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Bond yields and oil prices fall amid hope for an Iran deal, while stocks rise with Nvidia's results.
U.S. Treasury rates and oil prices fell on Wednesday, as optimism grew that the U.S. was close to a deal with Iran in order to end the Middle East?war. Meanwhile, major stock indexes rose before the closely-watched results of Nvidia. Investors continue to monitor headlines in search of signs that the U.S. is making progress with Iran on ending the war. Donald Trump, the U.S. president, said that negotiations with Iran are in their final stages. He also warned of more attacks if Iran does not agree to a deal. The U.S. Dollar fell from its six-week high. U.S. crude oil fell 4.7%, to $99.22 per barrel. Brent fell to $105.76 a barrel, a 4.95% drop on the day. Shipping data revealed that there were also some signs of a easing of the Gulf pressure on Wednesday as two Chinese oil tanks left the Strait of Hormuz. The yield on the benchmark U.S. 10 year notes was down 8.2 basis point to 4.588% from 4.669% at late Tuesday. Recently, yields reached multi-year-highs on inflation fears fueled by war. Consumer discretionary led the S&P 500 sector gains, while Nasdaq was at the top of Wall Street. Jake Dollarhide of Longbow Asset Management, Tulsa (Oklahoma), CEO, said that there is a renewed sense of optimism because oil prices and yields have fallen. He said that "pessimism is on the horizon" because the Fed has been pushed into a corner by higher oil prices. Fed funds 'futures traders have priced in about 50% odds that the Federal Reserve would raise rates in December. This is a dramatic change from the markets expectations before the Iran War began in late Febuary, when they had been expecting two rate cuts for this year. The Dow Jones Industrial Average rose by 428.50, or 0.87 percent, to 49.793.42, while the S&P 500 gained 65.46, or 0.88 percent, to 7,418.45, and the Nasdaq Composite climbed 326.83, or 1.26 percent, to 26,196.48. The MSCI index of global stocks rose by 9.16 points or 0.84% to 1,100.95. The pan-European STOXX 600 Index rose 1.65%. In Europe and Japan too, longer-dated bonds were also sold off, but like Treasuries they found relief on Wednesday. The benchmark yield for the eurozone, Germany's 10-year bond, has fallen 3 basis points to 3.16% from its 15-year high on Tuesday. The benchmark 10-year U.S. Treasury rate reached its highest level in 16 months on Tuesday. Meanwhile, the 30-year Treasury rate hit its highest level since 2007. NVIDIA RESULTS Ahead Nvidia will report its first-quarter earnings after the U.S. markets close. According to the median estimate of an LSEG analyst survey, expectations remain high. Revenue is expected to increase by nearly 80%, to $79 billion. Nvidia's shares rose 1.9%. Samsung shares fell as much as 4,4% earlier before closing close to flat. After a tentative agreement was reached between the two sides, the Samsung Electronics union announced that it would suspend its strike scheduled to begin on Thursday. This could have prevented a potential disruption of the production AI chips and other products. The other chip stocks were doing better than Nvidia's results. An?index for semiconductors was up about 4%. The dollar index on currency markets fell by 0.21%, to 99.09; the euro rose 0.19%, to $1.1626. The dollar fell 0.18% against the Japanese yen to 158.76.
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Sources say that the ECB's June rate hike is almost sealed, but July is still open.
Four sources said that the case for an ECB rate hike is almost sealed, but they are likely to be noncommittal about any future move. They want to temper bets on a quick step in July. Four sources told that the ECB 'kept rates at their current level in April, but 'debated a rate hike and indicated a move would be likely on June 11, given persistently high fuel costs. Sources said that the inflation outlook has moved towards the bank's negative scenario, and there is no sign of peace in Iran. The bank will need to act at its meeting next week, as the price growth rate is already 3% and well above the target of 2%. They added that even if an agreement on peace was reached prior to the meeting, it would not be guaranteed and energy prices will remain high for a while because the market takes time to normalise. A spokesperson for the ECB declined to comment. Sources claim that no decisions have been taken yet. Sources said that a follow-up increase is not urgent as the price pressures today are much more moderate than they were in 2022 when the last "major inflation shock" hit. Also, second-round effects of the price spike have yet to be seen. A soft labour market and expensive energy will also have a negative impact on the growth of the economy and, in the end, dampen the price pressures at the medium-term horizon. This is the most important time frame for policymakers. This suggests that the bank could skip July, and wait until September for new projections. The financial?markets have now priced three hikes by the ECB in the coming year. The first one will be fully priced by July, and the third by February. Three sources said that the weakening economy was the main reason for any policy tightening. The economy has been surprisingly resilient to recent shocks. However, the current situation is weaker than previous episodes. An energy shock could also dampen growth prospects, particularly if there are shortages of certain fuels like diesel or jet fuel. Two sources have suggested that the ECB’s own projections of a slight dip in the economy may be too?optimistic, and could be subject to a?downward revision. The hope for a meaningful deal could also support the argument for delaying any further hikes, as energy prices may fall if a peace agreement is reached. The sources all agreed that the outlook for the future could change rapidly, as political decisions drive the outlook. Reporting by Balazs Coranyi and Francesco Canepa, Editing by Hugh Lawson
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Sources say that oil refining in central Russia has been halted after drone strikes by Ukraine.
