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Asian markets rejoice as US-China trade dispute pause boosts risk appetite
On Tuesday, Asian stocks joined a global rally. The U.S. Dollar held onto most of its gains as investors breathed a huge sigh after a temporary stop in the U.S.-China trade war eased fears of a worldwide recession. The Nikkei index in Japan rose by 2% to its highest level since 25 February. Taiwan, a country with a high tech component, also gained 2%. Chinese stocks were slightly higher at the start of trading. The broadest MSCI index of Asia-Pacific stocks outside Japan is now at its highest level in six months. After the U.S.-China agreement to reduce tariffs for 90 days, Nasdaq rose 4.3% and S&P 500 over 3%. The real victory here was the change in tone by both the U.S. The markets have reacted positively to words like "mutual respect" and "dignity", which are a departure from recent confrontational rhetoric. The U.S. announced it will reduce tariffs on Chinese imports from 145% to 30%, while China said that it would lower duties on U.S. imported goods from 125% to 10%, providing relief for the markets. However, concerns remain about the potential harm of tariffs on the global economy. After the announcement of the agreement, the U.S. Dollar surged against the Japanese Yen, Euro and Swiss Franc. However, on Tuesday morning, it was slightly weaker but still held on to its gains. Analysts have highlighted the uncertainty that is caused by tariffs still in place. Christopher Hodge is the chief U.S. economics at Natixis. He said that a de-escalation of tensions was inevitable. The tariffs are still going to be much higher than they were before and this will have a negative impact on the U.S. growth." The ratings agency Fitch estimates that the U.S. tariff rate has dropped to 13.1% from 22.8% before the agreement, but is still higher than 2.3% at the end 2024. U.S. INFLATION TESTS Investors will now focus on the details of the agreement, and what will happen after 90 days. But before then, the focus will be on U.S. Inflation data that will be released later on Tuesday. Matt Simpson, City Index's senior market analyst, said that if we were to receive another set of soft CPI numbers, traders could refocus their attention on Fed policy, including the possibility of cuts, and this would take some steam off the dollar's recovery. As a result of the shift in U.S. China trade relations, traders have reduced their bets on Federal Reserve rate reductions. They believe that policymakers will be less under pressure to lower interest rates in order to boost economic growth. The traders are now pricing in 57-basis-point cuts for this year. This is down from the over 100-basis-point reductions they were expecting during the peak of tariff-induced anxiety mid-April. The yields on U.S. Treasury bonds rose to an all-time high of one month on Monday, and they were still hovering around that level during early trading on February 2. The yield on the two-year bond was at 3.9873% while that of the benchmark 10-year bond was at 4.4512%. Bitcoin, the most popular cryptocurrency, fell 0.5% on Tuesday to $102,146 but still remained well above the $100,000 threshold it broke last week. Gold prices were stable on Tuesday, after falling 2% the day before as investors fled some safe havens. Oil prices also eased on Tuesday.
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Financial Times - May 13
These are the most popular stories from the Financial Times. These stories have not been verified and we cannot vouch their accuracy. Headlines ISS proxy adviser Elliott backs in the fight against Phillips 66 - Perplexity is nearing its second fundraising in 6 months at a valuation of $14 billion - Cobalt Holdings to IPO in London with Glencore taking a 10% stake UK announces "backstop" plan to force pension funds into private assets View the full article The activist investor Elliott Management won the support of Institutional Shareholder Services, a powerful proxy adviser in its campaign to stop Phillips 66. Perplexity is the artificial intelligence search engine that has just completed a $500-million funding round, which would value it at $14-billion. Cobalt Holdings, a metals investor, announced on Monday that it planned to raise approximately $230 million through an initial public offering (IPO) in London. The UK's Chancellor Rachel Reeves is set to announce controversial "backstop" plans on Tuesday that will force large pension funds, if they do not meet voluntary targets, to invest as much as 50 billion pounds ($65.91billion) in private assets.
