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MORNING Bid EUROPE: Trade-driven rally concludes the week on a low note
Stella Qiu gives us a look at what the future holds for European and global markets. The week began with a bang, but by Friday traders were beginning to worry that the recovery had been overshot. They also feared that there would be more twists and turn in the trade saga. Wall Street and European futures are virtually unchanged, while Asian shares are in a mixed state. Hong Kong's Hang Seng fell by 0.8%. Alibaba's more-than-5% fall was a major factor. Investors were not impressed with its earnings. Australian shares performed better, rising by 0.7%. Now, it seems that the stock market is acting as if there was never a tariff war. MSCI's broadest Asia-Pacific share index outside Japan hovers just below its seven-month high. Even blue-chip stocks in China have recovered their losses since President Donald Trump's April 2 announcement of "reciprocal tariffs" on the rest the world - which has since been put on hold. Investors who had been beaten down by the bond market cheered a surprise drop in U.S. Producer Prices and a soft core Retail Sales print. They increased their forecast for rate cuts from 49 basis points to 56 basis points for this year. The benchmark 10-year Treasury yield fell by 3 basis points on Friday to 4.424%, continuing a 7-bps drop overnight. Trump has been very busy over the last few days promoting deals in the Middle East. This includes a possible nuclear deal with Iran. Trump's remarks that a deal is near sent oil price tumbling by 2% on Friday. Markets are eager to hear about progress in the trade negotiations with China, and any other trade agreements that may be signed after an agreement reached with Britain. Remember that tariffs have been higher since the 1930s, even before Trump started his crusade against trade. Walmart, the largest retailer in the world, announced that it will have to raise prices this month because of the high tariffs. This means more pain for American consumers. The latest U.S. prices data may have looked benign but it could only be a matter time before the tariff impact starts to show in the hard numbers the Federal Reserve needs to see to decide its response to the trade-related uncertainty. Economic calendars for Europe and the U.S. could be a little thin. U.S. releases include the University of Michigan Consumer Sentiment Survey and import prices for April. These could be helpful for gauging Trump's tariff maneuvering. The following are key developments that may influence the markets on Friday. University of Michigan Consumer Sentiment Survey U.S. Import Prices for April
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Topside for Hollandse Kust (west Beta) Substation Set to Sail to Final Location
Two weeks after the successful load out, the steel topside for the Hollandse Kust (west Beta) substation platform is ready to leave the port of Hoboken near Antwerp in the Netherlands for its final North Sea destination.The topside is schedule to leave the Dutch port on May 17, on a floating pontoon via the Scheldt and the Western Scheldt towards the North Sea.As soon as Heerema Marine Contractors’ installation vessel Sleipnir has completed its current job in British waters, it will sail to the coast of North Holland to start the installation operation.The superstructure of the transformer platform, weighing over 3,500 tonnes, will be installed 50 kilometers off the coast of Egmond aan Zee.As part of the job, Sleipnir will lift the 45-metre long, 20-metre wide and 25-metre-high structure from the floating pontoon and place it on the jacket, which has been firmly anchored to the seabed since May 2024.(Credit: TenneT)The topside and jacket will then be welded together and connected to the electricity grid in the coming months.Through this connection, the electricity from the 700 MW project, operated by RWE/OranjeWind, will be fed to the high-voltage grid via the transformer station in Wijk aan Zee.The Hollandse Kust West Beta offshore wind farm is expected to enter service in 2025.
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Copper prices rise on optimism about US-China trade
Copper prices rose on Friday, and are on track to finish the week on a positive note, thanks to a truce in the Sino-American tariff war. However, concerns about the long-term demand of the metal have capped any further gains. Asian stocks are set for a strong, but tempered week as the euphoria surrounding the U.S. China trade talks has faded. Meanwhile, renewed bets on policy easing by the United States have sparked a rally among the beaten down bond markets. As of 0238 GMT the benchmark copper price on the London Metal Exchange was up by 0.1% to $9,585 per metric ton. The most traded copper contract on Shanghai Futures Exchange rose 0.1% to 78,430 Yuan ($10,889.43). Metals from Shanghai said that "Chinese traders were happy with the 90-day break, but the market was still uncertain as to what would happen after 90 days." She added that the fact that China exporters are rushing to ship cargoes is a telling sign. LME copper prices are up around 1.5% this week, while Shanghai copper prices have increased by about 1%. The initial optimism about the 90-day suspension of most retaliatory duties agreed between Beijing and Washington has faded. The market has also been focusing on potential new tariffs imposed by the U.S. on copper imports since February. Other London metals saw aluminium rise 0.1% per ton to $2492, zinc fell 0.1% at $2723 and lead dropped 0.4% to $1996.5. Tin rose by 0.1% to $33,000. Analysts expect the price to be between 78,000-79,000 Yuan per tonne in the near future, reflecting a mixed market sentiment. SHFE aluminium dropped by 0.3%, to 20,185 Yuan per ton. Zinc fell by 0.6%, to 22,595 Yuan. Lead also declined 0.5% to 16920 Yuan. Click or to see the latest news in metals, and other related stories.
