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McGeever: Central banks will diverge from 2022 if the energy shock intensifies.
When the world was faced with a sudden surge in inflationary forces in 2021-22 due to a severe shock in supply and spikes in energy prices, all major central banks reacted?together. This is unlikely to happen again. Five years ago, supply disruptions caused by pandemics led to a united - but belated cycle of interest rate hikes among the world's largest central banks. This cycle accelerated in response to the skyrocketing prices of energy triggered by Russia’s invasion of Ukraine. By the time the European Central Bank raised rates in July 2022 (and the Bank of Japan did not), every G10 central banks except the Bank of Japan had joined the party. All of them raised policy rates by 400-525 bps. The war in the Middle East is causing the largest monthly increase in Brent crude oil price in history. It also disrupts other supply chains, which could lead to a rise in global inflation. This is causing central bank forecasts to be re-evaluated. Rates are shifting accordingly. Many policymakers fear that they will be too late in responding to the inflationary threat. The two U.S. rates cuts that were expected for this year have disappeared from the curve of futures. In addition, the ECB may now hike three times. And the reversal of the expected 'path' for UK interest rates is even more astounding. Can we expect the central banks to move in lockstep like they did 5 years ago? Not if supply becomes more scarce. SCENARIO PLANNING All rate markets are based on the assumption that the Middle East Conflict will soon end and the Strait of Hormuz reopens, allowing the global supply of oil, natural gas liquefied, fertilizer and other energy products, to flow again. This benign base-case scenario assumes that energy prices will continue to rise after the war, but will remain high on an average annual basis. Global growth will also hold steady, which will justify a relatively hawkish position from most central bankers. What if energy prices continue to rise, the war doesn't end, or the war doesn't end? What would the central banks do? UBS economists estimate the effects of three Middle East conflict scenarios. These include a rapid resolution, a two-month disruption of the Strait of Hormuz with oil peaks near $130 per barrel and an "extended disrupt scenario" involving additional damage to energy infrastructure as well as oil reaching $150. They believe that in the event of a recession that is caused by the Federal Reserve, it could reduce U.S. interest rates to zero next year and that the Swiss National Bank will again use negative interest rates. Bank of England could reverse only two or three of the rate increases currently expected for this year. The ECB may not reduce rates at all. UBS economists noted that "considerable differences" exist between economies. No one knows about POWELL The U.S. labour market stagnates today, but the average monthly job increase in 2022 will be over 600,000. In comparison to five years ago, the current price pressures, tariffs and all, are relatively benign. Policy is also much tighter. Will the new Fed chair rush to raise rates in an economy that is weakening? The euro zone labor market is tighter today than the U.S., while growth is near trend and monetary policies are more neutral. Moreover, since the ECB has only one mandate, which is to achieve a 2% inflation rate, it's more likely that they will tighten policy than ease. You can imagine a scenario in which the central banks diverge. This could increase volatility, widen interest rates and bond yields, accelerate currency swings and cause macro volatility. There is already a lot of uncertainty in the markets. Jerome Powell, Fed chair, said at his press conference after his March meeting that no one knows the economic effects of "the war" - not even him or his colleagues. It's therefore impossible to determine the best policy at this time. We can expect that, the more the central banks are impacted by the disruptions, the more likely they will act independently. You like this column? Open Interest (ROI) is your new essential source of 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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Australia restricts Hong Kong investors' voting rights in Northern Minerals
The Australian rare-earths'miner' said on Wednesday that Australian Treasurer Jim Chalmers had barred Hong Kong based Ying Tak, from voting or transferring a combined 361.5 million?"shares" in Northern _Minerals. It said that the shares transferred from Black Stone Resources may have violated a national-interest order of 2024, which required five China-linked shareholders to divest combined 613.6 millions shares. The interim directions highlight Canberra's scrutiny over foreign ownership of?critical minerals as Western governments try to secure supply chains that are dominated by China for use in defence technologies and clean energy technologies. This move is in response to a 'June 2024 order ordering Yuxiao Fund, Ximei Liu and Black Stone Resources (including Xi Wang, Xi Wang, and Black Stone Resources) to sell 613.6 millions shares or approximately 10.4% of their company. Yuxiao Fund was linked to Chinese investor Wu Yuxiao and given 60 days to sell down 80 million shares. Chalmers stated that he believed part of 'those shares' were transferred to Hong Kong Ying Tak in a... way which may have violated the earlier disposal order. This prompted the government to halt... the voting and transfer rights associated..."with the stake. The Foreign Investment Review Board will continue its investigation while Northern Minerals holds their next annual general assembly, which is due by June 30, 2026. Reporting by Roushni nair in Bengaluru, and Melanie Burton from Melbourne. Editing by Shreya biswas and Stephen Coates.
