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Bonds cheer lower inflation, while Asian shares fall on chipmaker drag
Asian shares dropped on Thursday, as chipmakers stumbled before results from bellwether TSMC. Bonds benefited 'from another benign reading of U.S. inflation which?lessened risk of an impending rate hike. As hostilities escalated in the Middle East, oil prices continued to rise. Washington has continued to strike Iran following the re-imposition of a naval blocade on its ports. Meanwhile, Tehran has warned of an "existential conflict" with America. Brent crude futures increased 0.6% to $85.45 per barrel, adding to the 12% gain this week. The quarterly earnings of Taiwan Semiconductor Manufacturing Co. (TSMC), world's leading manufacturer of advanced AI chip, are the focus. The company's net profit is expected to increase by 59% for the period April-June, marking a fifth consecutive quarter of record earnings. Investors are not happy as ASML shares, the dominant global supplier of equipment used to manufacture high-tech computer chip, ended 0.4% lower despite it raising its sales forecasts for 2026 and pledging a capacity increase. Brian Heavey said, in a JPMorgan note, that he was "seeing aggressive pullbacks in Memory/Hardware". Don't believe there is a 'negative headline' that's driving the semis/hardware sale. "I think it just shows how high semis earnings are." The?selling spread to Asia. MSCI's broadest Asia-Pacific index outside Japan fell 1.7%, while South Korea's KOSPI dropped 6.3% due to SK Hynix's 11% drop and Samsung's 8% decline. Japan's Nikkei dropped 3%. Taiwanese stocks fell by 0.5% while China's Hang Seng Index rose 1.2%. The South Korean central bank increased interest rates to 2.75 percent on Thursday for the first increase in three-and-a half years. This was done to stabilize a falling won and to combat persistent inflationary pressure. The decision was mostly as expected. Wall Street gained overnight, as investors shifted from semiconductors to Magnificent Seven and banks following strong earnings by major lenders. However, Asia is more susceptible to the chip selling-off due to its greater exposure to "semiconductor" stocks. BONDS CHEER COOL INSFLATION The surprising softness of the U.S. consumer inflation data in June was added to the positive figures for the previous day. Markets now price out the likelihood of a rate hike by the U.S. Federal Reserve within the next month to only 10% from 43% at the beginning. The pullback in inflation will likely only be temporary as oil prices are expected to rise due to renewed Middle East hostilities. The Wall Street Journal reported that President Donald Trump was leaning toward expanding U.S. operations in Iran and sending ground forces. Bond investors are however focused on the cooler inflation data. The yields on two-year Treasury bonds increased by 2 basis points, to 4.1493%. They had fallen 14 bps in the previous?two days. Ten-year yields remained at 4.5593% after falling 7 basis points over the last two days. The dollar fell against all currencies except the yen. The dollar index was steady at 100.48 after dropping 0.4% overnight, to the lowest level since June 18. The yen was hovering at 162.08, not far from its 40-year low 162.84, as speculators remain cautious of Japanese intervention. The pound reached a two-month high on the expectation that Andy Burnham will choose a fiscally conservative Finance Minister, if he is named Labour Party leader this Friday. The pound rose 0.1% to $1.3538 after a 1% surge overnight. Gold remained at $4,055 per ounce.
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El Nino could affect growth, warns Peru's central banking chief after weak May GDP
The chief of Peru's central banking Julio Velarde warned on Wednesday that El Nino would "likely" weigh on economic activity in the coming months, as it did in May when the country recorded its lowest growth rate for the year. According to data released by the national statistics agency INEI in May, Peru's GDP grew 1.8% from a year earlier. This is below the 3.2% predicted in a survey and slower than April's 3.73% growth. Velarde stated that "Perhaps, the figures we will see in 'the coming months won't be as?good because they are derived?from an existing natural phenomenon." He added that the overall economic climate remained favorable due to the "exceptional" price of the minerals exported by the country. The 73.1% drop in fishing output was the main factor behind 'the slowdown'. Warmer surface waters, linked to El Nino, pushed fish like anchovies deeper into the water. INEI reported that the manufacturing output fell by 10.7% as climate change affected the production cycle of textile?industry. Industry groups have warned that a strong El Nino can affect cotton production and lower the demand for winter clothing. It could also complicate logistics due to flooding and rains.
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Sources say that China refineries are opting for less expensive crude oil in order to reduce their fuel oil consumption.
