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The ECB predicts that the Iran energy shock will have a 0.4-point impact on growth in the Eurozone.
According to the European Central Bank, based upon 'current energy prices' and 'previous episodes, it is expected that the energy shock from the Iran war will reduce the economic growth in the eurozone by 0.4 percentage point this year. Fuel prices have increased for energy-importing Euro zone due to the attack on Iran, and the resulting closure of the Strait of Hormuz. The ECB has reduced its growth estimates two times since March and raised borrowing costs this month. The ECB economist Johannes Gareis examined a series?of oil shocks since 1985 along with indicators of economic activity and private consumption, as well as consumer prices, short- -and long-term rates of interest, to estimate the impact of 'the Iran conflict. According to an ECB Bulletin, "Using the current 'oil futures curve' and assuming geopolitical supply shocks will account for the majority of implied oil price fluctuations in 2026," the war in the Middle East could reduce the real GDP growth in the euro zone by 0.4 percentage points in the first year. The impact of the episode is expected to increase gradually over the course of the year, unlike in previous episodes. This is due to the substantial rise in oil prices that's expected in the second quater of 2026, and the longer-term path implied by the futures curve." The ECB anticipates that the eurozone economy will grow by?0.8% in this year's, 1.2% next and 1.5%?2028. Since these projections were made public, the United States has signed a ceasefire agreement with Iran and started talks. Reporting by Francesco Canepa, Editing by Kevin Liffey
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Stocks stabilize as technology recovers, dollar gains
On Wednesday, stocks recovered from a plunge in technology shares on the back caution over overstretched AI values. Meanwhile, crude oil prices dropped to four-month lows while the dollar rose to a one-year high. The technology stocks that were hard hit on Tuesday edged higher ahead of Micron's earnings, whose chips are key to the AI boom. Investors chose the dollar as a safe haven because sentiment was fragile. Michael McCarthy, a market analyst with Moomoo Securities Australia, said that the price action on markets in the past seven trading days was alarming. Not only when it fell, but when it rose as well. When markets move rapidly in either direction it is a sign that there's instability. The wild swings of Asian stocks overnight, which saw South Korea’s Kospi reverse Tuesday’s 10% drop into a 3.5% increase on Wednesday, did not translate to high volatility in Europe. DOLLAR 'FEAR PREMIUM' CITED The regional stock market was essentially unchanged for the day. The?15% drop in shares of Rheinmetall after media reports that the German government was planning to cancel a multi-billion euro frigate project delayed for years, was partially offset by gains made in heavyweight luxury and tech stocks. U.S. Stock Futures rose between 0.2% and 0.4%. The dollar rose against a basket major currencies for the third day in a row, reaching its highest level in over a year. The strategists at Scotiabank believe that the dollar is overvalued, given the expectations of at least one rate increase from the Federal Reserve in this year. This has boosted the currency. They said that the dollar continues to enjoy a 'fear premium,' due to persistent concerns about geopolitics in general and the U.S./Iran Conflict specifically. STRAIT of HORMUZ On Wednesday, oil prices dropped more than 2%, continuing this week's losses, and trading at near four-month lows. This was on the back of signs that more tankers stuck in the Gulf will be moving?out of Strait of Hormuz. The outlook is uncertain, as the U.S., and Iran, have given conflicting reports on the key elements of the peace agreement, such as nuclear inspections, and control of strait. The yield on the benchmark U.S. 10 year notes fell by 1 basis point to?4.48%. The dollar's strength was a major factor in the euro's decline on Wednesday. Investors lowered their expectations that the European Central Bank would raise rates more than they had expected this year. They also increased the likelihood that the Federal Reserve will increase borrowing costs. The euro traded at $1.1345, its lowest level in over a year. It was down for the third day. The euro has already lost more than 2.5% so far in June, and is on track to have its worst month since July. The yen also fell on the day. It traded around 161.695. This kept markets on edge over a possible currency intervention designed to support the?battered Japanese yen. The minutes of the Bank of Japan’s latest?meeting at which interest rates were raised to a 31 year high of 1.00% showed that policymakers discussed the rising inflation risks. Some called for faster rate increases in order to bring borrowing costs closer to levels considered neutral to the economy. Gold prices continued to fall, with the dollar rising, and fell 1.5%, or $4,045 per ounce. This is near two-week lows. (Additional reporting from Satoshi Sugiyama in Tokyo Editing done by Lincoln Feast.)