According to official sources and data, almost all major oil refineries located in central Russia have been forced to halt or reduce their fuel production following recent drone attacks by Ukraine. Moscow has already banned gasoline exports from April to the end of July. Refineries which have stopped operations completely or partially, together, produce more than 83 million metric tonnes per year. This is approximately 238,000 tons of oil per day. According to anonymous sources and data, this represents a quarter of Russia's entire refining capacity. Over 30% of Russia's fuel is produced by refineries, and around 25% by diesel. The Russian energy ministry did not respond to a comment request. According to Russian officials, Ukraine has intensified drone attacks against Russia's energy infrastructure. The number of oil refineries that have been targeted by Ukraine since the beginning of the year has doubled. The strikes have also damaged pipelines and storage areas. This has?reduced Russia’s oil production - which is the third largest in the world after the U.S. Kirishi, a refinery in western Russia, the Moscow refinery, as well as facilities in Nizhny Novgorod, on 'the Volga River, Ryazan, and Yaroslavl are all included in a list of 'oil refineries that have been targeted. According to sources, one of Russia's largest refineries, Kirishi with a capacity of 20 millions metric tons annually, has been completely shut down?since 5 May. Another major refinery, Nizhegorodnefteorgsintez (NORSI), with annual ?capacity of 17 million tons, was attacked on May 20. NORSI's ability to continue partial operations is still unknown. (Reporting and editing by Guy Faulconbridge, Bernadettebaum)
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French consortium bids for EU AI Datacentre Fund
The AION consortium, which is made up of some of France's largest?tech companies and infrastructure firms, will apply for EU funding to help build a data center in France that could cost as much as EUR10 billion ($11.60 billion). The European Union executive launched in December a EUR20 billion fund for AI infrastructure to try and close the gap with the United States and China who have invested heavily into high-capacity, data centres. The AION consortium was formed last year in response to EU efforts to be more competitive internationally on AI. It includes tech companies Artefact and Bull, telecoms Orange, Iliad, including its Scaleway?data center arm, private equity firm Ardian and the French utility EDF. Benoit Guillochet, Ardian's director of infrastructure investment, said that the French project could cost half the new EU fund. He said that he would expect funding from private investors including Ardian and bank loans, as well as EU funds. Iliad announced that it is ready to invest EUR4 billion in its datacentres, including through Scaleway. Scaleway's?CEO Damien Lucas stated that the ultimate goal was to have a data center with a gigawatt capacity. This would effectively double France's computing power. The initial phase of the project, he said, would be approximately 100 megawatts. EDF announced last year it would be opening tenders for a number of its 'old industrial sites' with direct grid connections to help data centre operators speed up the process.
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Sherritt signs a contract with Gillon Capital despite Cuba sanctions
Sherritt International, a Canadian miner, announced on Wednesday that it had entered into a non-binding 'term sheet', or a preliminary agreement, outlining the deal terms with a U.S. based company, Gillon Capital, for a private placing of up to 55 percent of its common stock. The placement includes a common share-purchase warrant exercisable in nine months. It is expected that the exercise price will be below C$0.11, which was the closing price for Sherritt common shares on May 15. The nickel-cobalt mining company said that the U.S. authorities are not opposed to Gillon Capital's current discussions with the company, but any final agreement will still need their approval. Sherritt is under increasing pressure due to U.S. sanctions against its Cuba operations. Sherritt says that the Trump administration has been imposing what it calls a "de facto fuel ban" since January. It has also threatened military action, increased sanctions and forced foreign businesses to leave Cuba. The 'Toronto-based firm announced on 'Tuesday that it will not go ahead with plans to dissolve its Cuban interests. This includes a joint venture with Nickel Company S.A. a Cuban state-owned nickel company. The U.S. had imposed sanctions against the joint venture earlier in the month.