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China stock market to rise on trade deal
China's stocks will open strongly on February 2, reacting to a U.S. China deal that will delay and slash the tariffs, and de-escalate tensions in trade between two of the world's largest economies. The agreement reached between U.S. officials and Chinese officials following weekend talks in Geneva exceeded market expectations, and led to an explosive rally in the U.S. Dollar and global stock markets. The news broke just after the mainland closed Monday, causing Hong Kong to rise ahead of its closing. On the news, the Hang Seng China Enterprises Index jumped more than 3%. Hong Kong's Hang Seng Index closed at a six-week high. Overnight, U.S. stock prices rose by nearly 3%. On Tuesday, the yuan was little different from Monday's level after it had risen 0.6%. Ting Lu wrote that the deal was "a pleasant surprise for markets and economies on both sides of Pacific Ocean." Ting is chief China economist with Nomura. It could be the beginning of an inevitable collision between the two biggest economies. The markets may need to consider the medium- to long-term risk after enjoying a recovery. After talks with Chinese officials at the Geneva International Conference, U.S. Treasury secretary Scott Bessent said that both sides agreed to a 90-day suspension of their tit for tat policies. Both sides announced on Monday that the U.S. would reduce its extra tariffs on Chinese imports from 145% to 30% and Chinese duties will drop to 10%. Before the news broke, China's blue chip CSI300 Index rose 1.2% and the Shanghai Composite Index gained 0.8%. China's stocks have fully recovered from the sharp drop in prices last month, triggered by President Donald Trump’s punitive measures against tariffs on "Liberation Day". The blue-chip CSI300 Index has risen 0.2% from its April 2 levels. The truce is a boon for Chinese consumer electronics manufacturers and other major U.S. exporters. Gold miners are likely to suffer, as the price of yellow metal, which is a safe haven asset, will drop on hearing the news. China's agricultural sector, which is vulnerable to increased imports from the U.S. The agreement's impact on China's rare-earth companies is not yet clear. The U.S. did not mention the sector, which is strategically significant. However, the U.S. stated that China would commit to "suspending the non-tariff measures or removing them". (Reporting and editing by Hong Kong Newsroom, Jamie Freed).
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Oil prices drop from 2-week highs following US-China tariff war
The oil prices fell on Tuesday, from the two-week high they reached in the previous session. This was after the U.S. & China agreed to temporarily reduce tariffs. This sparked optimism that the trade war between two of the largest economies in the world would end. The U.S.-China agreement to reduce steep tariffs by at least 90 day sent Wall Street stocks, U.S. dollars and crude oil prices sharply higher Monday. The dispute is not over, but the underlying issues that caused it remain. These include the U.S.-China trade deficit and U.S. president Donald Trump's demands for Beijing to take more action to combat the U.S. crisis of fentanyl. Brent crude futures fell 14 cents or 0.2% to $64.82 a barrel at 0011 GMT. U.S. West Texas Intermediate crude (WTI), which is a derivative of WTI, fell by 13 cents or 0.2% to $61.82. The benchmarks for both closed Monday with a 1.5% gain, their highest settlement since April 28. These gains are coming at a time when the global oil market is experiencing turmoil. Investors were worried that the U.S. China trade war would slow economic growth and reduce oil demand. The Organization of the Petroleum Exporting Countries decided to increase oil production by more than expected. (Reporting and editing by Jacqueline Wong; Stephanie Kelly)
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US House Republicans try to kill EV loan and tax credit program
As part of a broader tax reform bill, Republicans in the U.S. House of Representatives proposed Monday to kill the electric vehicle credit and repeal fuel efficiency regulations designed to encourage automakers to build more zero-emission cars. The proposal is scheduled for a House Ways and Means Committee Hearing on Tuesday. It would repeal the $7,500 tax credit for new vehicles and the $4,000 credit for used vehicles on December 31, but it would keep the credit for new cars for an extra year for automakers who haven't sold 200,000 electric cars. Genevieve Cullen - the president of the Electric Drive Transportation Association - criticized the plan, saying plans to "abandon U.S. energy leadership by gutting federal investments in electrification is catastrophically