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Norsk Hydro's Q2 profits are the highest as higher prices and Qatar offset the lower price.
Norsk Hydro, the Norwegian aluminium manufacturer, reported a quarterly profit that was?above expectations? on Wednesday. Higher aluminium prices and higher?recycling? margins outweighed lower energy output and negative currency effects. Hydro enjoyed a windfall from the higher aluminium prices, regional premiums and disruptions in Middle East supplies during the second quarter. However, reduced production at its Qatalum Joint Venture limited this. The company's adjusted earnings, before interest, taxes, depreciation, and amortization, rose 15% year-over-year to 8.92 billion Norwegian Crowns ($927.0 million) during the April-June period, while the average estimate of analysts polled was 8.22 billion Norwegian Crowns. Hydro's Aluminium Metal division, which has an adjusted EBITDA of 6.42 billion crowns, led the improvement. It said that higher metal prices and lower costs for alumina more than compensated a?8% drop in sales volumes, as well as increased energy and carbon expenses and a stronger Norwegian Crown. Hydro's adjusted EBITDA dropped from 922 millions crowns a year earlier to 316million crowns at Qatalum due to the Middle East Crisis. Hydro ceased purchasing metals from Qatalum in the third quarter after the marketing and offtake contract with the venture expired. Hydro stated that it was in discussions with its partner about how Qatalum’s metal would be marketed and sold going forward. Aluminum prices rose to a record high of four years in June, as regional supply risk increased and physical premiums in Europe and North America strengthened. Hydro's recycling operation earned over 900 million crowns despite little improvement in underlying demand. Hydro reported that primary aluminum consumption outside China has declined from a year ago. It added that the Energy division's profits had also been cut in half due to a lower hydropower output and regional price differences.
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Asian stocks hold gains as US recoveries, oil prices rise
The stock market made a few gains on Wednesday, but the positive impact of a strong Wall Street session was offset by caution as investors waited for earnings reports from Big Tech. Meanwhile, the oil price rose due to threats from Houthi "rebels" to escalate the Middle East conflict. The broadest MSCI index of Asia-Pacific stocks outside Japan rose 0.2%, while the South Korean Kospi's gains were reduced to just 1.5% from an earlier gain of over 6%. The Nikkei225 in Japan fluctuated between gains and losses. Meanwhile, S&P 500 futures fell 0.2% along with a 1.2% drop for Hong Kong stocks. Brent crude rose by 1.3% to $92.22 a barrel on Tuesday after two oil tankers transporting Saudi crude for Asia changed course in the Red Sea following threats from Yemen's Iran aligned Houthis. Westpac analysts stated in a report that equity markets have shrugged off the geopolitical risk and are instead focusing on returns from the tech sector. After large losses in the past few days, semiconductor stocks have bounced back. The market will be focused on the earnings of Alphabet and Tesla. Alphabet is under increased scrutiny for its delayed launch of an important AI model. Tesla is expected to report their first quarterly cash loss in more than two years. Laura Cooper, head of macrocredit at Nuveen and global investment strategist, wrote that the earnings season would be a test to see if the group?carrying the market could keep up the pace now required. The second half will require that AI spending translate into earnings growth in the entire market, and that credit can absorb a new wave of supply with no spreads giving away. The pharmaceutical stocks in India fell 1.5% following the announcement by U.S. president Donald Trump that all generic drugs imported into the United States would be subject to a 0% tariff for two years starting August 1, and then a 100% tariff for one year, followed by a 200% rate thereafter. The U.S. Dollar Index, which measures the strength of the dollar against six currencies held at 101.14, near its one-week high. The U.S. Dollar was unchanged at 163.17 yen against the?yen after hitting a four-decades high on Tuesday. Satsuki Katayama, the Japanese Finance Minister, said that the government is ready to take 'decisive action' in currency markets when needed. However, he refused to comment on specific