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Iran War raises stakes for US, China ahead of Trump-Xi discussions
The Iran War has further strained U.S. - Chinese ties and is expected to dominate the May 14-15 summit between U.S. president Donald Trump and Xi Jinping, his Chinese counterpart and host in Beijing. Here are some of the main issues that Washington?and Beijing will be dealing with as the U.S. - Israeli war against?Iran reshapes their broader relationship. IRAN CEASEFIRE CONFERENCES U.S. Treasury?Secretary Scott Bessent said the two presidents would discuss the Iran War, and asked China to "join in this international effort" to open up the Strait of Hormuz for international shipping. Analysts say that while Beijing did work behind the scenes last month to convince Iran to have peace talks with the U.S., it was not acting solely on Washington's orders. China has called for an end to hostilities after the visit of Iran's foreign minister last week. China said it appreciated Iran's commitment to not develop nuclear weapons while also recognizing Iran’s legitimate right to peaceful use of nuclear power. The U.S. thinks Iran is trying to build a nuke bomb. They want Iran to give up its right to enrichment and to hand over their stockpile of highly-enriched uranium for a period of 20 years. Energy security is a growing concern for China as the war continues. Beijing has been forced to cut back on its lucrative exports such as jet fuel or gasoline in order to protect its domestic market. China imports roughly half of its crude oil from the Middle East. The U.S. Blockade and the Strait of Hormuz closure have left many ships trapped in the Gulf, vulnerable to attack. China's crude oil imports fell by 20% in April compared to a year earlier, according to Chinese data. China's Foreign Ministry has stated that the U.S. blocking of the strait is not in the interest of international cooperation. Last week, it confirmed that a Chinese-manned oil tanker was attacked by a U.S. vessel in the strait. US SANCTIONS ON IRANIAN OIL AND WEAPON SALES China remains the largest buyer of Iranian oil, despite the pressure from the Trump administration. Over 80% of Iran's oil shipped has been bound for China as Chinese refiners have taken advantage of the discounted oil sanctioned by the U.S. Kpler estimates China will buy?an estimated 1.38 million barrels of Iranian oil per day in 2025. The U.S. Treasury sanctioned Hengli Petrochemical in April for purchasing Iranian oil worth billions of dollars. This was in response to its threat of sanctions against buyers. The Treasury also wrote to two Chinese banks, warning them of secondary sanctions should they facilitate trade in Iranian oil. Beijing has reacted. The Ministry of Commerce has ordered companies to not comply with the?U.S. Beijing imposed sanctions on five refiners for the first-time,?invoking legislation that allows Beijing retaliation against?entities who enforce sanctions it considers illegal. The U.S. Treasury sanctioned two Chinese companies and two Hong Kong-based firms just days before Trump's trip. They accused them of providing and facilitating Iran's efforts to buy weapons and materials for ballistic missiles from China. (Reporting and editing by Emelia Sithole Matarise, Mei Mei Chu, and Antoni Slodkowski)
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Constellation Energy beats its profit forecasts on the back of strong power demand and Calpine's boost
Constellation Energy, a U.S.-based power company, beat Wall Street expectations for the?first quarter adjusted profit on a Monday. It was helped by?increased power demand and contributions from recently acquired Calpine assets. In premarket trading, shares of 'the company' rose by?nearly?5%. According to the Energy Information Administration, U.S. electricity consumption is expected to continue to increase in 2026 and in 2027. Constellation is the largest U.S. nuclear power operator. After completing the?Calpine purchase in January, Constellation has expanded beyond its nuclear heavy fleet, adding a large portfolio of gas-fired generators that give it?more versatility in high-demand market such as Texas or California. The company announced earlier this year that it plans to spend $3.9 billion on capital expenditures and has increased its share buyback authorization to $5 Billion, as it prepares to meet the growing demand for cleaner electricity. Constellation has also completed commercial operation of the Pin Oak Energy Center in Fairfield (Texas), a 460 megawatt natural gas-fired power plant. As part of its regulatory 'commitments' related to the acquisition of Calpine, in March the company announced that it would sell a portfolio PJM generation assets for $5 billion to LS Power. The total quarterly operating revenue was $11.12 billion compared to $6.79 from the previous year. According to LSEG, the Baltimore, Maryland based company reported an 'adjusted profits of $2.74 for the three-month period ended March 31. This was higher than the $2.57 average analyst estimate. The nuclear fleet produced 44,666 Gigawatt-hours,?down from the 45,582 that was produced a year earlier, due to more planned outage days than last year. (Reporting by Dharna Bafna in Bengaluru; Editing by Tasim Zahid)
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Russell: The impact of the closure on Chinese EVs is not limited to oil, but also extends beyond it.
