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Asian shares fall from record highs on oil gains due to Iran risk
Asian shares fell from record highs as investors pulled?some money from the table after a 'technology-driven rally. Oil prices rose for the 'fourth? straight day, as the fragile Middle East ceasefire hung in balance. Overnight, S&P 500 rose 1%, and Nasdaq increased 1.6%, to set new record-breaking highs. This was helped by the strong start of earnings season, which has eased consumer concerns over the U.S. economy despite the rising cost of energy due to the Iran War. MSCI's broadest Asia-Pacific share index outside Japan, which tracks Wall Street, had risen to a record 831.56 point before selling began. Last down 0.7%. Japan's Nikkei index reached a new record for the second consecutive day, before falling by over 1%. Taiwan and South Korea's markets also reached new highs before turning lower. Hong Kong's Hang Seng index fell 0.9% and China's blue-chip index dropped 0.3% Brent crude futures rose another 1.3% to $103.18 per barrel on Thursday, after a 3.5% increase overnight. Iran captured two container vessels on Wednesday, preventing them from leaving the Gulf through the Strait of Hormuz. Investors are watching to see if the fragile ceasefire in Middle East will last. Nick Twidale is the chief market strategist of ATFX Global. He said that the increasing tensions in the Middle East are starting to scare investors, as more ship seizures are eroding hopes for further peace talks. The spike in Wall Street performance overnight was followed by a pullback, which was a reaction to the events taking place in the Middle East. After the earnings-driven rally in Asia, Wall Street futures declined. Nasdaq futures were down 0.5% and S&P futures were down 0.7%. European stock futures anticipate a weaker opening, with panregional futures down by 1.1%. Shares of GE Vernova surged 13.75% after the power equipment maker raised ?its annual revenue forecast on the AI boom, and Boeing advanced over 5% after a smaller-than-expected quarterly loss. Tesla, the electric automaker, reported a positive surprise in its first-quarter?free cashflow, but investors were sceptical about its plans to spend more on AI and robots. Its shares fell 2% following the bell. Treasury yields increased. The yield on the two-year U.S. Treasury rose by 2 basis points, to 3.8106%. It had risen?1 basis point on Wednesday. The 10-year yield rose 2 basis points to 4.3174% after being little changed overnight. The dollar held onto its small overnight gains. The?euro remained steady at $1.17 after losing 0.3% overnight. It was just above the?10-day lowest of $1.1691 Markets are remarkably effective at identifying risks, and this may continue. The list of risks continues to grow as solutions remain elusive, said Laura Cooper. Global investment strategist for asset manager Nuveen. "The dissonance can't last forever... At some stage, what is ignored may become the only thing that matters." (Editing by Kim Coghill & Shri Navaratnam).
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Gold drops on inflation fears fueled by oil; US-Iran developments are in focus
As investors sought clarity about the stalled U.S.-Iran peace talks, gold fell in choppy trading on Thursday. As of 0215 GMT, spot gold was down 0.7% to $4,705.09 an ounce. U.S. Gold Futures for June Delivery fell 0.6% to $4722.10. Brent crude oil prices remain above $100 per barrel despite a larger than expected gasoline and distillate stock draw in the United States. Also, the peace talks have not progressed. Tim Waterer is the chief market analyst for KCM Trade. He said that the sight of Brent Oil back at triple-digits keeps inflation worries in the forefront and puts gold on the backfoot today. A rise in crude oil prices can stoke the inflation rate by increasing transportation and production costs. This increases the probability of higher interest rates. Gold is considered an inflation hedge. However, as interest rates rise, yield-bearing investments become more appealing, and this reduces the appeal of bullion. Iran seizes two ships in the Strait of Hormuz, tightening their grip on this strategic waterway. This comes after U.S. president Donald Trump called off the attacks and there was no sign of peace talks resuming. Trump has maintained the U.S. Navy's blockade of Iran's maritime trade. Iran's parliament leader and top negotiator Mohammad Baqer Qalibaf stated that a complete ceasefire would only make sense if it was lifted. "Investors are worried that this 'ceasefire-plus-blockade' status quo could drag on for months, ?turning a short-term ?spike into a long-term inflationary anchor, which would hurt gold from a yield perspective," said Waterer. A poll of economists revealed that the U.S. Federal Reserve is likely to wait at least six months before reducing interest rates in this year, as energy shocks caused by war will reignite inflation. The traders now expect a 23% probability of a Fed rate reduction of 25 basis points in December, down from a 28% chance one week ago. There were two expected reductions in this year's budget before the war. Silver spot fell by 1.4%, to $76.64 an ounce. Platinum dropped 1.3%, to $2,048.25. Palladium, at $1,529.25, was down 1%. (Reporting by Noel John in Bengaluru; Editing by Subhranshu Sahu)
