's fleet would have to be re-energy by switching to electric vehicles rather than petrol or diesel. This is not possible, as Stellantis either has to double the sales of electric vehicles (which is impossible) or reduce the production of petrol/diesel vehicles. "I have only two options: either I push hard (on electric vehicles) or I shut down ICEs (internal-combustion engine vehicles). "I close factories," he said at one point, mentioning Atessa's Italian van plant.
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Minister: Peru's economy is expected to grow by up to 3.5% per year in 2025
Economy Minister Raul Perez stated on Tuesday that Peru's economic growth is expected to be between 3.0% to 3.5% by 2025. This is lower than what the government previously predicted and compares to the 3.33% recorded last year. Perez said at a press event that he didn't see "severe risk" for Peru's economic future from the United States tariff policies. The Minister's Estimate is higher than the Central Bank's forecast for 2.9% growth in late June, but lower than earlier estimates by the government that projected a 3.5%-4% expansion. Peru's economy has been one of Latin America’s best performers for decades. But in recent years, growth has slowed due to social unrest that hit the mining sector and political instability. Perez stated that his ministry would meet with executives of the embattled Petroperu to ensure that its cash flow remained "viable." The company, which was seeking alternative sources of funding to avoid relying on more state aid, reported a net loss of $111 million in the first quarter of this year. (Reporting and editing by Natalia Siniawski, Alison Williams and Marco Aquino)
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Bezos' methane satellite lost in space
The group operating the satellite said that an $88 million satellite that was backed by billionaire Jeff Bezos and that detected emissions from the oil and gas industries of the powerful greenhouse gas, methane, has been lost in orbit. Environmental Defense Fund, who led the initiative, stated that MethaneSAT was collecting emission data and images at drilling sites, pipelines and processing facilities in the world since March. However, it went off track around 10 days ago. EDF stated that it does not expect the satellite to be recovered, as it has lost power. Amy Middleton is the senior vice president of EDF. She said: "We see this as a setback and not a failure." "We have made so many progresses and learned so much that we would not have these learnings if we had not taken this risk." Launching MethaneSAT on March 20, 2024 marked a major milestone in EDF's campaign to hold more than 120 nations accountable for their pledges to reduce methane emissions in 2021. The report also sought to enforce a promise made by 50 oil and gas firms at the Dubai COP28 Climate Summit in December 2023, to eliminate methane emissions and gas flaring. Methane has a powerful greenhouse gas. Its warming power is 80 times greater than that of carbon dioxide in a period of 20 years. Scientists believe that capping oil and gas leaks in wells and on equipment is one of the fastest and most effective ways to combat global warming. MethaneSAT is not the only satellite project that publishes data on methane emission sources. However, it's supporters claim it provides more details on these emissions and has partnered with Google in order to create an publicly available global map of emissions. ENGINEERS INVESTIGATING EDF said that it reported the lost satellite on Tuesday to federal agencies, including the National Oceanic and Atmospheric Administration (NOAA), Federal Communications Commission and U.S. Space Force. According to the EDF, the cost of building and launching the satellite was $88 million. The Bezos Earth Fund had granted $100 million to the organization in 2020. Arnold Ventures and the Robertson Foundation, as well as the TED Audacious Project along with EDF donors also provided major financial support. The project also had a partnership with the New Zealand Space Agency. EDF stated that it has insurance to cover any losses and that its engineers are investigating the incident. The organization stated that it would continue to use resources, such as aircraft equipped with methane detection spectrometers to search for methane. The company also stated that it is too early to determine whether or not it will launch another satellite, but MethaneSAT was a proof of concept for a highly sensitive tool "that could see total methane emission, even at very low levels, across wide areas." The United Nations reported in a recent report that despite efforts to increase transparency about emissions, "super-emitters of methane" rarely take action when they are alerted. As the United States, under Donald Trump's second term in office, has ended its program to collect data on greenhouse gases from major polluters as well as rescinded Biden era regulations aimed at curbing Methane, there is less pressure to act. (Reporting and editing by Barbara Lewis, Alison Williams, and Valerie Volcovici)
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Bezos' methane satellite lost in space
