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Investors expect US-China trade talks to progress as they increase the dollar value of stocks
The dollar and global stocks both edged up on Tuesday, as the United States and China are set to continue their trade talks for a second consecutive day. This gives investors reason to believe that tensions between two of the largest economies in the world may be easing. After Monday's meeting, U.S. president Donald Trump emphasized the positive aspects of the discussions. Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, as well as U.S. trade representative Jamieson Greer will meet with their Chinese counterparts again on Tuesday in London. Markets will likely be relieved if the talks progress, given Trump's frequently changing tariff announcements. These have disrupted supply chain and threatened to stymie global growth. The MSCI All-Country World Index, which reflects world stocks, reached near-record highs while the dollar clawed higher against a variety of currencies. "While market participants clearly take a half-full outlook on the outlook, both in terms of trade policy and broader, we do not think this should be interpreted to mean that tariffs will fully be unwound," Jonas Goltermann said, deputy chief markets analyst at Capital Economics. Goltermann expects U.S. duty on Chinese goods will settle at around 40 percent, while the majority of analysts say that the 10% universal levy on imported products into the United States will remain. STOXX 600 in Europe was flat for the day. Investors focused on vaccine manufacturers after U.S. Secretary of Health Robert F. Kennedy Jr. fired an entire panel vaccine experts. GSK shares fell by 0.6% while Sanofi, Bavarian Nordic and Bavarian Nordic all rose between 0.6-1.3%. In Tokyo, Finance Minister Katsunobu Kato announced that policymakers are looking into measures to promote the domestic ownership of Japanese Government Bonds. This comes a day following reports that Japan was considering buying back super-long government bond issued in previous years at low interest rates. Last month, yields on super-long JGBs reached record levels due to the waning demand from traditional investors such as life insurance companies and concerns over rising global debt levels. The yield of the 10-year JGB remained flat at 1.47%. Meanwhile, 30-year yields increased by 1 bp to 2.92% after a decline from a high of 3.18% in late May. Dollar pares some Monday's losses in currencies The dollar was unchanged at 144.6 yens. After weak UK employment figures, the euro dropped 0.13% to 1.14 and sterling fell 0.5% to 1.003477. QUALITY, NOT SIZE Investors' confidence in U.S. assets has been eroded by Trump's unpredictable trade policies, and concerns over Washington's increasing debt. The dollar is down more than 8% so far this year. The deficit will remain stable, and the Americans won't be able to blow up their fiscal situation. Samy Chaar is an economist with Lombard Odier. You'll have macropayoffs if you spend and invest on productive investments. You'll develop an industry, strengthen your economy, create jobs. "If you reduce revenues by cutting taxes on people that don't require the money, then they won't consume more or invest more. So the macropayoff is limited," said he. U.S. Treasuries yielded around 4.45% on Monday, down 3.2 basis point from the previous day. The impact of tariffs on the price of goods could be revealed by data on U.S. Consumer Inflation for May, due to be released on Wednesday. The report on the producer price index will be published a day after. Kevin Ford, Convera’s FX and macrostrategist, said that the May CPI and PPI figures in the United States will be closely examined for any signs of inflationary pressures. If core CPI continues to be elevated, rate cuts may not occur at the FOMC meeting on June 18. The traders expect that the Fed will leave rates unchanged during its next policy meeting. By December, only 44 bps of easing had been priced in. Oil prices increased on commodity markets as a result of the optimism that Tuesday's U.S. China talks would ease trade tensions, and increase demand for energy. Gold spot rose by 0.15%, to $3332 per ounce.
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EUROPE GAS - Prices drop on Higher Temperatures
The wholesale gas prices in the Netherlands and Britain fell on Tuesday morning, as temperatures rose and gas demand decreased. LSEG data shows that the benchmark Dutch front-month contract was 34.88 euros per Megawatt Hour (MWh), or $11.65/mmBtu at 0805 GMT. This is a decrease of 0.68 Euro. The Dutch day-ahead contracts was down by 0.4 euros at 34.93 Euros/MWh. The British day-ahead contracts was down 1.25 pence to 82.25p/therm. Analysts at Engie EnergyScan say that in Europe, temperatures will be 5-7 degrees Celsius higher than normal on Friday before cooling down next week. LSEG data showed that the demand for local distribution zone gas, which is primarily for heating, was down 112 gigawatt-hours/day (GWh/d), to 894 GWh, on Wednesday. Prices were also affected by changes to the maintenance program for Norway's Oseberg Gas Field. Analyst Yuriy Onieshkiv of LSEG said that "the comfortable supply-demand imbalance and a further revision downward in the expected impacts of Oseberg Maintenance could contribute to a somewhat bearish tone". The field's full shutdown will now begin on 12 June, one day later than originally expected. Onyshkiv stated that Oseberg would have 13 million more cubic metres/day of capacity on 11 June than originally anticipated. The benchmark contract on the European carbon markets was down 0.75 euros at 73.48 euro per metric ton. (Reporting by Susanna Twidale, editing by Nina Chestney).
