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China's factory-gate prices in May rose to their highest level in almost 4 years
China's producer price rose for the third consecutive month in May, to its highest level?since July 20,22. Consumer prices remained?elevated due to global energy prices that put cost pressure on manufacturers and increase costs for households. The Middle East conflict may increase costs, which could further reduce domestic demand and stifle corporate profits. This will make it difficult for policymakers to promote household consumption. National Bureau of Statistics data revealed that the producer price index (PPI), a measure of the cost of goods produced, rose by 3.9% compared to the previous year. This was higher than the 3.8% predicted in a poll. The rise was greater than the 2.8% in April. PPI rose 0.5% compared to the previous month. This is less than the 1.7% increase in April. In a statement, the NBS stated that rising commodity prices were driving up factory-gate inflation and an improved demand for certain products in certain industries. Since the United States and Israel attacked Iran in late-February, energy prices have skyrocketed. Cost pressures will likely persist as the Strait of Hormuz remains effectively closed and continues to disrupt the flow of oil and gas from the Gulf. Even after the waterway is reopened, it will take time for the oil and gas flows to resume. In March, the PPI's year-on-year reading was positive for the first since September 2022. This is due to the?energy-induced shock in prices. The government's campaign to stop corporate price cuts and other policy efforts to increase prices had only helped to ease deflation. The mismatch between demand and supply in China may worsen, as rising living costs dampen the already lukewarm appetite of households for discretionary expenditure. According to the statistics bureau, consumer prices rose by 1.2% in May compared to a year ago, primarily due to higher gasoline, gold jewelry and service prices. The index rose by 1.2% in April, and economists expected a rise of 1.3% for May. Pork prices dropped 16.1%, a 1.7% drop on the year. After factoring in last week's price reductions, Beijing has increased?diesel prices by 1,530 yuan ($225.89), and gasoline by 1,590. China's gasoline and diesel consumption fell 13% on an annual basis in May, after having fallen by 16% the month before. This is according to OilChem data. China Passenger Car Association statistics show that domestic car sales have fallen. The number of cars sold has dropped by 22,3% in May, and by 19,7% in the five months prior to this month. Cui Dongshu is the secretary-general of the association. She said that the decline was primarily due to an increase in gasoline car sales as a result of oil prices rising because of 'the Middle East Crisis. The Core CPI (which excludes volatile fuel and food prices) rose by 1.1% compared to a year ago. CPI fell 0.1% on a monthly basis. This was in line with expectations, and compares to a 0.3% increase in April.
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Nikkei falls as Gulf tensions cause a shift in value shares
Japan's Nikkei average fell on Wednesday as investors shifted away from high-flying technology stocks that are sensitive to energy prices. The 'benchmark' Nikkei 225 Index fell 1.1% to 64,700.89. This was a reversal of the 2.1% gain in the previous session. The Topix index fell 0.69% to 3,586.34. In retaliation to the?downing a military chopper, the United States launched strikes against Iran Tuesday, which has deepened doubts about a possible?peace agreement. The data showed that the Gulf Crisis caused wholesale Japanese inflation to accelerate to its fastest rate in three years. This added upward pressure to domestic bond yields. "Declines are centered on AI- and semiconductor-related shares, as heightened tensions in the Middle East and upward pressure on domestic interest rates prompted ?investors to focus more on relative valuations," said Wataru Akiyama, an equities strategist at Nomura ?Securities. The Topix's fall is relatively?limited in comparison?with the Nikkei." The Nikkei Index had 96 advancing stocks and 128 declining ones. Sumco was the biggest loser, with a 9% decline, followed by SoftBank Group, which fell 8.9%, and Sumitomo, which declined 8.1%. Nintendo's share price dropped 7.8%, making it the biggest decliner among all companies. This was after investors were disappointed by its presentation of new titles.