levels of foreign exchange. Japan's imports reached a new record in June due to the soaring price of oil and the battered yen. Exports also exceeded expectations thanks to strong demand from AI data centres and a weak yen. Oil prices rose to a five-week peak on Tuesday. This did little to disturb the bond and currency markets in advance of next week's central bank meetings. According to a survey, economists believe that the U.S. Federal Reserve will keep its key rate constant for the remainder of 2026. However, they also said there is a high chance of a rate increase. FedWatch, an online tool from CME Group, showed that Fed funds futures indicated that, while a rate hike is likely by December, one of 50 basis points or higher by the end is just a coin flip. The yield of the 10-year Treasury bond in the United States was up by 0.2 basis points to 4.628%. Gold rose 1.2% to $4,124.74. Bitcoin was down by 0.5% to $66,077.16 while ether remained flat at $1923.25. (Reporting and editing by Christopher Cushing, Sam Holmes and Gregor Stuart Hunter)
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Steelmaker SSAB misses profit forecasts for Q2 as war-related costs bite
?Swedish steelmaker SSAB reported a smaller-than-expected rise ?in its second-quarter operating ?profit on ?Wednesday, ?as higher steel prices and shipments were partly offset by increased costs, including higher logistics and energy prices linked to the Middle East crisis. Operating earnings increased to 2.70 billion Swedish Crowns ($278.3million) in the April-June period, up from 2.14 billion crowns one year earlier. A poll by SSAB revealed that analysts expected?2.85 million crowns in average. In a press release, CEO Johnny Sjostrom stated that despite the continued geopolitical uncertainty, they remain committed to executing their'strategic priorities', strengthening the premium product offerings, and progressing our transformation towards fossil free steel production. SSAB operates steel businesses both on the Atlantic and the European side. It said that it?anticipated a seasonal decline in demand during the third quarter. It will also carry out planned maintenance in all of its steel divisions. Steel producer 'Steel Producer' expects its third quarter shipments in the Americas, Europe, and Special Steel divisions to be significantly lower than the previous quarter. It added that a slight increase in realised prices is expected due to?pricing increases already implemented.
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Gold reaches two-week highs as Fed outlook and Mideast conflict remain in focus
Gold rose to a two-week high on Wednesday as technical buying boosted the price. Investors assessed the escalating conflict in the Middle East and were awaiting the U.S. Federal Reserve's meeting next week, which will provide clues about the interest rate outlook. Gold spot rose 1.3% by 0511 GMT to $4,129.43 an ounce, after hitting its highest level since July 7 earlier that day. U.S. Gold Futures for August Delivery jumped?1.4% at $4,134.50. As tensions escalate in the Middle East, oil prices and inflation fears rise. This has led to expectations of interest rate hikes which caused gold to drop at its steepest weekly rate since early June. Tim Waterer is the chief market analyst for KCM Trade. He said that buyers are stepping in to find a bargain after the recent pullback. The hope of diplomatic progress between Iran and the U.S. also helps price movements. Marco Rubio, the U.S. secretary of state, said that Washington was still willing to talk about ending the Iran crisis with Tehran but Tehran wasn't serious. After threats by the Iran-aligned Houthis of Yemen, three oil tankers transporting Saudi crude to Asia changed course in Tuesday's Red Sea. This raised concerns over energy supply. According to a recent poll, the Fed will maintain its key rate for the rest of 2026. However, a majority who responded to a question regarding the possibility of a hike in this year described it as "high". This is a change from last month, when the majority saw the likelihood of a hike as "low". The opportunity cost of holding?bullion that does not yield increases as interest rates rise over time. Spot silver, among other metals?was up 1.6 percent at $59.71 an ounce. It had earlier reached its highest level since July 10. Palladium grew 2.2%, to $1310.50, while platinum rose 1.9%, to $1659.97. (Reporting and editing by Rashmi aich and Subhranshu sahu in Bengaluru, and Pablo Sinha in Bengaluru.
