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Morning Bid Europe-Chips are jolted by a shift in momentum for AI
Tom Westbrook gives us a look at what the future holds for European and global markets. Chip stocks in Asia fell on Tuesday due to the twin threats of Chinese competition rising and questions over funding and sustainability of AI infrastructure boom. South Korea's KOSPI fell nearly 10%, tripping a circuit breaker. Japan's Nikkei dropped 4.4%. The rally has been so strong that both markets are still the leaders for the year, even though they have now reached multi-month lows. Nvidia fell 5% Monday after a Wall Street Journal article reported that the chipmaker had been in discussions to provide $250 billion worth of financing guarantees for a?OpenAI Data Centre. The report stated that the guarantee would only cover Nvidia inside the center, but that financing OpenAI chips worth up to $35 billion was also being discussed, bringing attention to the circular nature of AI build-out expenditure. Europe's chip leader was also not spared. ASML fell?8.5% following The Information's report that China had begun manufacturing its own immersion deep ultraviolet machines, which are critical to chipmaking and were long dominated exclusively by the Dutch group. Investors are wondering if China's semiconductor sector is moving beyond a catch-up phase to a genuine contender. CXMT soared to the top of China’s stock market on Monday by valuation, causing investors to worry that dominant chip manufacturers may have to share AI spoils more widely. Apple was reported to have asked the U.S. for assurances that CXMT would not be added to a blacklist. The picture of hyperscalers' spending plans will be completed by the earnings at Apple, Meta and Microsoft later this week. Oil prices fell, but that was little help to stocks, or even bonds. They held steady during Tuesday's Asia session, even though crude futures continued their losses. The markets see an approximately 38% chance of a U.S. interest rate increase this week. The following are the key developments that may influence Tuesday's markets: Consumer confidence in France and the U.S. Earnings of Mercedes-Benz (editing by Shri Navaratnam), Barclays, Man Group EssilorLuxottica Logitech Rio Tinto Kering Ford Mondelez Visa NXP Seagate Coca-cola UPS Boeing
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Copper prices fall as rate hike expectations weigh on demand
The copper prices fell on Tuesday as 'lingering bets on an interest rate increase in the U.S. threatened to dampen demand. Crude oil prices also declined as investors assessed a pause in U.S. attacks on 'Iran. By 0300 GMT, the benchmark three-month metric ton of?copper traded on London Metal Exchange had fallen 0.5% to $13,664 per metric tonne. The Shanghai Futures Exchange's most traded copper contract fell 0.14% to 104,800 Yuan ($15.484.86) per ton. The market is waiting for the U.S. Federal Reserve's meeting on Wednesday and the effect of a possible lull in the fighting between Iran and the U.S. Analysts from the?Chinese brokerage Galaxy Futures said that despite the lower crude oil price, expectations of more Federal Reserve rate increases have increased. According to CME FedWatch, 62% of market participants believe that the Fed's interest rates will remain unchanged, and 38% expect at least a 25% increase. Copper market fears that higher rates will dampen economic activity and reduce demand. Red metal prices have risen due to expectations of increased demand from AI infrastructure, electric vehicles and electrification. The jittery stock market also affected traders' appetite for risk. On Tuesday, chipmakers were the main culprits in the Asian stock market's decline. They were worried about the financing requirements of the AI boom. Galaxy Futures analysts stated that "the?market is entering a week of heavy earnings reporting, and sentiment remains cautious." Aluminium prices were down 0.35% at the LME and stable on theSHFE. Disrupted Middle East supply has caused a massive drop in stocks, as well as total stock levels at LME-registered storage warehouses. The lowest level on record since 1998. Nickel?slid 0.16%, and tin fell 1.71%. On the SHFE, nickel dropped 0.77%, tin fell 1.5% and zinc declined 0.5%.
