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Bond yields and global equities are rising with the dollar as US inflation soars
MSCI's global equities index advanced along with the dollar Wednesday as investors?assessed higher-than-expected inflation data, while they waited for a meeting between U.S. president Donald Trump and China’s Xi Jinping. According to the Bureau of Labor Statistics of the Labor Department, U.S. producer price increases were?higher than expected for April and their largest gain since early?2022. The latest economic impact of the U.S. and Israel war on Iran is evident in the U.S. consumer price data, which showed that energy costs have increased the most since 2012. Jim Baird is the chief investment officer of Plante Moran Financial Advisors. He said that this data was a further source to increase the concern about inflation. Investors are likely to be most concerned about this narrative in the short term. He added that there are two opposing forces at play: "the concerns about inflation and the implications for Fed policy and interest rates." Wall Street's technology sector was a bright spot on Wednesday, as it helped to counter inflation fears. The S&P 500 and Nasdaq both advanced with the largest gains coming from shares related to artificial intelligence. Ryan Detrick is the chief market strategist for Carson Group in Omaha, Nebraska. After some weakness yesterday the chip stocks soared back today. Elon Musk and Nvidia CEO Jensen Huang were among the entourage of President Trump who received a warm welcome on Wednesday in Beijing as he was preparing to ask China's Xi Jinping for "openness" towards U.S. businesses at the beginning of their two-day meeting. Trump stated on Tuesday that while some investors had hoped that the talks would lead to progress in the?Middle East war, he didn't think that he needed China's assistance to end the conflict. "We'll hear a message saying that the meeting was productive. In reality, the progress will be limited. I'd be realistic in my expectations. Baird, of Plante Moran, said: "You have to be." The Dow Jones Industrial Average dropped 67.36, or 0.14 %, to 49.693.20. The S&P 500 rose by 43.29, or 0.58 %, to 7,444.25; and the Nasdaq Composite gained 314.14, or 1.20 %), to 26,402.32. MSCI's index of stocks?across the world rose 6.01 points or 0.54% to 1,109.33. The pan-European STOXX 600 closed earlier up by 0.79%. Bond markets saw longer-dated yields reach their highest level since mid-2025, before paring gains Wednesday, after producer prices rose higher than economists expected in April. The yield on the benchmark U.S. 10 year notes was flat, at 4.471% from 4.471% on Tuesday. Meanwhile, the 30-year bond rate rose?1.1 points to 5.04%. The yield on the 2-year bond, which is usually in line with expectations of interest rates for the Federal Reserve fell by 1.7 basis points, to 3.979%. The dollar reached a new two-week high after the latest U.S. Investors focused on inflation data, while Trump and China's Xi are set to start talks in Beijing. The dollar index (which measures the greenback versus a basket including the yen, euro and other currencies) rose by 0.16% at 98.49. Meanwhile, the euro fell 0.22% to $1.1711. The dollar gained 0.16% against the Japanese yen to reach 157.87. It briefly surged on Tuesday due to "rate-check" speculations, which are often viewed as a prelude?to an intervention. The pound fell 0.1% to 1.3523, as Keir starmer's hold on power began to wane. Oil futures fell as investors worried that the U.S. could raise interest rates due to inflation. They also waited for updates about the summit in Beijing. Brent crude fell 1.99% to $105.63 a barrel on Monday, while U.S. crude dropped 1.14% to $101.02 per barrel. Spot gold dropped 0.5% to $4689.91 per ounce. U.S. Gold Futures increased 0.04% at $4,679.60 per ounce. Reporting by Sinead Culp, Stephen Culp and Elizabeth Howcroft. Clarence Fernandez and Mark Potter edited by Keith Weir.
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Kashkari: Fed is "dead serious" about lowering inflation
Neel Kahkari, Minneapolis Federal Reserve President, said on Wednesday that U.S. employment looks "a bit better" now than earlier in the year, and that the Iran War has worsened an already high inflation rate. These views underscore Kashkari's preference to leave the Fed open to rate increases. Kashkari stated that he was "dead serious" about bringing the?inflation down at a St. Paul Area Chamber?event in St. Paul Minnesota. Kashkari is one of the three Fed policymakers that dissented at the Fed meeting in April. He advocated for a change in the Fed statement after the meeting to reflect an openness to interest rate increases and not only rate cuts. He spoke as 'the U.S. Senate was preparing to confirm Kevin Warsh, as the Fed’s new chairman. Donald Trump said he expected the Fed to reduce rates under Warsh. "The Federal Reserve chair has a great deal of influence." The chair sets the agenda. What topics will we be discussing? What types of?things are we going to consider in this 'deliberation?' Kashkari responded to a question on whether Warsh would deliver the rate reductions Trump desires. "But, when it comes to a vote (on interest rate), the chair is only one of twelve voters." So a new chair, no matter who it is, and whatever the situation, will need to convince his or her peers that this course of action is best.