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Jio BlackRock to launch ETF in August after $2 billion India fund base
Jio BlackRock Asset Management plans to launch its exchange-traded funds in India by August. The company hopes to emulate BlackRock's success in the global market of passive investing, where ETFs have yet to gain traction. In the first year of its existence, the joint venture between MukeshAmbani's Jio Financial Services (JFS) and the largest asset manager in terms of assets managed has amassed around 180 billion rupees in assets. This was achieved by building up a base in active equity funds, debt index funds and cash. The plan is to begin with equity-focused ETFs. BlackRock manages approximately $5.1 trillion in ETF assets worldwide, which is more than a quarter of its total assets. This highlights the importance of product line to the BlackRock franchise. Jio BlackRock is currently India's 29th largest asset manager. "ETFs can be a good long-term investment." Retail investors are becoming more interested in ETFs, even though the Indian market is predominantly institutional. We can see from global trends that ETFs are a popular choice of investment, said Sid Swaminathan. ETF INNOVATION CAN BOOST LIQUIDITY According to the Mutual Fund Industry Association, passive mutual fund assets in India amounted to 15.20 trillion rupees (or about 18.5%) of the 81.94 trillion rupees average assets under management in the industry. Comparing the assets of mutual funds and ETFs in the U.S., equity index and ETFs make up about 45.3%. Swaminathan stated that tighter bid-offer margins and more innovative strategies could improve liquidity and boost retail involvement in Indian ETFs. Within the next few months, the company plans to launch its products in Gujarat International Finance Tec-City. This is India's low-tax financial centre that competes with other centres like Singapore and Dubai. COMPLEX PRODUCTS - QUICK PIVOT TO A DISTRIBUTOR -LED MODEL Jio BlackRock's more complex products, such as special investment funds and GIFT City, are distributed by Jio BlackRock rather than digitally. This reflects the role that advisers continue to play in selling high-ticket items. Swaminathan stated that the decision to prioritize those launches was partly determined by "market conditions". India's Nifty 50 index has fallen 11.1% in 2026 due to foreign outflows and higher oil prices, as well as a slowing of earnings growth. MSCI's Asia-Pacific ex-Japan Index is up 18.2%.
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As US launches new attacks against Iran and supply tightens, oil prices rise by almost 1%
The oil prices rose about 1% Wednesday after the U.S. military launched a new strike against Iran, and market data revealed another large drawdown in U.S. crude stock. After President Donald Trump promised on Tuesday that he would respond to the downing overnight of a U.S. Apache helicopter, there was a new escalation which threatens to unravel a fragile truce between Washington and Tehran. Brent futures rose 83c, or 0.9%, to $92.29 a barrel, while U.S. West Texas Intermediate crude (WTI), climbed 68c, or 0.8% to $88.97. Brent closed at its lowest level on Tuesday since April 17 while WTI was at its weakest level since May 29, after Trump's call for Israel and Iran to cease direct attacks against each other. Tehran has said that it will resume hostilities in the event that?Israel continues to attack Hezbollah's?militia?in Lebanon. Israel's refusal of ending its campaign against Iran's Hezbollah hampered Trump's attempts to turn a fragile ceasefire in the U.S.-Israeli War with Iran into a lasting settlement. Tehran continues to block the Strait of Hormuz which carries about a fifth of all crude oil and natural gas in the world. Washington has also imposed a blockade on Iranian ports. U.S. Energy Sec. Chris Wright stated on Tuesday that the?oil and ship traffic through the Strait of Hormuz is increasing, even though Washington and 'Tehran are struggling to reach a deal regarding the end of their three-month war. According to sources, the American Petroleum Institute released data on Tuesday that showed that U.S. crude inventories had fallen for the eighth consecutive week. Gasoline stocks were also down. The sources, who spoke on condition of anonymity, said that crude stocks dropped by 9.12 million barrels during the week ending June 5. Gasoline inventories also fell by 1.19 million barrels. The United States was a marginal crude and product supplier during the war, and increased exports to Asia. A drop in U.S. stocks could harm exports and increase prices. (Reporting and editing by Shri Navaratnam.)
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McGeever: The $500 billion T-bill fix by ROI-Treasury isn't an issue yet.
