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Markets on hold in Europe as they wait and see what happens with the Middle East
Wayne Cole gives us a look at what the future holds for European and global markets. While Israel and Iran continue their missile exchange, the markets have been resilient on Monday so far with most Asian indices in the green. Chinese retail sales exceeded forecasts but there was no reaction. Oil initially jumped by 4%, but then settled down to a gain of around 1%. The Middle East's war is not unexpected, and so far it does not appear to be spreading. Investors seem to assume that Iran won't threaten to close down the Strait of Hormuz, as this could potentially drag the United States into a conflict. Saudi Arabia, and the rest OPEC can also increase supply if necessary to keep prices down. The G7 meeting, taking place in Canada this year, will be a headache to the host country. They already have enough problems with President Trump's tariffs against allies. The progress made on trade agreements has been slow, and the U.S. China tariff truce last week may not have resolved the most important restrictions on minerals that are closely linked to national security. The rise in oil prices will complicate the Federal Reserve's meeting this week. However, it must be a sustained increase in price to pose a real inflationary threat. The Fed's dots plots are the key to determining whether they will keep the two rate cuts this year or reduce them to one, as some believe. The central banks are busy this week. Bank of Japan is expected to remain steadfast on Tuesday, but may signal a slowdown of its bond-tapering for next year. Bank of England, Norges Bank and Riksbank are all expected to hold steady. The markets are fully priced in for the Swiss National Bank to ease by a quarter-point, going down to zero. Market developments on Monday that may have a significant impact - Appearances of ECB members Joachim Nagel, and Piero Cipollone. (Reporting Wayne Cole; Editing Jacqueline Wong.
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IMF: Sri Lanka's economic reforms have 'no room' for mistakes, according to the IMF
Sri Lanka's economic reform program, which is supported by the IMF, has seen significant progress, but there's still more to be done in order to reduce poverty, corruption, and domestic debt. The IMF's No. 2 official stated Monday. Gita Gopiath, the first deputy managing director at the International Monetary Fund (IMF), said that Sri Lankan reforms tested the social fabric of the country, but they also helped to pave the way for an even more resilient future. Sri Lanka has made a strong recovery since March 2023, when it secured a four-year loan from the global lender. In April, the country reached an agreement at the staff level with the IMF regarding a fourth review on the bailout package. This will allow it to access about $344 millions in financing once the board approves. Gopinath stated that "substantial progress has been made in restoring macroeconomic stability and reducing hardships experienced by the people." He cited renewed availability of cooking gas, fuel and medicines, an economic growth of 5% by 2024, and a sharp rise in tax revenue. "We now must shift our focus from crisis management to sustainable recovery. She said that there is much more to be done, and she urged the Sri Lankan authorities not to give up on their efforts in implementing governance reforms as well as reducing poverty and credit. Gopinath, a Sri Lankan economist, said that the small economies of Sri Lanka, as well as other countries with open economies, face major risks due to tariffs, conflict geopolitical and economic fragmentation. She said that policy mistakes are not tolerated, pointing out that half of Sri Lanka’s 16 previous IMF programs ended prematurely due to reform fatigue and the reversal of hard-won achievements. She said, "The country can't afford to repeat this cycle." This time, it must be different. Let's make sure this is the last IMF programme Sri Lanka needs. Gopinath stated that the IMF was in agreement with Sri Lanka's position, provided it stayed on course, pursued inclusive reforms and increased transparency, and made sure its policies were responsive, responsible and accountable. She said that Sri Lanka's debt restructure had led to improved methods for evaluating state contingent features in debt contracts, which link payments to the country's ability to pay. It also sparked certain IMF reforms. She said that the challenges included facilitating cooperation among a variety of official creditors including France, Japan India and China and including domestic debt into restructuring plans. However, this was done by focusing more on lower interest rates, longer maturities and less on nominal debt reductions. Reporting by Andrea Shalal, Editing by Jamie Freed