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Poland claims to have intercepted Russian aircraft in the Baltic Sea
?Poland's air force intercepted an?Russian reconnaissance aircraft in international waters of the?Baltic Sea. The Russian flight was deemed a provocative act and a potential threat. The machine flew in international airspace with its?transponders off and without a flight plan. The Polish army stated in a social media post that there was no violation to?Polish airspace. Defence Minister Wladyslaw KsiniakKamysz stated that flights without transponders could be a 'threat to other aircraft' and 'that its pilots would always respond immediately. "Our aircraft intercepted an Il-20 Russian reconnaissance aircraft in international waters of the Baltic Sea." "This is yet another aggressive act by the Russian?Federation, and a test for our air defense system," he wrote in X. The Polish Army announced earlier?on Wednesday that?it?had conducted military aviation operations within Polish airspace in response to?Russian strikes against?Ukraine. The Operational Command of the Polish Armed Forces stated on X that "Ground-based radar reconnaissance and air defence systems which were activated have returned to standard operational activities."
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Gold continues to decline as inflation worries weigh on rate-cut bets
The gold price fell a second time on Wednesday as inflation fears fueled by war weighed on the expectations for interest rate reductions. Markets were also looking forward to the upcoming summit between U.S. president Donald Trump and Chinese President Xi Jinping. At 1:59 pm EDT (1759 GMT), spot gold was down by 0.6% to $4,686.35 an ounce. U.S. Gold Futures closed 0.4% higher at $ 4,706.70. U.S. Producer Prices increased more than expected in April, posting the biggest gain since early 2020. This is the latest sign that inflation has accelerated amid a 'war on Iran. Peter Grant, senior metals analyst at Zaner Metals and vice president, said that inflation remains sticky, and expectations of higher rates were reinforced. This has been pushing gold down the last two weeks. Gold is often seen as a hedge to inflation. However, higher interest rates tend to?pressurize the metal. The data released on Wednesday shows that the U.S. consumer price index increased in April by a further 3%, and its annual rate has reached its highest level in three years. Last month, the U.S. Central Bank left its benchmark interest rate at 3.50%-3.75%. According to CME Group's FedWatch, traders have priced in a U.S. interest rate cut for this year. Trump was in China to make deals, to maintain the fragile trade truce between China and the second largest economy of world, and to boost his public approval ratings, which were hurt by his war against Iran. India increased its import tariffs for?gold and?silver to 15%, up from 6%. This was done to reduce the amount of metals purchased overseas and to ease the pressure on the country's reserves of foreign currency. India is the?second largest consumer of precious metals in the world. Grant stated that the news of higher import duties from India could create a demand concern and be a long-term obstacle. After hitting its highest level in the past two months, spot silver rose 1.6% to $87.28 per ounce. Platinum rose 1.6% to $2.159.58 after reaching its highest level since 12 March. Palladium rose 1.2% to $1,508.39. Ashitha Shivprasad reported from Bengaluru, and Alexander Smith, Ali Williams and Diti Pjara edited the article.
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Gold prices in India surpass $200/ounce records amid profit-taking
Bullion dealers reported that gold discounts in India reached a record high of over $200 per ounce on Wednesday. This was due to the surge in price after the 'import duty increase, which triggered investor selling in a weakening 'demand. India raised its import tariffs for gold and silver from 6% to 15% on Wednesday as part of an effort to reduce overseas purchases of these metals and relieve pressure on the country’s foreign exchange reserves. "Discounts were insane in the physical market." "We were double-checking before we executed deals," said the bullion division chief of a Mumbai-based bank who has been trading gold for over two decades. Discounts offered by dealers in India On Wednesday, the official domestic price of gold was $17 per ounce, but that increased to up to $207 per ounce, including 15% import duty and 3% sales tax. Mumbai-based dealers at private banks said that the duty increase triggered a steep rise in gold prices in their locality, which led some investors to sell gold at deep discounts in order to take advantage of gains. The two bullion dealers refused to be identified as they weren't authorised to talk to the media. The price of gold futures on the?second largest consuming market in the world jumped 7.2% to 164 497 rupees for 10 grams. This was the highest level seen in over two months. The bullion dealer stated that investors?were also able to make profits on gold exchange-traded fund (ETFs) and this was adding to the supply?into the market. Ashok Jain of Mumbai's gold wholesaler,?Chenaji Narsinghji, stated that retail buyers and jewellers were on the sidelines. This increased selling pressure, pushing discounts up to "unusual high levels". A bullion dealer in Chennai also expressed concerns that the recent duty hike could increase smuggling as it increased?margins for gray-market operators from 9% to around 18%. Grey market operators sell gold for cash in order to avoid duty, which allows them to offer the product at a discount to market price by evading tax. (Reporting by Rajendra Jadhav)
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Sources claim that the Brazilian government will announce a measure to subsidise gasoline.
