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Oil prices on the rise as tensions in the Middle East flare
Brent crude oil has risen by around 20% in June and is set to make its biggest monthly increase since 2020, as tensions between Israel/Iran flare up. The rise in oil prices, although relatively modest, has been noticed just three years after the Russian invasion of Ukraine. This triggered an increase in energy costs that pushed up global inflation rates and led to aggressive interest rate increases. What does the rising price of oil mean for global markets? How high is it? Investors are comforted by the fact that oil production has not been disrupted, and so prices have increased slowly rather than spiking. Attention! Investors priced in a higher chance of Middle East supply disruptions, as the premium for Brent crude first-month futures contracts compared to those for delivery six months from now this week reached a six-month-high. . The level remained high on Friday. Oil is trading at $77 per barrel. It is still below the $139 peak of 2022, but it is approaching pain points. Christophe Boucher, CIO at ABN AMRO Solutions, said that if oil prices stay in the 80-100 dollar range for a long time it would be a serious threat to the global economy. "We're just below the threshold." SHOCK 2/ IN SUPPLY? Shipping is often viewed as an important energy indicator by traders. Around a fifth (25%) of all oil consumed in the world passes through the Hormuz Strait, which connects Oman with Iran. Analysts say that disruptions here could push the price of oil over $100. Blockade of shipping routes will compound any supply shock. Nadia Martin Wiggen, director of Svelland capital, stated that despite the 1.2 million extra barrels a week promised by OPEC+, none have yet been delivered or shipped. She said that if shipping routes are blocked, this supply will not reach the international market. She is closely monitoring freight rates. Wiggen said that the freight rates indicate that China has not yet panicked and bought oil due to supply concerns. Once China begins to buy, freight prices and energy prices around the world will increase. 3/ NO OIL NO GROWTH The rising oil price is a cause for concern because it can increase inflation in the near term and harm economic growth through squeezing consumer spending. According to economists, high oil prices are like a tax. This is especially true for countries that import energy in large quantities, such as Japan or Europe, as oil can be difficult to replace on a short-term basis. Samy Chaar, chief economist at Lombard Odier, said that oil prices over $100 per barrel would reduce global economic growth by 1% and increase inflation by 1%. Israel's strike against Iran last week triggered a wave of unease. The initial rise in safe-haven bond prices soon faded away as the focus shifted to the inflationary effects of higher oil. The five-year euro zone forecast, which is closely watched as a gauge of inflation expectations on the market, has risen to its highest level for almost a week. Frances Donald, chief economist at RBC, said that if the oil price rises to $75 per barrel, it will boost the CPI by about a half-percent by year's end. This would take the CPI from 3.5% to 3.5%. The rise in crude oil prices will be felt most by Turkey, India and Pakistan. Morocco, too, is heavily dependent on imported oil. Analysts say that those who supply oil, such as Gulf countries, Nigeria Angola Venezuela, and Brazil, Colombia, and Mexico, will benefit from the rise in crude prices. Oh king dollar The dollar is changing. The currency has gained in recent years when oil has rallied, but its latest increase has only been a limited one, with just a 0.4% weekly gain. Analysts anticipate that the downward trend of the dollar will resume given expectations about Middle East risks being limited for now, and underlying negative sentiment. The dollar has fallen around 9% against major currencies so far this season, hurt by the economic uncertainty and concerns about the U.S. president Donald Trump's administration being a reliable trading and diplomatic partner. A weaker dollar will certainly ease the pain of higher oil prices, since they are priced in dollars. UniCredit stated that the fall of the dollar offers relief to oil-importing nations, as it reduces the impact of rising oil prices, and also eases wider economic strains. 5/ COMPLACENT STOCK? World stocks are content to remain near their all-time highs in the absence of a sudden oil supply shock. Investors will look past it until there is a reason for them to believe that this conflict will grow to be much more serious, said Osman Aly, Goldman Sachs Asset Management’s global co-head Quantitative Investment Strategy. Gulf markets initially fell on initial news but then stabilized, aided by higher oil prices. U.S. energy stocks, especially oil and gas companies, and defence stocks have performed well. Israeli stocks have outperformed all other markets, with a 6% gain in one week. Airlines are the most affected, but oil-consuming stocks have also been hit hard.
