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US construction spending exceeds expectations in April
U.S. Construction spending in April increased more than anticipated, thanks to the single-family homebuilding boom. However, rising mortgage rates due to the war with Iran continue cast a shadow on?the housing markets. Census Bureau of the Commerce Department announced?on Monday? that construction expenditures rose 0.4% following a downwardly-revised 0.2% rise in March. Economists surveyed by predicted construction spending would gain 0.2% following a previously reported rise of 0.6% in March. In April, construction spending rose 0.9% year-over-year. Spending on private construction projects increased by 0.4% in April after increasing by 0.2% the previous month. After a 0.6% increase in March, investment?in residential construction increased by 0.8%. The spending on single-family housing projects increased by 1.4%. The U.S./Israeli war against Iran has stoked inflation, which in turn has pushed up mortgage rates. The popular '30-year fixed rate mortgage' averaged 6.53% in the last week. This is a nine-month-high, according to data from mortgage finance agency Freddie Mac. The rate was 5.98% when the war began at the end February as Freddie Mac & Fannie Mae increased their purchases of mortgage-backed security. The rising mortgage rates have a negative impact on the demand for housing, and are making it difficult for builders to start new projects. Tariffs, shortages of land and workers are all contributing to higher costs for builders. The spending on multi-family units, which make up a tiny part of the housing market in April, dropped by 0.3%. In April, investment in non-residential private structures like power plants and factories dropped by 0.2%. The spending on nonresidential buildings has been declining for nine consecutive quarters despite an increase in the construction of data centres to support artificial intelligent. The investment in public construction projects grew 0.4% in April after increasing?0.2% during March. Construction spending by state and local governments increased 0.1% in April, while federal government expenditures jumped 4.8%. This is likely due to the construction of detention facilities during an immigration crackdown. Reporting by Lucia Mutiani, Editing by Andrea Ricci
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The buffer of savings for US consumers is gone. What now? Mceever
While corporate America continues to benefit from the AI boom in the United States, a large part of the population is struggling to keep up with the pace, and their savings are plummeting. This growing chasm may have grave political implications for President Donald Trump. Egal how you define the issue of inequality - K shape economy, two speed economy, haves-and-have-nots, it's getting worse. Last week, two data points brought this into stark focus: personal savings (and corporate profits). In April, the?personal saving rate dropped to a 4-year low of 2,6%. It has halved over the last year, and is now at its lowest level since 2008. Zoom in and you can see how thin the cushion of savings is for American consumers. The savings rate of consumers has never been so low since 1950s records started. Inflation, boosted by energy prices that are still high, is now surpassing wage growth for the very first time in the last three years. Americans' rapid depletion of savings in order to maintain their spending cannot last. Some closely watched measures of confidence in consumers have also fallen to their lowest ever levels. It's therefore reasonable to expect that household consumption, the largest and most important pillar in the economy, could be under pressure soon. Wall Street doesn't seem to be asking too many questions at the moment, as U.S. stocks continue to reach record highs. It's not surprising, given the state of corporate America. Last week, figures showed that U.S. profits for corporations as a percentage of total output rose to 18.4% in the first quarter. This is the second highest reading since records started in the 1940s. The pre-tax profit as a percentage of GDP also remained near the record high 14%. Even as Americans' financial situation becomes more precarious, corporate profits have never been higher. Phil Suttle, an economist, says that he does not believe these trends to be economically or politically sustainable. How they are resolved is an unresolved issue, but in my opinion, both profits and consumption carry a significant downside risk. MAKE UP THE PAIN It makes perfect sense. Who is spending the most? The estimates of Moody's analyst that the top decile income accounts for 50% all consumer spending have been disputed. A more accurate estimate could be between 35-40%. It's still a substantial amount. The top 10% of Americans own 90% of U.S. stock, and the top 1% represent half of all the wealth in the U.S. stock market. U.S. equity prices have risen 30% for these asset owners in the last 12 months. The asset-owning wealthy can continue to support aggregate expenditure as long as the stock prices remain high. This will keep headline GDP near a healthy 2 percent rate. This masks the increasing strain on the "bottom half" of the U.S. populace, who are being squeezed out by rising borrowing costs, inflation and shrinking savings. Look at the increasing struggles of consumers