The Indian diet cola consumer and the buyer of an electric vehicle may appear to have little in common. But they both face the risk of being affected by the closure of the Strait of Hormuz. The world economy will be affected by the second and third round effects of the closure of the narrow waterway. Already, the price of refined fuels like diesel and gasoline has increased and inflation is a result. Electric vehicles (EVs), which allow users to reduce their dependence on fossil fuels, are considered by many to be a big winner in the current conflict between Iran and the United States. EVs, however, are still exposed to the Strait of Hormuz because the manufacturing of their batteries relies on sulphuric acids. This is a component that is used in the extraction of nickel and lithium. The high-pressure acid-leach method is essential for the extraction of battery-grade Nickel from ore in mines in Indonesia, which is the world's largest producer of metal. Copper and lithium are also produced in Australia. Before the U.S.-Israeli attack on Iran on February 28, about half of the world's seaborne sulphur passed through the Strait of Hormuz and largely went to Asia. Sulphur is produced as a byproduct when crude oil or gas is refined into fuels. Middle East countries like the United Arab Emirates, Saudi Arabia, and Kuwait are major suppliers of raw materials used to produce sulphuric acids. Bulk carriers usually transport sulphur, but volumes have fallen since the Iran conflict began. According to Kpler's commodity analysts, only 30,000 tons of metric sulphur made it through in April and 188,000 tons in March. Kpler reported that this was a decrease from the average of 1.27 millions tons per month during the three months before the beginning of the conflict. Delivered prices in Asia have risen by 50% since the beginning of the war, to $880 per ton. Sulphuric Acid costs will rise for nickel, lithium, and copper miners. But the greater concern is that there could be a shortage of sulphuric acids. The risk is that some miners may have to cut back production if they cannot obtain enough sulphuric acids. RISE IN CONCERN The sulphuric-acid supply is becoming increasingly difficult to secure on a long-term basis, according to several mining executives from Indonesian and Australian companies that attended the Asian Battery Raw Materials Conference held in Hanoi last month. China's EV makers and battery manufacturers are vulnerable to any disruption in the supply of lithium as well as nickel from Australia. Alternatives to sulphuric acids are available, but are not suitable for producing battery-grade Nickel. For copper and lithium, they require more energy to produce smaller volumes. The processing of metals may not be a crisis yet, but the closer we get to that point the longer the Strait of Hormuz is effectively closed. This raises the issue of what Beijing will do if the threat to its EV industry and battery industries is more than just a remote possibility. The logical next step would be to increase pressure on Iran, its ally, and Donald Trump in the United States to reach an accord that at least reopens all traffic through the Strait of Hormuz. Other impacts are already felt, besides crude oil and LNG. Before the Iran?war, about 8% of the global aluminium supply passed through the Strait of Hormuz. This has now largely ceased. Kpler data shows that 20,000 tonnes of lightweight metal left the Strait of Hormuz in April. This is down from a previous average of 1,26 million tons during the three months before the beginning of the war. Loss of these cargoes have tightened the supply of aluminium in India. This has led to a shortage of Diet Coke which is sold only in aluminum cans. This is a 'inconvenience' for Diet Coke consumers, but it also shows how shortages can occur in unexpected places, disrupting supply chains and leading to higher prices. 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, an author for.