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Dalian iron ore is near flat this week due to China's resilient demand and property woes
The prices of Dalian Iron Ore Futures rose on Friday but remained nearly flat for the entire week, as investors balanced the resilient demand for steelmaking ingredients in China's top consumer against the persistent slump in that country's real estate market. The most traded September iron ore contract at China's Dalian Commodity Exchange ended daytime trading 0.93% higher, at 703 Yuan ($97.85), a metric tonne. It also fell 0.07% in the past week. As of 0708 GMT, the benchmark July iron ore traded on Singapore Exchange was 0.94% higher. It stood at $93.55 per ton. This week, the contract was down 0.65%. 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 reported late Monday that the demand for new homes in China will likely remain below its 2017 peak during the next few decades. Coking coal and coke, which are used to make steel, have both gained in the DCE. They rose by 1.08% apiece. The Shanghai Futures Exchange saw a significant increase in the majority of steel benchmarks. Rebar was up by 0.23%. Hot-rolled coils were up by 0.39%. Wire rod rose around 0.3%. Stainless steel fell 0.44%. $1 = 7.1845 Chinese Yuan (Reporting and editing by Harikrishnan Nair, Sherry Jacob Phillips).
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ASIA GOLD-Gold prices in India are falling as India's discounting shrinks; China's premiums also slip
This week, physical gold dealers in India reduced their discounts as a slight drop in prices in India supported the demand. Premiums in China, the top consumer of gold, dropped because of a subdued market and high rates. Indian dealers are offering a discount This week, you can save up to $27 per ounce over the official domestic prices. These include a 6% duty on imports and a 3% tax on sales. Last week, this discount was up to $63. The price of gold in India was around 98.700 rupees for 10 grams last Friday, after reaching a record high of 101.078 rupees this week. Saurabh Gadgil is the chairman of P N Gadgil Jewellers. He said that buyers are beginning to realize that prices will not fall dramatically and are therefore slowly making purchases. A Mumbai-based dealer of gold bullion with a private banking firm said that despite the low demand, discounts are shrinking as supplies on the market remain tight because imports have been lower over the last two months. The World Gold Council stated in a recent note that the gold demand could pick up as the festive and auspicious season begins in mid-August after a traditionally slow period between June and July. In China, bullion was traded at a premium of $10 per ounce to the global benchmark spot rate, down from a premium of $8-$14 per ounce last week. A precious metals trader in mainland China said that people are used to the high prices but they don't expect much demand to continue at these levels. He added that future demand is likely to be very low due to the weak macroeconomic outlook and a lack of funds to invest. In Hong Kong, gold In Singapore, the par value was $1.30 while in Singapore it was $1.30. Gold traded at par prices with a premium of $2.50. In Japan, bullion Was sold at a premium of $1 to $0.5 over spot prices.