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Ivanhoe's revised report reduces copper production forecast for 2026 at DRC mine
Ivanhoe Mines announced on Tuesday that an updated independent study has lowered the near-term production estimate for the company's copper?complex in the Democratic Republic of Congo. The 'technical report', which supports the Canadian miner’s plan to increase production at the Kamoa Kakula complex has lowered the estimate of 2026 copper anode output to a range between 290,000 and 330,000 tonnes. The outlook for 2027 was also reduced to between 380,000 and 420,000 tonnes. Kamoa-Kakula is one of the highest-grade copper projects in the world. It has become a major growth source for a market with limited supply and limited new project development. The company has a plan to increase the annual production of copper at the complex from 50,000 tonnes to over 500,000 tonnes by 2028. The latest mineral reserve estimate was 466 millions tonnes of ore with a copper grade of 2.82%, which contained 13.1 million tonnes?of copper. Copper, which is widely used in construction and power, will benefit from the?demand for electric vehicles and grid investments, as well as the rapid 'build-out' of datacenters to support the surge in artificial Intelligence usage. Ivanhoe said that following the recommendations in the technical report it has begun a new feasibility analysis. It is expected to finish?within a year, with drilling and mapping to start during the second quarter 2026. (Reporting by Dharna Bafna in Bengaluru; Editing by Leroy Leo)
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Rosneft says costs offset high oil prices, which explains the 73% drop in net income for 2025.
Rosneft said that the company's net income for 2025 will be down 73%, to $293 billion ($3.60 billion), due to high interest, a high tax on profits, and other factors. Igor Sechin is the Rosneft CEO and a close ally of President Vladimir Putin. He said that the Russian oil industry was caught in an "ideal storm" last year, which included negative geopolitical conditions, tight domestic macroeconomic conditions, as well as high interest rates. The United States sanctioned Rosneft, Russia's second largest oil producer Lukoil in October last year. Sechin stated that the Middle East conflict has boosted oil prices this year. However, rising freight rates, insurance, and other costs have offset these high prices. Brent futures for the front-month hit a record gain of 64% during March, according LSEG 'data going back to June 1988. U.S. benchmark West Texas Intermediate has gained 52% this month, the biggest gain since May 2020. Rosneft CEO stated that the freight rate for transporting Russian oil from the Baltic Sea to India in 'March' exceeded $20 per barrel. This is ten times more expensive than shipping oil from Russia into Europe in early 2022.
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EIA data show that US oil production fell to its lowest level in two years during the January winter storm.
