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MORNING BID EUROPE - Fed in the spotlight while Warsh faces Congress
Gregor Stuart Hunter gives us a look at what the future holds for European and global markets. Brent Crude is soaring around $85 per barrel as U.S. Fed chair Kevin Warsh prepares for his testimony before the 'Congress in two days. No pressure then. The?U.S. Warsh will likely be asked questions about the plans of the central bank for its balance sheet by members of?House Financial Services Committee. Fed Governor Christopher Waller's hawkish comments this week have increased the odds that there will be more rate increases this year, perhaps even as early as this month. This prospect, along with the?third consecutive night of strikes against Iran by the U.S. Military and the possibility of a U.S. 20% fee for cargo ships crossing the Strait of Hormuz roiled Asian markets on Tuesday. Brent futures rose to their highest level since mid-June while S&P500 e-minis futures fell 0.2%. MSCI's broadest Asia-Pacific index outside Japan fell 1.2%. This was primarily due to declines in shares from Taipei and Seoul. Even though the 'bear market' in South Korea continues -- the Kospi index had its worst two-day drop on Tuesday since the beginning of the Iran War -- the index remains one of the best performers this year. Early European trades saw pan-regional futures down by 0.9%. German DAX Futures also fell by 0.9%. FTSE Futures dropped 0.4%. Chinese stocks performed better than the majority of other countries after data showed that exports soared in June. This was boosted by demand for data centre computing power and chips to fuel global AI boom. In Tokyo, Finance Minister Satsuki katayama stated that Japan could consider changing the strategy of its 'giant Government Pension Investment Fund' if the investment climate changes dramatically. This comes after officials had said they would look for ways to encourage more investments in domestic financial assets. She did not provide any further information. According to a White House official, Trump's administration has also announced that it is blocking American citizens from the Democratic Republic of Congo to travel?back to America on commercial flights as the Ebola outbreak intensifies. Key developments on Tuesday include: company earnings from JPMorgan Chase and Bank of America Corporation; economic data for the U.S., including June CPI, core inflation, and debt auctions in Germany. (Reporting Gregor Stuart Hunter, Editing Kate Mayberry).
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Oil prices rise by one month as US and Iran intensify attacks on Strait of Hormuz
Oil prices rose by?nearly 3 percent on Tuesday, reaching their highest level in four weeks. The U.S. reimposed its 'naval blockade of Iran, while both countries intensified attacks in the Strait of Hormuz. This increased uncertainty over energy flows. Brent crude futures rose last $1.50 or 1.8% to $84.80 a barrel at 0330 GMT. U.S. West Texas Intermediate Crude rose $1.70 or 2.2% to $79.84 per barrel. Brent gained?9.6% the day before, which was its largest daily gain since may 2020. The oil prices have reached their highest level since June 17, when the two countries signed a Memorandum of Understanding to end the conflict. On Monday, the U.S. military conducted a third night of strikes against Iran as U.S. president Donald Trump reinstated an Iranian blockade and proposed charging a 20 percent fee to guard?the Strait of Hormuz. Tim Waterer, KCM Trade's chief market analyst, said that the latest escalation has brought a "fresh risk" to the market. He added that, "While there hasn't been a complete closure yet, the conflicting objectives of the two sides have left the supply picture in a highly uncertain state." The UAE Ministry of Defence reported on Monday that two United Arab Emirates tanks were struck by two Iranian cruise-missiles during the attacks in the southern lane of Strait of Hormuz, in Omani territorial water. One Indian crew member was killed and eight others injured. The latest shipping data also revealed that the number of vessels transiting the Strait of Hormuz has fallen to its lowest level in over two months. The key factor to watch is the physical movement of crude oil through the Strait of Hormuz. Any significant blockage of tanker movement, prolonged'reduction in vessel motion, or disruption to export flow would likely cause another leg up in oil prices, said Phillip Nova analyst Priyanka Sahdeva. If barrels keep moving despite military escalation, then part of the geopolitical premium may gradually diminish. Yemen's Houthi group fired missiles towards Saudi Arabia, accusing it of bombing a Saudi-controlled airport on Monday. Simon Wong said that if the Houthis continue their attacks on Saudi crude oil in the Red Sea it would "increase (further?) uncertainty" about the crude flow from the region. A preliminary poll conducted on Monday showed that U.S. crude stockpiles are expected to have declined last week while gasoline and distillate inventories likely increased. Reporting by Ishaan Chow and Emily Chow from Singapore, with editing by Jamie Freed.