to pay off their debts. Troy Ludtka, SMBC Nikko Securities Americas, notes that auto loan delinquencies 90 days and more reached a record high of 5.6% in the first quarter, while credit card delinquencies increased to 13.1% - their highest level since 2011. The interesting question is when does the K's lower end break the economy as a whole? What is the 'limit to this inequality?' Ludtka makes a point. Unsustainable Path Limits may not be as much a matter of economics but rather a matter of politics. Trump's ratings for his economy have plummeted since he launched military strikes against Iran three months back, in part due to the rising pressures of prices. Polls indicate that the Republicans are likely to lose the House of Representatives and possibly the Senate in the upcoming midterm elections. Many voters have cited the "cost of life" as their primary concern. The AI-driven capex boom and the rapid growth of corporate profits may increase these political pressures even if the economic situation continues to be relatively stable. The ultimate question is: How long can Americans continue to spend and stay afloat, now that their savings buffers have been rapidly 'disappearing'? How extreme will the U.S. public allow this "K"-shaped dynamic to get before they 'push back with policy demands'? Trump's Republican Party could find out this in November. You like this column? 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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Gold falls as inflation fears rise over Middle East conflict
Gold prices fell on Monday as fresh strikes between Iran and the United States raised inflation concerns. Gold spot was down 0.7% to $4,502.89 an ounce at 08:40 am EDT (1240 GMT), after reaching a two-week peak on Friday. U.S. Gold Futures dropped 1.3% to $4.533.20. Jim Wyckoff is a market analyst for American Gold Exchange. He said that if bond yields continue to rise and rates begin to stabilize or trend downward, gold will be under pressure. As diplomatic efforts to bring an end to three months of war drag on, Iran and the United States accuse each other of aggressive behavior. Oil prices rose on Monday as inflation fears arose from the conflict in Iran. This could lead central banks to increase interest rates to combat rising price pressures. According to CME Group’s FedWatch tool, traders see a roughly 51% chance that at least one U.S. interest rate increase will occur by the end of the year. Gold is often considered an inflation hedge but its appeal tends to fade when interest rates are high because it doesn't generate any yield. The market participants will be focusing on a series U.S. job data releases that are due to come out this week. Fed Governor Jerome Powell warned on Sunday about the dangers of a politicized Fed. Powell's tenure as Fed chair officially ended on 15 May. Kevin Warsh was sworn in on May 22, as the new Fed chairman. Powell has decided to remain a Fed Governor in part due to what he sees as the ongoing threats to the Fed's independence. Spot silver increased?0.5% at $75.61 an ounce. Platinum gained 1.5% to $1,944.70. Palladium dropped 0.1% to 1,352.75. Morgan Stanley stated in a Friday note that "Palladium has reached equilibrium as the supply constraints have been offset by a weakening of auto demand."
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Official: India could revisit its Scotch Whisky tariff reductions if UK steel curbs
An Indian official stated that New Delhi could reconsider the tariff concessions it made to Britain on Scotch Whisky, if London does not address New Delhi's concerns about its steel safety measures. The India-UK Free Trade Agreement, signed last May and expected to come into effect this year, has hit a snag after Britain proposed tighter safeguards for steel imports in order to protect the?domestic?industry. An Indian trade official told journalists on Monday that the ball was now in their court (UK). If they do not leverage their Free Trade Agreement, we can always revisit the concessions that we offered. On Tuesday, Britain's Trade secretary Peter Kyle will be in India to meet with Commerce Minister Piyush Ghoyal. India has agreed to reduce tariffs on Scotch Whisky by 150% initially, and then to 75% over 10 years. Both sides will reduce tariffs on a wide range of products, including textiles, whisky, and cars. This deal will also expand market access for companies in the fifth and sixth largest economies around the world. By 2040, the two countries anticipate that the agreement will boost bilateral trade by 25.5 billion pounds (34 billion dollars). India is concerned that Britain's steel safety measures could limit Indian exports. The dispute centers on higher 'duties' on certain shipments of steel and tariff-free quotas. This is creating new uncertainty for Indian exporters, even as both sides are working to implement the trade agreement. India, Brazil, Turkey and other countries, including Japan, South Korea, Switzerland, Australia, have raised concerns at the World Trade Organization about Britain's new restrictions regarding tariff-free imports of steel. As part of its efforts towards reducing carbon emissions, Britain has proposed to impose carbon-related border measures starting January 1, 2027. These would cover?imports such as iron,?steel and aluminium, as well as cement, fertilisers and fertilizers.