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Gold falls as dollar strength weighs on gold; attention turns to Fed meeting
The dollar strengthened on Tuesday and gold prices fell. Markets were looking for clues about the future of interest rates in the Federal Reserve's policy announcement. Gold spot fell by 0.7% at $4,044.81 an ounce as of 0250 GMT. It had risen as high as 1% Monday. U.S. Gold Futures for August Delivery fell 0.8% to $4.045.40. Dollars are nearing a month-high, which makes greenback bullion prices more expensive for those who hold other currencies. Ilya Spivak is the head of global macro for finance content network Tastylive. The U.S. Federal Reserve is expected to conclude its two-day policy meeting on Wednesday. According to CME FedWatch, 62% of market participants believe that the Fed will keep interest rates at their current level. However, 38% expect a rate increase at least 25 basis points. The markets are pricing in a 81% chance of a hike during the September meeting of the central bank. On Monday, President Donald Trump called on the Fed lowering interest rates. He said that the U.S. would have the lowest rate of interest in the world. Trump said that on Monday, the United States was having "good discussions" with Iran. He also stated that there is a possibility of a 'deal' to resolve their conflict. However, he warned that strikes will resume if the negotiations fail. Saudi Arabia, Jordan, and Iraq reported drone attacks on Sunday, indicating that Tehran had quickly tested the pause of the U.S. campaign. Spivak said that gold will likely rise above $4,200 an ounce if the Fed meeting does not produce language that is "setting the foundation for a rate hike in September". Silver spot fell by 1.9%, to $57.30 an ounce. Platinum lost 1%, to $1605.14, and palladium dropped 1.6%, to $1271.09. (Reporting and editing by Varun H. K. and Ronojoya Mazumdar in Bengaluru)
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Australia builds first oil refinery at home in 60 years, to improve fuel security
Prime Minister Anthony Albanese announced on Tuesday that Australia will be considering building its first?oil? refinery in over 60 years. The war in the Middle East has squeezed supplies from abroad and highlighted the urgency of improving energy security. Albanese stated that the project would help to build Australia's sovereignty and resilience in the fuel sector, which could shield the country against future supply shocks. Albanese stated that if the project is deemed?feasible', Perdaman, a chemical industrial producer in Western Australia will build a new large-scale refinery. Albanese, a reporter in Western Australia's Pilbara Region, told reporters that "the war?in?the Middle East... has an impact here just like it does all over the world." Building national resilience makes Australia less susceptible to events happening around the globe. Albanese announced that his government, along with the Western Australia State Government, will spend A$4,000,000 ($2.8 million) jointly on a feasibility study for the refinery. Albanese continued, "We want the project to be a success and that's why we are looking for the best location. Australia imports about 80% its fuel and is racing to secure supplies in the face of the Iran War. A report by the Australian Treasury warned that global oil markets have become more vulnerable, with "weaker buffers against supply-shocks". The treasury told Treasurer Jim Chalmers that global oil inventories?have decreased since the conflict in the Middle East has intensified. Meanwhile, refined fuel markets now face a?risk of further tightening?, it said. The majority of Australia's oil refineries were constructed in the 1950s and 1960s. However, high operating costs as well as the rise of large refineries across Asia have forced many of them to close over the last three decades. Ampol's Queensland Refinery and Viva Energy's facility in Victoria, both in the east of the country, are now the only two active refineries. In 2000 there were eight. Western Australia's lone refinery will be shut down by 2021, after BP converted its 146,000 barrels a day Kwinana facility into a fuel terminal. ($1 = 1.4306 Australian dollars)
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Asia markets sell off in a broad scale due to AI fears
