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Oil prices rise in Asia amid Gulf turmoil
The Asian stock markets matched Wall Street's?higher levels on Monday, after a weak U.S. jobs data reduced the risk of an increase in borrowing costs in the near term. However, a lack progress in Gulf peace talks led to a rise in oil prices. Iran announced?on Sunday that an agreement with Oman to define new shipping lanes through the Strait of Hormuz is in its final stages. However, it reiterated that this waterway will only be reopened once the United States meets other conditions. Brent crude increased 1.0% to $84.40 per barrel, as shipping in the crucial waterway was at a crawl. U.S. crude was up 0.8% to $79.80 per barrel. Fuel costs are on the rise again, raising the stakes in the U.S. consumer price report for July due Wednesday. Analysts expect a 0.1% increase in the headline figure and 0.2% in the core. A positive surprise next month could reignite speculation about a Federal Reserve rate hike. Michael Feroli is the chief U.S. economics at JPMorgan. He said that "our forecast for core CPI at 0.22% probably isn't firm enough to trigger a Fed hike at their September meeting." We are looking for a rebound in the prices of core goods after a period in which they dropped by two months. The market for futures has reduced the probability of a move in September to 44% from 67% just a week earlier. Wall Street closed at record highs on Friday due to the 'pullback of rate risk'. Japan's Nikkei rose 2.0%, while South Korea gained 1.1%. The broadest MSCI index of Asia-Pacific stocks outside Japan grew by 0.8%. Chinese blue-chips fell 0.4% as data revealed that consumer and producer prices inflation in July came in below forecasts, highlighting the softness in domestic demand. DOUBLE DIGIT GROWTH IN EARNINGS In Europe, EUROSTOXX Futures 50 and DAX Futures both fell by 0.1% while FTSE Futures dropped 0.4%. S&P futures were unchanged, while Nasdaq's futures rose 0.2% after gaining 5% in the previous week, amid a series of positive earnings reports. Analysts from BofA stated that earnings per share had increased 30% over the previous year, after Alphabet's and Amazon's investment gains were excluded. The 76% EPS rate was the highest since 2021. They said that "AI is still the leader, with median earnings growth of 28 percent compared to 12% for other non-AI related?stocks. However, consensus expects AI to slow down to 16 percent next quarter." This week's earnings are lower, but still include semiconductor maker Applied Materials and networking equipment maker Cisco as well as cloud infrastructure technology provider CoreWeave. Bond markets saw a slight increase in yields on 10-year Treasuries, at 4.662%. The market is preparing for $125 billion of new issuance this week. The U.S. Dollar had fallen sharply as a result of the drop in yields, and the general improvement in the risk environment. The euro was just a few cents away from achieving a seven-week high at $1.1554. Investors were wary about?intervention if they pushed the yen too low. A summary of opinions from the Bank of Japan's July meeting revealed that policy makers were concerned about rising inflation, which could lead to a faster than expected pace of interest rate hikes. This boosted the case for an increase in September. The drop in yields has helped gold that does not pay interest to hold its $4,320 per ounce price after it had risen more than 7% over the last week. (Reporting and editing by Shri Navaratnam, Stephen Coates and Wayne Cole)
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China data shows that iron ore prices are downbeat despite Australian strikes
Iron ore prices were barely changed on Monday as investors considered the impact of a strike in Australia at a major hub for exporting the key steelmaking ingredient against the downbeat inflation figures from China, the top consumer. As of 0323 GMT, the most traded iron ore contract at China's Dalian Commodity Exchange was unchanged at 716 Yuan ($106.13). As of 0315 GMT, the benchmark?September ore price on the Singapore Exchange had increased by 0.21% to $95.25 per ton. On Sunday, more workers joined the strike at BHP's Port Hedland operation in Western Australia. This was the first major industrial action in a quarter century. In the six months to June, 75% of the iron ore exported from Western Australia's Pilbara region was shipped through the hub. Investors and traders are watching to see if both sides can reach a deal soon or if an escalation will affect supply. China's producer prices inflation fell more than expected in July, to the lowest level?in three months. Consumer inflation also dropped, as global energy costs retreated, despite U.S. and Israel war against Iran. Coking coal, coke and other steelmaking ingredients grew by 2.23%, and 0.67% respectively. The Shanghai Futures Exchange steel benchmarks were mostly weaker. Rebar fell?0.23%; hot-rolled coil slipped?0.03%; wire rod dropped 0.46%, while stainless steel gained 0.69%.