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The new chip ad is MORNINGBID EUROPE. An AI model Breaking Bad
Gregor Stuart Hunter gives us a look at what the future holds for European and global markets. The AI trade is roaring back Wednesday, as export demand surges throughout?Asia. This has lifted chipmaker stocks to their highest level in a week and pushed the regional benchmark up. MSCI's broadest indice of?Asia-Pacific stocks outside Japan rose by 1.3%, extending gains into a second session. The KOSPI soared up to 6.2% while Japan's Nikkei increased by 1.9%. It's a curious coincidence that the rally of tech hardware names has taken place. The rally in tech hardware names comes at a curious time. But that's not the only reason for concern about Big Tech. S&P 500 futures fell 0.1% during Asian trading, ahead of Alphabet's and Tesla's results. Investors are watching Alphabet closely as questions about delays in a flagship AI product mount. Tesla, meanwhile, is expected to report its first quarter cash burn since more than two years. This could lead to a bumpy week as we approach the weekend. The Middle East conflict is still a major issue, driving oil prices up and causing policymakers to face more challenges. Brent crude is up 1.2% to $92.13 following the Tuesday reverse of two oil tankers that were carrying Saudi crude from Asia towards Asia after threats by Yemen's Iran aligned Houthis. The closure of the Bab el-Mandeb could cause more shipping disruptions in the Middle East. The U.S. Dollar was unchanged at 163.105 yen against the yen after Japanese Finance Minister Satsuki katayama stated on Wednesday that the government is ready to take "decisive actions" in the currency markets, if necessary, but refused to comment?on specific levels of foreign exchange. The Japanese currency fell to its lowest level since 1986 Tuesday. The combination of a battered Japanese yen and rising oil prices has made life difficult for Tokyo policymakers. Japan's imports reached a record-high in June. Exports were also above expectations, thanks to booming demand for AI-related data centers and a weaker currency which continues to boost overseas sales. Early European futures rose?0.1% while German DAX and FTSE futures grew 0.3%. Key developments which could affect markets on Wednesday include: U.S. earnings from Alphabet and Tesla; European earnings from Equinor, UniCredit, Deutsche Boerse and Experian; Economic events in the UK: CPI, PPI and RPI for June. (Reporting Gregor Stuart Hunter, Editing Shri Navaratnam).
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Oil gains from new Mideast supply risk
The oil prices rose on Wednesday, as concerns about a 'further disruption of supply' grew after U.S. troops struck Iranian military targets for the 11th consecutive night. Meanwhile, oil tankers reacted to warnings from the Houthi-backed militia by making U-turns at the Red Sea. Brent crude futures increased $1, or 1.1% to $92.01 per barrel at 0330 GMT. U.S. West Texas Intermediate Crude climbed 82 Cents, or 1.0 %, to $85.16. Gains were made after oil reached a five-week peak on Tuesday, following U.S. strikes against targets in western and southern Iran. Iran also attacked U.S. installations in Bahrain, Kuwait, and Jordan. The U.S. army said that it had begun its "latest strike on Iran" late Tuesday night in the United States or early Wednesday morning in Iran. The U.S. attack came just a few hours after the Kuwaiti military said that its air defences intercepted Iranian drones Wednesday. Constant trading of'strikes' has raised concerns about further disruptions in global energy supplies. Yemeni Houthis, who are Iran-aligned, opened a new front for the Iran War by?threatening vessels carrying Saudi Oil in the Bab el-Mandeb Strait. They also announced a naval blockade? of Saudi Arabia. Since the collapse of the ceasefire agreement between Iran and the United States earlier this month, the Bab el Mandeb 'waterway? at the southern entry to the Red Sea is becoming an increasingly important route for Saudi oil exports. Following a warning by Yemen's Iran aligned Houthi militia, three oil tankers carrying Saudi crude bound for China and India turned around in the Red Sea Tuesday. They headed towards the Suez Canal instead of braving the Yemeni coastline. ING commodity analysts?on Wednesday said that this would force tankers into and out of the Red Sea through the 'Suez Canal. This would add significant time and cost to voyages to Asia. They also noted that 'tensions in Black Sea added to the uncertainty regarding supply. Caspian Pipeline Consortium stopped receiving oil from Kazakhstan on Monday after suspending loadings due to attacks against oil tankers in its Black Sea terminal that were blamed on Ukrainian drones. Ukraine has not made any comments on the attacks. ING said that the longer the suspension continues, the more likely it is that Kazakhstan will have to reduce its upstream production. Market sources reported that data from the American Petroleum Institute revealed that U.S. crude and distillate stocks rose last week while gasoline inventories fell. The data on inventories comes before official figures released by the U.S. Energy Information Administration Wednesday. Reporting by Siddharth Cavale in New York, and Jeslyne Lerh in Singapore. Editing by Lincoln Feast.