The Energy Information Administration reported on Tuesday that U.S. crude oil production fell the most in two years last month following a'severe winterstorm' which knocked production offline?in large parts of the country. The EIA data showed that U.S. crude output dropped 410,000 barrels a day in January, compared to the previous month, to 13,25 million barrels a day, the lowest level since February 2025. The EIA reported that the total U.S. crude and petroleum product consumption fell by 201,000 barrels per day in January to 20.7 millions bpd, which is the lowest level since November '2025. The demand for gasoline dropped'sharply' during the winter storms of January. The EIA's measure for demand for motor gasoline finished fell by 501,000 bpd in a month. This is the lowest level since January 2022. Retail gasoline prices topped $4 per gallon on Monday, as the Iran War upended the global oil markets. This could put more pressure on fuel demand in the U.S. In January, the demand for distillate fuels (diesel and heating oil) increased due to unusually cold temperatures. The EIA data revealed that the average amount of distillate fuel products supplied in January was 4.03 million bpd, an increase of 213,000 bpd from month to month. This is the largest increase in over a year. (Reporting and editing by Chris Reese, Will Dunham, and Shariq Khan from New York)
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Oil sets a record monthly increase as global equities end a weaker month
The global equity and bond market jumped on the Tuesday due to speculation about a possible de-escalation of the Middle East conflict, which has led to the largest increase in oil prices ever recorded in a month. Financial assets suffered despite the rally due to fears of stagnant growth and rising inflation. Oil prices have surged on the back 'the 'worst ever energy supply interruption. This has caused investors to flee both the stock and bond markets in March. The benchmark STOXX 600 Index in Europe fell by 8% in the month of March. This was its biggest monthly drop in almost four years, and ended an eight-month streak of gains. Unconfirmed reports suggest that Iran's president, who is less powerful than the supreme leader of the country, has said the country is ready to end its month-long conflict. Wall Street Journal reported that Trump told his aides earlier this year that he was willing to end military operations even if crucial Strait of Hormuz remained largely closed. Trump, however, has contradicted his own message on occasion, as he warned that the U.S. will "obliterate", Iran's oil and energy wells, if the strait is not opened. The strait is used to transport roughly one-fifth the world's oil and gas. Colin Graham, the head of Robeco's multi-asset strategy, said that equity markets "take the U.S. government at its word" and believe it will end the war. The Strait of Hormuz may still be closed on day two. Brent crude futures for the front-month held above $110 per barrel following an attack and fire set by Iran on a fully loaded tanker near Dubai, early Tuesday morning. Brent crude futures rose nearly 5%, to $118.38 per barrel. This is on track to be the biggest monthly gain in history before the expiration of this contract. Brent, the contract for the next month, fell 2.5%, to $104.65. U.S. crude dropped 63 cents, to $102.26 per barrel. On Monday, the average retail price for gasoline in the United States was $4 per gallon. THE WAR'S GLOBALISATION The war that began with the U.S. and Israel striking Iran in late-February has sent shockwaves through global markets, and increased the risk of an international recession. The MSCI index of global stocks rose by 16.72 points or 1.7% to 977.59. The index has fallen about 9% for the month. Wall Street saw the Dow Jones Industrial Average rise 2.2% to 46203.56. The S&P 500 rose 2.5% to 6502.69, and the Nasdaq Composite increased 3.5% to 21513.34. The Dow Jones Industrial Average and S&P 500 were still on course for their largest monthly declines in almost four years. They both fell 5.3% and 7.7% respectively. Alonso Munoz is the chief investment officer of Hamilton Capital Partners. You get these periods when the market is so oversold, that you only have relief rallies if there are any good news. The pan-European STOXX 600 Index rose by 0.41% and Europe's FTSEurofirst 300 Index gained by 0.40%. U.S. jobs openings, which are a measure for labor demand, dropped more than expected in February, and hiring fell to its lowest level since nearly six years. Fears of inflation and growth were heightened by the oil shock that pushed euro-zone?inflation? above the European Central Bank?s 2% target?in March. The government bond yields have fallen from their multi-year highs after the conflict. Investors are now focusing on the possibility of a weaker economy due to the energy shock. After a month's heavy selling, U.S. Treasury price rose, sending yields lower. The de-escalation hope boosted demand for government bonds. The yield on the German two-year bond fell by 4.8 basis points, to 2,574%. Before a Tuesday emergency meeting, the European Union's energy chief warned governments to be prepared for "prolonged disruptions" in energy markets due to war. Graham, from Robeco, said that if the Strait of Hormuz remained closed for another week or two we would?raise our probabilities of a recession in our scenario analyses. However, this is not the case yet. The U.S. Dollar fell but was still on course to gain a month-long gain. The Japanese yen increased 0.57% to 158.82 dollars per yen. The Japanese finance minister stated that the government is ready to fight volatility in foreign exchange "on all fronts", underlining Tokyo's concern over the recent yen slide. Spot gold increased by 2.25%, to $4.612.60 an ounce. However, it was still expected to end the month with a decline of over 10%. U.S. Gold futures closed 2.7% higher, at $4678.60. (Reporting and editing by Keith Weir and Chizu Nomiyama, with additional reporting by Purvi agarwal and Twesha dikshit)