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Kremlin: Lithuanian minister's remarks about attacking Russian exclave "verge on lunacy"
On Wednesday, the Kremlin called Lithuania's top diplomat's remarks "bordering on insanity", after he said that NATO must?show Moscow they are capable of penetrating Russia's exclave Kaliningrad. Kaliningrad is an exclave on the Baltic Sea coast that lies between NATO member Lithuania and Poland. It is home to around 1,000,000 people and is heavily military, as it serves as the headquarters for Russia's Baltic Fleet. Budrys' country, which is a staunchly allied ally of Ukraine in its fight against Russia, stated in an interview published by the Neue Zurcher Zeitung on Monday that "we?have to prove the Russians we are capable of penetrating their small fortress in Kaliningrad." NATO has the ability, if needed, to destroy Russian missile bases and air defences in Kaliningrad. Dmitry Peskov, the Kremlin's spokesperson, told Russian state TV that when asked about the comments, he said that they showed how irresponsible politicians in?Baltic nations were and that these people should not be taken serious. Peskov said that the statement "borders on insanity". "Unfortunately, the Baltic States - they are really maniacally anti Russian." He said that this anti-Russian feeling blinds people, stops them from looking to the future and keeps them from acting in their countries' best interests. Lithuania, Latvia, and Estonia were occupied during World War II by Nazi Germany and absorbed into Soviet Union before gaining their independence in 1991 after the collapse of the USSR. Moscow claims that Soviet forces liberated these three countries from Nazis. The Baltic nations claim they have'simply swapped an occupier for the other and removed many traces from their Soviet past. In the past, Russia accused the West of trying to isolate Kaliningrad. Vladimir Putin warned against any attempt to?blockade Kaliningrad in December, saying that Moscow would resist and it could lead to "large-scale conflicts." Lithuanian lawmakers had to take shelter in the underground Wednesday after a drone violated Lithuania's airspace. This is the latest of a series security incidents in the Baltic region. Moscow is concerned that Ukrainian drones may be using the Baltic airspace for attacks against targets in Russia. Kyiv, and all three Baltic states have denied this claim. Reporting by Andrew Osborn Editing Mark Trevelyan
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Colombian presidential candidate Valencia promises to end the 'total-peace' policy and will be stricter on security
Paloma valencia, the Colombian presidential candidate, said that if she were elected as president of Colombia, she would abandon the "total-peace" policy of her government and adopt a more aggressive security strategy against armed groups. This is a radical departure from President?Gustavo Petro’s leftist approach. "The policy of total peace ends with me." "Total security will start," Valencia, 48 said in an interview Tuesday. She added that she would reactivate the arrest warrants and increase security forces with United States' cooperation. Valencia, the candidate of the Democratic Center Party, a right-wing party backed by Alvaro Uribe as former president, opposes the continuation of peace talks with dissident groups such as former?FARC rebels and the National Liberation Army, or ELN, along with criminal gangs like the Gulf Clan. Petro's government tried to?negotiate with armed groups in order to end the six-decade war that has claimed more than 450,000 lives. However, talks have failed with less than 3 months remaining of his term. Valencia's platform places a high priority on security. This includes expanding the police force and military by 60,000 people and resuming aerial herbicide spraying for coca plants using non-glyphosate herbicides, which was banned in 2015 due to?health concerns. Valencia, a three-term senator from Valencia, faces a crowded race that includes leftist Ivan Cepeda as well as independent right-wing businessman Abelardo De La Espriella. "We will elect a woman president for the very first time." "We must make history," Valencia said, who has focused her campaign on women voters. The polls indicate a close race for second place. This would determine whether Cepeda of the Historic Pact Coalition is the opponent in a possible run-off. ECONOMIC STANCE Valencia's economic policy favors the?boost of oil, gas, and mining production, including fracking, with environmental safeguards. This is in contrast to Petro's efforts to halt new fossil fuel developments. She said that fracking will be banned in the Amazon and high-altitude paramo ecosystems. She said that a 5% growth in the mining, construction and energy sectors could generate 30 trillion pesos (about $7.9 billion), which would be used to fund social expenditure. Valencia also proposed reducing income taxes, eliminating wealth and financial transaction tax, and supporting the U.S. led "Americas Shield", regional security initiative. The presidential election is on May 31, and more than 41 million Colombians can vote. Reporting by Luis Jaime Acosta, Editing by Aida Pelaez-Fernandez & Chizu Nomiyama
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McGeever: Trump blinks at the bond market's teeth as it grows bigger and worse.