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Rolls-Royce wins UK small nuclear reactor deal
The UK has chosen Rolls-Royce SMR as the company to build its first small modular reactors (SMRs) in order to accelerate the decarbonisation process of the electricity network by the mid-2030s. The government pledged on Tuesday 2.5 billion pounds ($3.4billion) over the next four-years for the SMR program, with the aim of launching one of Europe's earliest small-scale nuclear industries. The SMRs can be as large as two football fields, and the parts are built in factories. This makes them cheaper and faster than the traditional plants that take over a decade to build and have planning delays in Britain. The government has also said Tuesday It would invest 14,2 billion pounds in the construction of a large-scale nuclear plant called Sizewell C in eastern England as part "of the biggest nuclear roll-out for a century". Rolls-Royce SMR (majority owned by FTSE 100 engineer Rolls-Royce) which manufactures the power systems for Britain’s nuclear submarines said that it would build three units. Ed Miliband, Energy Minister at Sky News said: "Doing many of them allows you to lower the cost. That's the great prospect." It's a great opportunity for Britain, and it's a big deal for energy security. SMRs are being considered by dozens of countries around the world including the United States and Canada. Romania, the Czech Republic and Romania will also be interested if the British project succeeds. Tufan Erginbilgic, CEO of Rolls-Royce, said he expects Rolls-Royce to grow "materially". Great British Energy - Nuclear (GBEN), the state-owned energy firm in Britain, will sign a contract and select a site with Rolls-Royce SMR later this year. In mid-2030s when they are connected to grid, SMRs will be able to support about 3,000 jobs as well as power 3 million homes. In a two-year contest for the SMR contract, Rolls-Royce SMR beat out Westinghouse and Holtec Britain as well as GE-Hitachi Nuclear Energy - a joint venture between General Electric Co. and Japan's Hitachi Ltd. $1 = 0.7396 pounds (Reporting and editing by Sachin Ravikumar, Paul Sandle).
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Iron ore prices continue to fall due to a growing supply, but China's resilient demand is limiting the loss.
Iron ore prices continued to fall on Tuesday. They were dragged down by the expectation of an increase in supply. However, resilient demand from China, their top consumer, and hopes for easing Sino-US tensions helped limit losses. The daytime trading price of the most traded September iron ore contract at China's Dalian Commodity Exchange was 0.85% lower, closing at 698.5 Yuan ($97.16 per metric ton). As of 0700 GMT, the benchmark July iron ore traded on the Singapore Exchange had fallen 0.63% to $94.1 per ton after earlier hitting its lowest level since June 3, at $93.9. Data from Mysteel revealed that shipments of the main steelmaking ingredient, alumina, from Australia and Brazil rose nearly 2% compared to the previous week. This was the highest weekly level since December. Analysts at Shanghai Metals Market wrote in a report that iron ore imports are expected to increase in June as mills will use imported cargos more due to the lower price and miners will increase shipments to meet quarterly targets by the end of the month. Analysts at Hongyuan Futures wrote in a report that "Given the healthy steel margins, hot metal production is likely to be at a high-level." Mysteel data shows that the hot metal production is a good indicator of iron ore consumption. The daily average was 2.42 million tonnes on June 5, which is 2.6% more than the previous year. Investors are also hoping for a better relationship between the U.S.A. and China as they begin another round of talks in London, on Tuesday. Coking coal and coke, which are used to make steel, also saw gains. They were up by 0.51% and 0.48 percent, respectively. The benchmarks for steel on the Shanghai Futures Exchange were traded within a narrow range. Rebar, hot-rolled coil and wire rod were all little changed. Stainless steel dropped 1.46% and wire rod fell 0.12%. $1 = 7.1889 Chinese Yuan (Reporting and editing by Amy Lv, Lewis Jackson)
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After protests, Indonesia cancels mining permits for nickel ore in Raja Ampat