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Nikkei reports that Japan and France are considering a rare earths agreement to reduce China's reliance
The Nikkei reported on Wednesday that the French President Emmanuel Macron and Japanese Prime Minister Sanae Takaichi will create a roadmap to 'diversify supplies of rare Earths and other essential minerals. According to the report, a joint declaration expressing concern about export restrictions for critical minerals will be issued by both leaders. Could not verify immediately the information contained in the report. Nikkei reports that the Japanese and French governments are planning to launch a public-private partnership in southwest France by year's end to refine heavy rare earths, which can be used for electric vehicle motors as well as other technologies. The report said that both Takaichi, and Macron would?confirm' this plan and others to build rare earths independent supply chains from China. The deal is timely, as Japan, Western governments, and manufacturers are scrambling for supplies of 'rare earths minerals' to reduce their dependence on China, which is the dominant supplier and producer of 'rare earths. In March, Japan Australia Rare Earths (co-owned by the state-run Japan Organization for Metals and Energy Security and Sojitz Corp) struck a deal to supply Australia's Lynas Rare Earths - the world's largest rare earths producer outside China. Japan Australia Rare Earths has committed to buying half of the total production of heavy rare Earths. On March 20, the U.S., Japan and other countries released an action plan to develop alternatives to China in the?critical mineral and rare earths supply chain. The initial focus was on pricing floors for select minerals. Japan and France will also cooperate in the space sector. Companies from both countries are expected to sign Memorandums Of Understanding on 12 joint projects. These include space debris removal, rocket launches, and space debris removal. The report said that the Japan Aerospace Exploration Agency, (JAXA), and CNES, France’s space agency, would?provide financial support for corporate space technology developments, offering capital to businesses from their respective countries who take part in joint project. (Reporting by Rajasik Mukherjee & Nichiket Sunil in Bengaluru; Editing by Shailesh Kuber)
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Gold is up over 3% but it's on track to be the worst month for gold since 2008.
Gold was up on Tuesday but still on course for its'severest monthly decline' since October 2008 as inflation fears and expectations of higher interest rates due the Iran War weighed heavily on the metal. By 1:31 pm EDT (1731 GMT), spot gold had risen 3.2%, to $4652.31 an ounce. This was the highest price since March 20. U.S. Gold Futures closed 2.7% higher, at $4678.60. The U.S. Dollar slipped but was still on track for a gain of 1% per month. A stronger dollar increases the price of greenback-priced gold for holders of foreign currencies. The current gold rally is encouraging, and it's due to increased optimism regarding de-escalation of the Middle East. "I need to see more upside performance before I can say that this is a pattern to continue," said Peter Grant. "In the longer term, the underlying trends remain bullish and the key fundamentals such as de-dollarization and the central bank buying of bonds are still in place." The Wall Street Journal, citing officials in the administration, reported that Donald Trump would be willing to end his military campaign against Iran, even if the Strait of Hormuz remained largely closed. U.S. defense secretary Pete Hegseth warned Tehran to make a decision soon in the war with Iran. The price of spot gold fell 11.8% in march as the Middle East war?weighs on bullion. Energy prices have risen dramatically, causing inflation fears to increase and for markets to reassess their expectations of interest rates. High rates increase the opportunity costs of holding metal, despite it being a hedge against inflation and uncertainty. Goldman Sachs and BMI both forecast that the price of gold will reach $5,400 per ounce by 2026. Spot silver increased 6.7%, to $74.64, however it was down 20.4% in the last month. BNP Paribas analysts expect silver to trade in the range of $65-$75 per ounce until 2026, and that physical markets will be surplus by 2027. Palladium rose by 5.2%, to $1,479.25, and platinum gained 3.1%, to $1,958.05. Both metals are on course for a monthly decline. Ashitha Shivprasad, reporting from Bengaluru and Paul Simao, editing by Tasim Zahid
The global equities market has recovered on the back of de-escalation expectations, ending a poor month
The global equity and bond market jumped on the Tuesday due to speculation about a possible de-escalation of the Middle East conflict, which has led to the largest one-month rise in oil prices ever recorded.
