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Morning Bid Europe-Oil batters Bonds as AI Burns Cash
Stella Qiu gives us a look at what the day will bring for the European and global market. We're back to war watching as if June's ceasefire had never occurred. Investors were woken up by a sudden spike in oil prices, which topped $100 per barrel, after weeks of ignoring simmering tensions between the U.S. and Iran. Inflation is now back on everyone's list of fears. The Red Sea was the source of shock, as Iran-aligned Houthis sank two Saudi oil tanks, threatening global oil supplies by cutting off another important Middle East oil artery. Donald Trump's threat of "major punishment" was not subtle. It fueled fears that the conflict would spread. A protracted energy crisis could destabilize inflation expectations and exacerbate global inflation, which is the worst nightmare for central banks. Brent has risen by?nearly 40 percent this month. The 30-year Treasury yields are now on a march towards a 19 year high of 5,201%. Benchmark 10-year rates reached a new high of 4.7135%, which is 18 months old. All hopes for central bank policy ease have been dashed. The markets now see a 1 in 3 chance of the Federal Reserve raising rates as early as next week. This is a huge change from just a week earlier. They are also fully priced for 2 moves by January, next year. Oil and interest rates have sent Asian shares into the red. South Korea's KOSPI is down 6%, and Japan's Nikkei is down 2.8%. Intel Corp.'s stellar results, which sent its stock up more than 4% following the bell, didn't help local semiconductors. Investors are becoming uneasy over the tech giants' plans to increase their capex. This is adding to the gloom. Tesla shares fell around 14% after the company reported its first cash burn since two years. Alphabet shares fell by about 7% as the Google parent also burned through cash to ramp up AI spending. Trump's latest tariff wheeze was barely noticed in the midst of all the chaos, but it is a bit odd that they are making U.S. consumers pay more for imported goods. Nasdaq futures have a slight decline, but European stock exchanges will open steady. PMI surveys are due in Europe, Britain, and the United States. It is seen that the?U.S. The?U.S. Investors could push the odds of a Fed rate increase in July to 50/50 if they see any upside surprises. The following are key developments that may influence the markets on Friday: -- UK Retail Sales data for June Flash Manufacturing, Services and Composite PMIs for July in the UK, EU and US
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Copper Heads Weekly Rise Despite Mideast Pullback
The price of copper is expected to rise despite the fact that it has fallen from its mid-week peak. An escalation in the Middle East conflict will increase inflation concerns and weigh on the macroeconomic outlook for the global economy. Benchmark?copper for three months on the London Metal Exchange remained stable, adding 0.11% to $13,609.5 per metric tonne by 0300 GMT. The Shanghai Futures Exchange's most traded copper contract fell 1.4% to 104,530 Yuan ($15,426.51) per metric ton. Prices have risen 0.63% at the LME, and by 1.39% at the SHFE, since the beginning of the week. However, they are still down from their midweek highs, when the metal surged on demand expectations, inventory pressure, and supply concerns. The Middle East has had a negative impact on demand and copper prices. The Yangshan "copper premium" The previous session saw a drop in a measure of interest in importing steel to China, the world's largest consumer. Stocks at LME-registered storage facilities For the first time, metal prices were stable since two weeks ago when a wave of warrant cancellations began. Brent crude has risen above $100 per barrel for the very first time since last May, after Yemen's Iran aligned Houthis attacked two Saudi oil tanks in the Red Sea. Dollars rose, causing commodities in other currencies to be more expensive. Gold that does not yield a return fell by more than 2% as inflation fears from the war prompted bets to increase interest rates. This can have a negative impact on commodities because it dampens economic growth. Aluminium, zinc, and lead all fell in price. Nickel was barely changed at 0.04%. Tin also dropped 0.33%. Other metals on SHFE also dropped, including aluminium, zinc, lead, nickel, and tin.
