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As markets evaluate tensions in the Middle East ahead of US inflation figures, gold prices fall
Gold prices fell on Tuesday as the markets weighed developments in the Middle East conflict and interest rate expectations before key U.S. Inflation data. Gold spot fell 0.6% to $4,705.99 an ounce at 0603 GMT after reaching a session high of three weeks earlier. U.S. Gold Futures for June Delivery fell 0.3% to $4.714.50. The hope for a peace agreement on?Iran has faded since U.S. president Donald Trump said that a ceasefire deal with Iran is "on life support".?Tehran rejected the U.S. proposal and refused to accept a list demands from the U.S. President Donald Trump called the proposal "garbage". Ilya Spivak is the head of global macro for Tastylive. He said, "We have already seen expectations shift for many central banks in a more hawkish direction. For the Federal Reserve this has meant that all rate cut possibilities for 2018 are now off." We're looking at the CPI numbers to see if they give a stronger indication of inflation than expected. Investors could get clues about the Fed's future policy by watching the data that is due later today. The dollar also extended its gains from the previous session. Increased crude oil prices may increase the risk of higher interest rates. Gold is often seen as a hedge to?inflation but high interest rates tend to put a strain on this non-yielding investment. BofA Global Research & Goldman Sachs have lowered their expectations for U.S. rate cuts this year. They cited high energy prices, rising inflation and the 'growing strength of the labour market' as reasons. The markets are also closely watching Trump's two day visit to China, where he is set to meet Chinese Xi Jinping and discuss a variety of topics including the Middle East. Silver spot fell by 1.3%, to $84.98 an ounce. Platinum dropped 2.3%, to $2,083.47. Palladium, at $1,482.18, was down by 1.8%. (Reporting and editing by Subhranshu sahu in Bengaluru, Harikrishnan Nair, Rashmi aich).
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The FOREX dollar rises as hopes for a Middle East peace agreement fade
The U.S. Dollar strengthened on Tuesday, as there were no signs that the war in the Middle East would be ended. This pushed oil prices up and worried investors about whether interest rates might need to remain high to combat inflationary pressures. Investors are now concerned that the ceasefire, which has been in place since the 7th of April, could be at risk and that hostilities may resume in this conflict that began in February and killed thousands. Brent crude futures rose 0.6% to $104.88 per barrel, as the Strait of Hormuz remained largely closed. U.S. West Texas Intermediate is at $98.93 a barrel, an increase of 0.89% for the day. The latest exchanges on the proposal to end the conflict made it clear that the two sides are still far apart. Currency markets were in a risk off mood as attention shifted to Trump's trip to China later this week and the U.S. Inflation Report due later that day. Scott Bessent, the U.S. Treasury secretary, is also in Asia to meet with officials in Japan and South Korea. The euro fell 0.24% on the day to $1.1754 while sterling was last purchased at $1.3575. The dollar index, which measures U.S. currencies against six other currencies, is at 98.17. This is up 0.2%. Dollar initially gained from safe haven flows as the war broke out, but it has since lost much of these gains. It remains choppy due to shaky prospects for a peace agreement and ceasefire which 'appears on a thread. Christopher Wong said that Trump's refusal of Iran's reaction to the U.S. Peace proposal kept the markets cautious, and put a floor beneath the dollar. Wong noted that "USD gains were still contained" and that markets have not yet viewed the recent headlines as a complete risk-off shock. He also pointed out a breakdown in diplomatic talks or a new military escalation would likely bring about a larger reaction. INFLATION DATA TAKS THE STAGE A survey of economists predicts that the U.S. consumer price index will show a?0.6% increase last month, after a 0.9% jump in March. The estimates ranged from 0.4% to 0.9%. The data will confirm that the Federal Reserve will likely keep interest rates the same in the near future. The traders have already priced in the possibility of two rate cuts this year, compared to what was expected before the Iran War broke out. The risk of core inflation being higher than expected is due to spillovers from energy prices onto other prices, such as food and airfares. The dollar and interest rates in the United States will rise if there is an unexpected increase in core inflation. The Japanese yen fluctuated between 157.12 and 158.12 against the U.S. Dollar as traders considered comments made by Bessent, his Japanese counterpart Satsuki Catayama, and their Tokyo meeting. Bessent stated that the U.S. maintains "constant and vigorous" coordination with Japan to combat unwanted, excessively volatile exchange rate movements. The remarks indicate that Washington is generally in agreement with?Japan’s recent round of intervention to buy yens, aimed at boosting its sagging currency. This causes pain on the economy because it drives up import prices. The New Zealand dollar slipped 0.17% to $0.59531. Bitcoin last fell 0.65% to $81,272. The stronger dollar has cast a shadow over emerging market currencies, with the Indonesian and Indian rupiah hitting new lows. (Reporting and editing by SonaliPaul in Singapore, Ankur Banerjee)