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London copper prices slip on Hormuz concerns as a gloomy demand offsets supply-chain woes
The price of copper in London fell slightly on Tuesday, amid the latest escalation of the Middle East conflict. However, this was offset by concerns over a possible supply chain crisis. Benchmark 'three-month' copper prices on the London Metal Exchange dropped 0.18% to $13,516 per metric tonne by 0300 GMT. After an increase in LME copper prices overnight, the most-traded contract for copper on the Shanghai Futures Exchange increased by 0.64%. It now stands at 103950 yuan a ton. Donald Trump, the U.S. president, and Iran announced that they would both blockade the Strait of Hormuz. The U.S. has renewed their attacks on Iran and tankers in the crucial waterway have been attacked. Everbright Futures, a Chinese broker, said in a note that the escalation is a "double edged sword" for copper. The broker stated that it supports the prices of the red metal amid concerns about disruptions to the copper supply chains, while weighing them down by increasing economic and trade risk and dampening demand. The fighting has re-ignited fears that rising energy costs and input prices will force policymakers to increase interest rates in order to combat inflation. This would dampen demand for industrial minerals such as copper, which are dependent on economic growth. The latest escalation in the war has pushed oil prices to their highest levels in four weeks. However, they remain?below the peak levels of the conflict. Gold that does not yield slid down to its lowest level in two weeks on fear of a higher U.S. Interest rates. The dollar's direction will be determined by the U.S. inflation figures and Kevin 'Warsh's first appearance before Congress as Federal Reserve Chairman. The escalation in prices of aluminium?increased as a result, and threatened to undermine?supply from major producers?in the Middle East. On the LME it rose 0.63% while on the SHFE, it grew 1.37%. Nickel added 0.2%, tin 0.44%, and lead ticked higher. On the SHFE, tin fell 0.49%, tin gained 0.61%, and lead lost 0.4%. (Reporting and editing by Rashmi aich; Solomon Cefai)
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Asian stocks fall as oil prices rise after Trump's Hormuz levies threat
Tuesday, oil prices rose and stocks fell in Asian trading after Donald Trump announced that the U.S. would re-impose its blockade of Iranian ships in the Gulf and charge a 20% surcharge on all cargo crossing Strait of Hormuz. After a volatile session, MSCI’s broadest Asia-Pacific share index outside Japan fell 1.7%. The biggest declines were in South Korea and Taiwan, where shares at their lowest points exceeded 3%. Japan's Nikkei fell by 0.8% while S&P500 e-minis futures declined by 0.3%. The CSI 300, the benchmark for Chinese stocks, fell 0.4% less than the regional index after Tuesday's export and import figures beat expectations. Brent crude futures rose 1.7% to $84.72 per barrel after hitting their highest level since mid-June, $85.64. The markets were also shaken by the hawkish remarks made on Monday by Federal Reserve Governor Christopher Waller. He said that the U.S. Central Bank may have to raise interest rates in the near future if inflation continues well above its 2% target. The U.S. CPI is expected to be released later Tuesday. Kevin Warsh will then deliver the semi-annual report of the Federal Reserve's monetary policy to Congress. Chris Weston of Pepperstone, Melbourne's head of research, stated that "markets reacted aggressively to the recent headlines about the Iran conflict." The prospect of tighter monetary policies into a possible energy shock rarely supports risk assets. Overnight, Wall Street stocks fell and oil futures soared by more than 9%, as the conflict between Iran and the U.S. re-emerged, once again slowing the flow of goods across the Strait of Hormuz. The S&P 500 ended 0.8% lower, and the Nasdaq Composite dropped 1.6%. Fed