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Morning bid Europe-markets can breathe easier after Trump's hedging on Iran
Stella Qiu gives us a look at what the future holds for European and global markets. Donald Trump has said that we might need to wait another two weeks before he decides if he will launch an attack against Iran. Markets are largely breathing a sigh if relief, but they remain cautious about conflict in the Middle East. Brent crude oil fell 2.5% Friday, wiping out some of its recent gains, but it is still on course for a weekly increase of 3.7%, for the third consecutive week. The falling oil price has given European stocks a good reason to celebrate. EUROSTOXX futures rose 0.7%, and FTSE Futures gained 0.3%. Nasdaq and S&P futures both fell by 0.2%. Analysts have cited Trump's deadlines of two weeks for other important decisions, such as in his letters to U.S. trading partners about tariff negotiations. They hope that Tehran will be pushed to negotiate in the meantime. On Friday, Asian stocks were mixed. Japan and Australia fell while China rose. South Korea's benchmark share price rose by 1.1% and surpassed the 3,000 mark for the first since early 2022. This was after the newly elected president Lee Jae Myung unveiled a stimulus plan. The U.S. Dollar was also in the red, despite a projected weekly gain of 0.5% due to the safe-haven flows sparked by the Middle East conflict. Even though one week's gains wouldn't reverse the recent trend, many analysts believe that the dollar will continue to lose ground. China's benchmark lending rates remained unchanged as expected on Friday, while Japan's data showed core inflation reaching a two-year peak. This puts pressure on the Bank of Japan for another rate hike. Investors doubt, however, that a rate hike will occur before December. Overnight, several central banks in Europe have sent out dovish messages, including Norway's Central Bank, which announced its first rate reduction since 2020. The Swiss National Bank lowered rates to zero, but did not rule out a negative rate. Meanwhile, the Bank of England kept policy unchanged and saw the need for more easing. The following are key developments that may influence the markets on Friday. Germany PPI data May -- UK retail sales data for May The ECB releases an economic bulletin
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Oil, tariffs and war tear apart the central bank's roadmap
Investors are becoming more uneasy about the uncertain economic environment. The shock rate reduction in Norway on Thursday highlighted how U.S. Tariffs, Middle East conflict, and a shaky Dollar make global monetary policies and inflation harder to predict. Norway's crown fell by about 1% in relation to the dollar and euro, indicating how unexpected this move was. Switzerland's central bank, which warned of a cloudy outlook for the global economy, cut its borrowing costs on Thursday to 0%, surprising some traders who expected a return to negative interest rates. A day earlier, the U.S. Federal Reserve had kept interest rates at current levels and Jerome Powell, the chair of the Federal Reserve Board said that "nobody" was confident about the future rate path. Markets must contend with a new headwind: the uncertainty of monetary policy. This is in addition to geopolitical risks and trade concerns. A gauge of volatility expected in European equities reached a two-month peak as stocks fell across the region and government bonds - usually safe havens for geopolitical risks - were sold off. "We are in a period of significant policy and macro-uncertainty," said BlueBay Chief Investment Officer at RBC Global Asset Management, Mark Dowding. He added that he would not be making active market wagers on the investment portfolios of his group because he could not see a clear interest rate trend. Investors said that volatility was on the rise because geopolitical factors such as a volatile dollar and fluctuating oil prices made it difficult for central banks to give investors and markets a clear roadmap. T.S. Davide Oneglia, director of European and Global Macro at Lombard. BROKEN MODELS The Fed is not the only central bank that has cut rates. It also faces inflationary threats from President Donald Trump’s tariffs. The dollar, which is the backbone of global trade, commodity values and asset valuations has become weaker and volatile due to trade war stress, and anxiety about government debt. Nick Rees, Monex Europe's head of Macro Research and a specialist in macroeconomics, said: "This is a fundamental change that has occurred on the global markets. Everyone is trying to evaluate it." All of the standard economic rules that we use to forecast are totally broken right now. The dollar has fallen almost 9% this year against other major currencies, but it has also risen since the war between Israel and Iran broke out. Francois Villeroy de Galhau, a policymaker at the European Central Bank, said that if oil prices continue to fluctuate for a long time, then it may be necessary to adjust its rate-cutting plans. Analysts said that the new status quo of markets could be a period of central bank surprises, which would create rapid shifts to market narratives, asset pricing, and volatility trends. Oneglia stated that "we're entering a new cycle where variables are more volatile because events and human factors play a major role, and not just monetary policy, which is easily predictable." Kit Juckes, Societe Generale’s head of FX Strategy, said that Norway's surprise cut was due to the fact that the Norwegian crown had been a “runaway top currency” during the trade war era. The Swiss franc is soaring, as investors search for alternative wealth stores that do not use U.S. dollar. This has led to a drop in import costs and pushed the economy towards deflation. The franc rose on Thursday against the dollar, as traders viewed the SNB's cuts as being too small to prevent deflation. Ninety One's multi-assets head John Stopford stated that the risk of global stock prices increasing was a concern and that options that offer protection against incoming volatility appeared to be fairly inexpensive. He bought bonds in countries where rates and inflation could drop materially. For example, New Zealand. But he was against longer-dated U.S. Treasuries, and German Bunds, where the economic uncertainty is higher, and borrowing by government will likely increase. After investors relaxed over tariffs, global stocks are still almost 20% higher than their April lows. Stopford stated that there is more to be concerned about in the near term. Stopford continued, "The stock exchange feels like a thatched home in a hot land with a high fire risk. People aren't charging a lot to insure this house."