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SK Hynix to list in the US for $29 billion as AI demand increases
SK Hynix, a South Korean company, said it planned to?raise up to $29.4billion through a U.S. -stock market listing. This would be one of the largest?listings globally. If completed at the top end, the deal would be the second-biggest share sale after a record $85.7 billion initial public offering by SpaceX earlier this month, surpassing Saudi Aramco's $25.6 billion IPO in 2019and Alibaba'ssimilar-sized offering in 2014. The planned listing reflects a strong global appetite for AI linked equities even as volatility rises across U.S. technology and semiconductor markets. This comes after Elon Musk's SpaceX and other record-breaking equity offerings in the sector. It also precedes?expected IPOs by AI-focused companies such as Anthropic and OpenAI expected later this year. Tech giants are raising money through equity and debt to finance a costly expansion in?AI infrastructure. Alphabet, the parent company of Google, announced earlier this month that it hoped to raise $80 Billion in equity offerings. Access to U.S. Investors The most appealing benefit for investors will be that SK Hynix, along with Micron, will trade on 'Nasdaq, giving it an opportunity to re-rate in the U.S. Market," said Ryu You-ho a senior analyst from NH Investment & Securities. Investors are increasingly linking the two valuations. Memory chip makers, valued at $1.2 trillion now, have been the biggest beneficiaries of AI boom. Shares of the memory chip maker have quadrupled in value so far this year, outperforming both Samsung Electronics and U.S. based Micron. This week, the company surpassed Samsung as South Korea's top-valued company. It is a major supplier of high bandwidth memory chips that are used in AI systems for customers like Nvidia and Google. CLSA Senior analyst Sanjeev Rana stated that expectations of a U.S. IPO have already contributed to the stock's rise, along with strong demand for high end memory used in AI Data Centres. Rana stated that if they could get a valuation multiple that is similar to Micron for example, the local shares would also have to reflect this. This kind of expectation will be there. "I wouldn’t be surprised if the rally continues." The share price surge is a dramatic turnaround for the chipmaker, which nearly collapsed in debt two decades ago. It also helped to increase the size of the sale from an initial plan that a source estimated could raise up to $14 billion. CAPACITY EXPANSION SK Hynix announced that the proceeds of 'the listing of American depositary Receipts' will be used to build chips factories in South Korea, and to purchase chipmaking equipment like an extreme ultraviolet scan made by Dutch equipment manufacturer ASML whose shares rose 1.1% on Tuesday. The second-largest memory chips maker in the world plans to list up to 17,79 million shares worth 45.45 trillion Won ($29.43 Billion) on Nasdaq. Ten ADRs are equal to one common share. The final price will be determined after bookbuilding. However, the initial range of pricing is based upon Tuesday's close of 2.555 millions won ($1,651.69). The ADR listing will not change our opinion of SK Hynix, or the memory sector," said Gary Tan. He is a portfolio manager with Allspring Global Investments in Singapore. The?headline raise in capital appears large, but it implies limited dilution. It is modest compared to the mid-term capex plan. SK Hynix announced that BofA Securities is managing the offering. Citigroup Global Markets (including Goldman Sachs), JP Morgan Securities and Goldman Sachs are also involved. ($1 = 1,546.9000 won)
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SK Hynix, a South Korean company, will raise up to 29 billion dollars in US listing
SK Hynix, a South Korean company, said it plans to raise as much as 45.45 trillion won ($29.43billion) through a U.S. IPO. The company is aiming to increase its 'investor base' and 'production capacity for artificial intelligence chips. The listing of American depositary receipts, if completed to the top, would be one of the largest ever in history. It is comparable in size with Saudi Aramco’s IPO scheduled for?2019. Investor and analyst reactions to the latest news: CLSA SENIOR ANALYST SANJEEV RANA "If (SK Hynix can) get a valuation multiple that is similar to Micron for example, the local shares will also reflect that. So that?kind?of expectation?is there." "I wouldn’t be surprised if this rally continues." NICK ?FERRES, CHIEF INVESTMENT OFFICER AT VANTAGE POINT ASSET MANAGEMENT IN SINGAPORE: The capex boom is