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INDIA BONDS - Oil-led inflation fears are sapping demand for Indian bonds
Indian government bonds fell a little on 'Monday as stalled U.S. - Iran peace talks sent 'oil prices higher fueling concerns about India’s inflation and fiscal prospects. Traders were preparing for a 'potentially firmer April inflation % data. The benchmark 6.48% bond yield for 2035 settled at 7.0317% - a 5.1 basis point increase after Friday's sharpest rise. The yield of the new 10-year bond at 6.94% for 2036 closed up 4.1 basis points to 6.9814%. Donald Trump squashed Iran’s response to a U.S. Peace proposal on Monday, raising fears that the 10-week-old conflict would continue. Brent crude jumped 2.6% to $100 a barrel during Asian trading. Separately on Sunday, Prime Minister Narendra Modi urged Indians not to waste fuel and to reduce their use of fertilisers. He also urged them to limit unnecessary overseas travel, cut down on cooking oil, and reduce the amount they used. Traders said that his remarks reinforced concerns about the impact of energy costs and shortages on inflation. Kruti Chheta is a Mumbai-based fund analyst and fixed income analyst for Mirae Asset Investment Managers (India). A poll of economists revealed that India's April inflation data, which is due on Tuesday will likely move closer to the central banks 4% target, from 3.40% in March. HSBC economists said that with energy and 'El Nino' shocks, they forecasted FY27 inflation to be 5.6% and gross domestic product to be 6%. They also predicted two rate increases in the first and fourth quarters of 2027. India's overnight swap rates soared along with bond yields. The swap rate for a year rose by 7.5 basis points to 5.97%. Meanwhile, the rate for a two-year swap increased by 9 basis points to 6.22%. The five-year OIS was at 6.62% - up 6.25bps.
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India's SBI loses more than $11 billion over two sessions due to margin squeeze and disappointing earnings
State Bank of India lost more than $11 billion in market value during two sessions due to?narrowing profit margins and disappointing fourth-quarter results that brokers?warned might signal a 'tougher profitability cycle. On Monday, shares of India's largest lender by customer base fell 4.5% to 973.60 Rupees. This was an extension of Friday's nearly 7% fall following the results. The stock dropped more than 10% over two sessions and $11.3 billion was lost. NSE data on Monday showed that the 1,000 strike of SBI was the most heavily?called, indicating that investors are expecting any near-term recovery?in stock price to be capped around that level. The two sessions saw 95 million shares traded, which is almost five times the average 30-day volume of 18.7 millions. Analysts say the lender's fourth quarter?earnings missed reinforced concerns that Indian bank are entering a "tougher profitability cycle", with rising funding costs beginning to erode loan margins. SBI reported on Friday a smaller net interest margin for the quarter of 2.8%, compared to 2.98% during the previous three-month time period. They also missed the profit estimates by analysts. JP Morgan said on Monday that "NIM compression has become more apparent as funding costs reprice quicker", adding that earnings could slow down in the next quarters. "Core earnings are underwhelming and incremental margins are tightening," Bernstein stated, warning that upside catalysts could be limited if margins do not stabilize. Brokerages said that SBI's asset quality was a positive factor, as bad loans and credit costs remained benign. However, they warned it might not be enough to offset margin compression pressures on net interest income. Analysts maintained a positive long-term outlook, citing the strong balance sheet of the bank, its?scale, and market leadership. SBI's gains for the year to date were wiped out by the two-session selling, which left the stock down 0.8%, but it still performed better than the benchmark Nifty50's 8.8% decline.
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As US-Iran negotiations hit a stalemate, stocks fall and the dollar rises
Investors were 'fretted' that the talks between Iran and the U.S. had reached a deadlock, leaving the Strait of Hormuz almost?closed. This sent oil prices back up. Donald Trump, the president of the United States, rejected Iran's response on Sunday to a U.S. proposal for peace talks that would end the war. He said Tehran's requests were "totally inacceptable". Brent crude futures, around 45% more expensive than they were before Israel and the U.S. began their strikes against Iran on February 28th, jumped up to 4.6% over night and closed at $103.75 per barrel, an increase of 2.4% for the day. The MSCI All-World Index was relatively flat. In Europe, the STOXX 600 fell 0.2%, and U.S. Stock Futures were trading 0.1% lower. In the last two week, the correlation between oil and stock markets has turned positive, meaning that they are more likely than ever to move together, rather than in opposite directions as had been the case for the majority of the war. Investors will look beyond energy prices, for the time being, due to the strong enthusiasm for all things tech, and macro