Two sources familiar with the matter said that the Brazilian government will announce an executive order on Wednesday to subsidize gasoline. The goal is to cushion consumers from the higher oil prices caused by the Middle East conflict. In a?statement, the government announced that it would hold a?press conference at 3 p.m. local (1800 GMT) on?Monday to announce "measures" for the fuel industry aimed at "addressing war's effects," but did not give any further details. According to a?source, the?subsidy would be paid to producers and importers of gasoline who will then pass on savings to consumers. The goal is an effect that's?similar to partial reductions in federal fuel tax. Last month, the government announced subsidies for diesel fuel and liquefied petroleum gas (LPG), as well as lower taxes on biodiesel and jet fuel. High fuel prices are a concern to?President Luiz nacio Lula da Silva who is expected to run for reelection in this year. (Reporting and writing by Bernardo Caram, Editing by Gabriel Araujo).
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Egypt signs $1.5 billion loan agreement with ITFC for food and energy security
Egypt and the Islamic Trade Finance Corporation signed a $1.5 billion loan on Wednesday, to support the food and energy security of the country in the north. ITFC CEO Adib Yourssef Al?Aama stated during the signing ceremony that the ITFC had approved more than $24 billion of funding for Egypt since?2008 to support the energy sector, food security and small and medium enterprises. The funding includes $8.8 Billion for the General Authority for Supply Commodities to support Egypt’s imports of?food?commodities. This includes 12.6 Million tons of wheat. The ITFC has also helped Egypt to pay off arrears owed by foreign oil companies that it has pledged to fully repay by the end June. Egypt's bread subsidy program, which costs up to $2.6 billion per year and relies on by 70 million people, is one of the largest wheat importers in the world. The government announced last week that it could end the current subsidy programme and replace it with cash transfers beginning in July. The loan is coming as Egypt's economy absorbs the shockwaves from the war in Iran. This will put fresh pressure on the?country that is still navigating its fragile reform path under the $8 billion IMF program. The war cast a shadow on Egypt's fragile economic stability. It remains heavily reliant upon hot money inflows for financing, and on gas imports for energy.
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Tyson Foods CFO: 'Spotty' expansion of US cattle herd by Tyson Foods.
Tyson Foods' Chief Financial Officer Curt calaway stated on Wednesday that U.S. producers are "spotty",?in their efforts to rebuild a nation's reduced herd. Supplies will remain tight as low inventories pushed beef prices to record levels. As part of his efforts to reduce domestic beef prices, President Donald 'Trump' has been considering possible executive actions that would lower tariffs on imported beef and regulations for producers. Prices for milk, eggs and other grocery staples are down since Trump's presidency in January 2025. However, beef prices have increased by over 16%. HIGH?PRICES AND DROUGHT WORRIES Ranchers are slow to keep female cows, also known as heifers, for breeding. This is a crucial step in rebuilding herds, and increasing beef production. Cattle supplies have dropped to their lowest level in 75 years by 2026. Producers have instead sent animals to be slaughtered in order to profit from high prices, and due concerns about the 'dry weather' limiting grazing land. Calaway, speaking at the BMO Investor Conference in New York, said that cattle supplies would remain tight until 2027. He added that heifer retention is "spotty" and "regional." He said, "We will still manage with a limited cattle supply." Meatpackers are losing money on their beef business because rising cattle costs outweigh the gains made by higher beef prices. Tyson closed a beef facility in Nebraska and reduced operations at another one in Texas, laying off thousands workers. The beef prices rose due to a strong 'demand' and ranchers cutting their herds as grazing lands in the western U.S. were affected by drought. The Trump?administration also halted the imports of Mexican cows to prevent the New World Screwworm parasite. Calaway stated that Tyson's business of prepared foods, which uses raw materials such as beef and pork, had seen commodity inflation in seven out of eight quarters. The Iran War has accelerated inflation for consumers. Producer prices in April posted their largest increase in four-years. Donnie King, CEO of Donnie King Enterprises, said that there is a "point" where consumers will turn away from a product because of the price. "Inflation" is a real thing. It persists. "We don't think that will change in any meaningful way."