being funded by a number of companies in the AI sector and adjacent AI sectors. Hyperscalers are no longer relying on free cash flow. OpenAI (and Anthropic) are also raising. Alphabet, Meta and others have also announced that they will be raising equity. Hynix's decision to do so is not only logical, given the high value of their stock, but also shows that a supply will be coming. This is more likely to occur when equity values are high. CHRISTOPHER FORBES, DIRECTOR OF ASIA AND THE MIDDLE EAST FOR CMC MARKETS We're now in an infrastructure market. It's GDP-accretive, as you get the "flywheel" effect from spending on tangible assets. "Capex spending is a major factor in the U.S., and Korea's success." Reporting by Hyunjoo Ji and reporters. Editing by Louise Heavens
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EU strengthens Europol to combat digital and cross-border crime
The European Commission announced on Wednesday a series of'measures' to help Europol, the EU law enforcement agency, respond more quickly and effectively to cross-border crime. Europol warned in 2017 that organized crime groups were using AI scams to target their victims. Many governments continue to make it a priority to combat smuggler gangs who illegally transport migrants across Europe. * The Commission stated that 'Europol will create a?shared data space? and a sovereign cloud to enable investigators to more easily collaborate on joint cases. The Commission announced that the agency would also open support offices in EU member states, which will be staffed with officers who have prior Europol experience. * Europol will improve its coordination with Eurojust (the?EU's judicial co-operation body) and deepen its cooperation with international partners. * According to EU tech chief Henna Virkkunen, "Criminals have mastered the art of exploitation in the digital world and are able to operate effectively without limitations across borders." She added: "We are strengthening Europol and Eurojust to?ensure that Europe can respond more quickly... share information a lot more effectively and bring criminals into justice faster." (Reporting and Editing by Ros Russel)
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Indian stocks rise as banks and oil prices fall; RBI eases interest rate concerns
Indian shares rose on Wednesday on the back of a fall in crude oil prices, and an eased concern about interest rate hikes at home. Meanwhile, heavyweight banks saw their profits rise after the central banking system allowed them to borrow against foreign currency deposits. Brent crude futures fell to their lowest level since February 27, just a day before the Iran War began, as signs suggested that oil tankers stranded in the Strait of Hormuz were about to leave. Reserve Bank of India Governor Sanjay Malhotra said to ET Now that rate hikes were premature as the central banks did not see signs of inflation spreading. The longer-term reduction in borrowing costs may support corporate earnings, consumer spending and equity valuations. The Sensex rose 1.04%, while the?Nifty 50 gained 0.83%. "The decline in crude oil has powered market gains, as they have brightened both the outlook for the economy and the markets after a difficult spell," said Aishvarya dadheech. She is the founder and chief investment office at Fident Asset Management. The central bank's actions, including Tuesday's clarification, to support the rupee, banks and boost foreign inflows, has sparked renewed interest, as these measures could help deposit and credit growth. After the RBI clarified banks could lend to non-resident Indians using foreign currency deposits, lending flexibility improved. The index heavyweights - HDFC Bank and ICICI Bank - climbed 2.5% and 2.6% respectively. State Bank of India gained 1%. Eleven out of 16 major sectors rose. The larger small-caps, and mid-caps, gained 0.4% and 0.10% respectively. Trent rose 3.3% following a?raised price?target by HSBC, and textile stocks soared after Motilal oswal began coverage with a projection of export-led earnings. Since the U.S. reached a preliminary agreement with Iran, domestic benchmarks have risen by about 4% each session. Crude prices fell 16.6% in the same time period. Two analysts stated that with crude prices falling, the monsoon has become the most important near-term market indicator, due to its implications for consumption, inflation, and the markets. The monsoon rains are running 43% below the average, which could lead to the weakest rainfall in 11 years. Bharathrajeswaran, reporting from Bengaluru. Mrigank Dhaniwala. Sonia Cheema. Harikrishnan Nair.