data, including last week's U.S. Payrolls Report, which shows that global economic growth is still holding up. "Markets are good at learning how to adapt and live with situations that we once thought impossible. We are at this point with crude oil right now. If it rises another 50%, that's another test we will have to?navigate", IG Chief Market Strategist Chris Beauchamp stated. If you look at the data on earnings, they are really good. We would be firing on all cylinders if it weren't for the Iran issue. "But people are happy to believe there must be some sort of deal with Iran no matter how ugly it is," he said. Iranian media reported that an Iranian plan sent to Washington stressed the need to end the war on all sides and lift sanctions against Tehran. It also called for reparations and recognition of Iran's control of Strait of Hormuz. Bruce Kasman is the global head of JPMorgan's economics. He said that "the conflict in the Middle East has now entered its eleventh week." Energy prices are up but still at levels that are 'headwinds, not expansion-ending obstacles. Our commodities team is seeing operational stress levels start sometime in June. Iran has effectively closed the Strait, cutting off a corridor which normally handles about a fifth the world's oil shipments. The dollar gained 0.3%, to 157.12 Japanese yen. Meanwhile, the euro dropped 0.12% to $1.177. The British pound lost 0.32%, trading at $1.36 as British Prime Minister Keir?Starmer tried to quell the rebellion in his ruling Labour Party following last week's local election results. Overnight, optimism about AI drove Chinese stocks to new highs. Meanwhile, South Korea's chipmaker heavy KOSPI index rose by 4.3%. Data revealed that?China’s producer prices rose to a near four-year high. Meanwhile, consumer inflation also increased due to the rising global energy costs. Trump will visit China on Wednesday and meet Chinese President Xi Jinping, for their first face to face talks in over six months. Gold fell 1% on commodity markets as the dollar firmed and inflation fears were at the forefront. (Editing by Stephen Coates and Gareth Jones)
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The oil crisis and Modi's comments on gold have sparked fears about tariffs. Jewellery stocks are down.
The Indian Prime Minister Narendra Modi’s call to “avoid purchasing gold for one year” in order to help protect foreign currency reserves fueled fears of higher import duties on the metal. Shares of Indian jewellery retailers fell as a result. Oil prices have soared due to the Iran war, putting pressure on India's rupee and balance of payment. India is the third largest oil consumer and importer in the world, importing more than 90% its crude oil needs and half its natural gas demands. Modi made his remarks on gold on Sunday along with other measures that he advocated, such as fuel conservation, working more from home, and limiting travel and imports. Gold jewellery is a very popular gift in India. It is also a necessity for brides at weddings. India is the second largest gold consumer in the world, but imports are used to satisfy nearly all of its demand. On Monday, shares of jewellery manufacturers?such as Titan Gold, Senco Gold, and Kalyan Jewellers - fell between 6% to 9%. Surendra Mehta is the national secretary of the India Bullion and Jewellers Association. He said that there are fears the government may increase import duties on gold to deter imports for an entire year. "Duties may be increased even more than in previous years." New Delhi raised tariffs on imports of gold in 2012 and 2013 to stabilize a rapidly depreciating rupee. Jewellers are now concerned that the duty reductions made to 15 to 6% in 2024, to combat smuggling, could be reversed soon. On Monday, a government source stated that India "has no plans" to increase duties on gold and Silver imports. India's balance-of-payments is expected to decline sharply in the upcoming fiscal year April-March to a deficit between $66 billion and $70 billion compared to an estimated $26 to $28 billion by 2025-26. The 'central bank' has been prompted by the pressure on the rupee to limit the size and number of positions banks can hold in trading. The central bank has also tightened up on arbitrage trading. On Monday, the Indian rupee reached a new record low against the dollar of 95.31. On Monday, senior?government officials stated that India has enough?gasoline? and diesel? supplies. Fuel retailers lose about 100 rupees ($1.05) a litre of diesel and around 20 rupees a litre of gasoline when they sell the fuels at below-market rates. Since April 2022, state retailers haven't raised the price of gasoline or diesel. Reporting by Rajendra J. Jadhav, Nimesh Vora and Mayank Bhardwaj; editing by Edwina Gibbs, Raju Gopalakrishnan and Mayank Bhardwaj
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India shares and rupee drop on Modi's austerity call, while crude prices spike