Financial assets suffered despite the rally due to fears of stagnant growth and rising inflation. Oil prices have risen due to the worst energy supply interruption in history. This has caused investors to flee the stock and bond markets.
The benchmark STOXX 600 Index in Europe fell by 8% in the month of March. This was its biggest monthly drop in almost four years, and ended an eight-month streak of gains.
Unconfirmed reports suggest that Iran's president, who is less powerful than the supreme leader of the country, has said that the country is ready to end its month-long conflict. The Wall Street Journal reported that Donald Trump told his aides in an earlier report that he was willing to stop the military campaign if the Strait of Hormuz remained largely closed.
Trump has contradicted himself at times. He also said that the U.S. will "obliterate", Iran's energy and oil plants if the strait is not opened. The strait is used to transport roughly one-fifth (or a fifth) of the world's oil.
Colin Graham, the head of Robeco's multi-asset strategy, said that equity markets "take the U.S. government at its word" and believe it will end the war.
They haven't even moved on to the second day, when?the Strait of Hormuz may still be closed."
Brent crude futures in May closed up 4.94% to $118.35 a barrel before expiry.
Brent June settled at $103.97 a barrel, down $3.42. U.S. crude oil futures were down $1.50 (1.46%) at $101.38.
On Monday, the average retail price of gasoline in the United States was $4 per gallon.
The War's Global Reach
The U.S.-Israeli war that began in late February with coordinated strikes on Iran has shocked global markets and raised the possibility of a worldwide economic recession.
The MSCI index of global stocks rose by 18.07 points or 1.88% to 978.94.
Wall Street saw the Dow Jones Industrial Average rise 2.49% to 46341.51, S&P 500 gain 2.91% at 6,528.52 while the Nasdaq Composite rose 3.83% at 21,590.63.
Alonso Munoz is the chief investment officer of Hamilton Capital Partners. He said that "what we've seen in terms of messaging from the administration" may be an indication that they are either starting to wind down or pivot.
You get these periods when the market is so oversold, that you only have relief rallies if there are any good news.
The pan-European STOXX 600 Index rose by 0.41% and Europe's FTSEurofirst 300 Index gained by 0.40%.
Investors are worried that a surge in fuel prices could harm demand for goods and service, forcing the Federal Reserve into raising interest rates to control inflation.
U.S. employment openings, which are a measure for labor demand, dropped more than expected in the month of February, and hiring fell to its lowest level in almost six years, according to government data released on Tuesday.
Fears of inflation and growth
In March, the oil shock drove euro-zone inflation above the European Central Bank’s 2% target.
Investors appear to be refocusing on the risks of a weaker economy due to the energy crisis. Government bond yields have retreated at the beginning of this week from multi-year highs.
After a month's heavy selling, U.S. Treasury yields fell as demand for government bonds was boosted by the hopes of a de-escalation.
The German yield on the two-year bond fell by 3.3 basis points, to 2.588%.
Ahead of a Tuesday emergency meeting, the European Union's Energy Chief has warned governments to be prepared for a "prolonged disruption" of energy markets as a result if the war.
Robeco's Graham stated that this is not yet true.
The dollar index (which'measures the greenback versus a basket of currency) fell by 0.69%, to 99.86. However, it remained on course for a gain in the month.
The Japanese yen increased by 0.62% to 158.73 dollars per yen.
The Japanese finance minister stated that the government is ready to fight volatility in foreign exchange "on all fronts", underlining Tokyo's alarm at the recent slide of the yen.
Spot gold increased 3.52%, to $4669.09 per ounce. However, it was still expected to end the month with a decline of over 10%. U.S. Gold futures closed 2.7% higher, at $4678.60. (Reporting and editing by Keith Weir and Chizu Nomiyama; Additional reporting and Twesha Dkshit by Purvi Agarwal; Editing and reviewing by Keith Weir and Elizabeth Howcroft)
(source: Reuters)