The group that operated the satellite said on Tuesday that an $88 million satellite, backed by billionaire Jeff Bezos, that measured the emissions of powerful greenhouse gases methane from the oil and gas industries had been lost in the space. Environmental Defense Fund, who led the initiative, stated that MethaneSAT was collecting emission data and images at drilling sites, pipelines and processing facilities in the world since March. However, it went off track around 10 days ago. EDF stated that it does not expect the satellite to be recovered, as it has lost power. Amy Middleton is the senior vice president of EDF. She said: "We see this as a setback and not a failure." "We have made so many progresses and learned so much that we would not have these learnings if we had not taken this risk." MethaneSAT was launched in March last year as part of a campaign that EDF has been running for years to hold more than 120 countries accountable who in 2021 committed to reduce their methane emission. The report also sought to enforce a promise made by 50 oil and gas firms at the Dubai COP28 Climate Summit in December 2023, to eliminate methane emissions and routine gas flaring. Methane has a powerful greenhouse gas. Its warming power is 80 times greater than that of carbon dioxide in a period of 20 years. Scientists believe that capping oil and gas leaks in wells and on equipment is one of the fastest and most effective ways to combat global warming. MethaneSAT is not the only satellite project that publishes data on methane emission sources. However, it's supporters claim it provides more details on these emissions and has partnered with Google in order to create an publicly available global map of emissions. EDF said that it reported the lost satellite on Tuesday to federal agencies, including the National Oceanic and Atmospheric Administration (NOAA), Securities and Exchange Commission and U.S. Space Force. According to the EDF, the cost of building and launching the satellite was $88 million. The Bezos Earth Fund had granted $100 million to the organization in 2020. Arnold Ventures and the Robertson Foundation, as well as the TED Audacious Project along with EDF donors also provided major financial support. The project also had a partnership with the New Zealand Space Agency. EDF stated that it has insurance to cover any losses and its engineers are investigating the incident. The company said that it will continue to use all of its resources to search for methane leaks, including aircraft equipped with methane detection spectrometers. The United Nations reported in a recent report that despite efforts to increase transparency about emissions, "super-emitters of methane" rarely take action when they are alerted. As the United States, under Donald Trump's second term in office, has ended its program to collect data on greenhouse gases from major polluters as well as rescinded rules established by Biden to curb methane emissions, there is less pressure to act. (Reporting and editing by Barbara Lewis; Valerie Volcovici)
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Investors assess data and Powell's comments as they lower the dollar and stocks
The dollar and global shares both fell for the ninth consecutive session on Tuesday as investors analyzed a torrent of U.S. data and Jerome Powell's comments to determine the timing of interest rate cuts. Powell said that he couldn't say whether July was too soon for a rate reduction, but "it will depend on the data and we go meeting by meeting". According to CME's FedWatch Tool, market expectations for a cut in July have increased to 21,2% from 18,6% the previous session. The Dow Jones advanced on Wall Street but the S&P 500, Nasdaq and Nasdaq retreated to record lows after a fall of over 5% by Tesla. This was due to the threat of U.S. president Donald Trump of cutting off billions in federal subsidies for Elon Musk's businesses. The Dow Jones Industrial Average fell 227.77, or 0.52% to 44,322.06, while the S&P 500 dropped 19.78, or 0.32% to 6,185.17, and the Nasdaq Composite declined 181.49, or 0.89% to 20,190.00. MSCI's global stock index dropped 1.69 points or 0.18 percent to 916.20, while the pan-European STOXX 600 fell by 0.3%. Concerns about the impact of tariffs and the global economy were reignited as the deadline of July 9 neared. According to the Institute for Supply Management, U.S. manufacturing data for June showed that the industry was still in contraction territory. The Job Openings and Labor Turnover Survey (JOLTS) report showed that the number of openings had increased by 374,000, to 7.769 millions, on the last day in May. However, a decrease in hiring suggested the market might have slowed. Brian Jacobsen is the chief economist of Annex Wealth Management, based in Menomonee falls, Wisconsin. "Despite the large increase in job openings, the economy remains stuck in Powell's equilibrium, which states that there are no new hires and no firings." It's not stable and the ISM Manufacturing data may indicate a weaker employment market this summer. Investors are closely watching the key government payrolls data due out on Thursday, a day sooner than usual because of the Independence Day holiday. This report will help to shape their expectations about rate cuts by the Fed. After the data, U.S. Treasury rates reversed their course and rose. The yield on the benchmark U.S. 10 year notes increased by 2.9 basis points to 4.25%. The yield on the 2-year bond, which is usually in line with expectations of interest rates for the Federal Reserve has risen 4.3 basis points, to 3.764%. The markets were also waiting for a resolution on Trump's tax cut and spending legislation that the Senate Republicans in the United States were battling to pass. The dollar index (which measures the greenback versus a basket currencies) rose by 0.09%, to 96.85. The euro fell 0.08%, at $1.1776. The pound fell 0.17%, to $1.3709. The dollar fell 0.34% against the Japanese yen to 143.52. The Bank of Japan’s tankan business sentiment index showed that the largest economies in the region are likely to weather the tariff storm at least for now. A separate survey of the private sector revealed the manufacturing sector in Japan expanded for the first time since 13 months in June. U.S. crude climbed 0.48%, to $65.42 per barrel. Brent rose 0.27% to $66.92 a barrel.