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ConocoPhillips Confirms Oil Discovery off Norway
ConocoPhillips Skandinavia, a subsidiary of U.S. energy major ConocoPhillips, has completed the drilling of an appraisal well in the Norwegian Sea, confirming the previously made oil discovery.ConocoPhillips Skandinavia, the operator of production license 891, has concluded drilling of the second appraisal well, 6507/5-12 S, on the 6507/5-10 S (Slagugle) oil discoveryThe well was drilled about 22 kilometers northeast of the Heidrun field and about 270 kilometers north of Kristiansund.This is the third exploration well in production license 891, which was awarded in the Awards in Predefined Areas (APA) in 2016. ConocoPhillips owns the operating share of 80% in the license, with partner Pandion Energy holding the remaining 20%.The Slagugle oil discovery was proven in 2020. Preliminary calculations indicate a resource estimate in the range of 4.9 – 9.8 million standard cubic metres (Sm3) of oil equivalent, which corresponds to around 30.8 – 61.6 million barrels of oil equivalent in Triassic reservoir rocks (Middle Grey Beds).Additional volumes in the lower Åre Formation and Upper Grey Beds, which are not included in the production test, represent a possible upside potential.The licensees will now analyze the collected data and evaluate a possible development.The objective of well 6507/5-12 S was to delineate the discovery proven in well 6507/5-10 S (Slagugle), and to conduct a formation test to obtain better understanding of reservoir properties and connectivity in the hydrocarbon-bearing layers.The well encountered several oil columns in a 188-metre interval in the Åre Formation and Grey Beds, 75 metres of which consist of sandstone with very good reservoir properties.Extensive data collection and sampling have been carried out and a successful formation test has been completed. The maximum production rate was 650 Sm3 of oil per flow day through a 36/64-inch nozzle opening.The well, which has been permanently plugged and abandoned, was drilled using Odfjell Drilling's Deepsea Yantai semi-submersible drilling rig. Water depth at the site is 341 meters.The next stop for Deepsea Yantai is production license 586 in the Norwegian Sea, where it will drill well 6406/11-2 S for Vår Energi and its partners.
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Gold prices fall by a weekly average as Fed rate cuts are less likely
Gold prices dropped on Friday, and are on course for a weekly drop as a stronger dollar and the prospect that the U.S. will not be cutting interest rates in the near future offset the support provided by the rising geopolitical risk in the Middle East. As of 0245 GMT on Friday, spot gold was down 0.5% at $3,355.49 per ounce and 2.2% over the past week. U.S. Gold Futures fell 1% to $3371.80. Kelvin Wong is a senior analyst at OANDA. He said that the Middle East has a fluid situation, which causes traders to avoid taking aggressive positions on both the long and short sides of the trades. Israel's bombing of Iran's nuclear facilities and Iran's missile and drone attacks on Israel intensified the conflict in the Middle East on Thursday. This included an overnight attack against an Israeli hospital. Both sides have not signaled an exit strategy. The White House announced on Thursday that President Donald Trump would decide within the next two week whether or not the U.S. would get involved in Israel-Iran's air war. This will increase pressure on Tehran to negotiate. Trump has also reiterated his call for the Federal Reserve's interest rate to be cut by 2.5 percentage points. The Fed kept rates unchanged on Wednesday and policymakers maintained projections of two quarter-point cuts in this year. Analysts at ANZ stated in a report that "Macroeconomic development, especially steady yields and renewed USD power, have not supported (gold's) price." The Fed's cautious approach and rising inflation expectations have affected market expectations about the number of interest rate cuts expected this year. On Friday, the dollar was expected to record its largest weekly gain in more than a month. Gold becomes more expensive when the dollar is stronger. Palladium dropped 0.7% to $1 042,92. Platinum dropped 1.5% to $1.287.47 but is heading for a third consecutive weekly increase.