Industry sources say China's fuel demand will take a long time to recover after its imports hit a record low. Refiners reduced production and opted for cheaper crude as a result of the U.S. - Iran war. China's low demand for high-sulphur oil (HSFO), one of Asia’s largest importers, is expected to limit prices. This is despite the fact that the market has strengthened after Washington and Tehran intensified their attacks on the Middle East disrupting Gulf supply through the Strait of Hormuz. LSEG data show that the Asian refiners' margins for 380 centistoke HSFO rose to a discount of less than $2 a barge to Brent on March 13, which was the highest since more than a year. The?380cst HSFO crack for Dubai has risen to a premium of over $3.25 a barrel. A trading source at a Chinese refiner who refused to be identified due to commercial sensitivity said that "Regular crude oil currently trades at ICE levels between minus $5 and minus $8 a barrel." Fuel oil is no longer able to compete. In June, China's refinery run rates plummeted by a decade due to a weak domestic market and the export restrictions on refined oil products that followed the outbreak of conflict. The conflict has lowered the demand for fuel oil as an alternative to crude oil. Imports hit a record low in May According to LSEG data dating back to 2004, China's total imports of fuel oil in May fell to a monthly record low of approximately 559,000 metric tonnes (115,000 barrels). HSFO is a fuel that can be refined or used in marine fuel. According to Vortexa's ship-tracking data, June fuel oil imports totaled 700,000 to 800,00 tons. This is a slight increase from May, but still well below the typical import volume. In the first quarter 2026, China's fuel imports were about 2.29 millions tons per month compared to 1.8 million tons in 2025. Analysts and traders said that fuel oil imports may have recovered slightly in June and into July. However, they mainly used to refuel ships, not refineries. Chinese refineries import fuel oil primarily from Russia, as well as the Singapore and Malaysia trading hubs. According to Asian trading sources and refinery, the price of crude oil has also become more competitive. Traders said that spot offers for Russian straight-run oil fuel are currently muted due to low interest in buying. Russian fuel exports also fell as Ukraine intensified its attacks on Russian infrastructure. Chinese refiners are turning to discounted crude to take advantage of the additional?crude importquotas that were issued this year. Analysts said that while Beijing has eased the export restrictions for refined products, it is not clear whether this will lead to a rapid recovery in run rates or feedstock purchases.
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The fourth day of rising oil prices as a result of US strikes against Iran has raised fears about wider conflict
The price of oil rose on?Thursday for a forth consecutive day after a wave of U.S. strikes?on Iranian installations fueled fears of a full-scale conflict and supply?disruptions? in the Strait of Hormuz. After reimposing its naval blockade, the United States hit?Iran?s?coastal defenses and missile sites, on Wednesday. Iran, meanwhile, threatened to cut off regional energy exports by saying that it was in a "existential conflict" with America. Brent crude futures were up 33 cents or 0.4% to $85.28 a barge by 0026 GMT. U.S. West Texas intermediate futures were up 42 cents or 0.5% to $80.02 a barrel. Both benchmarks rose about 0.3% Wednesday, and hovered near the one-month highs?touched Tuesday. Hiroyuki Kikukawa is the chief strategist at Nissan Securities Investment. He said that "while mediation efforts are continuing by neighbouring nations and the consensus is that a full-scale conflict is unlikely," WTI could rise to between $85-$87, depending on the outcome of the conflict. The oil prices rose this week, as the Strait of Hormuz was a major supply hub for oil and natural gas before the war. Last week, hostilities between Iran and the U.S. re-emerged, threatening to undermine a fragile truce that had been reached in June following several months of fighting. Analysts claim that Iran may have signalled its intention to use Houthi allies to close the Bab el-Mandeb Red Sea gateway through?Yemen, opening a front against Washington. This would put two of 'the most vital energy arteries in the world at risk. Goldman Sachs stated that Brent could reach $110 if the Gulf exports continue to stagnate, but could drop into the $60s at year's end if tensions ease and production recovers more quickly than expected. The U.S. Energy Information Administration reported that crude inventories dropped by 1.7m barrels during the week ending July 10 compared to analysts' expectations of a 2.6m-barrel draw. (Reporting and editing by Shri Navaratnam.)