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Florida Governor Ron DeSantis signss bill to prohibit DEI in local government
The Republican Florida Governor Ron DeSantis has signed a law on Wednesday that prohibits local government in his state from promoting and?funding?diversity?initiatives. He claims such programs are discriminatory against certain groups, like white men. Republican state leaders in the United States and President Donald Trump’s administration have rallied to oppose diversity, equity and inclusive (DEI). Civil rights activists say DEI practices address historical inequities faced by marginalized groups such as women, the LGBT and racial/ethnic minorities. DeSantis stated on Wednesday that "I think the white males have been discriminated against" by DEI. DeSantis’ office stated that the bill prohibits local government from establishing or maintaining DEI programs or offices. It also provides enforcement mechanisms including 'penalties' for officials who violate this law. Republicans have repressed DEI in state and federal government because they deem diversity programs to be anti-merit, and discriminatory towards groups such as white men and women. Trump signed executive orders that directed the demise of DEI policies in federal agencies, the private sector and government contractors?and subcontractors. Trump has also tried to freeze federal funding for colleges and universities in the DEI dispute. DEI practices include, among other things, training in combating discrimination and addressing pay disparities along racial or gender lines, as well as enhancing recruitment and access to underrepresented ethnic groups. DeSantis signed a bill that prohibits initiatives related to climate changes. His office stated that the law would prevent any new taxes, fees, or penalties associated with carbon emissions. Rights advocates have criticised Republicans for "cracking down" on DEI initiatives, climate initiatives, the rights of transgenders and pro-Palestinian demonstrations against U.S. allies Israel's attack on Gaza. Civil rights groups claim that such actions violate the right to free speech and due process. Republicans claim that their actions are against "woke," far-left, and anti-American ideologies. DeSantis, who took office earlier this month signed a law that gives him and other officials of the state the authority to label groups as terrorist organizations.
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Investors weigh rising costs due to war against increasing supply when evaluating iron ore prices
Iron ore prices were in a narrow range on Thursday as investors weighed the higher costs of the prolonged war with Iran against the prospect of an increasing supply?of this key ingredient for steelmaking. As of 0212 GMT, the?most traded iron ore?contract at China's Dalian Commodity Exchange was little changed. It was trading at 785.5 Yuan ($115.05). As of 0102 GMT, the benchmark May iron ore traded on Singapore Exchange was down 0.18% at $107.1 per ton. It reached the highest level since March 30, at $107.5, earlier in the session. Singapore's benchmark has been well above the psychologically important level of $100, for over six weeks. Iran?said that it captured two container vessels on Wednesday, after firing on them as well as another vessel. This casts doubt on the prospects of another round of US and Iran peace talks. Analysts said that the Iran war has caused energy prices to surge, resulting in a rise in freight and input prices. This has helped iron ore prices. The anticipation of rising ore supply has, however, slowed the rise in prices. BHP Group’s?iron ore production in the third quarter exceeded expectations. The company’s resolution of a long-running dispute over a supply contract with China also raised prospects for?potentially higher shipments to China, the world's biggest consumer. Rio Tinto, the world's biggest iron ore supplier, has maintained its forecast for 2026 Pilbara ore sales at 323 to 338 millions?tons, while highlighting potential supply chain risk due to?the Middle East conflict. Coking coal, coke and other steelmaking components rose by 0.43% and 1.03 percent, respectively. The benchmarks for steel on the Shanghai Futures Exchange have gained some ground. Rebar gained?0.35%. Hot-rolled coils advanced by 0.68%. Wire rod grew by 0.61%. Stainless steel gained 0.27%.