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Iron ore prices fall on the back of falling demand in the near term, but still head for a weekly gain
The price of iron ore futures fell on Friday, despite a trade truce that was reached between the US and China. This is due to signs of a softer near-term market demand as well as growing concern over the outcome of the Sino-US tariff war. As of 0228 GMT on China's Dalian Commodity Exchange, the most traded September iron ore contract was trading 0.75% lower, at 729.5 Yuan ($101.3) per metric ton. This represents a 4.7% increase so far this week. As of 0220 GMT the benchmark June iron ore traded on the Singapore Exchange had fallen by 0.68% to $100.5 per ton. This represents a 3.7% gain this week. A survey by consultancy Mysteel revealed that the average daily hot metal production, which is a measure of iron ore consumption, fell 0.4% from the previous week to approximately 2.45 million tonnes as of May 15. This weighed on sentiment and prices. Analysts and traders expect hot metal production to remain stable in May and June, as mills are encouraged by profit margins to keep up their high operating rates. The easing of trade tensions is likely going spur another wave of first-run shipments. Benchmark Mineral Intelligence analysts forecast an average annual ore price of $100, despite the subdued outlook for demand amid possible China steel production cuts and renewed optimism about easing trade tensions. Coking coal and coke, which are used to make steel, also fell on the DCE. The declines were 2.88% and 1.49 %, respectively. The benchmarks for steel on the Shanghai Futures Exchange have also fallen. Rebar fell 0.51%, while hot-rolled coils dropped 0.55%. Wire rod slumped 0.38%, and stainless steel declined 0.42%. ($1 = 7,2033 Chinese Yuan) (Reporting and editing by Mrigank Dahniwala; Amy Lv, Lewis Jackson)
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Gold has its worst week for six months due to trade calm
Gold prices fell on Friday, and were set to experience their biggest weekly drop in six months as a stronger US dollar and diminishing trade war fears dampened its appeal. As of 0222 GMT, spot gold was down 0.5% at $3,223.06 per ounce. Bullion is down about 3% this week, and it's on track to have its worst performance weekly since November 2024. U.S. Gold Futures fell 0.1% to $3.224.90. Gold priced in greenbacks is now more expensive to overseas buyers due to the dollar's 0.3% gain for the past week. Ilya Spirak, global macro head at Tastylive, said that "gold prices were under heavy pressure this week due to the markets' cheering of a de-escalation of the U.S. China trade war." The U.S. announced earlier this week that it and China had agreed to temporarily reduce the high tariffs, which were imposed on April. Retail sales growth in the U.S. slowed down as well. A report revealed that consumer prices in April rose less than anticipated. Federal Reserve Governor Michael Barr stated on Thursday that the U.S. is in a good position, with inflation headed to the central banks' 2% target. However, trade policies have clouded this outlook. The markets are pricing 57 basis point rate cuts for this year. It is expected that the easing will begin in September. In a low rate environment, gold, which is traditionally viewed as a hedge to economic and political uncertainty, thrives. Gold price drops continue to attract buyers, which shows the precious metal is still a preferred asset. Global growth and inflation forecasts are still murky, said KCM Trade's Chief Market Analyst Tim Waterer. Silver spot fell 0.6%, to $32.49 per ounce. Platinum dropped 0.3%, to $986.58. Palladium was down 1.1% at $957.42. (Reporting and editing by Sumana Jacob-Phillips and Sherry Mukherjee, Bengaluru)
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Indonesian military: 18 separatists were killed in Papua, according to the country's military
An official confirmed that Indonesian military killed 18 Papuan Separatists in an operation conducted in the easternmost region Papua on Thursday. Three civilians were also killed. In a statement, Kristomei Santuri, the military spokesperson, said that during Wednesday's raid, the military seized dozens munitions including an assault weapon, bows andarrows, and an unspecified home-made weapon. The Indonesian military suffered no casualties. Sebby Samboom, a spokesperson for the Papua Separatists, said that three of its members were dead. A prominent church group in Papua, citing reports from local churches, said that three civilians died during the shootout. Nearly 1,000 people were evacuated. Ronald Rischard is the head of the Papua branch. He told reporters that the attack happened while villagers were sleeping. Ronald Rischard urged the country's rights agency to conduct an independent investigation into the incident. He said that the cycle of violence has continued, and a child’s ear had been razed to