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Kpler data show that Saudi Arabia increased crude exports to the United States in June.
Saudi Arabian oil exports reached their highest level in over a year during June, as the country shipped more crude into overseas storage amid fears that supply disruptions could be caused by conflict in the Middle East. OPEC’s largest producer has intervened on oil markets since decades ago to supply more oil when there are disruptions in the market or reduce output when they feel that the market is oversupplied. Kpler data show that crude exports increased by 450,000 barrels a day (bpd), from the level of May to 6.33 millions bpd, in June. Kpler predicts that there could be an increase to almost 7.5 millions bpd in July. The rise in prices last month came against the backdrop of concerns about disruptions to supply due to conflict between Israel, Iran and a U.S. strike on Iranian nuclear sites. OPEC+ sources claim that Saudi Arabia and the OPEC+ producer groups are looking to increase market share following years of production cuts. The June increase coincided also with a June decision by OPEC+ that it would raise its oil production quotas by 411,000 bpd. (Reporting and Editing by David Goodman).
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Trump highlights 'Alligator Alcatraz,' Florida deportations ahead of the bill deadline
U.S. president Donald Trump arrived in Florida Tuesday to open a remote migrant center in the Everglades, dubbed “Alligator Alcatraz”, as he presses lawmakers to pass a spending bill that would increase deportations. The facility is located about 60 km (37 miles) south of Miami, in a subtropical wetland filled with crocodiles, alligators and pythons. This is a frightening symbolism that the White House uses to demonstrate its determination to remove migrants who it believes were wrongfully allowed to remain in the United States under the former president Joe Biden's Administration. Karoline Lavitt, White House spokesperson, said at a Monday news briefing that there is only one way in and only one way out. The area is remote and is surrounded by dangerous animals and harsh terrain. "This is a low-cost and efficient way to carry out the largest deportation campaign ever undertaken in American history." Trump issued an official warning on Tuesday about the wildlife in the area. Trump told reporters that he would not like to run for a long time through the Everglades. Congressmen are discussing the details of a new bill that would increase funding for deportations. Trump has been adamant about pushing the bill through Congress before the Independence Day holiday on July 4. It includes his tax and spending plans, as well as tens billions in funding for immigration enforcement. HARDLINE POLICIES Since a decade, the Republican president who lives in Florida has made border policies that are hardline a central part of his political agenda. One out of eight voters in the 2024 U.S. elections said that immigration was their most important concern. Trump's pledge to deport up to 1 million people a year has been met with protests from the affected communities, legal challenges and employer demands for low-cost labor. Lawyers representing some of the migrants detained have questioned the legality and conditions of temporary detention centers. Government data shows that the number of federal immigrants in detention has increased dramatically to 56,000 on June 15 from 39,000 at the time Trump assumed office. His administration is also pushing to find additional space. White House officials have said that the detentions were necessary for public safety. Some of the migrants detained had criminal records. However, U.S. Immigration and Customs Enforcement statistics show an increase of eight times in the arrests of those charged with only immigration violations. Trump has praised the vast prisons that El Salvador has built and his administration has detained some migrants in the Guantanamo Naval Base, located in Cuba. This base is best known for housing suspects of foreign terrorism following the September 11th, 2001 attacks on the United States. U.S. officials used social media to promote the opening of this facility by posting images of alligators in hats from Immigration and Customs Enforcement. Florida Republican Party sells gator themed clothing and beer koozies. Rep. Debbie Wasserman Schultz (a Democrat from a nearby