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Gold falls from its seven-week high as US inflation data is looming
Gold prices fell on Monday, as investors took profits following a seven-week high. Meanwhile, markets waited for new clues from U.S. inflation figures to determine the Federal Reserve's rate policy. As of 0200 GMT, spot gold was down 0.5% to $4,322.28 an ounce. After a weaker than expected?U.S. jobs data. U.S. Gold futures dropped 0.4% on Monday to $4,381.60. Gold is slightly lower as it succumbs a little to profit-taking after last week's NFP-inspired gains. This is more of a natural stabilisation than a significant shift in sentiment. I expect gold will remain above $4,300 in the near term. The U.S. economy lost jobs unexpectedly in July, and the previously reported gains in employment for the previous two months have been revised dramatically lower. The futures market then changed the odds that a rate increase would occur at the Federal Open Market Committee's meeting on September 15-16 from a more likely-than not chance to a less-than-even possibility. Gold is more attractive than income-generating assets in a low interest rate environment, since it does not earn interest. The Consumer Price Index, or CPI, will be released on Wednesday and the Producer Price Index on Thursday. Waterer said that "soft readings would make the case for a rate hold and open up a new path to further gold upside. Middle East uncertainty is a persistent risk factor as any renewed escalation in oil prices could put pressure on 'the metal. Iran has said that it is close to a final agreement with Oman, defining new shipping lanes through the Strait of Hormuz. However, the U.S. still needs to meet several conditions in order for the strategic waterway to be reopened. Silver spot fell by 0.2%, to $63.45 an ounce. Platinum lost 0.1%, to $1.742.50, and palladium dropped 1.1%, to $1.362.97. (Reporting and editing by Subhranshu sahu in Bengaluru. Ashitha Shivaprasad is based in Bengaluru.
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Australia tightens restrictions on two Northern Minerals shareholders who are ordered to divest
The Australian government has tightened restrictions on two Northern Minerals shareholders who were ordered to 'divest their shares over national security concerns,' the?miner reported. This is a further scrutiny of Chinese investment in the rare-earths developer. Northern Minerals has developed the Browns Range Heavy Rare Earths Project in Western Australia. Western governments are looking to reduce their reliance on China as a source of these minerals. The Australian Treasurer Jim Chalmers, ordered in May that six offshore shareholders of Northern Minerals divest all their shares over concerns that Chinese-linked groups were seeking to control the rare earths miner. Chalmers said it had amended interim instructions for Hong Kong Ying Tak and Real International Resources registered in the British Virgin Islands, as well as Hong Kong Qogir Trading & Service. According to the revised directions, Real and Qogir are not allowed to dispose of their shares until the proposed sale has been notified?to the Treasurer in order for him/her to confirm the buyer isn't an associated party. In May, the six shareholders were required to sell a total of 1.68 billion Northern Minerals shares by July 2 to non-associated parties. The ASX200 index had fallen 0.3% by 0026 GMT, despite the share price of Northern Minerals rising as high as 3.9%. (Reporting and editing by Sherry Jacobi-Phillips, Subhranshu S Ahu, Melanie Burton in Melbourne. Additional reporting by Rajasik Mukherjee)
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Russell: The demand for crude oil in Asia is balanced by the ROI-China.