funds futures are pricing in an implied probability of 43.3% for a 25 basis-point increase at the U.S. Central Bank's next two day meeting on July 28 and 29, compared to 34.2% on Friday. This is according to CME Group's FedWatch. The yield on the 10-year Treasury bond in the United States was up 1.6 points to 4.624%. The U.S. Dollar Index, which measures the strength of the 'greenback against a basket?six currencies - dipped 0.1% to 101.18. It was trading at its highest levels for the month. Gold rose 0.3% to $4,012.37. Vis Nayar, Eastspring Investments chief investment officer, said in a recent note that the risk of a resurgence in U.S. - Iran tensions is primarily due to the impact higher energy prices have on currencies and interest rates. "Continually higher oil prices will increase the likelihood that the U.S. Federal Reserve will raise the Fed funds rate this year." Taiwan's benchmark index? fell to a new low in Taipei and led regional declines. Seoul's?stocks fluctuated between positive and negative territory, as shares of?SK Hynix fluctuated between gains and losses. They fell as much as 5,6% after a rally. The memory chipmaker's volatility comes after its dramatic drop a day before following its Nasdaq launch last week. (Reporting by Gregor Stuart Hunter; Editing by Muralikumar Anantharaman and Kevin Buckland) (Reporting and editing by Muralikumar Anaantharaman, Kevin Buckland, and Gregor Stuart Hunter)
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China's June imports of iron ore are at a six-month high due to robust shipments and resilient demand
China's imports of iron ore in June increased by 15% compared to the previous month, reaching a six-month record. This was due to miners increasing shipments to meet quarterly targets and lower prices encouraging more buyers among steelmakers and traders. Data from China's General Administration of Customs revealed that the world's largest iron ore importer imported 112,69?million tons of the key ingredient in steelmaking last month. This was up 6.4% on the previous year and the highest amount since December. Analyst Qingwei Xie at Shanghai Metals Market said that "shipments increased last months as some miners increased efforts to meet quarter guidance and as certain mines boosted production." Data from the shipping tracking agency Kpler revealed that iron ore exports to major suppliers Australia, Brazil and South Africa increased by 4.3% in late June. Hot metal production remained high?in the month of June, Xie said. Mysteel data showed that the average daily hot metal production in June, which is a measure of iron ore consumption, was 0.7% higher than it was in May. Analysts said that some cargoes cleared customs in June, but arrived as early as May. This contributed to the increase in ore imports. The price of this key ingredient in steelmaking fell by 4.7% during the month, as energy and freight prices dropped due to the tentative agreements between the United States & Iran. China's imports of iron ore totalled 628.87 millions tons between January-June, a 6.3% increase on an annual basis. Steel exports in China in June were high, despite a small monthly drop. This was due to a lackluster domestic market and competitive prices on the export market. Exports in June, which totaled 10.32 million tonnes, were 0.2% lower than the previous month, but 6.6% higher than the same period last year. Last month, steel consumption declined as high temperatures and heavy rains in certain?regions curbed building. This encouraged mills export more steel products. Last month, export prices dropped in line with the trend on the domestic market. This made Chinese steel more competitive against its international rivals. The Iran conflict has disrupted the flow of steel from the Gulf and prompted Middle Eastern customers to look for alternatives. Steel exports fell by 5.6% in the first half of this year to 54.87 millions tons. (Reporting and editing by Amy Lv, Lewis Jackson and Kate Mayberry.