Indonesia, a major nickel ore producer, has revoked the permits of four mining companies in Raja Ampat, its easternmost region, Papua. This follows a public uproar over their environmental impact. Last week, protests against mining in Raja Ampat - a beautiful UNESCO Global Geopark famed for its marine biodiversity - dominated Indonesian social networks. Users shared a graphic showing the blue waters of the area with the hashtag #SaveRajaAmpat. Bahlil lahadalia, Indonesia’s energy minister, stated that President Prabowo decided to revoke permits for the four nickel-producing companies in the region starting Tuesday to protect the environment. He said that we need to pay attention to the marine life in these areas and to conservation. The nickel companies that operate in Raja Ampat are PT Nurham Mining, PT Kawei Sejahtera Mining PT Anugerah Surya Pratama PT Mulia Raymond Perkasa. Bahlil stated that the government had not granted quotas for these four companies because they did not meet administrative requirements. This means they are not currently in production. Bahlil stated that the permit for another nickel miner PT Gag Nikel - a subsidiary company of the state miner Aneka Tambang - was not revoked because the company operated outside of the geopark. Gag Nikel is the only production company in the region. It has a 3 million ton quota per year. Indonesia's Energy Ministry temporarily halted mining activities of the company last week following protests. The Energy Ministry did not respond immediately to a Tuesday request for comments on whether this suspension had been lifted. Bahlil stated that the government will monitor its activities, including its regulatory practices "exhaustively". Antam claimed that Gag Nikel replanted trees and protected coral reefs last week. On Tuesday, PT Wanxiang Nickel Indonesia (the parent company of Anugerah Pratama, Gag Nikel and Kawei Sejahtera Mining) did not respond immediately to requests for comments. Nurham and Mulia Ray Perkasa could not be reached for comment. Last week, Greenpeace activists held a small protest at a mineral convention in Jakarta to highlight mining activities around Raja Ampat. Greenpeace later said in a press release that mining has destroyed more than 500 acres of native forest, coral reefs, and marine ecosystems. (Reporting and editing by David Stanway; Stanley Widianto)
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Source: RPT-Hyundai Motors has a stockpile of rare earths that can last for about a year.
A person who attended an investor call for Hyundai Motor said that the company has a stockpile of rare earths which can last up to a year. It does not anticipate any short-term impacts from disruptions in global supply chains caused by China’s export restrictions. China's decision to limit exports of rare earths, magnets, and other materials in April has disrupted supply chains for automakers, aerospace companies, semiconductor firms, and military contractors. Hyundai, along with Kia Corp., the third largest automaker in the world, is better positioned than most competitors to withstand the restrictions that have already affected production and the supplier networks of Ford and BMW. According to a participant on the call for investors, which was closed to the general public, a Hyundai official in investor relations said that the South Korean automaker has "far more flexibility" than its rivals when it comes to supply chain issues related to rare earths. The official informed investors that Hyundai's efforts in diversifying supply chains and improving procurement had been successful. The company expects to be able produce electric or hybrid vehicles without interruptions "for about a year at least," said the attendee. The official, who spoke under condition of anonymity as the call was private, said that Hyundai had also increased its rare earths inventory during the recent period in which China had relaxed export restrictions. The South Korean automaker had not previously reported its stockpiles of key minerals. The inventory held by Hyundai, Kia and their suppliers was unclear. Hyundai refused to comment in a written statement to on any specific details of inventory or procurement strategies. Hyundai stated that they constantly evaluate the market conditions in order to maintain operational stability, and a diverse global supply chain. As part of our normal business practices, Hyundai maintains appropriate inventory levels in order to ensure uninterrupted production. China produces 90% of rare earths in the world, which is essential for vehicle production, and especially electric motors. A person with knowledge of the matter declined to give their name due to the sensitive nature of the issue. China's dominance in the vital mineral industry is increasingly seen as a key leverage point for Beijing in the U.S. tariff war that was sparked by President Donald Trump. The U.S. and China trade talks are set to continue for a second full day on Tuesday in London as the two world's largest economies try to diffuse a bitter dispute which has expanded from tariffs to restrictions over rare earths. (Reporting and writing by Heekyong Yay; editing by Miyoung KIM and Jamie Freed).
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Sources say that the supply of Saudi crude oil to China will decline in July.