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Mike Dolan: Red lines of ROI-Warsh concern world finance
Kevin Warsh, the new Federal Reserve chairman, is on his way to the Federal Reserve to "clip the wings" of a bank that he believes has strayed into politics. Many countries are afraid that this will only give the 'U.S. Politicians have more freedom to use financial instruments as a weapon. Warsh, who was nominated by U.S. president Donald Trump in January to succeed Jerome Powell at the helm of the board, is expected to be confirmed by the Senate before Powell's?term ends on May 15th. His confirmation hearing delved into his views on?Fed independence? and a controversial preference to slash the Fed's $6,7 trillion balance sheet. There was a twist to his testimony which enraged many of his future colleagues around the globe. Since Trump returned to the White House in 2017, concern has grown throughout Europe about the willingness of the administration to weaponize the trade and military support for the purpose of extracting political and financial concessions. Finance has traditionally linked perceived threats to Fed Independence - Powell raised the issue himself after a criminal charge was filed against him earlier in the year - to a possible revision of the Fed's Currency Swap Lines. These lines have been providing dollar liquidity to allied countries for the past two decades. The fear is very simple. If the Trump Administration is willing to politicize transatlantic military alliances and long-standing international trade agreements, central banks around the world will need to prepare contingency plans to deal with a possible removal of Fed dollar funding lines overseas. These lines, like tariffs, could be used as bargaining chips by other G7 central bankers. Warsh's view on Fed reform sounds more nuanced. Many see the president's appointment of Mr. Powell, who is demanding lower rates and has publicly threatened central banks who refuse to do so, as undermining Mr. Powell's own argument that balance sheet reduction is a way to disassociate the Fed from politics. Many overseas finance chiefs are just as concerned about the stability and security of dollar backstops after his hearing as they were prior to his nomination. Warsh's written response to the question of Democratic Senator Elizabeth Warren, asking if the Fed can disagree with Treasury over swap lines, or act independently was cryptic. Warsh wrote that "Fed autonomy is at its highest in the operational conduct monetary policy." "Fed officials do not have the same right to special deference, for example in matters affecting international finances. In these matters, the Fed works with the Administration and Congress." One official overseas described this statement as "troublesome." 'TROUBLESOME' Warsh seems to be indicating that standing facilities will be dropped in favor of Treasury sanctioned bilateral financing lines. Washington may or may be against making liquidity backstops contingent on political approval. It would upset the assumptions of foreign central banks and financial institutions about the availability of dollars in a sudden shock, such as the one that occurred in 2008 during the banking collapse. The dollar's dominance in global finance and trade may be the reason for this funding vulnerability. The U.S.'s unwillingness to address the issue of sudden dollar shortages may accelerate efforts to reduce reliance over time. The monetary authorities who can't rely on emergency spigots any longer need to increase stress testing and develop alternatives. Fed swap lines to Canada and Mexico date back to the 1990s. They were extended to G7 central banks and others around the 2008 crash. The current dollar swap lines were established in 2013, and have been adjusted to reflect the global pandemic?and regional banking squeeze that will occur by 2023. Minutes of Fed meetings from May 2025 show that most standing lines are in place until further notice, but they appear to be reviewed annually and voted upon. Treasury's involvement with bilateral dollar swap lines, drawn from its more limited stabilization funds, appears to have increased over the last year, particularly in Argentina, and more recently around a United Arab Emirates request. If you want to depoliticize the central bank, then you could end up politicizing global finance and crisis management like never before. Warsh may be able to feel the tension in his first meeting. The opinions expressed are those of Mike Dolan a columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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AI rally pauses while Middle East ceasefire is on 'life-support'