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Gold drops as inflation fears fuelled by renewed Middle East tensions
Gold prices dropped on Monday as renewed U.S. - Iran tensions?pushed up the dollar and oil price, fueling inflation fears and reinforcing an outlook for higher interest rates. Gold spot was down 0.7% to $4,506.49 an ounce by 1158 GMT, after reaching a high of two weeks on Friday. The yellow metal fell nearly 2% in the month of May, marking its third consecutive monthly decline. U.S. Gold Futures for August Delivery fell 1.2% to $4,36.70. Dollars rose, making bullion priced in greenbacks more expensive for holders of other currencies. The U.S. claimed to have struck Iranian military bases over the weekend, and Iran's revolutionary guards?on Monday announced that they had attacked a U.S. based in response. This is the latest exchange of attack amid negotiations to end?the?three-month old war. Ricardo Evangelista, an ActivTrades analyst, said that the optimism around negotiations between the U.S.A. and Iran aimed to end?the standoff? in the Strait of Hormuz waned over the weekend. As a result of this, energy prices rose, reinforcing Federal Reserve expectations and reviving inflation fears. Brent crude oil has increased by more than 3% since the last strikes. Oil prices that are higher can increase inflation and cause interest rates to remain high for longer. Gold is traditionally seen as an inflation hedge, but in a high interest rate environment it becomes less attractive as a non yielding asset. According to CME Group's FedWatch, traders are pricing in an?Fed interest rate increase this year. There is a 39% probability of a quarter point increase?in December. This week, a number of Fed board members will be speaking. Friday's major data releases include the ISM manufacturing survey and the May payroll report. "Traders are closely monitoring this week's important data releases, as they have the potential to reshape expectations about the future path of monetary policy at the Fed, influencing the demand for the U.S. Dollar and, therefore, the performance in gold prices," Evangelista stated. Silver spot rose 0.6%, to $75.69 an ounce. Platinum gained 1.3%, to $1,941.15, and palladium remained at $1,355.00. (Reporting and editing by Thomas Derpinghaus, Kevin Liffey and Noel John from Bengaluru)
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Russell: It's not about altruism, but economics that's driving China's crude imports to slump.
China's imports of crude oils by sea fell to their lowest level in nearly 10 years in may as a result of the Iran War. This led to a drastic reorganization of operations for the world's largest oil importer. According to data compiled by Kpler, seaborne arrivals of crude oil were down to 6.36 million barrels each day in May from 8.10 in April. This was the lowest since October 2016. The imports also fell by a little over half of the 11,39 million bpd that Kpler recorded for February. This was the 'last full month' before the U.S.-Israeli attack on Iran, which took place on February 28, the last month in which arrivals occurred. Media and market commentary frame the collapse in China's imported crude as helping Asia adapt to the loss of 10 million barrels per day of crude due to the closure of the Strait of Hormuz. Beijing is not acting out of altruism, but rather as a result of the changing dynamics in price and supply. The conflict in Iran is clearly the main reason for the decline in China's oil supplies. But the real challenge lies in understanding what China does to adapt to a loss of up to 10% of global crude supply. First, China's imports are falling as usual when prices increase. In March 2022 when Brent crude futures reached a high of $139.13 per barrel following Russia's invasion in Ukraine, China's imports fell from 10.84 millions bpd to 8.07million bpd. China is not unusual in having imports fluctuate by up to 2,000,000 bpd per month in response to price changes. However, the drop in arrivals between February and May of this year was a much larger 5.5,000,000 bpd. The drop in prices is not the only reason for the decline. The Chinese refiners may also have struggled to get crude oil from their usual sources, particularly those who were cut off due to the closure of Strait of Hormuz. Kpler reports that imports from Iraq dropped from 790,000.00 bpd a month earlier to only 60,000.00 bpd a month later in May. Imports from Kuwait also fell from 522,000.00 bpd bpd bpd bpd bpd bpd bpd bpd ppd bpd bpd bpd bpd bpd bpd RUSSIAN CRUDE The drop in seaborne arrivals of Russian products in May was the lowest since August, and down from 1,96 million bpd. Prior to the Iran War, China was the sole major buyer of Russian crude oil which had been under Western sanctions ever since the invasion and occupation of Ukraine. The?administration led by Donald Trump, President of the United States, eased sanctions against Russian oil to help meet the shortfall in crude supplies caused by the war with Iran. India, Asia's largest buyer of crude oil, has returned to purchasing Russian crude. Arrivals in May were 2.17 million barrels per day, a new record and more than double the 1.07 million barrels per day in February. Higher prices and supply problems help explain China's decline in crude imports for May, but it is not clear how the country is adapting to such a "massive" drop. Refiners are likely to have changed their product mix in order to maximize the production of middle distillates, such as jet fuel and diesel. Light distillates, which are used in petrochemicals and plastics production, is likely to be affected by the shortage. China's Strategic Petroleum Reserve (SPR) is unlikely to be tapped yet, as the refineries are using commercial stocks of crude and refined products. This sharp decline in refined products exports from 777,000 to 463,000 bpd is keeping fuels more available on the domestic market. The problem is that the commercial inventories are unlikely to last for a long time, so China will have to eventually do one of three things or a combination of them. The SPR will either have to be increased, the refinery processing rate drastically reduced or it will need to tap into crude oil imports. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. ROI provides data-driven, thought-provoking analysis on everything from soybeans to swap rates. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X. These are the views of the columnist, an author for.