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Trump reduces the size of two Utah National Monuments
The White House reported that U.S. president Donald 'Trump' signed orders on Monday reducing the size of 2 national monuments by over 90% in order to allow for motorized recreation, logging, and other resource developments in the area. The Bears Ears National Monument was reduced to 121.100 acres (49,000 ha) from 1.36 million acres and the Grand Staircase-Escalante National Monument was cut to 181,500 from 1.87 millions acres. Earthjustice, an environmental?group, said that it would "maintain protections for these precious landscapes" by taking legal action. Trump announced the news?at The White House with Utah Governor Spencer Cox, and Utah's two U.S. Senators, Mike Lee, and John Curtis. Trump stated that "we're doing something very drastic and very important for people in?Utah and people in?our country because many people use this." Joe Biden, the former president of the United States, expanded the monuments despite the opposition from Utah officials. Former President Barack Obama established Bears Ears in 2016. The monument is named after twin buttes which resemble the head of a bear on the horizon. It contains cultural and archaeological sites sacred to many Native American tribes. Bill Clinton, former president of the United States, established Grand Staircase-Escalante in 1996. Over the past two decades, numerous dinosaur fossils were found at 'the monument, which is known for its colorful rock formations. Trump has dismissed environmental and cultural preservation projects in the past. Senator?Martin Heinrich of New Mexico, a Democrat whose State borders southern Utah, criticized the President's decision. Heinrich stated in a?statement that this administration had repeatedly put the interests billionaires and powerful industry ahead of the?America's?public lands and their owners. "They're once again ignoring Tribal Voices, marginalizing local communities, and endangering places that belong every American." (Reporting and editing by Sonali Freed and Jamie Freed; reporting by Gram Slattery in Washington, Kanishka Singh and Nichola Slattery in Los Angeles.
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Asia markets are choppy due to Trump's threat of a levy on the Gulf of Hormuz.
The stock market fluctuated between gains and losses on Tuesday, and oil reached a new high of one month in early Asian trading after President Donald Trump announced that the U.S. would re-impose its blockade of Iranian ships in the Gulf. He also said the U.S. would charge a 20% surcharge on all cargo crossing the Strait of Hormuz. MSCI's broadest Asia-Pacific share index outside Japan rose by 0.4% in a volatile session. The gains were led by 2.2% for Korean shares. Japan's Nikkei was up by 0.2% while S&P500 e-minis futures were down 0.1%. Brent crude futures rose 2.6% to $85.50 per barrel, the highest price since mid-June. Trading resumed in Asia. The markets were also shaken by the hawkish remarks made on Monday by Federal Reserve Governor Christopher Waller. He said that the U.S. Central Bank may have to increase interest rates in the near future if inflation continues well above its 2% target. Chris Weston of Pepperstone Group Ltd, Melbourne, stated that "markets reacted aggressively to the recent headlines about the Iran conflict." The prospect of tighter monetary policies into a possible energy shock rarely supports risk assets. Overnight, Wall Street stocks fell and oil futures soared by more than 9%, as the conflict between Iran and the United States re-ignited and once again choked the flow of goods across the Strait of Hormuz. The S&P 500 ended 0.8% lower, while the Nasdaq Composite dropped 1.6%. The U.S. CPI is expected to be released later on Tuesday, and then Fed Chair Warsh will give the semi-annual monetary report of the central bank. Fed funds futures price in an implied 43.3% chance of a 25 basis-point 'hike' at the U.S. Central Bank's next two day meeting on July 28 and 29, compared to a 34.2% chance last Friday, according to the CME Group’s FedWatch tool. The yield on the 10-year Treasury Bond in the United States was up 2.2 basis point at 4.6297%. The U.S. Dollar Index, which measures the strength of the greenback against a basket six currencies, was at 101.29 and trading near its highest levels for the month. Gold fell 0.1% to $3,997.27. Stocks in Seoul fluctuated between positive and negative territory on Tuesday, as shares of SK Hynix fell as much as 4.7% in the opening minutes of trading, before rallying and trading up to 4.6% higher. The memory chipmaker's volatility comes after its dramatic drop a day before following its Nasdaq launch last week. Bitcoin was up 0.3% to $62,318.43, while ether rose 0.7% to $1,777.63. (Reporting and editing by Muralikumar Aantharaman; Reporting by Gregor Stuart Hunter)
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Australia blocks the voting rights of certain China-linked investors at Northern Minerals
Northern Minerals announced?on?Tuesday that Australian Treasurer, Jim?Chalmers, has ordered three 'offshore 'investment firms - including Hong Kong Ying Tak - to refrain from exercising voting rights within the rare earths developer. Foreign Investment Review Board of Australia (FIRB) has said that Hong Kong Ying Tak and?British Virgin Islands registered Real International Resources as well as Hong Kong registered?Qogir Trading & Service have failed to comply to earlier government 'orders to reduce stakes in Northern Minerals. In May, Treasurer Chalmers?ordered offshore shareholders to divest by July?2 their?holdings over concerns that Chinese-linked groups were seeking control of rare-earths mining company. Ying Tak's phone number and email address are not listed in the Hong Kong companies registry. Adam Handley, Northern Minerals' Executive Chair, said that the Federal Treasurer had issued interim instructions regarding compliance with his May Disposal orders. Handley stated that a review of Northern Minerals' share registry on July 10 found that the majority of shares covered by May divestment were still held by the investors targeted by these orders.