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Shanghai copper reaches 7-week high due to supply concerns and strong China demand
Shanghai copper prices rose a week on Wednesday, as supply concerns and a strong?Chinese market boosted the price. London copper fell after reaching a six-week high just a day earlier. As of 0300 GMT, the most traded copper?contract? on the Shanghai Futures Exchange had risen 1.21% to 106,100 Yuan ($15.672.55) per metric ton. It had reached its highest level since June 3, at 106760 yuan, earlier in the day. The benchmark three-month copper price on the London?Metal Exchange fell 0.39%, to $13,831.5 a tonne after reaching a six-week-high on Tuesday. Copper inventories have dropped in LME-registered storage warehouses Warehouses that are SHFE monitored . The Chinese demand is strong, and the market is waiting for any news about possible U.S. metal tariffs. "Traders continue to?deliver metal to the U.S. due to the CME-LME?arbitrage import?ahead of the 'U.S. Craig Lang, Principal Analyst at CRU said that the U.S. would decide whether or not to impose tariffs on refined copper. The Chinese market remained active. The Yangshan Copper Premium Tuesday, the, which measures import demand, reached its highest level since December 2023 at $109 per ton. Lang explained that typhoon-related smelter maintenance and stockpiling are impacting the supply of?copper? cathode. Meanwhile, a tight scrap supply has increased demand for this metal. The Middle East conflict has also pushed up oil prices, and economists polled predicted that the U.S. Federal Reserve will keep interest rates the same for the rest of the year. Copper became more expensive for copper buyers who use other currencies as the dollar strengthened. Aluminium ticked up by 0.14%, while zinc rose?0.17%. Lead was unchanged, while nickel added a?0.18%. Tin was also up?0.02%. Aluminium gained 0.59% on the SHFE. Zinc gained 0.59%. Lead lost 0.91%. Nickel advanced 1.05%. Tin gained 0.76%.
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Gold reaches two-week highs as Fed outlook and Middle East conflict remain in focus
On Wednesday, gold rose to a two-week peak on technical purchases as investors assessed the escalating conflict in the Middle East and awaited next week's Federal Reserve meeting for hints on interest rate expectations. Gold spot rose 1.6%, to $4,139.64 an ounce, by 0307 GMT. It had already reached its highest level since 7 July earlier that day. U.S. Gold futures for August delivery rose 1.7% to $4144.20. Last week, the escalating tensions in Middle East pushed up oil prices and inflation concerns. This boosted expectations for interest rate hikes which led to gold's steepest weekly decline since early June. "Buyers are looking for a bargain after the recent pullback. Hopes of diplomatic progress between the U.S.A. and Iran also help to drive price movements," said Tim Waterer, chief analyst at KCM Trade. The Middle East conflict has disrupted shipping in two of the most important energy chokepoints. On Tuesday, three oil tankers transporting Saudi crude to Asia changed course after being threatened by the Houthis from Yemen. On Monday, a senior Iranian official said that Tehran received a proposal from mediators to implement a 10-day truce in an effort to salvage the June interim ceasefire agreement. Eskandar Mumeni, Iran's interior minister, visited Pakistan mediators and asked Islamabad for continued efforts. A poll has revealed that the Fed will maintain its 'key interest rate' for the remainder of 2026. However, a majority who responded to a separate question about the likelihood of a hike in this year have now described it as a "high" probability, a change from last month, when most thought the likelihood was "low". The opportunity cost of holding non-yielding gold increases as interest rates rise for longer periods. Spot silver, among other metals rose 1.9% to $59.87 an ounce. It had earlier reached its highest level since July 10. Palladium grew 3%, to $1320.75, while platinum rose 2.4%, to $1667.22. (Reporting and editing by Rashmi aich and Subhranshu sahu in Bengaluru, and Pablo Sinha from Bengaluru.