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Wisconsin protesters demand justice after a man is killed by police
On Thursday, hundreds of protesters gathered in Madison, Wisconsin, to demand that police be held?responsible for the death of a man, which was captured by witnesses on video. Social media went wild with the shooting death of Corey Ruiz. Local community advocates and Wisconsin media outlets identified him as Black. This rekindled some of the anger that arose after the Minnesota police killed George Floyd in 2020 and other deaths which 'have raised questions about racism in police force use in the United States. The police said Ruiz was armed with a blade that injured one of the officers who wrestled Ruiz down. According to the video, during the struggle, the officer pulled out his handgun and shot what sounded like three shots from a close range. Demonstrators gathered late on Wednesday at the scene, and also at the Capitol where a concert outside was cancelled due to the protests. Demonstrators returned on Thursday to the scene, and placed flowers in the streets. The organizers introduced Ruiz's relatives, including his daughter, to the crowd. On Thursday morning, several protesters demanded that the officers should be jailed. They held up signs like "Corrupt cops also deserve to die !!!" A video from Wednesday shows a?man being wrestled by four uniformed officers amid shouts such as "Let him go" and "He has a knife." Patterson stated that an officer had used a Taser at some point to?try and subdue this man. However, for unknown reasons, it was not successful. Ruiz was stopped by police after reports that a man had been looking in parked cars. Patterson believes that a second call at the same time, about an "unlawful entry to a home", may have increased police presence. Patterson stated that the Wisconsin Department of Justice, Division of Criminal Investigation, is conducting an independent investigation into homicide. (Reporting and editing by Donna Bryson, Christopher Cushing, and Daniel Trotta from Vista in California)
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Japan's June core inflation increases, but remains below BOJ target
Japan's core price inflation rose in June, but it remained below the central bank's target of 2% for a fifth consecutive month. This suggests that firms have not yet aggressively passed on rising input cost to consumers. Analysts expect that consumer inflation will accelerate in the second half of this year, as the recent spike in producer prices, fueled by the rising cost of fuel and imports from the Middle East conflict, and the weakening yen, filters through to the rest the economy. Analysts say that the yen's decline to its lowest level in four decades is likely to increase inflationary pressures and maintain market expectations of future interest rate increases by the Bank of Japan. Sarah Tan, an economist with Moody's Analytics, said that the inflation outlook is heavily dependent on what happens in?the Middle East? and its impact on global commodities prices. The concern is that nominal wage increases may not keep up with inflation. This will impact real wages and consumer spending. "A renewed depreciation would intensify imported inflation." Data showed that the core consumer price index (CPI), excluding volatile food prices, increased 1.6% from a previous year in June, a rise that was in line with market expectations and faster than the 1.4% increase seen in May. This is partly due to the effect of the sharp drop in gasoline prices last year, caused by government subsidies. The data revealed that food inflation declined due to the falling price of rice. Meanwhile, service inflation fell to 1.2% in June from 1.4%, despite gains in wages. The BOJ closely monitors an index that excludes volatile fuel and fresh food, which is a better measure of inflation. It rose by 1.7% from a year ago in June after rising 1.8% in May. Next week, the central bank is expected to examine the data at its policy meeting and announce new?quarterly forecasts. Marcel Thieliant is the Asia-Pacific head at Capital Economics. He said that there are no clear signs that BOJ's fears about inflation risks are becoming a reality. "Producer price inflation accelerated in recent months," the Bank said. The Bank's concern about inflation risks will not have diminished as crude oil prices approach their recent highs - and the yen falls to new lows against the US dollar. The producer price index jumped 7.1% in June, the fastest rate in over three years. The BOJ increased?interest rates in June to a high of 31 years, a milestone in its policy normalisation. It was a sign that it is ready to tighten even more as it concentrates on taming the price pressures caused by the energy shock caused by the U.S. and Israeli war against Iran.