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UN Guterres: Finance ministers must prioritize climate risks
United?Nations?Secretary-General Antonio Guterres stated on?Wednesday? that climate adaptation should be treated as an important priority by governments -- and valued appropriately by the financial system. As climate risks increase and funding gaps widen, this must become a top priority. Guterres said that as droughts, flooding and other extreme weather conditions affect communities around the world, adaptation has been chronically underfunded and undervalued. "Finance Ministers, Central Banks, Planning Ministries and Public Investment Authorities must 'treat climate risks as core economic policies in order to mobilize greater domestic resources," said he, urging government to 'incorporate climate risk into everything from fiscal policy through to regulation. Guterres stated that closing the gap would require a wide range of tools. These include?levies against polluting industries and blended finance structures, as well as guarantees to encourage private investments. He called for a windfall tax on fossil fuel companies with the proceeds going to adaptation and climate-related damages and losses. In the context of reforming the world's Development Banks, he said that their shareholders should give them "far more firepower," which includes increased capital, in order to increase lending for resilience building projects. The poorest nations are most vulnerable to climate impacts He said that the need for more public funding and grants is greatest in developing countries. These are the ones most vulnerable to climate change impacts, but also have the lowest capacity to prepare. According to the UN Environment Program, these countries need between $310 and 365 billion dollars a year in 2035. Yet, they only received about 26 billion dollars?in 2023. Guterres stated that the financial system needs to change its approach in valuing resilience, especially for private capital. "Countries who invest in reducing risk should not be punished," he said. He called on insurers, credit rating agencies, and regulators to reflect the adaptation efforts through lower borrowing costs, better insurance terms, etc. He said that better preparation is needed before disasters strike, such as universal access to early warning systems, and affordable pre-arranged financing, like insurance. He said: "You can't let climate disasters become fiscal disasters." "Adaptation is a necessity for economic growth, security, and climate justice." (Reporting and editing by Tommy Reggiori Wilkes, Ros Russell and Simon Jessop)
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Sources: Brazil's CSN is in discussions with China's iron ore state buyer
Two'sources' with knowledge of the matter said that CSN Mineracao, a Brazilian miner and steelmaker, is in talks to establish a supply deal with China's iron ore buyer. This is another sign that Beijing wants to tighten up its control over iron ore prices. China Mineral Resources Group plans to become the exclusive agent for some of CSN's Iron Ore cargoes that are sold in China, according to one source. This is similar to a deal struck with Roy Hill (now part of Australia's Hancock Prospecting). China Mineral Resources Group has negotiated better sales terms between steelmakers and miners in its deals with other companies, such as BHP. CSN and CMRG didn't immediately respond to comments. CMRG, which was established in?2022, was created to centralise China’s iron ore purchasing and secure better terms with upstream mining giants. CSN, with 45.5 million metric tonnes of iron ore produced in Brazil last year, is a major producer, but its output is lower than that of the '250 million tons and more produced by majors such as Australian BHP. The sources asked not to be named as they were unable to talk to the media and their 'talks' are confidential. Reporting by Staff, Editing by Milla Nissi Prussak
China will use a whistleblower hotline in order to catch mineral smugglers.
China announced Wednesday plans to create a 'whistleblower hotline' that will encourage citizens to report the smuggling?of restricted?critical minerals. Beijing is continuing its crackdown against a sector which has given it so much diplomatic leverage.
The Ministry of Commerce will reward organisations and individuals who report violations of export controls, such as transshipment.
Callers must call during normal business hours. The hotline is closed for 2.5 hours over lunch. You can also submit information?via a?form online.
China processed the majority of rare earths in the world and used its production control to great diplomatic advantage during the U.S. trade war.
Due to massive smuggling that undermined previous rounds of Chinese export controls, the latest restrictions coincide with a "state-led crackdown" on attempts to circumvent regime.
China's spy agency claimed last year that foreign agents colluded with domestic lawbreakers in order to steal rare Earths. They vowed to crack down on this practice.
Last month, two?Japanese citizens suspected of?smuggling?rare earths?were detained. Reporting by Lewis Jackson, Beijing Editing Tomasz Janowski, Jan Harvey
(source: Reuters)