China is doing all the heavy lifting to reduce crude oil demand in?Asia as a way to compensate for the reduced shipments of Middle East oil due the the Iran?war. The world's largest oil importer reported arriving 8.41 million barrels a day (bpd), up from a near decade-low of 7.12 mln in June, but still 24.3% less than July last year. When June and July imports combined, this gives a?average of 7.78 million bpd over the last two months. The average for the three-month period ending in February was 11,99 million bpd. This is 4,21 million bpd less. The United States and Israel launched an attack on Iran on 28 February. The conflict escalated to the point that the Strait of Hormuz effectively shut down, cutting off the waterway which carried about 20% of crude oil and refined goods in the world before the start of war. Saudi Arabia and the United Arab Emirates are two of the Middle East’s biggest crude exporters. They have been able to increase shipments outside the Strait of Hormuz. However, flows have fallen by about 5 million barrels per day. Crude exports from the Middle East are mainly destined for Asia, which is the largest importer of crude oil. However, crude arrivals in Asia have dropped significantly. According to Kpler's data, Asia imported 22.82 millions bpd of oil in July. Although this was an increase from April's 18.77 millions bpd (which was the lowest since Nov 2015), July's imports still fell by about 4 million per day compared to the average of 26,89 million per day in the three-month period prior to the onset of the 'Iran conflict'. The data shows that China's imports have dropped by about the same amount as the imports of Asia in the last two months. Price Moves China's decreased imports are partly due to price volatility. Brent futures hit a four-year peak of $126.41 per barrel on April 30 – a date when cargoes for June and July would have been scheduled. China has historically reduced imports as prices increase, but this drop is unprecedented. Analysts estimate that China's crude oil stockpile is at least 1.2 million barrels, and could even be higher. How long will China be able to balance crude oil prices in Asia? Imports from China are expected to show a slight recovery in August as the cargoes which managed to leave the Strait of Hormuz despite the short ceasefire between Iran and the United States are delivered. Kpler estimates that China's Middle East imports will reach 2.71 million barrels per day (bpd) in August. This is up from 2.43 millions bpd during July, and 1.42 million in June. Kpler estimates that China's crude oil imports in August will be 5.97 million barrels per day. This is up from 2.43 million bpd in July and the 1.42 million bpd of June, which was?the lowest ever recorded by Kpler going back to 2013. September imports will likely be more telling, since flows from the Middle East are more restricted due to the sharply reduced shipments that have returned through the Strait of Hormuz following the failure of the ceasefire agreement between U.S. president Donald Trump and Tehran. Even if recent efforts to restore vessel movement through the Strait of Hormuz prove successful, it may take several weeks before exports ramp up. China's refiners have two options: they can continue to suppress their appetite for import crude and dip into inventories or bid for cargoes coming from outside the Middle East. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. ROI provides data-driven, thought-provoking analysis on everything from soybeans to swap rates. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X. These are the views of the columnist, who is also an author. (Editing by SonaliPaul)
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Oil prices rise on the uncertainty surrounding the reopening Hormuz
Oil prices rose Monday?on the uncertainty of a reopening the Strait?of Hormuz any time soon. Iran said a?deal with Oman?defining?new shipping?lanes? was in its final phases?but?insisted that the U.S. still must meet other conditions. Brent crude futures increased 91 cents (1.09%) to $84.46 a bar by 0056 GMT. U.S. West Texas Intermediate Crude futures also rose 61 cents (0.78%) to $78.79 a bar. Both benchmarks fell more than 7% in the last week, on the hope that Iran and Oman would soon reach a deal that would lead to the reopening of Strait of Hormuz. The Strait of Hormuz carried a fifth of the world's crude oil before the war. Iran claimed on Sunday that it was "finalizing" a deal with Oman, but reiterated that waterway access would be restored only after Washington met certain conditions. Tim Waterer is the chief market analyst for KCM Trade. Abbas Araqchi, Iran's Foreign Minister, said on Sunday that Iran and the U.S. have not begun talks. Tehran won't start any as long as Washington violates a June interim agreement. A Saudi oil plant has been attacked in a "further attack on supply". The Iran-aligned Houthis claimed they 'hit' Saudi Aramco Jazan refinery two days after 'the kingdom signed a pact of defence with Sunni Muslim friends Turkey and Pakistan to respond to the growing regional 'instability' caused by the U.S./Israeli war against 'Shi'ite Iran. Separately, ADNOC of the United Arab Emirates said that 15 of their vessels were attacked while transiting the Strait of Hormuz.