Indian shares and the rupee fell on Monday after Prime Minister Narendra Modi called for a series of measures including fuel conservation, less imports, and gold purchases as surging energy prices put pressure on foreign exchange reserves. India, the world's largest oil importer and consumer and third-largest oil importer, said late last month that there was no plan to increase the pump prices of diesel and gasoline. It is one of the few countries who have not raised prices despite global price increases. The Nifty 50 dropped 1.49%, to?23.815.85. Meanwhile, the BSE Sensex fell 1.7%, to 76.015.28. The rupee recorded a record-breaking closing?low at 95.31 to the dollar, falling about 0.9% for the day. This is its steepest drop in a single-day since March 27. Brent crude rose more than 2.6%, to around $104 per barrel, after U.S. president Donald Trump dismissed the Iranian response on Sunday to Washington's peace proposal as "unacceptable." Arun Kejriwal of?Kejriwal Research and Investment Services called the market's slide on Monday a "knee jerk reaction" after the Prime Minister's remarks. He said that the oil prices, which refuse to drop and remain below $100 despite efforts by Iran and the U.S. for peace, will continue to weigh on sentiment. 13 of 16 major sectors posted losses. Small-caps and midcaps both fell by about 1.5%. Oil marketing companies - Indian Oil, BPCL, and HPCL all fell between 2.3% and 3%. Reliance Industries, the index heavyweight, lost 3.3%. Stocks of travel-related companies such as Indian Hotels, Lemon Tree, Chalet Hotels, Thomas Cook, and Yatra Online have fallen between 1% to 4.5%. Airline ?operator IndiGo lost 4.9%. Jewellers' shares also fell. Shares of Senco Gold, Kalyan Jewellers and Titan all fell between 6.7% to 9.3%. State Bank of India dropped 4.5% and extended losses after missing the quarterly profit forecast, pulling?PSU Banks 2.5% lower. Hyundai Motor India ?rose 2.8% on a smaller-than-expected fall in quarterly profit, and agro chemicals firm UPL gained 3.6% on quarterly profit rise.
The MORNING BID AMERICAS 11-week countdown
What's important in the U.S. and international markets today by Mike Dolan Editor-at-Large of?Finance and Markets
Iran's conflict has now lasted 11 weeks - twice as long as President Donald Trump said when he ordered the first strikes against Iran. And there is no end in sight. The weekend knocked down last week's hopes of a U.S. strategy to end the war, as Trump deemed Iran's response "totally inacceptable".
Below, I'll go into more detail. Listen to the Morning Bid podcast. Subscribe to the Morning Bid daily podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
11 WEEKS AND COUNTING The U.S.-Iran seem to be at odds about Tehran's nuclear plans and its control of Strait of Hormuz which is largely closed for oil and cargo shipping. The world oil price jumped overnight by nearly 5% in response to Trump's announcement, but then eased slightly so that Brent crude is now trading at about $104 a barrel. This was enough to stop the stock markets from continuing their upward trend. The AI frenzy, chip boom and energy crisis continue to compete for attention. Wall Street futures were mostly unchanged on Monday morning, following the S&P500's?against another series of record-highs last week. The Friday April U.S. Employment Report, which was in line with other labor market indicators from last week, showed little or no damage to the overall job creation as a result of the war.
However, the employment disruption may take a while to arrive, and gas prices that are still high may bite at some point. China's'mainland' stocks rose ahead of the summit this week between 'President Trump' and Chinese President Xi Jinping. The meeting will start on Thursday. The energy shock could create an unsettling backdrop, but the above-forecast increases in Chinese consumer and producer inflation may be a cause for concern. Treasury Secretary Scott Bessent is also in Asia today, meeting with Japanese officials. After the poor results of local elections last week, Keir starmer's UK Labour Party has continued to put pressure on him. Starmer announced that he will not resign following weekend reports about a possible challenge to his leadership. He gave a speech Monday to 'increase the support of his party.
On Monday, the United States will be focusing on existing home sales data, while Tuesday's focus will be on April inflation updates. Washington will also receive attention, as the U.S. Senate could vote on Kevin Warsh’s nomination to be the next Federal Reserve chair on Monday. The term of outgoing chair Jerome Powell will officially expire on Friday.
The week's biggest earnings are Cisco? and Applied Materials.
Chart of the Day China's export growth picked up in April, as factories raced against the clock to fulfill a wave orders from AI-related companies and other buyers who wanted to stockpile parts amid fears that the Iran War could drive global input costs even higher.
Next week, when Trump visits Beijing for the summit of leaders that will likely extend the trade truce from last year, the focus will be on the export strength which has led to China's surplus in trade with the U.S. reaching $87.7billion so far this season.
Watch today's events
* U.S. April existing home sales (10 a.m. EDT), April Conference ?Board Employment Trends Index (10 a.m. EDT)
* U.S. 3-year ?note auction (1 p.m. EDT)
Scott Bessent, U.S. Treasury secretary, departs on a three-day trip to Tokyo
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(source: Reuters)