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Brent futures are down by nearly $2 as the U.S. delays its decision on direct Iran participation
Brent crude prices lost ground from their previous session on Friday, falling nearly $2 after the White House deferred a decision about U.S. participation in the Israel-Iran Conflict. However, they are still on track for a record third consecutive week of positive price movements. Brent crude futures dropped $1.89 or 2.4% to $76.96 per barrel at 0255 GMT. Weekly, the price was up by 3.8%. U.S. West Texas Intermediate Crude for July grew by 53 cents or 0.7% to $75.67. The WTI for August, which is more liquid, rose by 0.2% or 17 cents. The prices of goods and services rose by almost 3% as Israel bombed Iranian nuclear targets and Iran launched missiles and drones against Israel, after it had struck an Israeli hospital over night. Israel's and Iran's week-old conflict showed no sign of a truce. Brent futures pared previous session gains after the White House commented that President Donald Trump would decide whether or not the U.S. gets involved in the Israel/Iran conflict within the next two week. Oil prices surged amid fears that the U.S. would increase its involvement in Israel's conflict against Iran. "The White House Press Secretary later said that there was still enough time to de-escalate," said Phil Flynn of The Price Futures Group. Iran is the third largest producer of crude oil among the members of the Organization of Petroleum Exporting Countries. It extracts about 3.3 millions barrels of crude oil per day. Around 18 to 21 million barrels of oil per day (bpd) and oil products pass through the Strait of Hormuz on the southern coast of Iran. There is widespread concern that the fighting may disrupt the trade and supply. Trump has also used the "two-week" deadline in making other important decisions. Often, these deadlines are not met, which could lead to the crude oil price remaining high and possibly building on recent gains, said Tony Sycamore. (Reporting and editing by Shri Navaratnam; Sudarshan Varadhan)
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Dalian Iron Ore to see weekly gains due to resilient China demand
The prices of Dalian Iron Ore Futures rose on Friday, and are poised to make modest gains for the week on a resilient demand in China for this steelmaking ingredient. This is outweighing a persistent decline in China's real estate market. As of 0245 GMT, the most traded September iron ore contract at China's Dalian Commodity Exchange was up 1.36% to 706 yuan (98.31 dollars) per metric ton. This week, the contract has gained 0.57%. The benchmark July Iron Ore traded at the Singapore Exchange 1.42% higher, at $94 per ton. However, it has fallen 0.22% for the entire week. According to Mysteel, the operating rate of China's blast furnaces increased by 0.4% in the last week to 83.82%. Mysteel data showed that hot metal production, which is a measure of iron ore consumption, increased 0.24% from week to week, reaching 2.422 millions tons as of 20th June. Galaxy Futures, a broker, said: "While the demand is resilient right now, market traders are primarily focused on whether or not off-season demand continues to be factored into trading." Construction in China peaks during the spring, before the rainy season begins. Analysts at ANZ say that meaningful growth in steel and ore demand will not be possible until the new construction activity increases. Official data released on Monday showed that China's new house prices dropped in May, continuing a stagnation of two years. Goldman Sachs projected late Monday that demand for new homes will remain below the 2017 market peak in the coming years. This suggests a property slump in the second largest economy in the world. Coking coal and coke, which are used to make steel, have both gained in price, rising by 2.23% and 2.5% respectively. The Shanghai Futures Exchange saw a significant increase in the steel benchmarks. The rebar price rose by 0.57%. Hot-rolled coil, wire rod, and hot-rolled sheet all gained 0.7%. Stainless steel fell by 0.32%. $1 = 7.1812 Chinese Yuan (Reporting and editing by Sherry Jab-Phillips).