In average, the U.S. Treasury issues more than?half-a-trillion dollars in T bills per week. The spike in short-term funding is not a problem for the moment, but it could be if U.S. lending costs continue to rise. Trump's administration has a good reason for favoring the short end of the "borrowing curve". The term premium has increased due to the persistently large budget deficits and the elevated inflation that has been above the Federal Reserve’s 2% target for five years. This is what investors want to compensate them for purchasing long-term bonds. It makes short-term loans more appealing. The problem of rolling over $500 billion in bills each week is not an urgent one. Cash-like instruments are a huge market, and they're essential for overnight and short term collateral and liquidity management. The Fed and money market funds in the US have a combined balance of $8 trillion dollars, which is enough to absorb the new issuance. Even the demand for high-quality collateral will not last forever. Eventually, flooding this market may reach a point where it is impossible to absorb without a dangerous increase in money market interest rates. Treasury's interest bill may pose a more immediate problem. Rolling over bonds and notes at higher interest rates can take years before the impact is felt, but bills only take months. The fiscal impact is already being felt as the federal interest bill is on track to exceed $1 trillion in this fiscal year. Fed rate hike expectations are also increasing. 25% THRESHOLD What is the tipping point for a bill? The current share of bills in the outstanding federal debt is just under 22 percent, which is slightly below the historical norm of 22,4 percent, but well above the range of 15% to 20% recommended by the Treasury Borrowing?Advisory Committee. Analysts say that the direction of travel is toward 25%. Lou Crandall is the chief economist of Wrightson ICAP. He said that it's difficult to pinpoint a specific tipping point, but once you reach a net borrowing requirement of more than 25%, the Treasury will have to examine the sources of the demand. It's not a line that, when crossed, will instantly reduce demand for bills. The share of bills in government debt was only 25% or higher during financial crises or recessions. And so, borrowing policies seen only in the pandemic of 2020 and the financial crisis of 2008 could become the norm. It is not known how the market will react to this over time. 1 TRILLION BARRIERS Treasury is currently facing record interest costs, both in nominal terms as well as when viewed by the percentage of GDP and revenue. The federal government's cumulative interest costs in the first quarter of this year totaled $616 billion. This is an increase of more than $100 billion compared to the period January-April two years ago. According to the Congressional Budget Office (CBO), total interest payments will surpass $1 trillion in this fiscal year. They are expected to reach 3.3% of GDP, and 18.6% revenue, both records. The Fed is expected to raise interest rates from their current range of 3.50 to 3.75% in the next few months, a scenario that markets have already priced in. Rate hikes would not only increase short-term borrowing costs, but they could also threaten economic growth. Treasury would be in a weak position if there was a recession or slowdown, as it would already be front-loading its borrowing and paying high interest rates. This could reduce investor interest and?raise yields, even if Fed policy was loosened to support the economy. Martin Tobias is the U.S. Rates Strategist at Morgan Stanley. Recession does not appear imminent. A stock market correction or economic slowdown is not ruled out by higher borrowing costs. The $500 billion T-bills that are renewed every week will be scrutinized if this happens. 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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Karen Braun: The role of China in US agriculture has changed.