The dollar and oil rose as expectations faded of a deal that would allow ships to pass through the Strait of Hormuz. Meanwhile, a raging rally in?chip stock prices cooled down while traders waited for U.S.?inflation data. U.S. President Donald Trump said that the ceasefire agreement with Iran, which had been in place for a month, was "on life-support" following Tehran's reaction to the U.S. plan of ending the war. Brent crude futures rose 0.6%, to around $105 per barrel. S&P futures dropped 0.2%, FTSE Futures fell 0.5%, and European Futures dropped 0.6%. Even the KOSPI index, which was a near-unstoppable market leader in Seoul, began to falter as it reached 8,000 points. It dropped by about 3.5% and pulled down other regional markets. Huh Jaehwan, analyst at Eugene Investment Securities, said that while the number of 8,000 is not significant, it's up 60% from 5,000 late in March. This is "not common". This stunning rally has sparked such a surge in South Korean stock trading that it enabled?brokerage Mirae Asset Securities?to almost quadruple its first-quarter profits thanks to an unprecedented increase in commissions. Tokyo's Nikkei gained 0.6% despite a bumpy day. The markets are watching Trump's trip to China which starts on Wednesday. Expectations for progress on either the Iran issue or trade fronts is low. Investors should not expect to see sweeping deals. "A 'win' means no new export controls or tariffs, but perhaps small symbolic deals such as agricultural orders, aircraft purchases, or signals about rare earths," Daniel Casali said, chief investment strategy at Evelyn Partners. "These might seem minor, but margin stability is important." Wall Street is resilient in the face rising oil prices. The S&P 500, and Nasdaq have all reached new highs in recent days. APRIL INFLATION SPEEDS EXPECTED IN US?DATA U.S. data on inflation is expected later Tuesday. The headline consumer price index will likely show a rise of 3.7% on a year-on-year, following a previous 3.3% increase. Markets could be rattled by any suggestion that the Federal Reserve might need to raise interest rates this year, rather than reduce them as investors expected before the war. Global bond yields are rising, led by a selloff of gilts, after Prime Minister Keir starmer's speech on Monday failed to convince investors that he would survive his election defeat. Japan's 10-year bond yield rose to 2.54%, a 29-year record high. A hawkish reading of last month's Bank of Japan meetings left the door open for a rate hike in June. Benchmark 10-year Treasury rates remained at 4.42%. The dollar dominated the foreign exchange markets, putting Asia's emerging-market currencies under pressure. Both the rupiah of Indonesia and the rupee of India hit record lows. The dollar increased to 157.62 yen. Scott Bessent, U.S. Treasury secretary, said that after a meeting with Japanese Finance Minister Satsukikatayama in Tokyo he was "constantly and robustly" coordinating with Japan to combat undesirable, excessively volatile currencies movements. The euro fell 0.2% to $1.1762, and the Australian dollar dropped 0.25% to $0.7232. Australia's budget deficit is expected to be smaller than the one previously announced on Tuesday. (Reporting and editing by John Mair; Tom Westbrook)
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Thyssenkrupp reduces sales forecast after steel and auto weakness affects results
Thyssenkrupp, the German conglomerate, cut its'sales forecast for 2026 on?Tuesday. It cited lower demand in its steel and automobile divisions as a sign that economic activity was muted across Europe. Axel Hamann, finance chief, said: "We remain cautious in our sales forecasts... not least due to heightened geopolitical uncertainty and its impact on?international markets." The company now expects that sales will fall by up to 3%, and at worst remain flat. Previously they had expected a range between -2% and +1%. In an LSEG survey, analysts expected sales to drop by 1%. Thyssenkrupp - which is attempting to turn itself into a holding company - said that demand for steel was "persistently low". Thyssenkrupp’s steel unit has been in the spotlight after a failed attempt to sell it this month to Jindal Steel International in India. This is the latest 'failed' attempt to divest from 'the business', and highlights 'the structural challenges surrounding industrial activity in Europe. (Reporting and Editing by David Goodman, Friederike Heine, and Christoph Steitz)
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Indian shares continue to fall and the rupee is at a record low, as optimism about a Mideast deal fades