Wanted: Volunteers who will host nuclear waste forever
The Trump Administration's plan to release a wave small futuristic reactors that will power the AI age relies on an ancient strategy to dispose the highly toxic waste. Bury it at the bottom a very deep pit.
There's still a problem. The hole is not very deep, but the temporary stockpiles of 100,000 tons of radioactive waster at nuclear plants and other sites in the United States keep growing.
The U.S. government is now offering a radioactive reward to resolve this dilemma.
According to a proposal released by the Department of Energy last week, states are being asked to offer to host a permanent geological storage facility for spent fuel. This repository will be part of a campus of new nuclear reactors, waste processing, uranium enlargement and data centers.
The request for information marks a major shift in policy. A spokesperson for DOE's Office of Nuclear Energy said that the plan to boost nuclear power is now accompanied by a requirement to find "a permanent home" for waste. This puts the decision-making in the hands of the local communities and could result in tens of millions of dollars of investment and thousands of new jobs.
Lake Barrett, a former U.S. Nuclear Regulatory Commission official and DOE employee, said, "By combining all of this together, it is a matter that big carrots are placed next to a less desirable waste facility." He said that states such as Tennessee and Utah have expressed an interest in investing in nuclear energy.
The Nuclear Office said that the request generated interest, but did not comment about individual states. States have 60 days to reply. Utah and Tennessee officials did not respond when contacted for comment.
The President Donald Trump is looking to quadruple the U.S. nuclear capacity by 2050 to 400 gigawatts as the electricity demand increases for the first decade thanks to artificial intelligence, the growth of data centers and the electrification in transport.
The DOE has selected 11 advanced nuclear test reactors for licensing on a fast track in 2025. It aims to build three pilots by the 4th of July this year.
According to the U.S., British and European Commission governments, the public's acceptance of nuclear power is partly based on the "promise" of burying the nuclear waste deeply underground.
The spokesperson for the Office of Nuclear Energy said that "a complete nuclear strategy must include durable, safe pathways for final disposal, and this remains a requirement element of the RFI."
Prior attempts to find a resolution have met with strong opposition locally.
The DOE began looking for a permanent facility to store waste in 1983. In 1987, it settled on Nevada's Yucca Mountain. Former President Barack Obama stopped funding the project in 2010 because Nevada legislators were concerned about safety, and how it would affect casinos and hotels. Nearly $15 billion had already been spent.
NEW REACTOR DESIGNS
Small modular reactors are being promoted by countries such as the United States, Britain Canada, China, and Sweden to accelerate the deployment nuclear power.
SMRs are attractive because they can be largely prefabricated in factories. This makes them easier to assemble and faster than larger reactors.
The new SMR designs will not solve the waste issue. Designers are not required to take into account waste from the start, but they do need to have a plan on how it will managed.
Seth Tuler is an associate professor at Worcester Polytechnic Institute. He was previously a member of the U.S. Nuclear Waste Technical Review Board.
According to a 2022 study published by the Proceedings of the?National Academy of Sciences, the majority of the new SMRs will produce the same amount of waste or more per unit of electricity as today's large nuclear reactors.