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Global stocks near record highs, as AI boom overshadows Middle East tensions
The AI boom drove demand on Monday, while news of new?attacks? in the Gulf tempered optimism for a reopening of Strait of Hormuz. This pushed up oil prices. Iran and the United States both claimed to have carried out military strikes, accusing each other of aggressive behavior as diplomatic efforts continue to try and end the three-month war. Donald Trump, the U.S. president, had been quiet about their progress before he posted that everyone should just "sit back and relax". On Saturday, Defense secretary Pete Hegseth stated that the U.S. would be ready to resume attacks against Iran if an agreement could not come about. U.S. forces had struck Iranian targets at the weekend, and Tehran responded. Kuwaiti defences intercepted missiles and drones, according to reports. Brent crude futures rose by nearly 3.3%, to $94.12 per barrel. This prompted a sale of government bonds. Government bonds were hurt by expectations that interest rates would rise to combat inflation spikes. S&P 500 Futures grew by 0.3% and Nasdaq Futures grew by 0.3% following the record-breaking week for both benchmark indices. Markets in Tokyo, Seoul, and other cities traded at or close to all-time highs. This was largely due to the demand for AI-related products. The market continues to hold on to the idea that Iran/US negotiations are still ongoing, despite the attacks by both sides. "A deal to 'end the Middle East war and reopen Strait of Hormuz is still possible," XTB Research Director Kathleen Brooks stated. Investors will have to "watch" how this all plays out as the market's sentiment could be affected by any delays in reaching an agreement. Data showing South Korea’s exports increased at their fastest annual rate in over four decades in the month of May, hitting a record $87.75 Billion. Nvidia's Jensen Huang will kick off the Computex show in Taiwan with a speech on AI on Monday. He is expected to elaborate on the latest product efforts of his company as well as Taiwan's role as a leader in the industry. PAYROLLS Ahead European stocks fell marginally for the day as gains in energy shares was offset by losses in airline and defence shares. The inflationary pressure from oil continued to hamper the bond market as U.S. 10 year yields rose by 1.2 basis points, to 4.465%. Yields on German 10-year debt increased 5 basis points on the day, to 2.98%. In a recent note, Mohit Kumar, Jefferies' chief European economist, wrote: "Market needs an open Strait of Hormuz agreement, which will provide the next leg of higher equity prices and lower rates." He said that as we approach June, the focus will be on the central bank meetings in the coming weeks. This week, a number of Fed members will be speaking. Also on Friday are the ISM manufacturing survey and the May payroll report. The market forecasts a steady increase of 85,000 jobs, which will keep the unemployment rate at 4,3%. The odds of a rise would be further reduced if the data were to get stronger. Chris Weston, Pepperstone's chief market strategist, said that the Federal Reserve speakers scheduled for this week will continue to promote a two-way approach to policy. Officials are "open" to both rate increases and rate reductions depending on new data. Expectations may grow that the Fed will gradually move away from its easing policy and toward a neutral policy stance over the next few months. The markets indicate that the Federal Reserve is 50/50 likely to have to raise rates by the end of the year, which has allowed the dollar to remain strong against a variety?of currencies. Most notably the Japanese yen. The dollar is up 0.1% against the Japanese yen, at 159.44. This is just below the 160-mark that many think could spark another round of government intervention to boost its currency. A survey released on Monday showed that the growth of euro zone manufacturing slowed in May due to a stagnant demand for goods and disruptions in supply chains linked to the Middle East conflict, which pushed up input costs. (Reporting and editing by Alex Richardson, Kevin Liffey).