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Japan halts MBK Makino Milling's buyout bid over security concerns
In only the second such case to date, the Japanese government has asked Asian private equity firm MBK Partners to halt their acquisition of machine tool maker Makino?Machine, citing national?security?concerns. Satsuki Katayama, finance minister, told the parliament that after analyzing the impact of the investment on the production base as well as the potential for sensitive technology to leak out, the ministry of industry "determined that this investment poses a threat to national security." She said: "We considered the fact that Makino is a leading manufacturer of machine tools in the world and its products are used widely by Japanese manufacturers of defence equipment." MBK announced in June of last year its 'plan to acquire Makino via a tender offer. However, prolonged regulatory'reviews both domestically and abroad have pushed the launch date for the tender offer - expected late June - back. Makino’s tools are not allowed to be exported due to their potential to be used for military purposes. Makino shares dropped 10% in the early Tokyo trading. Japan has only rejected one deal so far under the Foreign Exchange and Foreign Trade Act, namely an attempt to acquire Children's Investment Fund of Electric Power Development from London in 2008. Arun George, a Smartkarma analyst, wrote: "This 'event' sets a precedent that will increase the risk premium of?foreign takesovers?of Japanese firms in core business sectors." He wrote that "FEFTA approval is no longer low-risk." Japan's opposition is in contrast with its approval of Taiwanese company Yageo’s unsolicited offer for Shibaura Electronics, even though it was after a long security review. The government of Prime Minister Sanae Takaichi?this past week announced the biggest reform?of defence-export rules in decades. This will allow for the exports to warships, rockets and other weapons. Reporting by Makiko Yamzaki, Writing by Sam Nussey, Editing by Alex Richardson and Muralikumar Aantharaman; Christopher Cushing.
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The oil price continues to fall despite no progress in the US-Iran negotiations, and shipping around Hormuz is still disrupted.
The oil prices were marginally lower on Thursday, after big gains in the previous session. This was due to the stalemated?peace negotiations between Iran and the United States and both nations maintaining restrictions on trade flowing through the Strait of Hormuz. Brent crude futures dropped 15 cents, to $101.76 per barrel. On Wednesday, Brent crude futures settled above $100 for the very first time in over two weeks. West Texas Intermediate futures dropped 14 cents to $82.80. Both benchmarks closed Wednesday more than $3 higher after larger-than expected gasoline and distillate stock drawdowns in the U.S. and the lack of progress in peace talks. Despite the fact that U.S. president Donald Trump has extended a ceasefire following the request of Pakistani mediators to the two countries, Iran and the U.S.?restrict the transit of vessels through the Strait of Hormuz. The Strait of Hormuz carried 20% of the daily global oil and LNG?supplies up until the U.S.-Israeli attacks on Iran at the end February. Iran has seized two ships in the Strait of Hormuz, tightening their grip on this strategic waterway. Trump has also maintained the U.S. Navy's blockade on Iran's sea trade. Iranian parliament speaker Mohammad Baqer Qalibaf, who is also a top negotiator and is the Iranian parliament speaker, said that a complete ceasefire would only make sense if this blockade were lifted. Sources in shipping and security said that the U.S. military intercepted three Iranian flagged tankers and diverted them from positions near India, Malaysia, and Sri Lanka. Trump's decision to extend the ceasefire Tuesday was a reversal of his earlier warnings that Iran's bridges and power plants would be bombed. White House Press Secretary Karoline Leavitt informed reporters that Trump had not set a 'end date' for the extended ceasefire. U.S. EXPORTS SET A RECORD HIGH The United States' total exports of crude and petroleum products rose by 137,000 barrels each day, reaching a new record of 12.88 million barrels. This was due to Asian and European countries buying up supplies following disruptions caused by the Iran War. The Energy Information Administration reported on Wednesday that U.S. crude stock levels rose, while gasoline and distillate stocks fell. The crude inventories rose by 1.9m barrels compared to expectations of a 1.2m barrel draw. Analysts had predicted a draw of 1.5 million barrels. Distillate stocks fell by 3.4m barrels, compared to expectations of a drop of 2.5m barrels. (Reporting and editing by Tom Hogue; Arathy S. Somasekhar)