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Nippon Steel shares rise after Trump approves $14.9 billion US Steel bid
Nippon Steel's shares rose Monday after U.S. president Donald Trump approved the $14.9 billion offer for U.S. Steel. This cleared a major hurdle in their 18-month pursuit, and secured access to a crucial market for their growth strategy. The approval culminated a turbulent process that was marked by two reviews of national security and union opposition. Nippon shares, the fourth largest steelmaker in the world, rose 3% by midday to 2,915yen after they were untraded earlier due to a surplus of buy orders. The shares outperformed the benchmark Nikkei 225 Index in Tokyo, which rose about 1%. Trump signed an order on Friday allowing the tie up to proceed, subject to an agreement with Treasury Department regarding national security concerns. The companies announced that they had signed an agreement, clearing the deal. The agreement also includes commitments to governance, production, and trade. Nippon Steel has also confirmed its plans to purchase 100% of U.S. Steel ordinary shares. Shinichiro Ozaki, senior analyst of Daiwa Securities said that investors have been pleased with the end to the uncertainty surrounding this deal. He said that the overall agreement appeared reasonable, both in terms of investment size and timeline. The acquisition was central to Nippon Steel’s medium-to-long-term growth strategy. The agreement would increase Nippon Steel’s annual production capacity from 63 to 86 millions metric tons. Masayuki KUBOTA, Rakuten Securities' chief strategist, said that shares rose due to long-term growth prospects, driven by the preferential access to U.S. markets, where steel consumption is expected to rise. Some investors are still concerned about the financial strain that will be placed on them in the near future by these large investments. The U.S. Government's ownership of the combined company (known as the "golden shares") has also raised questions about the level of control that it can exercise. Ozaki stated that "while the risk of capital increases hasn't entirely receded," it may be less serious than expected, referring back to Trump's comment earlier this year, in which he said the steelmaker planned to invest $14 billion over the next 14-month period. Ozaki minimized the management risk associated with the golden share by saying that "Nippon Steel anticipates a growth in the U.S. for high-end product, making production reductions and job cuts unlikely."
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Costa: It's not the right time to mess up with EU-US Trade
John Irish KANANASKIS (Alberta), June 15, 2015 - Instead of creating economic insecurity through trade tensions between the United States and Europe, the European Union's President Antonio Costa stated on Sunday. Costa, speaking to reporters alongside European Commission President Ursula von der Leyen before a G7 gathering in the Canadian Rockies was a chance to discuss "some problems" among allies and friends. Costa, in response to Washington's shift of its foreign policy away from China, said that the main issue between Europe, and the United States, is European defence. We should concentrate on this. "Since this is the primary issue, we should avoid introducing any other issues that would undermine our ability to take greater responsibility for our own defense." U.S. president Donald Trump has backed down from his threat of imposing 50% tariffs on imported goods from the European Union (EU) next month. He restored a deadline of July 9 to allow talks between Washington, and the 27-nation group to produce an agreement. Trump's haphazard levying of tariffs around the world has caused uncertainty among U.S. key allies and increased pressure on the global economic system. Von der Leyen, who spoke alongside Costa, said that the trade negotiations with Washington are now focusing on the details but there is no guarantee of a successful deal. "This is why it's not the right time to create economic uncertainty." Costa stated that it is not the time to cause problems in trade because we must strengthen our economic base. "We're talking about some of the most important trade relations in the entire world. We need to protect them and concentrate on the most crucial thing, which is a good agreement on burden sharing between the EU and United States on defense." Von der Leyen echoed Costa's remarks, saying that the G7 must avoid protectionism. This is a very important message. She said that the G7 could send a message to the markets, and the rest of the world. (Reporting and editing by Shri Navaratnam).
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Tariffs cap the rise in iron ore prices as China's demand grows.