Last month, the prospect of renewed Chinese interest in U.S. agricultural products sparked excitement on grain markets. However, enthusiasm has waned and no immediate purchases have materialized. It was not surprising that the initial reaction to the?bullish news was so positive. China is the main driver of growth in U.S. Agriculture, driving record soybean exports and grain prices, as well as emerging to be a major buyer for everything from beef to corn. The trade agreement signed last month included at least $17 Billion in 'U.S. The Chinese government's recent announcement of additional agricultural purchases, beyond the existing soybean deals revived hopes for China to become again a?leading driver?of growth in American farm exports. The dynamics have changed due to years of tensions in the trade and the rise of South America. China's importance to U.S. agricultural production remains high, but its contribution varies depending on the commodity. SOYBEANS: China left the U.S. market, not the soybeans China's dependence upon U.S. soyabeans has declined dramatically over the past few years, but its influence on the global soybean markets has not. Since nearly two decades, the Asian buyers' share of global imports remains relatively stable at around 60%. Chinese purchases of U.S. soya beans have dropped sharply from record levels earlier in this decade, as Brazil increased production and exported more. According to the U.S. Department of Agriculture, the U.S. soybean volume exported to China in 2025/26, which ends August 31, will fall by almost 50% compared to last year. This is a 19-year record low. Industry estimates show that by the end May, China had met more than 90% its needs for 2025/26. This pace is on par with last years', thanks to an increase in South American purchases. Recent trade agreements suggest that U.S. soyabean exports to China may double in 2026/27. However, the overall picture of soybean exports is not as rosy. The USDA projections indicate that U.S. soyabean exports to other countries would drop to a low of 13 years in 2026/27 if China's assumed share is excluded. This could be because forced demand from one partner can impact the demand for the other partners. CORN: HEALTHIER IF CHINA IS NOT INCLUDED? U.S. exports of corn are a completely different story. Chinese purchases accounted for nearly one-third (2020/21) of U.S. Corn shipments, helping to boost U.S. Corn exports that year to a new record 2,75 billion bushels. Many at the time viewed China's role in export growth as crucial. This record was broken without Chinese involvement in 2024/25, and 2025/26 is expected to see shipments reach another high of 3,3?billion bushels without Chinese participation. Mexico, a reliable and long-term buyer, is the reason for this increase in demand. USDA's forecast shows that a greater share of corn will be exported in 2026/27 than it did in 2020/21. However, there is little evidence to suggest that China has made significant purchases. This doesn't mean that the Chinese demand is no longer important or that it would not have positive market implications. If China were to return as a major buyer of corn, would the total U.S. exports increase further or would higher prices displace existing demand as it appears to be happening for soybeans. BEEF: TRADE DEAL WEAKNESSES EXPOSED Beef is a product that falls between corn and soybeans, but presents different tradeoffs. China was a major customer of U.S. beef importers just a few short years ago. U.S. officials want to regain that business after the recent trade agreement. The beef prices in the United States have hit record highs and the cattle herd is at a low not seen for 75 years. U.S. officials highlighted China's appetites for lesser-valued cuts and variety meats, suggesting Chinese consumers buy products Americans don't consume as often. This portrayal is incomplete and leaves out important details. In the past, U.S. exports of beef to China were largely products that overlapped heavily with domestic consumption. This is similar to other major U.S. buyers of beef. China is a major buyer of U.S. cuts and offal. Even if the Chinese demand for lower-valued cuts benefits U.S. ranchers, it also risks intensifying competition for already limited supplies. Ranchers are also at risk of intensifying the competition for limited supplies. It may be worth examining the idea that beef exports to China could increase without impacting on the domestic market. NEW MARKET, OLD THINKING? Soybeans and corn, as well as beef, help explain why China’s role in U.S. Agriculture cannot be defined with a single narrative. However, the grain markets react to Chinese purchases as if they were uniform in all sectors. Even though purchase commitments are not a guarantee, they can still cause sharp movements in futures and speculative positions. The 'prospect of a renewed Chinese purchasing helped push speculators combined positions in U.S. grain and oilseeds at record bullish levels. This was a logical reaction: a stronger Chinese economy has usually led to better prospects for U.S. agricultural production for the last two decades. Now, however, the impact is less clear. China will continue to affect markets, but it is not the most important factor. 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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Musk's xAI and SpaceX are the targets of a class action lawsuit over 'nuisance data centers'
Residents of Mississippi have sued Elon Musk’s xAI, SpaceX and xAI for allegedly causing "omnipresent" and "inescapable noise" that has eroded the value and health of their homes and homes. The 'lawsuit', which was made public in Federal Court in Oxford, Mississippi on Tuesday, alleges that Musk’s companies were negligent in failing to stop the disturbance, and creating a public nuisance by excessive and offensive sound. Three residents brought the lawsuit on behalf of an estimated class size of more than 10,000 people. The lawsuit claimed that the artificial intelligence boom was causing havoc in communities "across the United States", by subjecting thousands to constant noise and vibrations. Plaintiffs seek damages for emotional distress, property value reduction, and other harms as well as the disgorgement an unspecified amount of profits. xAI and 'SpaceX didn't immediately?respond to requests for comments. MZX Tech, a subsidiary of xAI, was also listed as a defendant. Musk is not a plaintiff. In a statement Robert Wiygul said that "our homes are supposed be a sanctuary against the world" but when they "are invaded by sound 24 hours a days, it takes away the fundamental peace of a decent and good life from us." xAI spent more than $20 billion on the construction of the plant in Southaven, with the support of Mississippi Governor Tate Reeves. The lawsuit claimed that gas-fired Turbines in Southaven are powering data centers around Southaven. In April, the NAACP sued xAI? over the plant and the centers. The company was accused of violating U.S. Environmental Rules. The lawsuit is still pending. The?U.S. The?U.S. Justice Department indicated in a?court filing last month that it?may interfere in the NAACP Case, stating the dispute raises questions about the role of government in AI infrastructure. (Reporting and editing by David Bario, Bill Berkrot, and Mike Scarcella)
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As the war in Iran drags on, rising fuel prices are hitting US farms.