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IAEA: Military activity affects water supply at Zaporizhzhia Nuclear Plant and nearby town
The U.N. nuclear watchdog reported on Thursday that military activity had affected water supplies in parts of the Russian-held Zaporizhzhia Nuclear Power Station and nearby areas of southeast Ukraine. In the first few weeks of the Russian invasion of Ukraine in February 2022, Russian forces captured the largest nuclear power station in Europe, with six reactors. Since then, both sides have accused each other of actions that compromise nuclear safety. Rafael Grossi said that there is no shortage of water to keep the fuel cool in reactors. The attacks on and around Enerhodar - where many plant staff live - "targeted local electrical infrastructure and led to a loss of water supply in the ZNPP and the city." Grossi added that IAEA monitoring staff stationed in the plant had only limited access to water since 18 July. Grossi has visited the plant a number of times since the Russians took over the operation. He made no mention of either Russia or Ukraine in relation to the military activity. The IAEA?on-site?team has not been able?to?visit an emergency operations center nearby since December due to security concerns. Last week, Rosatom, the state-owned nuclear corporation of Russia said that a Ukrainian drone killed the plant's chief engineering. Grossi reiterated in his latest statement that the nuclear power plant employees "must always be protected."
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Newmont's profit beats expectations on higher gold prices
Newmont beat analysts' estimates for the second quarter profit on Thursday as higher gold prices helped to offset lower production. Gold prices have been rising on the back of a steady demand for safe-haven assets and hopes that U.S. rates will be cut. However, a stronger dollar as well as inflation fears fuelled by oil price volatility during the Iran War has?limited gains. Gold prices that are higher usually boost revenue and margins for miners. Prices for 'the yellow metal' averaged $4,606.41 per ounce during the second quarter 2026. This is up 37% from one year ago. Newmont's average quarterly realized price of gold was $4,414 per ounce. This compares to $3,320 an ounce one year ago. The quarterly gold production was 1.29 million, down from 1.48 million the year before. In extended trading, its shares dropped 1%. According to data compiled and analyzed by LSEG, on an 'adjusted' basis, the company earned a profit of $2.10 for the quarter - ended June 30 compared to the analysts' average estimate of $1.99.
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Chile investigates Antofagasta’s Los Pelambres Mine after rainwater discharge
Antofagasta Minerals, a Chilean copper mining company, said on Thursday that its flagship mine Los 'Pelambres is safe following an investigation by Chile's environmental regulator into a water discharge incident caused by extreme weather. On Wednesday, the regulator said that Antofagasta released water into the Pupio Waterway from a drainage pool after heavy rains caused an?avalanche near the site. Antofagasta has said that the controlled release of water from two pools downstream the tailings?dam?wall was part of its water management system. Water from the tailings dam was channeled to the Pupio stream whose flow had already increased significantly because of rain. The company reported that the tailings pond was "stable and in accordance with its design parameters and safety parameters with no risk to people or surrounding?environment." * The regulator stated that it will continue to evaluate whether any further action is needed. Chile has been hit by heavy rains?from the north-central region to the south causing flooding, road closures, and home damage. * Copper mines are usually prepared for winter with contingency plans. However, the intensity of the storm has forced some to reduce their activities. *?Los Pelambres is the largest copper mine in Antofagasta, located in Chile's Coquimbo region.
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Officials say five Palestinians were killed in an Israeli strike and violence in the West Bank.
According to Palestinian officials and the Israeli military, an Israeli airstrike on Thursday killed two Palestinians, including two children, in northern Gaza. Three other Palestinians were also shot dead in the West Bank. Israel's military claimed it had targeted "militants" in Gaza. A senior Israeli military official confirmed that a civilian killed two Palestinians after they had stabbed an Israeli and injured him during a dispute. After a separate stabbing attack in which an Israeli soldier was injured, the Israeli military confirmed that its forces had shot a third Palestinian. Israel has launched nearly daily attacks on Gaza in what it claims are attacks against Hamas militants. This is more than nine month after the U.S.-backed "ceasefire" in the enclave. According to Palestinian and Israeli statistics, more than 1,160 Palestinians as well as four Israeli soldiers were reported dead since the fragile truce began in October. Palestinian medics claim that the majority of those killed are civilians. The Palestinian Authority's official media agency WAFA reported that Israeli soldiers and settlers attacked Palestinians in the West Bank as they attempted to extinguish a nearby fire. Two Palestinians stabbed a soldier, according to an Israeli military official. "Friction" broke between Israeli settlers and Palestinians while trying to put out the fire. Official, who did not want to be named, claimed that an Israeli "civilian", which is an apparent reference of a settler killed the two Palestinians. The West Bank has been a hotbed of tensions due to the escalating violence between Israelis and settler groups, as well as Israeli plans to expand settlements in territory Palestinians consider a "key" part of their future state. Around 700,000 Israelis live with 2.7 millions Palestinians in the West Bank and East Jerusalem. Most foreign governments claim that Israel's settlement activities in the West Bank, where the Palestinian Authority has limited autonomy, are illegal under international law. Israel disagrees with this view. Reporting by Ali Sawafta and Steven Scheer; Writing by Pesha Magd; Editing Andrew Heavens
US, Mexico set more USMCA talks for September amid differences over autos content
U.S. officials and Mexican officials announced on Thursday that they would meet in September for a 'fourth round' of negotiations to revamp North American trade agreements. This follows a week-long discussion which revealed disagreements about changes to the automotive content rules, among other things.