The rupee and Indian shares both fell to a new record low Tuesday as crude oil prices rose. This was due to fragile negotiations over the end of the Iran 'war, which fueled concerns about global supply and economic fallout. As of 10:15 a.m. IST the Nifty 50?was down 0.69% to 23,652.4 while the BSE Sensex fell 0.82%, to 75,386.61. The benchmarks fell by 1.5% each on Monday. The mood was also affected after Prime Minister Narendra modi, over the weekend, urged fuel conservancy and restraint in gold purchases to help preserve foreign currency reserves. Jewellers, oil companies and travel stocks were all down for a second session. The rupee fell to a new record low as concerns about India's import bill grew. Crude oil prices hovered around $105 per barrel, and the outflow of foreign currency continued. The Asian markets dropped 0.7% on Monday after U.S. president Donald Trump claimed that the ceasefire agreement with Iran is "on life support". He also called Tehran's response, to a U.S. proposed peace plan, "stupid", causing a fear of a long-term conflict. India is the third largest oil importer in the world. Higher crude prices can cause inflation, devalue the currency, and impact growth and corporate profits. Investors were waiting for India's retail inflation data due later that day to get a sense of how much higher fuel costs have affected domestic prices. In a poll, the Reserve Bank of India (RBI) estimated that annual inflation would likely be closer to its 4% target by April from March's 3.4%. 11 of 16 major sectors suffered losses. The broader small-caps fell by 1.1%, while the?midcaps declined by 0.7%. Bajaj Broking Research stated that "the lack of progress in the U.S.Iran peace negotiations, along with continued selling pressure from foreigners, has weighed heavily on the market sentiment. There is a broad-based sell-off across all sectors." Financials fell 1% while the IT sub-index dropped 3.3% in advance of U.S. Inflation data. TCS,?Infosys and HCLTech all saw declines between 2.5%?and 4%. ONGC, Oil?India and other companies rose 6% and 6.6% respectively after CLSA, a brokerage, referred to the government's cuts in royalty rates on crude oil and natural gas production as a positive development for both companies.
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Sources say that China's independent refining companies cut production in May due to mounting losses
Sources from the trade and refining industry said that some independent'refiners' in China’s eastern province Shandong have cut fuel production due to dwindling margins. The Iran -war has pushed up crude prices, as they battle weak domestic demand. China's biggest independent refinery hub has been forced to cut production despite Beijing's order to small refiners (also known as teapots) to continue fuel production in order to protect the domestic supply amid disruptions caused by the Iran War. One of four sources familiar with the current situation, who spoke under condition of anonymity, stated that the average operating rate had fallen to about 50% from 55% in April. The demand for Iranian and Russian crude oil in the top importer of the world would be lowered if such refineries reduced their output. Sources said that some?refiners began reducing their runs to the minimum levels of operation as soon as the May Day holiday started. REFINERS SUFFER LOSSES OF ABOUT?500 Yuan PER TON Source: Independents are expected to lose 500 to 600 yuan (74 to 88 dollars) for every metric ton crude that is processed during the last week of this month. This source and another claim that some smaller refiners shut down their plants to perform maintenance. A third source said that without cutting output, the losses were unbearable. Some refiners had lowered their run rates from April by between 5 and 10 percentage points. In a Friday note, the commodities data provider SCI reported that Chinese refiners suffered losses of 649 Yuan per ton of crude they processed in April. This compares with a profit 269 Yuan one year ago. Sources said that Teapots, which is the world's largest buyer of Russian and Iranian sanctions crude, ran out of cheap crude in April, and chose to wait rather than purchase more cargoes of high-priced crude. Traders said that prices for these barrels, which usually trade at a discount to the benchmark ICE Brent oil, have surged since the conflict in the Middle East disrupted Middle East?oil?supplies due to the closure of Strait of Hormuz. They added that China's fuel consumption remained weak, while Beijing's curbs on fuel exports resulted in a glut of domestic fuel, which impacted the prices of gasoline and diesel, which teapots produce mainly. Beijing DIRECTIVE China's powerful planner warned independent refiners in early April not to reduce run rates below averages from the previous two years. He threatened to reduce crude import quotas if they did not comply. Sources said that it was unclear how strictly Beijing's directive is being enforced. However, some refiners requested permission from the Shandong Provincial government on May 9, to?lower processing rates or suspend operation at?some units. Sources claim that Beijing has not yet approved the requests. The National Development and Reform Commission didn't immediately respond to an fax request for comment. It was not clear if run-cuts would continue even if requests were denied. $1 = 6.7931 Chinese Yuan (Reporting from Siyi Liu, Singapore; Additional reporting provided by Beijing Newsroom. Editing by Florence Tan and Clarence Fernandez).