Helen Jewell: ROI-AI is not a threat to equity diversification
Investors are searching for diversifiers as the AI market becomes more crowded. Several options are hidden in plain sight.
The massive spending on AI in the last year has boosted earnings for corporations. Companies associated with this splurge, as represented by an iShares?ETF, have seen their?stocks double from?June of 2025 to this June before a recent drop. BlackRock reports that the "momentum factor" - which is where winning stocks continue to?win - has outperformed all other factors over the last five years. It gained nearly 200%. Diversification is not a strategy that has been rewarding. This could change. Goldman Sachs says that the AI market is the most crowded ever. This has led many investors to wonder which parts of the market could offer an alternative if this AI boom fails.
Three options are available.
First, healthcare. The current global equity index strategy is not as diverse as you would expect. According to our analysis of global stock returns over the last 12 months, the MSCI All Country World Index has a correlation with AI stocks of 0.79 and with the momentum factor of 0.76, which means that the?returns are closely related.
Healthcare stocks had a negative correlation with AI of 0.06 and a momentum factor of 0.12. There was, in other words almost no correlation between the movement of AI stocks and that of healthcare stocks over the last year.
It is clear that healthcare has been a good diversifier. We expect healthcare to continue to play a role in protecting portfolios from downturns, due to its long history of strong earnings growth. Long-term changes such as the demographic shift and innovation in medical technology, as well as pharmaceuticals, continue to boost profits.
In the past 30 years, the strength of healthcare earnings has translated into higher valuations for healthcare compared to the market. AI's dominance over the last few years has led to healthcare trading at a discount of 15%.
We believe that while healthcare offers attractive valuations and strong earnings, it is important to be selective. According to?FactSet & BlackRock, the healthcare sector had more stock-specific volatility than any other sector last year.
We prefer companies that embrace technology change. Combining large?medical data with AI models could, for example speed up the detection and treatment. This will not change, even if AI as a whole fades.
OLD ECONOMY, NEW CASE
Latin America is the second. Investors have mostly overlooked equity markets in Latin America, which have had a low relationship with AI and momentum over the past few years. According to BlackRock, Latin America accounts for just 0.8% in the MSCI ACWI but 7% in global GDP. This gap could close in the next few years, according to BlackRock.
Brazilian and Mexican shares are also trading below their historical values, while most major markets are at a premium. Interest rate cuts in the near future, which would benefit their domestic economies, as well as, on a longer-term basis, rising commodity demand due to?AI and electricification, could be catalysts for a rating reassessment.
The UK, my home market, has a low correlation with AI of 0.26 and has proven resilient to market turmoil over the past few years, fueled by the COVID-19 Pandemic, geopolitical conflict, and inflationary spikes.
Over the last five years, the FTSE 100 outperformed the global stock market on a total returns basis - without having much or any exposure to pure AI.
The UK market is characterized by its exposure to sectors of the "old economy", which are less susceptible to disruption from AI, including financials, materials and energy. As with healthcare, there are many reasons to believe that these sectors will benefit from AI. This could be through cost-cutting in banks or increased demand for copper due to AI and electrification. After a decade of six different prime ministers, political stability could be a catalyst to help UK stocks close the gap in valuation with developed markets. Stability could lead to greater economic confidence, which would encourage domestic investors to buy UK stocks in addition to foreign investors.
This diversification strategy carries a risk: AI could continue to grow while diversifiers, which are meant to protect portfolios, drag down performance. Although there are many reasons to be optimistic about the three above areas over the long-term, there are not many catalysts that will lead to AI outperforming them in the near term.
The AI trade could stall, either due to fears of over-investment or an unforeseen event. We've seen a drop in the U.S. Semiconductor Index just this month. Holding stocks to help weather the storm seems sensible.
(source: Reuters)