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BHP misses quarterly copper output estimates, flags lower Chilean production
BHP Group announced a larger-than-expected decrease in fourth-quarter copper production on Thursday. This was due to lower production in 'Escondida' and 'Pampa Norte. The Visible?Alpha estimate for the quarter ending June 30 was 492.7 Kt. The same period last years, 516.2 Ktreported. The unexpected failure of an underground conveyor belt in Carrapateena has impacted the production at Copper South Australia. It is expected that the recovery process will result in a mine 'production impact of up to 8 weeks. The copper production for fiscal year 2027 is forecast to range between 1,650 Kt to 1,800 Kt. This will be below the fiscal output of fiscal 2026, which was 1,952.8 Kt. BHP's Western Australia iron ore operations produced 74.8 Mt of iron ore on a quarterly basis, which is below Visible Alpha's consensus of 75.1 Mt and the 77.5 Mt that was produced during the same quarter a year ago. In fiscal 2026, the average realised price for iron increased?3%, to $84.56 wet metric tons. The miner announced that $900 million had been approved for the Ministers North Iron?Ore Project in Pilbara. First production is expected to begin in fiscal year 2029. Reporting by Sneha Kumar and Sherin Sun in Bengaluru, editing by Pooja Deai
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Russia claims that a Ukrainian drone killed the chief engineer of Zaporizhzhia Nuclear Plant
According to the head of Russia’s state nuclear corporation Rosatom, a drone from Ukraine killed the chief engineer of the Russian-controlled nuclear power station in Zaporizhzhia near the station. Alexei Likhachev said in a press release that a Ukrainian drone struck a car transporting engineers between the site of the plant and Enerhodar. The engineer, Alexander Yakovlev and driver were killed. In the first weeks following the Russian invasion of Ukraine in 2022, Russian forces captured the largest nuclear power plant in Europe, with six reactors. Since then, each side has regularly accused the others of military actions which endanger nuclear security. Enerhodar has been the target of many attacks, as it is home to most of nuclear station staff. Likhachev said that the failure of Western nations to respond to attacks on the plant "encourages the escalation?of terrorist acts by the Ukrainian Government." He added that attacks in the area have killed 13 people and wounded 48 over the last 2 1/2 months. Rafael Grossi of the International Atomic Energy Agency (IAEA), the U.N.'s nuclear watchdog, condemned this incident without mentioning Ukraine or Russia. Grossi stated that the incident "represents a serious threat to nuclear safety, as it represents an unacceptable attack against the plant and its managers." Maria Zakharova of the Russian Foreign Ministry wrote on Telegram: "This is an unacceptable attack against the plant and its management, seriously threatening nuclear safety." Last Friday, the Kremlin accused Ukraine of intensifying what it referred to as "terrorist" actions against a?power plant. Dmitry Peskov, the Kremlin's spokesman, accused Ukraine of launching strikes against civilian infrastructure as well as infrastructure directly connected to the power plant. Ukraine has not yet commented on this latest incident. (Reporting and Editing by Kevin Liffey; Ron Popeski, Sanjeev MIglani, and Sanjeev Liffey)
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Sources: Congo Ebola outbreak disrupts US backed mineral talks
Three people with knowledge of the situation said that a 'worsening Ebola epidemic' in 'the Democratic Republic of Congo' is causing travel disruptions and delaying meetings related to a U.S. supported critical minerals partnership designed to loosen China's grip on Congo's copper and cobalt reserves. Travel to and from Congo has become increasingly difficult due to the Ebola outbreak. Health concerns and quarantine regulations have forced officials and investors to delay visits. Congo is the second-largest copper producer in the world, and has significant deposits of germanium and lithium. It's a major source of energy transition minerals, and it's a focal point of global competition. Separately, the United States and China have expanded their mineral partnerships with Kinshasa in order to secure access and boost investment. According to data from the government, since mid-May, 2,011 people have been infected and 754 killed by this outbreak. The U.S. Embassy in Kinshasa warned Americans on July 11, not to travel to Congo for "any reason" due to Ebola, and warned travelers that they could be quarantined up to 21 days at their expense if exposed. Washington, according to a spokesperson for the U.S. State Department, "has no greater priority than the safety of Americans." In an email, the department stated that the U.S. is working to contain the outbreak and advance its minerals partnership with Congo. It cited progress made on the Lobito Corridor as well as Kinshasa’s commitment to facilitate U.S. investments. The outbreak is 'delaying the U.S. - Congo minerals partnership and deal discussions have been postponed. Sources said that a Washington gathering scheduled for last month, to review U.S. interest in Congolese project, had been postponed. However, discussions have continued elsewhere including London. Sources requested anonymity as they were not authorized by the government to speak publicly about this matter. The Congolese government didn't immediately respond to comments. A consultant revealed that some?investors? and?officials? have moved meetings to Paris and Brussels. A planned review of Congolese project in July was cancelled due to the fact that key partners from the U.S. were unable travel.