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MORNING BID EUROPE-Peace talks stutter
Ankur Banerjee gives us a look at what the future holds for European and global markets The markets are stuck in a cycle of hope and disappointment as talks to end war in the Middle East continue to be deadlocked. Donald Trump, the U.S. president, said that a ceasefire agreement with Iran is "on life support", after Tehran rejected an American proposal to end this conflict. Investors bet that both sides would not escalate their attacks. The lack of progress between Washington and Tehran in the negotiations has begun to weigh on some corners of the stock market. Investors are bracing for higher interest rates in order to combat inflationary pressure due to high?energy costs. Markets in Europe have priced two 25-basis-point hikes by the ECB over the 'three meetings up to September' and see a 75% probability of a third at year-end. Meanwhile, traders have fully priced any rate cuts from the Federal Reserve this year. The U.S. Dollar is now the safe-haven currency of choice, but gains are limited as investors continue to hope for a resolution in the next few days. Investors will be analyzing the U.S. data to determine the impact of war on prices. After an initial report that showed a rise, the final German inflation data is due for April. The data could help to highlight just how vulnerable Europe is, given its dependence on energy. Futures indicate a lower opening as the dour sentiment moves to Europe. The pan-European STOXX600 is still trading at a level that's 4% below its pre-war peak and lags behind global peers who have recovered on artificial intelligence driven optimism. The following are the key developments that may influence Tuesday's markets: * Germany: April inflation data, May ZEW survey * U.S. Inflation Report
Outokumpu Steel's profit missed market expectations as Europe drags
Outokumpu, Finland's stainless steel company, reported on Tuesday a core profit for the first quarter that was?below expectations, due to?weak profitability in its European operations, but it also said that the market dynamics in the quarter had improved.
In early trading, the shares of steelmakers fell by around 2%.
Vara Research's poll showed that its adjusted earnings before taxes, depreciation, and amortization (EBITDA), which are a measure of profit, rose by?32% in the quarter ending January-March, but fell short of analysts' expectations?of 70m euros. European steelmakers have been under pressure for years by low domestic demand, high energy prices and cheap Asian imports. They stand to benefit from EU protections such as a carbon tax on imports with high emissions and a trade policy that will halve import quotas. These measures are set to take effect from July 1.
In a press release, CEO Kati Ter Horst stated that "in the first quarter the stainless steel market dynamics have improved. This is due to seasonality as well as the Carbon Border Adjustment Measure (CBAM), which has had an impact in Europe."
Outokumpu’s stainless steel deliveries increased by 27% quarter on quarter?to 465,00 metric tons. They are expected to remain flat or even increase by 10% in the second quarter. Analysts expected 457.100 tons in the first quarter.
The adjusted EBITDA for the European region, which was a loss of 13 million euros despite a?improvement in profitability from the historically low levels seen the previous quarter, is still well below analyst expectations.
The company stated that the result was negatively affected by the 'backlog of implementations for a new supply-chain?solution.
Outokumpu anticipates that its adjusted EBITDA will be higher in the 2nd quarter than the 1st.
(source: Reuters)