ashes by a bullet. However, he did not know who had fired the shots. Since 1969, when the area was controversially handed over to Indonesian rule following Dutch rule by a vote overseen and supervised by the United Nations, rebels have waged a low-level independence campaign in the richly resourced Papua bordering Papua New Guinea. Rebels have held foreigners as hostages, including 26 wildlife researchers from 1996 and a New Zealander pilot who was freed last year after 19 months of imprisonment. The rebels claimed to have killed 17 people in the last month. They said that they were disguised gold miners. The statement stated that the Indonesian military had deployed personnel to the area of the operation on Wednesday in order to anticipate the movements of the remaining rebels. (Reporting and editing by Martin Petty, Ed Osmond and Ananda Teresia)
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Brazil's Marfrig completes the takeover of BRF by merging as MBRF
Brazilian beef processor Marfrig revealed on Thursday that it plans to complete the takeover of BRF, a poultry and pork processor. It also hinted at plans to list shares in the combined entity eventually in the United States. Marfrig has been pursuing a strategy of gaining scale in order to compete with Brazilian meatpacking company JBS. JBS is preparing to list its shares on the New York Stock Exchange. All three companies are now listed on the Sao Paulo Stock Exchange. Marfrig, BRF and other parties disclosed that the proposed deal involved a share exchange whereby BRF holders would receive 0.8521 Marfrig shares for every BRF share. This move will also involve the creation of a new company called MBRF. It will control National Beef owned by Marfrig, a meat processing firm based in America that will be integrated into the corporate structure. In a joint announcement, the companies stated that they expect 805 million reais (142 million dollars) in annual synergies as a result of the tie-up. 400 to 500 millions reais are expected to be captured during the first year. The proposal will be voted on by shareholders on June 18. BRF executives told analysts that the move was intended to build on the strengths of both companies, giving them greater power to compete on a global scale with giant food producers. Fabio Mariano, CFO of MBRF, said that MBRF may move its fiscal domicile to New York and list shares there at some point. He said that the merging companies should first focus on extracting synergies from the new structure. Marfrig purchased almost a quarter BRF shares in May 2021. It became the company's largest shareholder at that time, but stated it would be a passive investor. Marfrig gradually increased its stake to 50.49%. In the past 12 months, these companies generated combined net sales of 26.75 billion reais (152 billion reais), with 38% from food products that were processed and had a higher price. Both companies' shares rose on Thursday in Sao Paulo, beating out peers from the sector including Minerva & JBS. BRF shares rose 7% at one stage during the session. Marfrig rose by 4.34%, to 20.66 Reais. $1 = 5.6817 Reais (Reporting and editing by Gabriel Araujo, Diane Craft).
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Oil prices to rise by 1% this week on U.S. China trade agreement
The oil prices rose on Friday after a steep drop the previous day. This is expected to lead to a weekly increase of more than 1 percent as the optimism surrounding the U.S. China trade relations outweighed the prospect of Iranian supplies returning to the market. Brent crude futures were up 17 cents or 0.26% to $64.70 per barrel at 0007 GMT. U.S. West Texas Intermediate Crude Futures rose 18 cents or 0.29% to $61.80. Prices fell more than 2% the previous session, after President Donald Trump claimed that the U.S. and Iran were "close" to a nuclear agreement. He also said that Tehran "sort of" accepted its terms. Sources familiar with the negotiations said that there are still some gaps to be filled. The oil prices spiked in the first part of the week, after the U.S., and China, two of the largest oil-consuming economies and consumers, agreed on a 90 day pause to their trade war, during which time both sides would lower their trade duties. Sino-U.S. trade tariffs were hefty, and sparked fears that global growth would be severely affected. The oil market is still subject to the dynamics of supply, which includes the possibility that Iranian supplies could return to the market after any agreement between Washington and Tehran. ANZ Bank said in a client note that "the easing geopolitical risk weighed on the sentiment already burdened with fears of rising supplies from fellow OPEC member" The International Energy Agency announced on Thursday that it expects the global supply to increase by 1.6 millions barrels per day in 2018, up 380,000 bpd compared to its previous forecast. Saudi Arabia and OPEC+ will be unwinding their output cuts.