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Two people die after chemical leak in West Virginia
Officials said that two people died after a chemical 'leak' at a sliver scatalyst?plant?in Kanawha County in West Virginia on Wednesday. In a?statement posted on Facebook by the county commission, it was revealed that the incident took place at Catalyst Refiners, located in the unincorporated Community of Institute. One?person is in critical condition, according to the statement. Kanawha County's Deputy Attorney Christopher Settles stated that more than 30 people were transported to hospitals, including?seven first responders. Some of these individuals traveled as a precaution. Ben Salango, President of the Kanawha County Commission, said that there would be national and state investigations into this chemical release. Officials from the county said that they believe a chemical reaction created deadly hydrogen-sulfide during cleaning and decontamination at 'the plant to prepare for its closure. Salango stated that Ames Goldsmith Corporation owned the factory. ABC News, citing a statement by Frank Barber of the?Ames Goldsmith Corporation?, reported that those who died were company employees. The company 'didn't immediately respond to a request for a comment. (Reporting and editing by Scott Malone; Lisa Shumaker, Neil Fullick and Daphne Psaledakis)
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ROI-Bumper US tax refunds soften energy blow. McGeever: But not for much longer
Tax deadlines in the U.S. are April 15th. This date is often met with both anticipation and dread. The filing process can be a chore, but the possibility of a windfall refund is also exciting. This year's refund may be much larger than normal, and the timing could not be more perfect. Goldman Sachs economists estimate that tax refunds will be 17% higher this year than last, which would mean a windfall of $50 billion for consumers by the end May compared to the same time last year. The fuel price spike that followed the Iran War two months ago should provide a boost to the economy and consumers. Last month, it appeared that consumers were already preparing to receive their refunds to cover the record rise in gas prices. The figures released on Tuesday show that retail sales rose more than expected in March. The Atlanta Fed, citing this resilience, increased its GDPNow model's estimate of the first-quarter rate of growth from 0.9% to 1.2% annualized - the only upward revision for a whole month. The upturn is small, but welcome. The consumer outlook was relatively bright at the beginning of the year. However, the Iran War has dimmed it significantly and forced growth forecasts be cut. How long will any boost based on refunds last? April is expected to be a strong month for consumer spending. One-time, large refunds tend to be viewed as discretionary money and are spent rather than saved. This timeline means that the boost will fade as long as energy prices remain high, forcing consumers into dipping into their savings. SWALLOWING UP REBATES Morgan Stanley's economists provide a sobering assessment. The economists at Morgan Stanley predict that the average increase in tax refunds can only offset the spike in gasoline prices if this year's average pump price is not more than $3.60 a gallon. This figure is still above $4.00. The pump will eat up the rebates if prices don't fall sharply and quickly. Oxford Economics says that despite the windfall of rebates, consumer spending growth could be low in the second quarter, possibly dipping below 1%. Goldman economists are also not optimistic that consumers will be able to endure higher gas prices before they cut back on their spending. According to their baseline scenario, Brent crude will drop to $80 per barrel by the end of the year - from around $100 since the outbreak of the war on February 28 and $70 the previous day - causing a $70bn annualized hit to consumers. This headwind, at current prices is estimated to be $140 billion annually. Not So