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Oil prices rise in the Gulf amid confusion and Asian stock markets edge higher
The Asian share market matched Wall Street's gains on Monday, after a weak U.S. employment report reduced the risk of an increase in borrowing costs near-term. However, a lack progress?in Gulf Peace talks led to oil prices?creeping?higher. Iran announced on Sunday that it was nearing the final stages of a deal that would define new shipping lanes for the Strait of Hormuz. However, the Iranian government reiterated that this waterway will only be reopened once the United States meets other conditions. Brent crude increased by 0.9% to $84.32 per barrel, as the shipping volume through this vital waterway was minimal. U.S. crude rose by 0.7% to $79.74 per barrel. Fuel costs are on the rise again, raising the stakes for Wednesday's U.S. consumer price report. Analysts expect a 0.1% increase in the headline figure and 0.2% for the core. A positive surprise could reignite speculation about a Federal Reserve hike next month. Michael Feroli is the chief U.S. economist at JPMorgan. He said that our forecast of core CPI at 0.22% was "probably not firm enough" to trigger a Fed hike at its September meeting. However, repeated readings closer to 0.3% might do the trick. We are looking for a rebound in the prices of core goods after a period of two months where they have fallen. The futures markets has reduced the probability of a move in September to 44% from 67% one week ago. Wall Street closed at new records on Friday as the pullback in interest rate risk helped Treasuries rally. Japan's Nikkei jumped 0.6% Monday while South Korea gained 0.5%. The broadest MSCI index of Asia-Pacific stocks outside Japan grew by 0.3%. DOUBLE DIGIT GROWTH IN EARNINGS In Europe, EUROSTOXX Futures 50 and DAX Futures both fell by 0.1% while FTSE Futures dropped 0.4%. S&P futures fell 0.1% while Nasdaq was little changed after a week of positive earnings reports. Analysts from BofA stated that earnings per share were up 30% over the previous year, even after Alphabet's and Amazon's investment gains had been excluded. The 76% EPS rate was the highest since 2021. In a note, they said: "AI is still the leader, with median earnings growth of 28%, compared to 12% for non AI related stocks. However, consensus expects AI's growth to slow down to 16% in the next quarter." This week's earnings are lower, but semiconductor maker Applied Materials and networking equipment?maker Cisco as well as cloud infrastructure technology provider CoreWeave all have positive results. Bond markets saw yields for 10-year Treasuries a little higher, at 4.673%. The market is bracing itself for $125 billion of new issuance in the coming week. The U.S. Dollar had fallen sharply due to the drop in yields, and a general improvement of risk. Investors are still wary about intervening if the yen falls too low. The drop in yields has helped gold that does not pay interest to hold its $4,342 per ounce price after it had risen more than 7% over the last week. (Reporting and editing by Shri Navaratnam.)
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Taylor Farms recalls salsa and guacamole over salmonella risk
Taylor Farms announced on Sunday that it was recalling from retailers more than 12 'prepared food items' containing jalapenos. This includes salsas and guacamole. The California-based provider said that it had voluntarily pulled products with jalapeno in them due to a recall by Coast Citrus Distributors. It also stated that it was "no more" sourcing the peppers from a Mexican farmer who?supplied Coast Citrus, while it searches for alternative suppliers. The recall is being conducted as U.S. authorities investigate an outbreak of Salmonella linked to imported jalapeno peppers from Mexico. This outbreak, which began earlier this week, sickened 345 people in 27 states and resulted in 36 hospitalizations. Chipotle Mexican Grill, QDOBA and other restaurant chains have stopped using the peppers. Coast Citrus has recalled and informed customers of the remaining product. Taylor 'Farms has not received any reports of illnesses related to the voluntary recalled products, the statement added. Salmonella infections cause diarrhea, fever and stomach cramps, which can be severe for young children, elderly people, or those with weakened immune systems. The recall is being conducted amid increased scrutiny on food safety following an outbreak of cyclosporiasis, a parasitic disease linked to iceberg lettuce served by Taco Bell. It also coincides with renewed attention given to Chipotle’s previous foodborne illness outbreaks.