Energy costs are squeezing soybean and grain growers in the U.S. Farm Belt as the Iran War chokes fuel supply through the Strait of Hormuz, pushing diesel prices to record highs. Farmers were already under pressure and faced a fourth consecutive year of shrinking margins due to a resurgent dry spell, high input costs, and the fallout from President Donald Trump's policies on trade, which has impacted crop prices. Diesel prices in the Midwest, America’s main corn- and soybean-producing region rose to record highs as a result of the conflict in May. This was just as farmers were ramping up spring fieldwork and planting. Wisconsin diesel reached $5.873 a gallon in mid-May, Indiana $6.167 and Illinois $6.14. According to the data of the AAA, Ohio and Michigan have also set records. Since the Middle East conflict started, the national average diesel has increased by more than 40%. The global crude oil price, which is the basis for diesel and gasoline, has risen by about 30% since late February. Diesel is used to power equipment on farms in the U.S. for a variety of field operations. From spraying pesticides, planting seeds, and fertilizing fields, to harvesting and harvesting crops. Most U.S. farming machinery is designed to run solely on diesel. This leaves farmers exposed to the volatility of diesel prices. "It is a very expensive cost," said Glenn Brunkow who raises cattle and soybeans in Wamego. We can't do much about it and didn't budget for it. We were surprised by the suddenness of it. Ben Klieve of Benchmark Analysis, citing University of Illinois estimates, stated that fuel-related costs accounted for 3% to 4 % or $16 to $ 23 per acre on average, prior to the war. Klieve stated that if diesel prices remain at the current level, fuel costs for row-crop farmers could increase to between 5% and 6% of their total input costs. This would mean a jump from $20 per acre to $30 per acre. He said that row-crop farmers are facing a difficult situation. The prices of grain they produce have dropped sharply over the past few weeks, and are even lower than the levels before the Iran war. However, input costs such as diesel and fertilizer are still significantly higher. This is affecting their bottom line. FARMERS BEAR LOSSES Tom Murphy, a corn and soybean farmer in northwest Indiana, said that he had delayed plans to turn the soil on fields he recently rented because he didn't want to waste fuel operating his machinery. Murphy planned to level five fields before prices spiked to make it easier to use equipment to spray and harvest crops. He only tilled a single field to save 6,000 gallons (of farm diesel) he purchased in December. The fields will be used to grow crops but will not look as he had hoped. Murphy, who doesn't till many of his fields, said, "We will leave them a bit rough this year and fix next year." Murphy stated in late May that there were still 2,500 gallons of water in his storage room from December. He would have to purchase more in order to maintain the crops during the summer growing season. Don Bloss is a grain and soy bean grower from Pawnee City in Nebraska. He said that he paid higher rates to truckers for the 80-mile haul of corn to market. Bloss told Bloss, "You have to continue writing checks." "We are at the mercy of everyone else." More pain may be on the way Fuel prices could rise even more if the Iran War continues to choke off global fuel supplies. Since the Strait of Hormuz was closed, which is a vital passageway for almost a fifth of all global oil flows, the demand for U.S. Petroleum Products has been high. The domestic supply cushion, which helps to keep gasoline and diesel prices under control, could shrink further if exports remain at record levels as we head into summer. According to the U.S. Energy Information Administration, distillate fuel oil stocks in the United States fell to a 23 year low in May. The distillate stocks of the United States, which include diesel and heating oils, dropped by 2.1 millions barrels during the week ending May 22. This is the lowest level since May 2003. Patrick De Haan is the head of GasBuddy's petroleum analysis. He said that there are still many uncertainties surrounding a possible deal between Iran and the United States. De Haan stated that any setbacks in the negotiations could reverse the recent drop in fuel prices. Reporting by Nicole Jao and Tom Polansek, both in New York; editing by Liz Hampton and Nick Zieminski.