Fast Hold off calling for the U.S. consumers to capitulate just yet. The average household's balance sheet is in good shape, particularly with equity prices proving to be so resilient. The 'wealth' effect has been underestimated by those who predicted the end of the U.S. Consumer in recent years. According to Motio Research, the real household income has reached its highest level since the series began in 2010. This excludes the pandemic-distorted 2020 year. A consumer'stress index' released on Wednesday by the Kearney Institute shows that 37% U.S. consumers were stressed out about their debts and savings during the first quarter of this year, up from 10% at the end of last year. One persistent trend over the past few years has been the huge disconnect between what consumers say they feel and how their anxiety affects their spending. The consumers in lower income brackets, however, are more vulnerable because they spend a greater proportion of their incomes on energy. They are only responsible for a small portion of total U.S. expenditure, so headline figures could remain strong even though large segments of the populace are in serious financial difficulty. The bumper tax refunds will delay the increase in pump prices. But, as with all things crisis-related, the question is for how long. Save the date! On April 23, at 1300 GMT/9 a.m. ET, ROI columnists Jamie McGeever and Mike?Dolan will be joining LSEG in a webinar entitled "Markets Unpacked With Open Interest: Rethinking Safe Havens in Uncertain Times." Sign up here. 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.
REFILE-Asian stocks follow Wall Street to new highs, but higher oil costs are a risk
Asian shares followed Wall Street higher Thursday, led by record highs in Japan,?South Korea, and Taiwan as investors shrugged?higher?oil prices due to more shipping woes from the Gulf, and focused instead on strong corporate earnings.
The S&P 500 rose 1% overnight and the Nasdaq jumped 1,6% to close on new records. This was helped by a good start to the earnings season, which has eased consumer concerns in the U.S. despite the rising cost of energy due to the Iran War.
This was despite the fact that oil prices had risen for the fourth consecutive day. Iran captured two container vessels Wednesday as they attempted to leave the Gulf through the Strait of Hormuz. The Iranian government tightened its grip on this vital waterway. A fragile ceasefire is still in play.
Brent crude futures rose by 0.5% to $102.45 per barrel after gaining 3.5% over night. They had previously crossed back above $100. MSCI's broadest Asia-Pacific share index outside Japan rose 1% to reach a new record high, as tech giants surged in the region. The Nikkei, South Korea, and Taiwan markets all reached new records on the second day.
Hong Kong's Hang Seng index fell 0.3%, while China's blue chips rose 0.3%.
Markets are remarkably good at identifying risks, and they may continue to do so. The list of risks continues to grow as solutions remain elusive, said Laura Cooper. Global investment strategist for asset manager Nuveen.
The dissonance can't last forever... At some stage, what's being ignored may become the only thing that matters.
After the earnings-driven rally in Asia, Wall Street futures slid. The Nasdaq futures were down 0.2%, and the S&P futures were down 0.3%. Shares of GE Vernova surged 13.75% after the power equipment maker raised its annual ?revenue forecast on the AI boom, and Boeing advanced over 5% after a smaller-than-expected quarterly loss.
Tesla, the electric automaker, reported a positive surprise in its first-quarter?free cashflow, but investors were sceptical about its plans to spend more on AI and robots. Its shares fell 2% following the bell.
Treasuries also remained mostly unchanged despite the rise in oil prices. The yield on the?two-year U.S. Treasury held steady at 3.8064% after moving up by 1 basis point (bp). The 10-year yield increased by 1 basis point (bp) to 4.3094% after finishing little changed overnight.
The dollar held onto its small gains overnight. The euro remained steady at $1.1709 just above the 10-day low of $1.1691, after losing 0.3% overnight.
Skye Masters is the head of market research at National Australia Bank. She said: "It's questionable if financial markets have correctly priced the reality that supply restrictions will remain an issue in the future." (Editing by Kim Coghill).
(source: Reuters)