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Copper prices are soaring on the back of geopolitical unrest
On Friday, the most traded copper contracts on the Shanghai Futures Exchange (SFE) and London Metals Exchange (LME) were in a range as the market sentiment was mixed due to the ongoing uncertainty surrounding the Israel-Iran dispute. Israel bombed Iranian nuclear targets on Thursday, and Iran fired missiles or drones towards Israel after it hit an Israeli hospital over night. U.S. president Donald Trump said he would make a decision in the next two week on whether he will get involved with Israel. Metals analysts at a Shanghai futures firm said that a number of issues are affecting the metals markets. These include the Middle East and possible U.S. rate cuts. China's reduced consumption is also a factor. The Shanghai Futures Exchange's most traded copper contract eased by 0.1%, to 78.400 yuan per metric tonne as of 0103GMT. This was up 0.04% from the previous week. Three-month copper at the London Metal Exchange rose 0.3%, to $9,641 per ton, and remained unchanged. Data on Wednesday revealed that China's refined output of copper in May increased 13.6% over the previous year, to 1,25 million metric tonnes. The country's demand, however, for metals like copper and aluminum, has been dampened by the summer season's weakness. LME tin rose 0.5% to $32,180; aluminium increased 0.4% to 2,531, while zinc grew 0.2% to 2,644.5. SHFE tin dropped 0.9% to 261,390 Yuan per ton. Aluminium fell 0.2%, to 20,555 Yuan. Lead rose 0.2%, to 16,915 Yuan. Zinc increased 0.1%, to 21,925. Click or to see the latest news in metals, and other related stories. Data/Events (GMT). 0600 UK Retail Sales, Ex-Fuel, MM, YY, May 0645 France Climate Business, Mfg., Overall Jun 1230 US Philly Fed Indx. Jun 1400 EU Confid. Flash Jun ($1=7.1880 Chinese Yuan) (Reporting and editing by Harikrishnan Nair; Reporting by Hongmei Li)
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Oil prices rise for the third week in a row as Trump considers US action against Iran
On Friday, the Asian share markets struggled to find direction as fears of an attack by the United States on Iran hung in air. Meanwhile, oil prices are expected to increase for a third consecutive week due to the escalating Israel/Iran conflict. Israel has bombed Iranian nuclear targets overnight, while Iran has fired missiles and drones towards Israel. A week-old aerial war is intensifying, with neither side showing signs of an end. The White House announced that President Donald Trump would decide within the next two week whether or not the U.S. is going to get involved in Israel-Iran War. Some of the MAGA base is furious about a possible attack on Iran. Brent fell by 2% to $77.22 a barrel on Friday, but it is still heading for a strong gain of 4% per week, after a 12% increase the previous weekend. Tony Sycamore is an analyst at IG. He said that Trump used the "two-week deadline" in many other important decisions. The complexity of the situation means that this could happen again. In Asia, markets were still cautious. Nasdaq and S&P futures fell by 0.3% each. The U.S. market was closed on Juneteenth, so there were few indications for Asia. The MSCI broadest Asia-Pacific share index outside Japan grew by 0.1%, but is still on track for a weekly decline of 1%. Japan's Nikkei slipped 0.2%. China's blue-chips rose by 0.3% while Hong Kong's Hang Seng grew by 0.5% after the central banks held benchmark lending rates constant as expected. The dollar fell 0.2% on the currency market to 145.17yen, after data revealed that Japan's core rate of inflation reached a two-year peak in May. This increased pressure on the Bank of Japan, who was under pressure to increase interest rates. Investors are not expecting a rate increase from the BOJ before December of this year. This is about 50% priced in. In Asian hours, the U.S. Bond market, which had also been closed on Thursday morning, began trading on a more subdued tone. The yield on the 10-year Treasury bond was unchanged at 4,389%. Two-year yields fell 2 basis points to 3,925%. The Swiss National Bank has cut its rates overnight to zero, and is not ruling out a negative rate. Meanwhile, the Bank of England kept policy unchanged but felt the need for more easing. And Norway's central banks surprised everyone by cutting rates for the very first time since 2020. Gold prices fell 0.2%, to $3,363 per ounce. However, they were still set for a loss of 2% on a weekly basis.
Copper prices steady before Fed decision; focus on Middle East
The copper price remained stable on Wednesday, due to the softer dollar in anticipation of the Federal Reserve's decision on U.S. Interest Rates. However, the escalating conflict in the Middle East with its impact on demand and growth dominated the mood.
At 1001 GMT, the benchmark copper price on London Metal Exchange was up by 0.2% to $9,691 per metric tonne.
Traders said that metals activity is low as the Federal Reserve will announce its interest rate decision in a few hours and the U.S. market closed for Juneteenth on Thursday.
The oil prices have risen in the last few days, as the markets assess the likelihood of disruptions to supply from the Iran-Israel war.
Reports indicate that the U.S. military has increased its presence in the area, causing speculation about a possible U.S. invasion, which investors fear will escalate the conflict. The region is rich in energy resources, supply chain and infrastructure.
Tom Price, Panmure Liberum's analyst, said that "Copper and industrial metals were under pressure" because the spike in oil prices was putting the global economy at risk.
"We don't have an end in sight to the conflict but they are already discussing one. So the market is settling down, and trading will resume as normal."
Concerns about copper availability on the LME due to falling stock, large holdings in warrants (title documents conferring ownership) and cash contracts have pushed up premiums for nearby contracts.
Copper Stocks
Backwardation or premium
The traders are also keeping an eye on a large number of aluminum warrants (0#LMEWHC>) and contracts that are nearing maturity (0#LMEFBR>), which have also led to premiums in nearby contracts.
Aluminium for three months was down by 0.3% to $2,541, while zinc fell 0.1% to 2,635, lead increased 0.1% to 1,977 and tin rose 0.8% to 32,525; nickel advanced 0.6% at $15,015. (Reporting and editing by David Evans; Pratima Dasai)
(source: Reuters)