U.S. president Donald Trump is learning - once again - how powerful and unforgiving bond markets can be. The global sovereign debt market has been ravaged by a selloff, and rising inflation has caused yields on long-dated bonds to reach their highest levels in decades. BNP Paribas' analysts predict a "deanchored rise" to 5.50% or even higher. The Federal Reserve's response function has also been dramatically repricing, and traders are now putting 80% of a rate increase by December. They were preparing for two to three rate cuts in this year before the Iran war. The U.S. doesn't stand alone. The 30-year gilt rate climbed to 5.90% on Monday, its highest level since 1998. The UK bond sale has been fuelled not only by inflation concerns but also by increasing alarm about the country's financial outlook. It's already a political issue. Andy Burnham, mayor of Manchester and widely considered the frontrunner for replacing embattled PM Keir starmer in a leadership race, retracted this week on a pledge to ease fiscal rules by the government if he won. Trump might seem to share little with a leftist mayor from the North of England. The rate drop and inflationary surge have been so severe, that Trump now seems to be backing off some of his previous pledges. Trump has recently lowered his expectations for the incoming Fed chair Kevin?Warsh to preside over rapid and aggressive rate reductions. Trump said in an interview published by Fortune magazine on Monday that he might have to wait for the war against Iran to be over before lowering interest rates. He said that he couldn't look at figures until the war was over. Trump continued his comments on Tuesday by telling the Washington Examiner that he would let Warsh do whatever he wanted to. He's very talented, and he will be fine, he will do a great job. REALITY CHECK Uncertainty surrounds whether Trump's softening of his stance on interest rates was a result of his own assessment or that of Treasury Secretary Scott Bessent. Bessent is a former hedge-fund manager and former George Soros colleague who has been familiar with bond market sentiments for a long time. Trump seems to accept the fact that rates will not be reduced any time soon. The energy supply shock caused by the Iran War and the closing of the Strait of Hormuz - the sea route that used to carry a fifth of all global oil and LNG supplies - has led to a surge in price pressures. Inflation is also on pace to surpass 4%. It has exceeded the Fed's target of 2% for over five years. According to a survey by the Philadelphia Fed of professional forecasters, CPI inflation is expected to average 6% in this quarter. Be Rational The pressure on the bond market to raise rates is increasing, both from the long and short ends. The spread between the two-year and the midpoint of fed funds' target range is the largest in over three years. Investors are clearly saying that the Fed needs to tighten its policy. Tim Duy, SGH Macro Advisors, argues that an "rational" Fed will raise rates in September. It would still be less than two month before the midterm elections and Trump is unlikely to welcome this. Duy says that inflation is "a clear liability" for Trump as he enters these elections. This complicates the president's calculations. Even though Trump may no longer be as adamant about lower rates, that doesn't mean he's now open to higher rates. Trump told CNBC about a month back that he'd be disappointed if Warsh did not cut rates immediately. He posted this on his Truth Social platform only two weeks ago: "Interest rates too high!" The reality of the U.S. Bond market's $30 trillion is beginning to bite. 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.
Trump: Iran may need to be hit harder by Trump - or not
Donald Trump stated 'on Wednesday' that the United States might 'have to attack Iran even harder? but he will wait and see if there is a deal. He repeated the "either/or", rhetoric he used six weeks ago when announcing the ceasefire.
Trump said, "We'll watch what happens" during a commencement speech at the U.S. Coast Guard Academy. "We?hit them terribly. "We may need to?hit them even harder, but perhaps not."
"We won't let Iran possess a nuclear weapon." "It's simple," Trump said to the cadets.
He said Iran?s military might is largely gone, and the only question now is whether or not the U.S. will go back to finish it off or if Iran will sign a pact.
"Everything's gone. "Their navy is gone." Their air force is gone. Everything. Only one question remains: Do we finish it? Will they be?signing? a document? Trump told graduates at the U.S. Coast Guard Academy, "Let's wait and see what happens."
Trump warned earlier on Wednesday of further?attacks should Iran not agree to a deal regarding its nuclear program. (Reporting and editing by Nandita BOSE, Katharine JACKSON, Doina CHIACUL; Michelle Nichols, Caitlin WEBBER)
(source: Reuters)