shortsighted." She said that the proposal would give "an enormous advantage" to Chinese competitors and threaten U.S. jobs and manufacturing. In 2024, the U.S. Treasury will award more than 2 billion dollars in rebates at the point of sale for EVs. The proposal keeps in place the key tax credit for battery production for automakers and batteries makers. However, a new provision would prohibit credit for vehicles made with components manufactured by certain Chinese companies or produced under a licence agreement with Chinese firms. This provision would come into effect in 2027 and could prevent credit for vehicles powered by Chinese batteries licensed by American companies like Ford Motor or Tesla. The House Republicans propose also to end a loan program which supports the production of certain vehicles with advanced technology. The plan would cancel any funding that was not obligated and would also repeal corporate average fuel efficiency standards and greenhouse gas emissions rules through 2027. This portion will be handled by the Energy and Commerce Committee. Among the outstanding loans that President Joe Biden finalized during his last weeks as president are $9.63 Billion to a Ford Motor joint venture with South Korean battery manufacturer SK On to build three battery manufacturing facilities in Tennessee and Kentucky, $7.54 Billion to a Stellantis-parent Chrysler and Samsung SDI joint venture for two EV Lithium-ion Battery plants in Indiana and $6.57 Billion to Rivian to start building smaller and less expensive EVs by 2028. (Reporting and editing by Leslie Adler; reporting by David Shepardson)
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Elliott wins ISS Support in Phillips 66 proxy battle
Elliott Investment Management won a major victory in the board fight it waged against Phillips 66 on Monday when Institutional Shareholder Services, a prominent proxy advisory firm, recommended that investors elect each of its four activist nominees for director. Elliott, which has a stake of approximately $2.5 billion in Phillips and is valued at $48, billion, wants to see the refiner make changes, including spinning off or selling the midstream business. It also wants to see investors re-energize the board to accomplish these goals. Analysts and investors believe that the hedge fund has gained significant support with the backing of ISS, following a similar recommendation by Glass Lewis, ISS's smaller competitor. Glass Lewis encouraged investors to elect at least three of Elliott's nominees during the May 21 meeting. When voting on controversial issues such as who sits on board, investors often consider the recommendations of proxy advisory firms. The ISS report stated that "despite the fact that the board was reformed since the pandemic outbreak, there are strong indications the board does not want to exercise independent supervision of management." The dissident's slate is strong, and has the independence and experience that PSX needs. The proxy battle between Elliott and Phillips 66 has been one of the most heated in recent years. Both sides have spent a lot of time and money trying to convince shareholders that they are the best candidates. Neither Phillips 66 or Elliott responded immediately to the report. Four directors will be elected by investors from the 14 member board.
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Petrobras announces $2.1 Billion in dividends and a first-quarter profit increase on the back of one-offs
Petrobras, Brazil's largest oil company, announced a first-quarter net profit of $35.2 billion, an increase of 48.6% over the same period last year. Non-recurring events boosted this figure. The company also announced dividends worth $2.1 billion. If not for one-off events such as fluctuations in the exchange rate of the real against the dollar, state-owned oil company would have seen a 12.1% decline in its net profits over the same period to 23.6 billion reais. Magda Chambriard, Petrobras' Chief Executive Officer, said in a press release that the company's financial results and operational performance were "robust." EBITDA (earnings before interest, tax, depreciation, and amortization) for the oil producer was 61 billion reals, an increase of 1.7% year-on-year. Petrobras reported that adjusted EBITDA was 62.3 billion reais without non-recurring effects. LSEG polled analysts who had predicted an EBITDA of 62.9 billion dollars. Petrobras announced in a separate filing that its board of directors had approved the payment to shareholders of 11,72 billion reais ($2,1 billion) as dividends and interest. This is equivalent to 0.91 reals per share. The earnings report revealed that the amount was due to investments, as measured by capital expenses (capex), a measure which is of great interest