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Sources say that Russia is seeking more gasoline from India following the Ukraine attack on refineries
Two sources with knowledge of the situation said that top Russian energy companies approached Indian refiners to request more gasoline following Ukrainian strikes which knocked out a large portion of Russia's refueling capacity. India is Russia's largest buyer of seaborne crude oil. Moscow's attempt to secure Indian gasoline represents a reversal of their energy relationship and highlights the impact of the Ukrainian attacks. Moscow is experiencing its worst gasoline shortage. One source with knowledge on the subject said that at least one cargo of Indian gas has already been shipped to Russia. More are expected. Nearly 40% of Russia's refinery capacity is unlikely to return until the next two months, if no more attacks are launched. Source: Rosneft Gazprom and Lukoil have all contacted Indian counterparts including state and private refiners. Any supplies will be routed via traders if a deal is agreed. Three Indian state refineries have said that Russian companies approached them to buy more gasoline, but they do not have any surplus to export. The three sources, as well as the two others who spoke to us on condition of anonymity in order to discuss sensitive issues, said that Russian companies had approached them for more gasoline. However they did not have any surplus volumes available for export. The three Russian oil companies and the Russian energy ministry have not responded to email requests for comment. The Indian oil minister Hardeep Singh Puri stated earlier this month that Indian fuel companies did not sell fuel to Russia, but that it is possible that Russia purchases fuel of Indian origin from traders. SHIP-TOSHIP TRANSFERS Sources familiar with the situation said that any additional supplies from India would be able to reach Russia via ship-to-ship transfers. Source: Russia will seek diesel supplies if Ukrainian attacks disrupt further refinery capacity. However, there are enough supplies for now. Early this month, it was reported that traders had sold gasoline to Russia produced by Indian refiner Nayara Energy which is owned in part by Rosneft. Kpler, citing satellite images in a report, said that between June 18-20 the tanker Agni was loaded with 42,000 tons of gasoline at Nayara’s?Vadinar Port. The cargo was then transferred from the ship to the vessel 'Garnet' near Damietta Light (Egypt) between July 6-7. Garnet should reach Vitino, Russia around the 26th of July according to ship tracking agency?. Shipping sources reported that another tanker Varg, which was loaded with gasoline at Nayara’s Vadinar Port, was headed for Suez. The cargo will then be transferred onto another vessel in the Gulf of Egypt, and shipped to Russia. Nayara said it "has not sold or has plans to sell fuel?to Russian companies". In response to questions, Nayara Energy said that it was committed to "serving the Indian Market and meeting the Demand for Fuels?across India's length and breadth." As the largest private sector fuel retailer in the country, our top priority is to supply optimum supplies to more than 7,000 stations as well as other channels such bulk customers.
BHP's quarterly iron ore price rises despite China's purchasing curbs
BHP Group reported record iron ore production and higher realised prices on Friday, despite the purchasing restrictions imposed by China Mineral Resources Group during tense contract talks earlier this summer.
BHP's Western Australia iron ore operations produced 291.2 Mt of iron ore on a 100 percent basis, which is higher than the 290 Mt.
In fiscal 2026, the average realized price for iron increased by 3% to $84.56 a wet ton. BHP didn't mention any price impacts from its annual negotiation with China's State Buyer, after reporting in April that?its biggest client had lifted its prohibition on certain products.
China's state-owned buyer is flexing his muscles in annual price negotiations with big iron ore miner companies. It wants to take advantage of its size and pay less for the ore to lower costs for its steelmakers.
The miner expects to produce between 284 and 296 Mt of ore in fiscal 2027 from its Western Australia operations.
Visible Alpha's consensus for the quarter ending in 2026 was 75.1 Mt. The 77.5 Mt production of the same period last year was based on the Visible-Alpha consensus. BHP's Port Hedland Iron Ore Operations, which handles $80 million in iron ore per day, is set to strike later on Thursday. Negotiations are expected to resume next Tuesday.
COPPER PERFORMANCE & OUTLOOK The quarterly production of Copper, which BHP views as a source of long-term value growth, reached 491,900 tonnes in the quarter ending June 30. This was largely in line?the Visible Alpha estimation of 492,700 tones and less than 516,200 tones reported last year.
Major miners are focusing more on copper as the demand for it increases, driven by the rapid growth of power consumption by AI data centers and the transition to cleaner energies.
The underground conveyor belt at Carrapateena was unable to function properly last quarter due to a 'unexpected failure'. This process of recovery and replacement is expected to affect mine production for eight weeks.
The copper production is expected to fall by as much as 15% next year, due to a predicted grade decline at Escondida.
BHP projected that unit costs for fiscal 2026 would be lower than its forecast range. This shows a strong cost management, and resilience to a challenging macroeconomic climate.
Separately the miner announced approval of $900 million for the Ministers North Iron Ore?project, in Pilbara. First output is expected in fiscal year 2029.
Early trade saw shares fall more than 1%, while the sub-index for mining fell by a little over 1%.
BHP will release its annual results on 18 August.
(source: Reuters)