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Shares of Revolution Summit rise as cancer drugs that have been tested show promise in improving survival rates
Shares of Revolution Medicines, Summit Therapeutics and Summit Therapeutics rose in premarket trading Monday after their experimental cancer treatment boosted'survival rates for patients' in late-stage clinical trials. Daraxonrasib is an experimental cancer pill that doubles survival when compared with chemotherapy. Summit's ivonescimab treatment, in collaboration with Akeso, a Chinese partner, helped lung cancer patients to live 15 percent longer than BeOne Medicines Tevimbra. On Sunday, the companies presented their data at the American Society of Clinical Oncology in Chicago. Summit's stock gained 3.6%, while Revolution's shares rose 7.3%. Summit's shares are essentially flat this year while Revolution's has almost doubled. Daraxonrasib was found to reduce the risk of death in patients with advanced pancreatic carcinoma who had already failed a round of chemotherapy by 60% compared to chemotherapy standard. Two?brokers called Revolution's trial data "compelling." Sean McCutcheon, Raymond James analyst, called the overall survival results of daraxonrasib a "homerun" and predicted rapid and widespread adoption in patients with advanced cancer. Patients with advanced non-small-cell lung cancer treated with ivonescimab, chemotherapy and Tevimbra lived on average 27.9 months compared to 23.7 months in the Tevimbra-treated group. Tyler Van 'Buren, TD 'Cowen analyst, said: "This is a significant advancement in a -setting where other treatments have never found success." Summit has the rights to the drug for the U.S.A., Canada Europe and Japan, through a deal worth up to $5 billion. Akeso holds the rights in?China and for the rest of world. Some analysts warned that there are still questions about the broader patient populations and whether or not this?study is applicable to China only. Faisal Khurshid, an analyst at Jefferies, said that investors will be looking to see if similar benefits are replicated globally in trials conducted in the U.S.A. and Europe. Reporting by Christy Santhosh from Bengaluru, edited by Pooja Deai and Sriraj Kalluvila
Sources say that Barrick Mining is considering a London listing while it negotiates the sale of its Africa business.
Two sources with knowledge of the matter said that Barrick Mining is evaluating a London listing for its African operations. A potential?all-share?transaction?with UK-listed Endeavour Mining was one option being considered.
Sources said that discussions are in an early stage, and there has not been a decision made. They added that it is uncertain whether a deal would materialise, and no announcement was expected soon. Market capitalization could reach $30 billion for the combined entity.
Barrick and Endeavour mining?didn't comment.
One source said that one scenario was being considered, whereby the Canadian listed miner would keep its Toronto listing and become a holding entity which would own shares in Barrick North America in New York, as well as a separate Africa focused entity listed in London. Another source familiar with Barrick's business operations said that if the move goes through, it would be similar to what Barrick did in 2000 when it spun off and listed its Africa division as Acacia, before later reacquiring Acacia. Barrick Mining announced earlier this year that it would'spin off' its North American operations with the primary listing to be in New York. Mark Hill, CEO of Barrick Mining, said that the company would also look to sell mines in Africa and places like Papua New Guinea where Barrick has no majority control but does have management control.
Barrick's Chairman John Thornton Hill is seeking to move Barrick away from risky areas, as investors are looking for?stronger return.
The move comes after the company settled a dispute that lasted a whole year with Mali’s military-led Government, which led to the ouster its former CEO Mark Bristow.
Endeavour is a London-listed company, which has billionaire Naguib Samiri backing. Endeavour has been searching for mining assets in order to expand the business. One banker working in mining M&A said that Endeavour's "presence" in Africa made it a good strategic fit for Barrick to sell its "rump". One banker in the mining M&A space said that combining Barrick's African assets with Endeavour could provide Endeavour with exposure to new areas such as Tanzania and Democratic Republic of Congo. It could also bring back exposure to Mali where Endeavour had previously left and might be reluctant to return.
After a period of operational challenges and governance issues, Endeavour has stabilized and is at a point where it can consider a bigger deal, according to the source.
Source: A merger between Barrick's African assets and Endeavour, a company with a market capitalization of $15 billion, could look like a merger on equal terms, possibly at little or no premium.
(source: Reuters)