This week, U.S. trade representative Jamieson Greer held a meeting with Mexican President Claudia Sheinbaum as well as Economy Minister Marcelo Ebrard during a third round discussion on the U.S.-Mexico-Canada Agreement.
In a statement released after the conclusion of the talks, Greer and Sheinbaum said they discussed autos and economic security, agriculture, electronic payments, and steel and aluminum.
The statement stated that "Ambassador Greer" and President Sheinbaum had agreed on the importance and urgency of bilateral cooperation, and emphasized the need to?grow North American manufacturing and strengthen regional supply chains, and address free-riding by non-parties like China.
The statement stated that Greer and Ebrard had agreed to hold a fourth round of bilateral negotiations in Washington, D.C. in early September.
Ebrard, in a statement released separately on Thursday, said that the conversations were "constructive" and had led to progress on topics such as steel, aluminum, and import substitution from Asia.
Canada was excluded from the bilateral talks. The talks come as the two countries are renegotiating the six-year-old deal, which governed nearly $1.6 trillion of regional trade in the past that was duty-free. Negotiations could extend into next year and prolong the uncertainty in business and investments that Mexico and Canada are trying to reduce.
Two sources who were familiar with the negotiations, but spoke on condition of anonymity due to the sensitivity of the closed door talks, said that the two sides are still far apart on important issues.
Sticking Points
Washington's requirement that cars contain at least 50% U.S. content in order to be eligible for preferential access is one of the main sticking points.
One of the sources stated that the proposal was a non-starter with the Mexican government. Mexico will not accept "even 1 percent" of American content. One of the sources added that this provision would "open the door to a possible increase in the future".
The current trade agreement requires that vehicles contain at least 75% North American-made content in order to be eligible for duty-free treatment. 40% of the vehicle's components must be produced by workers who earn at least $16 an hour, a threshold which is met both in the U.S.A. and Canada. The agreement does not specify a specific percentage of content from any country.
Mexico wants Washington to lower "Section 232", national security tariffs, of 25% on automobiles and 50% on aluminum and steel from Mexico and Canada, before it makes concessions on any other issue. Trump, however, has not shown any signs of easing tariffs.
Mexican auto factories currently face a cost disadvantage compared to their competitors from Japan, South Korea, and the European Union who are subject to a 15% duty to export vehicles to the U.S. without any regional content requirements.
A source familiar with these talks stated that the U.S. had told Mexican officials to come up with alternative solutions to Trump's goals, which include bringing more auto production to the U.S. and replacing Asian components in the North American supply chains.
The Trump administration decided not to extend the USMCA on July 1. Instead, it started a 10-year clock that would wind down the agreement unless changes could be agreed.
Greer stated in his Senate testimony on Wednesday that he hopes to reach interim trade agreements this year with Mexico and Canada, while taking on the more difficult USMCA questions such as auto content standards, labor, and environmental regulations in 2027.
Kevin Brady, former U.S. Representative from Texas, who chaired the influential U.S. House Committee on Ways and Means and is a supporter of the North American Trade Pact, said: "At this stage, each (negotiation round) adds value." "The negotiations are in a good place."
(source: Reuters)