Oil prices rise as Middle East tensions increase, Asian stocks fall
Asian stocks dropped on Wednesday, while oil prices surged as escalating Middle East tensions unsettled the markets. Dimming hope for an end to a months-long conflict that has driven commodities higher and stoked concerns about inflation.
After President Donald Trump claimed that Tehran had shot down an American Apache helicopter in Strait of Hormuz investors were on edge about a fragile ceasefire.
The broadest MSCI index of Asia-Pacific stocks outside Japan fell 0.6%. The Nikkei of Japan fell by 0.9%, while the South Korean KOSPI, which is dominated by tech stocks, dropped 2%.
In early trading, oil prices rose about 1%. They are now off the seven-week low they reached in the previous session following the latest?U.S. attacks. Brent futures increased 0.9% to $92.29 per barrel while U.S. West Texas Intermediate WTI Crude climbed 0.8% at $88.97.
Charu Chanana is the chief investment strategist for Saxo, in Singapore. She said that geopolitics was being treated as an headline risk and not a macro-shock.
Oil holding at $90 despite recent Iran headlines indicates markets are not pricing in a sustained supply disruption. This leaves room for an even bigger repricing in the event that energy infrastructure, shipping lanes or U.S. participation escalate.
U.S. stock prices overnight fell as a tech recovery fizzled. Investors were scared off by concerns about AI valuation, Middle East tensions, and increasing?rate bets.
Inflation Test Awaits
Investors will focus on U.S. Inflation data on Wednesday, to gauge the impact of the war. A survey of?economists predicted that inflation would likely increase 4.2% over the past 12 months up until May. This would be the biggest annual rise in CPI since April 20,23.
A stronger-than-expected jobs report on Friday increased bets that the Federal Reserve will hike interest rates this year. The traders have fully priced in the 25-basis point hike in December, compared to expectations of two rate reductions before the war.
Chanana, from Saxo, said that if CPI is high today, it will be harder for the Fed next week to sound relaxed. "The Fed cannot raise rates aggressively in the face of a supply shock. But it cannot ignore inflation expectations either if oil continues to rise."
The dollar remained steady at $1.1537, while the euro traded at $1.1537. Sterling was trading for $1.337. The yen traded at 160.38 dollars, close to the 160-level widely considered as a possible line in the sand.
Data released on Wednesday showed that Japan's wholesale price inflation increased at its fastest rate in three years in May as the effects of the war grew. This is a strong argument for the Bank of Japan to increase interest rates.
Analysts say that a rate hike by the BOJ during the policy meeting on June 16 is almost priced in. They also believe that a persistent weakening of the yen, and a more hawkish Fed could force the BOJ into accelerating its rate hikes.
Anthony Saglimbene is the chief market strategist of Ameriprise. He said that when energy prices are contained, "the market can absorb geopolitical sounds rather well."
It?has less comfort when oil prices and?inflation are all moving in a way that is less supportive of stocks near-term. We see this risk building up in the market at the moment.
This risk is felt in emerging market where Bank Indonesia increased interest rates on Wednesday in a surprise meeting off-cycle to support the fragile rupiah, just weeks after BI shocked markets with a jumbo increase.
. (Reporting and editing by Shri Navaratnam in Singapore)
(source: Reuters)