Iron ore prices rose on Monday, as rising crude production in China's top steel-consuming country boosted sentiment. However, U.S. tariff concerns limited gains. As of 0253 GMT, the most-traded contract for September iron ore on China's Dalian Commodity Exchange was trading 0.28% higher. It was 705 yuan (US$98.13) per metric ton. The benchmark July Iron Ore at the Singapore Exchange increased by 0.25%, to $94.4 per ton. China's crude output of steel in May increased by 0.6% compared to April, as mills increased their operating rates and took advantage of the healthy profit margins generated by exports. Mysteel, a consultancy firm, reported that 60% of China's blast furnace steel mills had positive margins by June 12. According to Mysteel, the average daily hot metal production, which is typically used to gauge iron ore consumption, fell by around 0.1% on a week-on-week basis to 2.416 millions tons at June 13. Trump's steel tariffs of 50% will apply to a wide range of household appliances imported from June 23, including dishwashers, washers, refrigerators, and others. Official data released on Monday showed that China's new house prices fell 0.2% from the previous months. This is a sign of the stagnation in the property market despite several rounds policy support measures. A stronger U.S. Dollar, driven by the demand for safe havens amid increasing geopolitical tensions across the Middle East, also pushed prices down. Dollar-denominated investments are less affordable for holders of currencies other than the dollar. Coking coal and coke, which are used to make steel, have gained ground on the DCE. They rose by 1.81% each and 1.04% respectively. The benchmark steel prices on the Shanghai Futures Exchange have strengthened. Rebar was up by 0.81%; hot-rolled coils were up 0.88%; wire rod was up 0.3% and stainless steel was up 0.04%. ($1 = 7.1843 Chinese Yuan) (Reporting and editing by Rashmi aich; Michele Pek)
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Shanghai metals fall as Israel-Iran tensions and mixed China data weigh
The Shanghai Futures Exchange saw most metals trade lower on Monday as mixed Chinese economic data reinforced investor caution. Escalating tensions between Israel, Iran and other countries also weighed on investor sentiment. As of 0224 GMT the SHFE's most-traded contract for copper was unchanged at 78.390 yuan per metric ton ($10,910.69), while zinc dropped 0.8% to 21.780 yuan. Aluminum fell 0.2% to 20,375 yuan and nickel was down 0.6% at 119,370. Lead also declined 0.3%. Tin edged up 0.2% to 264,820. Metals analysts at a Beijing futures company said that the conflict has created a new level of uncertainty in global geopolitics. This has led to concern about metals consumption. China's May industrial production missed forecasts, despite retail sales exceeding expectations. New home prices continued to fall in May, despite the continuing weakness of the property market. In early Asian trading, the dollar rose by 0.25 percent. Its gains were extended with an additional 0.2% increase. The greenback price of commodities increases when purchased in other currencies. The London Metal Exchange's three-month copper price rose 0.1% per metric tonne to $9,655.5 by 0224 GMT. Aluminium fell by the most, 0.6%, to $2488, while lead fell by 0.1%, to $1,989; zinc dropped by 0.1%, to $2620; and nickel fell by 0.1%, to $15,110. Click or to see the latest news in metals, and other related stories. Data/Events (GMT 0630 India WPI inflation YY may 1100 EU Reserve Assets total May
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Gold prices near two-month highs as Middle East conflict increases demand for safe havens
Gold rose on Monday for the fourth consecutive session, reaching a high of nearly two months, after intensified clashes over the weekend between Israel and Iran stoked fears about a wider regional conflict. This pushed investors to safe-haven investments. As of 0246 GMT spot gold rose 0.3% to $3442.09 per ounce after reaching its highest level since the 22nd April earlier in session. U.S. Gold Futures rose 0.3% to $3.461.90. The demand for safe-haven gold is being boosted by the rising political risk premium due to the Iran/Israel conflict, said Kelvin Woong, senior analyst at OANDA, Asia Pacific. We have a break over $3,400 and the short-term uptrend is intact. We see a resistance level of $3,500, and there is a possibility that if we break above $3,500, a new high will be set. Israel and Iran launched new attacks on Sunday. Both militaries warned civilians to be cautious against future strikes. Donald Trump, the U.S. president, said that he hoped Israel and Iran could broker a deal. However, he said that sometimes countries must fight it out before they can reach an agreement. In times of geopolitical or economic uncertainty, gold is often considered to be a safe haven. This week, investors will be watching a host of central banks make monetary policy decisions. The U.S. Federal Reserve is the focus on Wednesday. Markets are waiting for signs of possible rate cuts. The U.S. Central Bank is expected to maintain interest rates at current levels. The markets are predicting two rate cuts before the end of the year, starting possibly in September. This is boosted by the tame data on inflation last week. Palladium rose 1.3% to $1,000.96, while platinum gained 0.4%. (Reporting and editing by Rashmi aich in Bengaluru, Anmol Choubey from Bengaluru)