Stocks fall as AI fears linger; US yields rise
The major stock indexes dropped on Friday as investors remained cautious about artificial intelligence bets. Meanwhile, the dollar edged up and U.S. Treasury Yields increased. Investors weighed comments from Federal Reserve officials, who had voted against a rate cut by the U.S. central bank this week. They said that they were concerned about inflation and feared lower borrowing costs. Stocks were also weighed down by rising yields. As tech-related concerns lingered, technology fell the most among the major S&P sectors. Oracle, a cloud computing company, warned earlier this week of massive spending and poor forecasts. Broadcom's warning on margins late Thursday added to concerns. Broadcom's shares closed 11.4% lower. Oracle shares fell by 4.5%, adding to the almost 11% drop on Thursday. Nvidia, which is a leader in AI technology was down by 3.3%. Bruce Zaro, managing Director at Granite Wealth Management, Plymouth, Massachusetts, stated that "continued frustration and uncertainty regarding the AI trade and technological trade" pushed the market.
He said: "I thought that this choppiness had ended by now." He added, "We are in a really great?seasonal time. Santa Claus rally is usually held from mid-December to the end of the trading year. Investors are optimistic about future U.S. rate cuts after the Fed reduced interest rates on Wednesday by 25 basis points, in a decision that was 9-3. Policymakers have indicated they will pause further reductions for now. The Fed has expressed concern about the cooling of the labor market and a high inflation rate.
U.S. unemployment claims data on Thursday showed that the number of Americans claiming unemployment benefits increased to the highest level in almost 4-1/2 years. Next Thursday, the Bank of England will likely cut interest rates. The European Central Bank will likely keep rates?steady', but traders now speculate that it may hike rates in the year 2026. After Governor Kazuo ueda's strong signals, the Bank of Japan will likely raise rates. The Dow Jones Industrial Average slid 245.96 points or 0.51% to 48,458.05, while the S&P 500 slid 73.59 or 1.07% to 6,827.41, and the Nasdaq Composite dropped 398.69 or 1.69% to 23,195.17. The MSCI index of global stocks fell 6.39 points or 0.63% to 1,008.88. The pan-European STOXX 600 ended 0.53% down. The yields on the 10-year Treasury note in the United States rose after two consecutive sessions of declines. The yield of the benchmark U.S. Treasury 10-year note increased 5.1 basis point to 4.192%, and was up over 5 basis points for the week. This is the second consecutive weekly increase.
Investors have already begun to price in rate increases for the euro zone. The divergence is due to traders' expectations that U.S. interest rates will fall over the long-term, despite the recent jump in yields. Germany's 30-year bond yield, which is more sensitive to fiscal concerns over the long term, has risen to a new 14-year-high of 3.498%. This represents a 3.5-basis-point increase.
DOLLAR GAINS; POUND FALLS SLIIGHTLY ON UK-DATA The U.S. Dollar drifted higher in relation to major currencies after also falling recently, but it was still on track for its third consecutive weekly drop amid the prospects of interest rate reductions by the Fed next. The pound eased following data showing that the UK economy shrank unexpectedly in the three-month period ending October. The pound fell 0.2% against the dollar, to $1.3375. This is not far off from its seven-week high reached on Thursday. The dollar gained 0.2% against the yen to reach 155.93yen in advance of the BoJ meeting next week, when a rate increase is expected. The BoJ is expected to maintain its pledge to raise interest rates next week, but the rate of increase will depend on the economy's reaction to each hike. The euro was unchanged at $1.1735, after reaching a two-month high Thursday. Meanwhile, the dollar index, which compares the U.S. dollar to six other currencies, increased 0.1% to reach 98.44.
COAL DROPS FROM RECORD HIGH
Copper fell more than 3% after reaching a record high earlier in session. Fears of the AI bubble burst prompted a sell-off of riskier assets.
The benchmark three-month copper price on the London Metal Exchange dropped as much as 3.5 % to $11,451.50, and was trading at $11,537.50 down by 2.8% as of 1700 GMT. The oil prices fell and recorded a weekly drop of 4% as fears over the U.S. seizure and subsequent impact on the Venezuelan oil tanker outweighed the supply glut. U.S. crude dropped 16 cents and settled at $57.44 per barrel, while Brent also fell 16 cents.
(source: Reuters)