Asian markets dropped on Tuesday, led by chipmakers, on concerns?about massive funding requirements of the AI boom. A slide in oil prices didn't do much to lift bonds, and traders were worried about U.S. interest rate hikes coming this week. South Korea's KOSPI plunged more than 8 percent to a low of three months, setting off a circuit breaker. Japan's Nikkei fell 4% after a drop of 2.2% for the Philadelphia Semiconductor Index. Nvidia's shares fell 5% overnight, after the Wall Street Journal reported that the company was in discussions to provide approximately $250 billion in financial guarantees for OpenAI in connection with a massive data center project. CXMT shares in Shanghai surged 466% on their debut day, highlighting the growing interest of investors and the competitive threat from Chinese competitors. Chris Weston is the head of Pepperstone's research. He said that there was a growing sense of optimism in mainland markets regarding China's ability build a global competitive AI ecosystem. The Information reported that China had?also started manufacturing locally developed immersion deep UV lithography machines. This chipmaking tool was long dominated exclusively by Dutch supplier ASML. ASML's shares fell 8.5% on Monday. South 'Korea SK Hynix shares fell by nearly 11%, while Samsung Electronics shares dropped more than 9%. In Tokyo, Kioxia was down 18% and?Tokyo Electron was down 9.8%. CXMT, the chip-making indexes and CXMT were also lower in early trading. OIL SLIDES US YIELDS DIPLEAD Brent crude futures continued their nearly 9% drop on Monday, dropping to $87.55 per barrel as hostilities between Iran and the U.S. cooled following Washington's sudden suspension of airstrikes on Saturday. Donald Trump stated on Monday that the United States and Iran were having "good discussions" and that there was a possibility of a deal. The break in fighting has pushed benchmark U.S. Treasury 10-year yields down by four basis points, to 4.64%. Shorter-term rates have not moved much. The Federal Reserve is expected to hike by 25 basis points this Wednesday, according to traders. "The U.S. - Iran War, which is driving up the price of crude, remains the main determinant for what will 'happen in the global economy over the next few months and, as a result, what informs the central bank policy forecasts at the margin," said Thierry?Wizman, currency & rates strategist?at Macquarie Group. We expect the Fed to tighten its bias this week. The expectation of a hike?sooner rather than later' kept the dollar at $1.1370, the euro at $1.14 and the Australian Dollar just below 70 cents. The yen was trading at 163.78 per dollar, barely above a four decade low. Markets are on edge about Japan interfering in the currency pairing, especially if the Bank of Japan holds rates this week, and causes another yen drop. Wizman said that if BoJ communication was not hawkish, and USD/JPY continues to rise, traders can expect an official response. This could include verbal interventions, rate checks or direct FX market interventions, possibly on Friday. (Reporting and Editing by Shri Navaratnam).
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Whitehaven Coal's output in 2026 is at the top of its guidance range, but costs are at the low end.
Whitehaven Coal, Australia's largest coal producer, said Tuesday that its annual sales and output were near the top end of their guidance range due to the recovery of its Queensland mines. However, the company expects its costs for the full year to be near the lower end of the forecast. As the Sydney-based coal mining company tries to absorb higher diesel costs linked to Middle?East conflict, it is important to consider cost forecast. Whitehaven has said that unit costs are expected to be around A$132 ($92.29), towards the low end of their forecast range. This is after they achieved savings in line with its annualised target between A$60 and A$80 million. The company made A$222 for every ton of thermal coal it sold in the 'fourth quarter,' up from A$189 per ton a year ago, thanks to a stronger Asian demand after the supply of liquefied gas was interrupted. The managed run-of mine production for the year ending June 30 was 40.3 Mt, up 3% on the previous year and close to the upper end of the 37-41 Mt range. The managed coal sales increased 8%, to 32.7 Mt. This was within the estimates of 29.5 to 33 Mt. The Visible Alpha consensus estimate was that fourth-quarter production would rise by 1.3%, to 10.7 mt. Queensland operations including the Blackwater and Daunia Mines, which were purchased from BHP Group for $4.1 billion in early 2024, have recovered from weather disruptions in previous quarters, with production increasing 41% sequentially. New South Wales' mines including Maules Creek Narrabri, and Gunnedah posted a 1.6% increase in quarterly production year-on-year, but output fell by 8% from the previous quarter due to tougher mining conditions. Whitehaven shares were down 1.1% at 0058 GMT, following the declines of the energy subindex and the wider market. $1 = 1.4302 Australian Dollars (reporting and editing by Shilpi Major and Subhranshu S Ahu in Bengaluru).