Oil prices are off peak, but tech resilience is a bright spot for Asian shares
Asian shares rose on Friday, as investors reacted to the relief that oil prices had dropped and positive company earnings attracted them into tech stocks. Japan's first yen buying intervention in two-years also helped stabilize the currency.
Apple boosted the mood by exceeding?forecasts, and announcing a positive outlook for sales. However, it warned of chip supply shortages. In extended trading, its shares rose 2.7%. This was on top of gains of 10% for both Caterpillar (which beat expectations) and Alphabet (which also exceeded expectations).
S&P 500 rose more than 10% in April on the back of expectations for rising profits, while Nasdaq soared 15% for its best performance since 2021. S&P futures rose 0.2% Friday, while Nasdaq's futures firmed 0.1%.
Asia also had a great month in April, with the Nikkei 225 index of Japan up 16 percent, Taiwan's Nikkei 225 index up 23 percent, and South Korea almost 31 percent.
The Nikkei gained 0.6%, while Australian shares added 0.9%. The broadest MSCI index of Asia-Pacific stocks outside Japan rose 0.3%.
Asia remains acutely vulnerable to higher energy prices. It imports most of its oil, gas and other fuels, and oil flow through the Strait of Hormuz is severely disrupted.
Iran warned on Thursday that it would respond to any new attacks by Washington and reaffirm its claim over the Strait with "long, painful strikes".
Brent crude rose 0.6% to $111.70 per barrel. However, this was still well below the four-year high of $126.41 set on Thursday. U.S. crude oil rose by 0.1% to $105.10 per barrel.
JAPAN DRAWS LINE FOR YEN
The currency markets were also enlivened after reports that Japanese authorities intervened to sell dollars in exchange for?yen on Thursday. This initially sent the greenback tumbling five?yen and to a 2-month low at 155.50.
But buyers returned on Friday and lifted the dollar up to 157.29, a sign Tokyo might still need to do more to reach the 160.00 yen mark.
Tim Baker, macro strategist at Deutsche Bank and expert on the history of intervention, said that the cost would likely be in the tens or hundreds of millions of dollars.
He said, "We are not convinced USD/JPY is going to keep falling or stay at this level for very long." The cross is high in relation to rates but low in comparison to a simple model which includes rates, oil, and equities.
The rise in crude oil prices will cause the trade deficit to increase dramatically.
The surge in dollar sales lifted the euro indirectly to $1.1726, and away from its trough for three weeks of $1.1655. The pound reached a 10-week-high of $1.3591.
Both currencies were supported with hawkish comments from their respective central banks.
One board member voted to increase rates immediately after the Bank of England warned that the fallout could be "forceful" if energy costs continue to rise.
Christine Lagarde, President of the European Central Bank, said that they are debating whether to raise rates. She noted that the data collected over the next six-week period will decide the issue.
Analysts at Citi said in a report that "the messages conveyed at the press conference give us a distinct impression that governors are unanimous that they will raise policy rates at their next meeting, on June 11,".
"We see no reason to change our expectations of a back-to-back increase in rates?in July and June."
This comes after the Federal Reserve made a shift to a more hawkish stance on Wednesday, which led markets to give up any hope of a rate reduction in this country for this year.
After the pivot, U.S. Treasury 10-year yields are up 8 basis points for the week to 4.390%. However, they have fallen from a high of 4.436%.
Gold was also flat on the commodity markets at $4,612 per ounce. It has been in a trading range that is tight for over a month. (Reporting and editing by Shri Navaratnam, Sam Holmes and Wayne Cole)
(source: Reuters)