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Stellantis and Renault fear China's rivals in the small car market, and lobby EU for less rules
Stellantis, a French company, and Renault, a Chinese automaker, are pushing for fewer safety features in small cars, which would make them more affordable. In the past two months, Stellantis chairman John Elkann has engaged in a public campaign that is rare to try and get the European Union's attention on the issue. It is a goal to revive the small car segment that was abandoned by Europe's automobile manufacturers because they were unprofitable. They blame this on regulations which make vehicles heavier, larger and more expensive. Elkann said last week that Europe needed its own version, which could be called "e-car", of Japan's small urban cars with engine and size restrictions and lower insurance and tax costs. He said that there was no reason for Europe to not have an electric car if Japan, with its kei cars, has 40% of the global market. This is similar to comments made in a recent joint editorial by Renault's de Meo. Although de Meo will be leaving Renault in July, it is expected that the company will continue to support the proposal. Renault's Director of Procurement, Partnerships, and Public Affairs, Francois Provost said, "Small vehicles are an area of growth that we cannot and must not ignore at this time." Chinese rivals have focused their efforts on hybrids and larger EVs to gain market share in Europe. However, smaller EVs will be on the way. The Dolphin Surf, a vehicle from BYD, China, was launched on the market a month ago. It is priced at under 20,000 Euros ($23,124), and has features like a large rotating touch screen, anti-steam mirrors, and rotatable rear screens. Comparatively, the Renault 5 is almost 5,000 Euros more expensive when equipped similarly. It's similar, but can accommodate one additional passenger. Flavien Neuvy is the head of Cetelem's research and auto analyst firm. He said, "The market has declined by 20% from last year. There isn't enough volume to satisfy everyone and the Chinese will be here soon." S&P Global estimates that sales of small cars could reach 600,000. This would be an increase of about 20% over last year. "A LOT of EXCUSES" The lobbying effort focuses on the EU's General Safety Regulations 2(GSR2) which mandates safety measures such as side-airbags, sensors that detect if a driver falls asleep, lane crossing warnings, and more comprehensive crash tests. According to a source with knowledge of the lobbying, such requirements and European pollution rules add between 850 euros and 1,400 euro ($983 and $1607) to the price of a vehicle. Some lobbyists claim that small cars are not subject to the same safety standards as vehicles designed for high-speed collisions. The European Automobile Manufacturers Association, also known as ACEA, has backed the demand for a new category of vehicle called M0 or e-car. Lea Zuber, spokesperson for the European Commission, confirmed that it is investigating this matter. People familiar with the discussion said that it would be difficult to change safety requirements without compromising smaller cars. It remains to be determined whether models with less regulations can compete with Chinese EVs. Matthew Avery, Director of Strategic Development at Euro NCAP which tests cars for safety, says the idea that small cars in cities would not be involved with highway accidents is nonsense. Avery said that the Chinese bring cars to Europe which consistently receive five-star ratings by Euro NCAP. Despite the fact that Euro NCAP's ratings are not legally binding, many consumers still take them into consideration and corporate fleets won't buy vehicles with less than five-star ratings. Avery stated that a change in safety regulations could result in smaller European cars being rated at two or three stars. Avery stated that "if they wish, they can despec a vehicle for safety", but added that Euro NCAP tests and ratings of safety will remain the same. "Our job is to simply say that this car is safer than another car," Avery said. Emmanuel Bret is the deputy head of BYD in France. He says that the company will keep offering small cars which meet all the current EU regulations. Blaming the EU for making the vehicles unaffordable, he claims, is "just a bunch of excuses". Bret stated, "Let the customer choose."
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Brent falls as Trump considers military action against Iran
Asian shares rose on Friday, as investors were relieved that the threat of an imminent U.S. strike on Iran had been averted for the time being. This weighed on Brent oil and dollar prices. Israel has bombed Iranian nuclear targets overnight, while Iran has fired missiles and drones towards Israel. The war, which began a week ago, is intensifying, with neither side showing any 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 conflict. Some of the MAGA base is expressing concern about a possible attack on Iran, which could lead to another long-term war. Brent fell by 2.1% to $77.23 a barrel on Friday, but it is still heading for a gain of 4% per week, after a surge of almost 12% the previous weekend. The lower oil prices have caused European stocks to rise, with the EUROSTOXX futures rising by 0.8% and the FTSE Futures up by 0.3%. Yesterday, Trump said he would consider a strike on Iran in the next few days. White House comments overnight... now indicate that the decision will be made within weeks," Rodrigo Catril said, senior FX Strategist at National Australia Bank. The price action suggests that investors are still very nervous. In Asia, Nasdaq and S&P futures both fell by 0.2%. U.S. market were closed on Juneteenth, so there was little direction in Asia. Hang Seng in Hong Kong led the way with a jump of 1.2%. The index is down 0.4% this week. South Korea's benchmark share price also performed better than the market with an increase of 1.1%. It surpassed the 3,000 mark for the first since early 2022 after the newly elected president Lee Jae Myung unveiled a stimulus plan. Nikkei 225 in Japan was flat. China's central banks held their benchmark lending rates at the same level as expected on Friday, while Japan reported that core inflation reached a two-year peak in May. This data keeps pressure on Bank of Japan for them 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. The dollar is expected to gain 0.5% per week on the currency market. The euro rose by 0.3% to $1.1527 while the pound increased by 0.2% to £1.3494. In Asian hours, the U.S. Bond market, which had also been closed on Thursday morning, began trading on a subdued tone. The yield on the 10-year Treasury bond was unchanged at 4.3909%. Two-year yields dropped 1 basis point to 3.9289%. The Swiss National Bank has cut its rates overnight to zero, and is not ruling out going negative. 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 0.5%, to $3354 per ounce. However, they were still set for a loss of 2.3% on a weekly basis.