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Origin Energy in Australia flags the possible exposure of data for about 900,000.
Origin Energy, a company in Australia, said that on Tuesday, data relating to 900,000 customers, both current and former, may have been accessed. The company is contacting the affected individuals. Last week, the country's largest electricity and gas retailer announced that it was investigating an alleged security breach which involved unauthorised access to some customer information. Origin stated on July 23 that the affected data could include financial information, such as last few digits of a customer’s credit card number or bank account number. As of 0121 GMT, shares of the company were down 1.7% at A$10.47. The broader ASX200 index was 0.3% lower. On its website, the company announced that it had finished its initial review phase and was notifying customers affected. It also offered identity protection and cybersecurity support services. Sydney-based company reviewed a possible security threat in early July but stated that, 'based on the information available at the?time, it was not considered credible. The company said that new information it received on the 22nd of July indicated that a possible security incident could?have taken place, prompting them to inform customers and investors. Origin has engaged cybersecurity and forensic experts, taken steps to secure its systems and is continuing its investigation into the incident. Customers are urged to be vigilant and watch out for scams.
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South Korea's KOSPI falls 7% as the global chipmaker sale deepens
South Korean shares fell 'on Tuesday, as a global sale of chipmakers weighed down on technology heavyweights. Pressured 'by concerns about a 'intensifying competitive environment - from China - and a steep drop in SK Hynix shares listed in the U.S. The benchmark KOSPI fell 500.47 points or 7.41% to 6,253.81, prompting "sidecar" trading restrictions on both the KOSPI index and junior Kosdaq, temporarily suspending programme trading. Memory-chip manufacturer SK Hynix fell 10% after 'its American Depositary Receipts (ADRs), which were issued in the United States, dropped to a new record low and below their original U.S. offering prices. Samsung Electronics fell 9.15%, another major index component. The KOSPI weighting is dominated by the two largest chipmakers, who together make up more than half the market. This amplifies the effect of the sell-off across the entire sector. The market sentiment was further dampened due to developments in China. These included a blockbuster debut of ChangXin Memory Technologies, (CXMT), and reports that a Chinese state-backed company began manufacturing immersion DUV equipment. Kim Seokhwan, a Seoul based analyst at Mirae Asset Securities said that the market is more concerned about CXMT's potential to expand its capacity?to Korean rival companies and?technology following?its IPO. Reporting by Cynthia Kim, Editing by Sherry Phillips
Western miners push for higher metals rates to ward off Chinese competitors
CHALLIS NATIONAL FOREST, Idaho, July 22 (). T he only U.S. cobalt mine sits fallow in the northern Idaho. woods, a mothballed hunk of steel and dirt that is too costly. for its owner to operate since Chinese rivals have flooded. international markets with inexpensive supplies of the bluish metal used in. electric vehicle batteries and electronic devices. Jervois Global, which dug the mine into the side of a. almost 8,000 foot (2,400 meter) mountain, saw helplessly. last year as cobalt costs plunged after China's CMOC. Group opened the Kisanfu mine in the Democratic. Republic of Congo, pressing international production of the metal to an. alltime high. The Idaho site, which Jervois bought in 2019, was idled in June. 2023 just weeks before it was set to open. More than 250 workers. lost their tasks. A skeleton crew now rotates unused rock. squashing equipment weekly to keep it from flattening under its. own weight. We were uncomplicated with our personnel and informed them: 'This is. all about the cost of cobalt,' site supervisor Matthew Lengerich. told throughout a check out to the facility. Jervois states cobalt. rates need to reach at least $20 per pound for the website to. open. However rates sat near $12.17 in July. A comparable quandary deals with BHP, Albemarle and. other Western mining companies attempting to compete with metals. produced by Chineselinked companies, a few of which use. coalgenerated electricity, kid labor or other practices not. fulfilling the requirements set by many governments and. producers.