QUOTES - Trade and labor associations, analyst on Trump's reciprocal duties
Donald Trump announced on Wednesday that he will impose a baseline 10% tariff on all imports into the United States, and higher duties for some of the biggest trading partners. This could lead to a trade conflict and upset the global economy.
Countermeasures from trading partners could result in a dramatic increase in prices of everything, including bicycles and wine.
Trump has already levied 25% on automobiles and auto parts.
SCOTT WHITAKER, CEO, ADVAMED
"This type of tariff would be similar to an excise duty." R&D would be the most immediate and direct victim, as it threatens America's leadership in medtech innovation. Tariffs would cost U.S. workers, increase health care costs and hinder future medical progress."
RYAN ORABONE MANAGING CONSULTANT BEARINGPOINT
"Diversification (of the supply chain of an apparel retailer) and manufacturing is a moot issue because tariffs impact every major geographic facility where we produce clothing."
Brands need to be more strategic than ever before and plan everything with precision. "There is no room for errors anymore, including assortment, allocation and pricing."
DAVID SWARTZ ANALYST MORNINGSTAR FOLLOWING FITNESS
The huge tariffs on imports from Vietnam are clearly a negative for Nike Adidas and other sportswear companies. Due to the difficulty of manufacturing, athletic footwear can't be easily produced in other countries. Tariffs are also being levied on other Asian nations.
The industry will not react in a panic. If the tariffs remain in place, sportswear prices will rise and margins could be affected.
The chances of significant footwear and apparel manufacturing in the US being a result of any of these initiatives are virtually zero.
MARI SHOR SR., EQUITIES ANALYST AT COLUMBIA TREADNEEDLE INVESTIMENTS, WHICH HOARDS NIKE STOCKS
"The announcement of the tariffs is much worse than expected." Nike and other footwear companies will find it difficult to avoid a 46% tariff against Vietnam. The companies will try to fight back against vendors but tariffs are likely to drive up inflation in many categories and pressure consumer discretionary spending."
CHRIS VITALE, UAW VETERAN WHO RETIRED FROM STELLANTIS, ATTENDED TRUMP'S TARIFF ANNOUNCEMENT IN PERSON
"You know what's amazing is that an announcement about trade policy could become emotional."
"These are the things we've been preaching about for years. We've watched our factories and our capabilities being hollowed-out. To see a President address this and use some words and thoughts I've used, was incredible."
LIZ SHULER PRESIDENT AMERICAN FEDERATION of LABOR and CONGRESS INDUSTRIAL ORGANIZATIONS
The Trump administration's attacks against the rights of union workers at home, the gutting of government agencies that work to discourage outsourcing of American jobs, and efforts to erode crucial investments in U.S. Manufacturing take us backward.
RICHARD CAPETTO, SENIOR DIRECTOR, NORTH AMERICAN GOVT. AFFAIRS IPC
"A strong U.S. electronic industry requires a holistic approach - one that combines targeted investments and incentives, with policies that promote mutually beneficial trade partnership. Trade is crucial to innovation, cost-competitiveness, and supply chain resilience. Tariffs could increase costs for American companies and drive production overseas.
ZOLTAN VAN HEYNINGEN EXECUTIVE DIRECTOR, U.S. WOOD COALITION
We welcome President Trump's measures and the focus of his administration on Canada's unfair trading practices. We are especially pleased that the President has launched the Section 232 Investigation under the Trade Expansion Act of 1964 focusing on the imports of softwood lumber.
MARK COMPTON EXECUTIVE DIRECTOR THE AMERICAN EXPLORATION & MINING ASSOCATION
We are encouraged that the Trump administration is prioritizing the production and processing of domestic minerals so we can have the raw materials our manufacturing base, and society needs. We are looking forward to working together with the administration in order to ensure that the domestic mining industry can meet this challenge.
TONY REDONDO, FOUNDER AT COSMOS CURRENCY EXCHANGE
Intel is not immune to the cost increases caused by imported chips. Semiconductor giants such as Nvidia are also affected. China's retaliation against rare materials may worsen shortages.
PC makers (Dell and HP) may face cost increases of 10%-25%, which could add $200-$500/unit to the unit price, causing margins to be squeezed or prices to rise.
The cost of chips and steel may cause delays for AI server companies (Nvidia and Amazon).
Construction and retailers like Walmart could also be affected.
"Short-term, higher costs and chaos." "Long-term, maybe more U.S. Manufacturing but labor and infrastructure are lagging."