SMRs could also be located in areas that lack the infrastructure required for larger plants. This raises the possibility of many other nuclear sites becoming interim waste dumps. According to the U.S. Nuclear Power Regulator, the term "interim" in the United States can refer to more than a century after the reactor has closed.
We contacted nine companies that were behind the 11 SMR designs supported by DOE's Fast-Track programme. Some people said that nuclear waste was a problem for both the reactor operators and the government.
Some said that they hoped for technological advancements in the next decade to improve prospects for reprocessing, but they still agreed that a permanent repository is needed.
Reprocessing spent fuel, where uranium, plutonium, and other elements are separated and sometimes reused, is gaining interest due to the prospect of a second wave of nuclear reactors.
The spokesperson of the Nuclear Energy Office said that "modern technologies, especially advanced recycling and processing, can shrink the volume nuclear material that needs to be disposed," Reprocessing is not a substitute for permanent disposal.
However, nuclear security experts questioned whether the reprocessing process would be included on any of these new campuses.
Ross Matzkin Bridger, a former DOE official, said that "every time it has been tried, it has failed. It creates security risks and proliferation, costs are huge, and it complicates the waste management." He claimed that the few countries recycling fuel recycled between zero and 2%. This is far below the 90 percent promised.
A PERMANENT PROBLEM
Most waste is currently stored indefinitely on-site in the United States of America, Canada, Europe and Britain, initially in spent fuel pools for cooling, then in concrete or steel casks. France sends spent fuels to La Hague, Normandy, for reprocessing.
According to the DOE, the more than 90 reactors in the United States -- the largest nuclear power producer in the world ahead of China and France -- add about 2,000 tonnes of waste each year to the existing stockpiles.
Office of Nuclear Energy data indicates that by the end of 2024 U.S. tax payers will have paid $11.1 billion in compensation to utility companies for storing spent nuclear fuel. Some of this fuel can remain dangerous to humans for hundreds of thousand of years.
According to the British Government, the decommissioning of Scotland's Dounreay plant, where the last nuclear reactor closed in 1994 has been extended several times due to problems with waste handling. This is a sign that the industry will face many issues as old plants close.
As Dounreay is demolished, vast vaults will be filled with large metal containers containing low-level radioactive material.
Since the first commercial nuclear power plant in England went online in 1970, there has been a consensus that burying toxic wastes deep underground was the best option. However, no repository is currently in operation in any part of the world.
It takes time to get a repository operational. The government needs community support and geological studies to determine how the groundwater flows and the rock's stability up to 1,000 metres underground (1,090 yards).
Finland is the country that has made the greatest progress, and is on the verge of opening the first permanent nuclear repository to be located in the world in Olkiluoto. The process began in 1983.
Posiva, the Finnish firm behind the project began moving test?canisters over four hundred meters underground in 2024. It said its goal was to begin commercial operations in this year. However, it is still waiting for the Finnish Radiation and Nuclear Safety Authority (Finnish Radiation and Nuclear Safety Authority) to approve the operating license, which will then be followed by technical inspections.
After the system is up and running, separate tunnels underground will be filled with canisters of copper and steel housing waste and sealed forever.
Sweden started building its permanent repository on January 20, 2025. It aims to be operational by the end of 2030s. Canada has chosen a site to operate in Ontario by the end of 2040. Switzerland and France, too, have selected sites and plan to open their repositories around 2050. The UK is aiming for late 2050s but has not yet decided on a site.
In the interim, until a permanent repository is built in the country for high-level nuclear wastes from sites like Dounreay, they are sent to Sellafield (England) for storage.
Data centers are being built on some decommissioned nuclear sites including Dounreay. They're already connected to the grid and don't require a wait.
There is still a long way to go in the cleanup. The sea was contaminated with irradiated fuel decades ago, and a "minor fragment" of radioactive material was discovered on a local shore in January.
The last "significant particle" was found in April, and fishing has been banned within a radius of 2 kilometers (1.25 miles) of Dounreay’s outlet pipe due to radioactive particles.
The British government extended the deadline for cleaning up Dounreay from 2033 to 2070 last year.
(source: Reuters)