Western miners say their competitors have intrinsic cost. benefits that enable rapid production growths even as. rates for cobalt, lithium and nickel have plunged more than a. 3rd in the past 18 months. Operational costs for many of these. Western companies have, as a result, been surpassing what market. prices will cover. That has actually fueled growing calls from some policymakers and miners,. consisting of Jervois and Albemarle, for a two-tier rates system. with a premium for sustainably produced metals, according to. interviews with more than 3 lots traders, financiers,. executives, buying agents, and pricing companies.
The strategy is to charge more for a metal that is produced. sustainably, whether that is through direct deals or via. numerous costs for a metal listed through futures exchanges,. depending on production approaches. For instance, there would be one. rate for standard nickel and another for green nickel.
Western miners just can't compete with China, and China. has revealed the willingness to drive market prices method, way down,. stated Morgan Bazilian, director of the Payne Institute for Public. Policy at the Colorado School of Mines.
Two-tier rates could significantly move how metals needed for. energy transition have actually been bought and offered for centuries yet. likewise reduce market transparency as miners might bypass metals. exchanges to work out straight with consumers.
It could likewise, 2 experts informed , cause numerous. definitions of just what makes up green metal.
' COMMITMENTS HAVE An EXPENSE'
Market leaders have pushed for two prices structures for. numerous years, but the call for change began getting more. attention from investors, policymakers and clients last fall. as Western federal governments grew more worried about Chinese. competition.
In conferences across Washington and Brussels, mining. executives have actually been pleading with federal governments for some sort of. intervention until two-tiered pricing is more commonly accepted,. suggesting that tariffs, supply chain transparency requirements,. or federal government insurance coverage for mines might be potential solutions,. three market sources stated. U.S. and E.U. authorities have independently revealed sympathy with. the mining market, according to 2 of the sources, however have. so far been loath to inject themselves into the mechanics of how. costs are set by exchanges and others. I don't want to say what the markets ought to or should not do to. ensure strong ESG practices, said the U.S. State Department's. Jose Fernandez, who oversees a program developed to help with. metals supply deals. But it holds true that all of those. commitments have an expense.. As an outcome, mining market customers such as car manufacturers are in. the uneasy position of trying to keep their expenses low. while maintaining protected and diverse metals products. Some deals. are taking shape, prodded in part by guidelines connected to. emissions. The European Union by 2027 will require EV manufacturers to reveal. where they acquire metals and the carbon footprint for their. production. Rejection to comply would suggest an EV can't be sold in. the area, a step not yet taken by the United States but one. widely seen as the most aggressive globally to improve supply. chain transparency and most likely to sustain premium metals agreements. In Canada in 2015, Northern Graphite began. successfully requiring a premium from clients desiring. ensured North American products of the battery metal.
Teck Resources earlier this year started selling. a lightly processed kind of copper called concentrate to. Aurubis, a source with direct knowledge stated. The. deal does not rely on exchange prices and warranties. Aurubis a stable supply of ESG-compliant concentrate that it. turns into copper for sale to the auto industry.
Teck decreased to comment. Aurubis stated it sees the method to a. green-friendly copper industry as a joint task for the whole. worth chain, which requires to be honored from the raw material. supplier to the end consumer.