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Palm oil prices fall on low demand, but set to rise for the sixth consecutive weekly gain
The price of Malaysian palm oils futures dropped on Friday, due to weak demand from key markets. However, the contract was still set to gain for a 6th consecutive week despite needing an additional catalyst to maintain momentum. At midday, the benchmark palm oil contract on Bursa Derivatives Exchange for September delivery fell 10 ringgit or 0.24% to 4,094 Ringgit ($962.61) per metric ton. This week, the contract has gained 5,5%. Paramalingam Supramaniam said that trading volumes were relatively low and prices had been largely accounted for by most internal and external factors. "For the trend to continue, it will be necessary for more bullish news." Demand will be crucial in July, as the current market rally is based solely on external forces and has yet to demonstrate a robust increase of demand. The palm oil contract in Dalian, the most active contract, fell 0.05%. Chicago Board of Trade soyoil prices were up by 0.38%. As palm oil competes to gain a share in the global vegetable oil market, it tracks the price changes of competing edible oils. Later in the afternoon, cargo surveyors will release estimates of Malaysian palm oil imports for the period June 1-20. Brent crude prices retreated from their gains of the previous session on Friday, dropping 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 in the green. Palm oil is less appealing as a biodiesel feedstock due to the weaker crude oil futures. The palm ringgit's trade currency strengthened by 0.09% against dollars, increasing the price of the commodity for foreign buyers. ($1 = 4.2560 ringgit) Reporting by Ashley Tang, Editing by Sonia Cheema
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French and Benelux stocks: Factors to watch
Here are some company news and stories that could impact the markets in France and Benelux or even individual stocks. ArcelorMittal ArcelorMittal, a German steelmaker, has dropped plans to convert its two plants to carbon-neutral production due to the high energy targets set by Germany. Eutelsat After a capital increase of 1.35 billion euros, the French state will be Eutelsat's largest shareholder. The aim is to make it more competitive with Elon Musk and Starlink. LightOn LightOn has been selected by Ariane Group’s Sodern on Thursday to industrialise AI generative within a safe framework. PostNL Dutch parcel delivery company PostNL issued a Schuldschein on Thursday for 100 million Euros, with maturities of 3, 5, and 10 years and both fixed and variable interest rates. Sanofi Pan-European market data: European Equities speed guide................... FTSE Eurotop 300 index.............................. DJ STOXX index................................................ Top 10 STOXX sectors................................... Top 10 EUROSTOXX sectors......................Top 10 Eurotop 300 sector..................... Pan-European market data: European Equities speed guide................... FTSE Eurotop 300 index.............................. DJ STOXX index...................................... Top 10 STOXX sectors........................... Top 10 EUROSTOXX sectors...................... Top 10 Eurotop 300 sectors..................... Top 25 European pct gainers....................... Top 25 European pct losers........................ Main stock markets: Dow Jones............... Wall Street report ..... Nikkei 225............. Tokyo report............ FTSE 100............... London report........... Xetra DAX............. Frankfurt items......... CAC-40................. Paris items............ World Indices..................................... survey of world bourse outlook......... European Asset Allocation........................ News at a glance: Top News............. Equities.............. Main oil report........... Main currency report.....
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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
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.
(source: Reuters)