congressional district) said in a statement sent via email that "Trump, and Republicans desperately need this wasteful dangerous mass misery distraction." This is in reference to a bill which would result in residents of the state losing their health insurance benefits. Officials estimate that the complex at Dade Collier Training and Transition Airport in southern Florida could cost up to $450 million per year and house 5,000 people. Florida Governor Ron DeSantis said that he would send 100 National Guard soldiers to the area. Federal Emergency Management Agency (the U.S. government's disaster recovery service) is expected to provide a portion of funding. Local leaders, including those from nearby Miccosukee or Seminole Tribes, have protested the construction of the facility and pointed out the sensitive environment in the area. Demonstrators have gathered in large numbers to protest the construction. Tom Homan, Trump's border czar, said in an interview Monday that the facility was "great". "We need to add more beds." "We need to pass the beautiful, big bill."
Investors wait for Trump's tax bill to see if it will affect the stock market and dollar.
The dollar fell to multi-year lows and global shares dropped on Tuesday. It had just finished its worst half-year performance since 1970, and was ahead of the vote on President Donald Trump’s tax-cutting and spending legislation.
The previous day, optimism about trade helped global share markets reach an intraday high. The Senate debate over Trump's proposed bill, which is estimated to add $3.3 billion to the United States debt pile, weighed down on sentiment.
The European share market, which had a gain of 6.5% on a year-to date basis at the end of June, was down by 0.4% for the day.
The tax-cutting and spending bill was expected to be voted on during Tuesday's Asian trading session, but the debate continued over the long list of amendments proposed by Republicans and minority Democrats.
Trump wants to pass the bill before the Independence Day holiday on July 4. Investors are also looking forward to Thursday's key U.S. employment data as global trade negotiators rush to reach agreements before Trump's deadlines.
Ray Attrill is the head of FX Strategy at National Australia Bank.
He said on NAB's The Morning Call Podcast that the payroll data due later this week would "have a significant impact, I believe, on the sentiment regarding the timing of Fed rate reductions".
POLITICAL DRAMA
Futures for the S&P 500 index and Nasdaq fell 0.2%, indicating a slight pullback in the opening of trading later. Tesla shares fell 5% or more in pre-market trade after Trump suggested that the government's efficiency department review the subsidies provided to CEO Elon Musk's companies.
Musk criticised Trump's proposed budget and social media exchanges between the two began to devolve into personal attacks as of early June.
This political drama, which could be a resurgence of the bear story just as shares are starting to recover, said Matt Britzman. Senior equity analyst at Hargreaves Lansdown.
Tesla is still among the top 10 most valuable Wall Street companies, but its value has dropped by around a third since December, when it reached a record-high.
Nvidia, another heavyweight, is also on its way to becoming the most valuable business in history. It's market capitalisation is approaching $4 trillion. In pre-market trading, the chipmaker's stock was down slightly.
The Bank of Japan’s tankan business sentiment index and a Chinese measure of factory activity showed that the largest economies in the area were likely to weather the tariff storm at least for the moment.
Japan's manufacturing sector also grew for the first time since more than a month, but a significant drop in demand underscored the difficult trade outlook for Asia’s export-dependent economies.
The dollar was weaker against the Japanese currency dropping by 0.8% to 143yen. Its value against the Euro was also little changed at $1.18. This is its lowest level since September 2021.
In the first half of this year, the U.S. dollar lost more than 10 percent of its value against six other currencies. This is the worst performance it has had in at least fifty years.
Brent crude futures rose 0.7% to $67.22 a barrel on the same day, reversing a previous decline. This was due to expectations that OPEC+ would increase their output in August. Gold spot rose by nearly 1.5%, to $3352 per ounce.
(source: Reuters)