Customers for now do not face a penalty if they do not. source sustainable metals, however they increasingly deal with a. reputational risk. The question is really for cars and truck business:. Are you OK with something that may be priced lower or are you. willing to pay premiums understanding that this is sourced sustainably. in the right method? stated Michael Scherb, CEO of Appian Capital. Advisory, a personal equity firm that buys mining. companies. ' WEATHER THE STORM'. BHP, the world's largest mining company, said this month it. would suspend operations at its Australia nickel mines due to. the substantial economic obstacles driven by an international. oversupply of nickel.. The relocation was a blow to a company that had unsuccessfully wager its. customers would be willing to pay a premium for nickel produced. in a country that mines sustainably. BHP cautioned that nearly. two-thirds of Australia's nickel market is in threat of closing. amidst low market value sustained by a 153% boost in Indonesia's. nickel from 2020 through completion of in 2015 due to Huayou. Cobalt and others - production that. ecologists say has partially come by destroying the. country's large rain forests. U.S. authorities are motivating Jakarta to improve the country's. mining standards. Huayou Cobalt did not react to a request for. remark.
Australia's nickel market is amongst the cleanest in the. world mainly due to how it handles carbon emissions, according. to data from ESG consultancy Skarn Associates. Nickel processed. in Indonesia discharges more than 5 times the quantity of carbon as. production in Australia, the information show, with emissions from. China's nickel industry nearly 7 times worse than Australia.
Albemarle, the leading international manufacturer of lithium, laid off staff in. January amidst low rates caused in part by ramped up production. from Yongxing Unique Materials Innovation and. others in China. If there isn't a reward above current. rates, you're not going to get the financial investment you require to construct. the domestic (U.S.) supply chain, stated Eric Norris, who. oversees Albemarle's lithium operations.
Fernandez, the U.S. State official, anticipates increasing minerals. demand to offset existing global oversupplies, however acknowledged. that miners, in the meantime, remain in a bind.
We have to discover ways to weather the storm, Fernandez stated.
TRANSPARENCY
Considering that January, world leaders have actually taken a variety of actions to. balanced out China's market control. President Joe Biden imposed tariffs in May on crucial minerals. produced in China, stating ( metals) prices are unjustly low. due to the fact that Chinese companies do not require to fret about a revenue.
Jim Chalmers, Australia's treasurer, in February said. federal governments should consider assistance for a distinguished. international trading market for resources produced to higher. ESG standards.. Chrystia Freeland, Canada's deputy prime minister, in April said. Ottawa would combat the dumping of vital minerals by China,. Indonesia and others. The Chinese objective to the United Nations did not react to a. ask for remark. China has in the last year banned exports. of graphite and other metals.
Multiple U.S. senators from both parties have actually said they are. considering legislation to use rate insurance coverage for metals,. similar to a federal government insurance program for crops, according. to Senate assistants. Such a relocation would ensure miners a price for. their metals, regardless of market conditions. Automakers have been moving carefully as this pattern for green. rates premiums evolves, conscious that customers are reluctant. to pay more for EVs.
General Motors, the biggest U.S. automaker, believes. important minerals ought to be produced sustainably however does not. wish to pay a premium out of issue that it will be not able to. take on Chinese rivals, according to a source directly. involved in the company's minerals procurement. GM told . it needs providers to abide by high requirements, a position. echoed by Volkswagen, BMW and Stellantis. Tesla and Ford, which is building an Indonesian. nickel processing plant with Huayou Cobalt and PT Vale Indonesia. , did not respond to requests for comment.
EXCHANGES
The London Metal Exchange (LME) stated it has actually received. favorable market feedback regarding its relocate to price. sustainable nickel. Its partner Metalshub, a German online. metals auction platform, offered 144 metric tons of low-carbon. nickel in May and plans to publish a matching cost when. there are more transactions.
Benchmark Mineral Intelligence, a UK-based service provider of. crucial minerals prices and data, has actually launched green metals. pricing contracts, with each price derived from how a mining. business sticks to 79 criterion that Criteria stated reflect high. production requirements.
You will not have the ability to guarantee by any stretch of the. imagination a non-China supply of specific metals unless you're. willing to pay some degree of a premium for that item, said. Standard's Daniel Fletcher-Manuel.
That's the message that Jervois has actually been pressing,. unsuccessfully. Ultimately, ESG has an expense, said Bryce. Crocker, the business's CEO. It's a rewarding cost..
(source: Reuters)