for investors. It rose from $3 billion a few years ago to $4.1 billion, a significant increase. In a statement, the company's Chief Financial officer Fernando Melgarejo said that the majority of the investments were concentrated in presalt projects in Buzios, Atapu and Buzios. He added that Petrobras had invested 22% its annual guidance. Petrobras investments are special Investors' attention After they exceeded the firm's estimates in 2024 there was concern about dividends being reduced. Petrobras reported that net revenue for the quarter increased 4.6%, to 123.1 billion reals, a slight decrease from the 124.9 billion reals analysts had expected. The company had already published an operational report Last month The country's oil, gas, and gas liquids output fell by 0.2% to 2,77 million barrels per day. $1 = 5.6699 Brazilian reais (Reporting and editing by Gabriel Araujo in Rio de Janeiro, Andre Romani and Chris Reese in Sao Paulo)
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Oil jumps and soy gains with US-China tariff relief
After the United States and China suspended trade tariffs for 90-days, the markets felt some relief. Two of the world's largest economies have agreed to temporarily reduce their reciprocal tariffs while they negotiate to stop a damaging trade conflict that has caused financial markets to rumble and raised fears of recession. The U.S. is reducing the extra tariffs on Chinese imports from 145% to 30% and Chinese duties on U.S. imported goods will drop to 10% from 125%. The new tariffs are a return to the pre-Liberation Day level and represent a de-escalation better than expected, said ING commodities analyst EwaManthey. She was referring to April 2, when U.S. president Donald Trump announced a slew levies against trading partners. Brent crude and U.S. WTI futures, which were up by around 1.5% last week, are now adding around 1.5% to their gains. The benchmarks both rose to their highest levels since April 28. Ole Hansen, analyst at Saxo Bank, said that crude oil was initially the biggest winner. The news helped to stabilize the demand outlook. According to LSEG, the benchmark Dutch front month contract reached a intraday high at 36.25 Euros per megawatt-hour (MWh). This is the highest level since April 16. The U.S. soybean crop has been hit the hardest by the trade dispute, as China, the top soy importer in the world, shifts purchases from the U.S. to Brazil, the second largest exporter. CBOT soybeans, the most active Chicago Board of Trade product, settled at a 19-1/2-cents-higher price of $10.71-1/4 a bushel. This was their highest level since early February. Gold prices dropped to $3,207.3 per ounce, and last fell 2.7%, at $3,233.78. The price of industrial metals rose, as fears about growth and demand eased. However, traders noted that the market was still cautious. The benchmark copper price on the London Metal Exchange was up by 0.6% at $9,502 per metric ton. Aluminium gained 2.3%, to $2,473. Callum Macpherson, Investec's head of commodities, said: "Tariffs were lowered temporarily, but it is unclear what will happen next and whether the U.S. will be able reach a long-term agreement." The longer the uncertainty continues, the more impact it will have on the economy. Reporting by Seher Daeen in London and Robert Harvey in New York; additional reporting from Stephanie Kelly in New York, Nora Buli and Pratima Deai in London and Brijesh Pattel in Bengaluru. Editing by Kirsti Donovan and Sonali Patel.
Mercedes will add GLC SUV Production at Alabama Plant
Mercedes executives announced on Monday that the company would increase production of its GLC crossover SUV in North America, at its Tuscaloosa plant.
This month began earlier
The German automaker announced that it would introduce a new model to the Alabama factory in 2027, which would "deepen its commitment to the U.S."
The global trade war of Donald Trump has been focused on foreign-made automobiles. Early in April, the Trump Administration implemented 25% tariffs for vehicle imports.
Mercedes-Benz' GLC model is manufactured at Bremen, Germany plant. The factory has 10 models in total.
Mercedes' spokesperson stated on Monday that no significant changes are expected to be made in Bremen's average production numbers in the medium-term. Bremen will continue to produce GLCs for the rest the world, and the Alabama plant will "localize GLC production in North America".
The automaker will increase production at its Alabama plant, which is the hub of its SUVs including the GLE Coupe and GLE Coupe as well as the GLS.
Mercedes executives did not reveal how much they will invest in the Southern Plant to build the GLC, as it is still in the planning stages. (Reporting and editing by Chris Reese, David Gregorio and Kalea hall)
(source: Reuters)