Consumers will face higher prices by 2025, unless companies absorb the costs. This is not common.
BERNSTEIN ANATOMY
"We are concerned that the vehicle and part tariffs will be here to stay, and they will add a significant cost burden to this sector." We see more downside risk for automotive stocks if automotive tariffs do not get reversed, but are instead extended.
TOM MADRECKI VICE-PRESIDENT OF SUPPLY CHAIN RESILIENCY CONSUMER BRANDS AFFILIATION
The majority of consumer packaged goods are already manufactured in the United States. There are some critical inputs and ingredients that must be imported because they are scarce in the United States. Tariffs alone will not bring these ingredients back to the U.S.
"Reciprocal Tariffs that don't reflect the availability of ingredients and inputs will increase costs, limit access to affordable products for consumers and unintentionally hurt iconic American manufacturers." We urge President Trump and his advisors to refine their approach to exempting key ingredients and inputs, in order to prevent inflation and protect manufacturing jobs.
LENNY LARCCA, KPMG U.S. AUTOMOTIVE LEADERS
"U.S. Automakers are looking for steps they can take to mitigate tariffs in the short term, such as working on items that can be shipped to the U.S. rapidly without major investment." Massive longer-term investments require more time and clarity."
The current playbook of the U.S. automobile industry is insufficient, and it's a momentous time for them. Automakers have an opportunity to change the way they do business. Leverage emerging technologies like AI in all areas of their business. Explore and make alliance decisions faster. "Speed up the vehicle production cycle time."
This watershed moment presents an opportunity for mergers and purchases.
DAVID McCALL, PRESIDENT UNITED STAINWORKERS INTERNATIONAL
We must make sure that our trade policy is aimed at cheaters and not trusted economic allies such as Canada. We should work to build relationships, not barriers, with partners who have shown their commitment to join us in tackling the global overcapacity.
The administration must also take measures to prevent companies using tariffs to increase prices on consumers.
MIKE HAWES is the CEO of UK's Society of Motor Manufacturers and Traders.
The tariffs cannot be absorbed, and the U.S. consumer may pay more for British products, while UK producers could have to reduce production due to a constrained market.
SETH GOLDSTEIN MORNINGSTAR ANALYST FOR U.S. SETH GOLDSTEIN, MORNINGSTAR ANALYST ON U.S.
"I expect lower volumes due to tariffs." Tariffs are likely to be passed on to the consumer in order to increase prices of products. "I expect that consumers will buy less goods."
Due to the high fixed costs of chemical production, lower volume would have a large impact on profits. We could also see another year with declining profits if tariffs are widely implemented. Many chemical producers manufacture their products in the U.S. for domestic sales, so there is less direct impact.
DAVID FRENCH EXECUTIVE V.P. OF GOVERNMENT RELATIONS AT THE NATIONAL RAILWAY FEDERATION
"More Tariffs = More Anxiety and Uncertainty for American Businesses and Consumers. Tariffs represent a tax that is paid by U.S. importers and passed on to the final consumer. No foreign country or supplier will pay tariffs. "We encourage President Trump, to hold trading partners responsible and restore fairness to American businesses without creating uncertainty or higher prices for American consumers."
ART WHEATON DIRECTOR, ILR SCHOOL CORNELL UNIVERSITY, LABOR STUDIES
It will take years and billions to bring new manufacturing jobs online. However, expansions in existing factories can happen much faster. Companies prioritize stability. Frequent policy changes can slow down investment decisions, as businesses wait to see clearer long-term signals.
MICHAEL ASHLEY SCHULMAN IS A PARTNER AT RUNNINGPOINT CAPITAL ADVISORS AND THE CIO.
"Trump may be trying not only to bring manufacturing back to the U.S. but also to increase the economic instability of China by putting tariffs on Chinese goods. Tariffs of 34% on Chinese products could force Chinese manufacturers to shut down, leading to increased unemployment and social unrest in China.
If these tariffs are imposed, they will have a significant impact on the PC, server, and semiconductor manufacturers.
Investors, analysts and politicians will all be watching with bated breathe to see what happens after this 'Liberation Day volley' from the administration. The announcement today is likely to be a worst case scenario. Hopefully, any negotiations will lead to improvements. Reporting by Juby B. Babu from Mexico City; Vallari Srivastava in San Francisco; Abhirup Roy and Caroline Humer at New York City; Nick Brown, Shounak D. Dasgupta, and Alan Barona for the editors.
(source: Reuters)