Saudi Arabian crude oil supplies to China are expected to drop slightly in July. However, they will still be strong for a 3rd consecutive month, as the OPEC kingpin regains market share by supplying the top crude importer of the world. A tally of the allocations made to Chinese refiners revealed that Saudi Aramco, the state oil company, will ship around 47 million barrels in July. This is 1 million barrels below June's allocated volume. Sources say that state refiners Sinopec and PetroChina, as well as Aramco's joint-venture Fujian refinery, will receive more crude in July. However, independent refiners Rongsheng Petrochemical Hengli Petrochemical Shenghong Petrochemical are likely to see a decrease. Saudi Aramco didn't immediately respond to our request for comment. Saudi Arabia's robust supply is a result of the Organization of Petroleum Exporting Countries (OPEC+) and its allies agreeing to increase output by 411,000 barrels a day in July for a third month running. Since April, OPEC+8 have announced or made increases totaling 1.37 million bpd or 62% the 2.2 millions bpd that they intend to add to the market.
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Markets watch US-China trade talks
Oil prices rose on Tuesday, as investors waited for the results of U.S. China talks which could ease trade tensions and increase fuel demand. Brent crude futures were up 28 cents or 0.4% to $67.32 per barrel at 0330 GMT. U.S. West Texas Intermediate Crude was up 23 cents or 0.4% at $65.52. Brent oil prices rose to $67.19 on Monday, their highest level since April 28. This was boosted by the prospect of a U.S. China trade agreement. The U.S. and China trade talks will continue in London for a second consecutive day as officials try to reduce tensions which have risen from tariffs on rare earths to global supply chain disruptions. Goldman Sachs analysts say that prices have recovered due to the fact that demand concerns have diminished with the trade negotiations between Washington and Beijing, and a positive U.S. employment report. However, there are still risks for North American supply because of wildfires in Canada. Donald Trump, the U.S. president, said that on Monday that he had received "only good reports" about his talks with China from his London-based team. The U.S.-China trade agreement could boost the global economy and increase demand for commodities, including oil. Iran has said that it will soon present a counter proposal for a nuclear agreement to the U.S. as a response to an offer from the U.S. that Tehran finds "unacceptable", whereas Trump stated that both sides remain at odds on whether Iran would be permitted to enrich uranium in its soil. Iran is the third largest producer of oil among the members of the Organization of Petroleum Exporting Countries. Any easing of U.S. sanction on Iran will allow it to export even more oil and this would have a negative impact on the global crude price. A survey also found that OPEC's oil production rose in May. However, the rise was not as large as expected, since Iraq pumped less than the target amount to make up for the earlier overproduction, and Saudi Arabia, the United Arab Emirates and Kuwait increased their output by a smaller amount. OPEC+ - which includes OPEC and its allies, such as Russia - is accelerating the plan to undo its latest layer of production cuts. Daniel Hynes is a senior commodity strategist with ANZ. He said that the prospect of further increases in OPEC's supply still hangs over the market. "A permanent switch to a market-driven strategy (in OPEC), would push the oil markets into a large surplus in H2 of 2025, and almost certainly lead to lower prices."
JP Morgan lowers oil price forecasts due to weak demand and higher output
JP Morgan lowered Monday its oil price predictions for 2025 as well as next year. They cited higher production by OPEC+, and weaker demand.
The bank lowered its forecast for 2025 Brent prices to $62 per barrel, down from $73, and its target price for 2026 to $58 per barrel, up from $61. The bank lowered its 2025 WTI forecast to $62 from $69 per barrel and its 2026 outlook to $53 from $71.
Brent crude futures traded around $65 and U.S. West Texas Intermediate Crude futures around $61.
JP Morgan expects the global oil demand to rise by 0.8 millions barrels per daily (mbd), but only a growth of 0.3 mbd on average in the third quarter.
The bank stated in a report that "higher production volumes by the OPEC+ Alliance indicate a change in reaction function. This, combined with weaker demands, will push the balances to a large excess and drive Brent below $60 at the end of the year."
Analysts at JP Morgan said that the oil market is still under pressure due to an "80% chance of a mild economic recession, coupled with an increase of 1 mbd in production" by the Organization of Petroleum Exporting Countries.
JP Morgan stated that while OPEC+ will gain market share by 2025, to stabilize the market at $60 Brent for 2026, the alliance would need to not only reverse the current production increases but also implement further reductions.
This month has been a busy one for us.
Goldman Sachs has reduced its
Brent and WTI Oil Forecasts for 2025-2026 will be based on an expectation of increased OPEC+ oil supply, and the possibility of escalating trade conflicts. This will cause a global recession and dent demand.
(source: Reuters)