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G7 needs to raise pressure on Russia, von der Leyen says
Ursula von der Leyen, President of the European Commission, said that more pressure should be applied to Russia in order to secure a ceasefire. She urged G7 nations intensify sanctions to achieve this goal. The leaders of the largest industrial countries are meeting in Canada’s Rockies, along with European nations. They want to keep the conflict in Ukraine on the minds of U.S. president Donald Trump, despite the fighting between Israel and Iran taking place in the Middle East. The European Union has decided to adopt new sanctions against Russia. However, they have not been able to convince Trump, who is reluctant to put pressure on Russian President Vladimir Putin, to implement new U.S. sanctions. "We need to put more pressure on Russia in order to achieve a ceasefire and bring Russia to the table for negotiations and end this war. Sanctions are crucial to this end," von der Leyen said at a press conference on Sunday, before Britain, Canada France Germany Italy, Japan, and the United States began their Monday talks. "Last Monday, we presented a package of 18 sanctions." I will invite the G7 to join me in this endeavor. The Middle East has become the focus of global attention. Israel's strikes on Iran have increased the risk of escalation to a wider regional conflict. The subsequent spike in oil prices has increased concerns about the global economy. Von der Leyen stated that during their Saturday talks, she and Trump had agreed on the importance of market stability for like-minded nations. This was particularly true in the case of the energy markets. She said, "We will be very attentive to the impact of the international energy market." She said that she would prefer a negotiated trade solution with the Trump Administration ahead of the July 9 deadline. However, the bloc is preparing contingencies if no agreement can be reached. Von der Leyen spoke earlier Sunday with Benjamin Netanyahu, the Israeli Prime Minister. She reaffirmed Israel's right of self-defense, but insisted that the diplomatic solution would be the best long-term option to deal with Iran's nuclear program. She said, "Iran has always been the main source of instability in the region, and it's very clear that Iran will never possess a nuclear weapon." The recent events have highlighted the growing interconnections between conflicts in Europe and the Middle East. "The same Iranian-designed and manufactured drones and missiles are randomly hitting cities in Ukraine or Israel." (Reporting and editing by John Irish, Kim Coghill, and Shri Navaratnam).
LME WEEK: Trump, China and tariffs as the metals industry gathers to Asia
The metals industry will gather in Hong Kong to celebrate its annual event. They'll be focusing on the huge amounts of copper that are being diverted from the U.S. because President Donald Trump has threatened to impose tariffs.
Trump's attempts to overturn the post-war system of trading have caused metals markets to roil and raised questions about global growth and commodity flows.
In February, Trump ordered an inquiry into potential tariffs on copper. Copper is vital to energy transition technologies like electric vehicles and solar panel technology as well as power grid wiring.
The possibility that Trump would impose tariffs on aluminum and steel in his first term fueled an increase in COMEX Copper, pushing prices to a new record of $11,633 a metric ton of copper on March 26, a date which was a significant milestone for the market.
The London Metal Exchange (LME), which approves warehouses, has diverted cargos to China because of the premium on copper.
CME inventories of copper are at an 8-year high, totaling 152,919 tons. LME warehouse stock is down 34% from mid-February.
After weeks of withdrawals, the Shanghai Futures Exchange's (ShFE) warehouses in China saw their stocks drop to 80,705 tons, or four days worth, according to JP Morgan.
A jump in stock levels this week has temporarily shifted the focus to whether Chinese demand will be strong enough to reduce inventories.
A senior metals trader stated, "I am not surprised that the metals are being returned. We're not seeing real consumer demand in China." "The panic seems to have passed in China, at least for the moment."
China's Yangshan Copper Premium
The price differential between LME copper and COMEX has dropped to about $600 per ton, down from a high of $1,570 a ton in late March. This raises questions as to how long the U.S. can continue to exert its gravitational influence over copper stocks.
Tariffs and Chinese Smelters
As they negotiate a new settlement, attendees will have to deal with the uncertainty caused by the 90-day reprieve on tariffs agreed between the U.S.
Within a few weeks of their implementation, the U.S. scrap copper exports to China had been cut, causing a shortage of feedstock for China's copper-smelters.
As it continues to open new smelters, the industry faces deep negative margins. This is despite its overcapacity and lack of feedstock. Lewis Jackson, Pratima Deai, and David Holmes edited the article.
(source: Reuters)