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All eyes on the way Warsh walks his line in MORNING BID EUROPE
Tom Westbrook gives us a look at what the future holds for European and global markets. Kevin Warsh wraps up his Federal Open Market Committee (FOMC) meeting, with tumbling oil and a tentative offer of peace as a backdrop that will allow interest rates to be held at the current level. The market will be watching his vote, how he conducts himself at the news conference and his ability to explain the outlook. Warsh does not like "forward guidance" and could choose to avoid a projection of interest rates in the U.S. Central Bank's quarterly economic outlook. He was chosen by Donald Trump, the U.S. president, to lower rates. With inflation over target and employment solid, markets are expecting a rate hike. He will be questioned about it, and the dollar has been dithering in anticipation of his response. Investors might interpret his failure to push back against market pricing as a hawkish message. If he doesn't, investors may worry about inflation. He will also be facing a boardroom in which his predecessor Jerome Powell still has a voice. Shinichi Uchida, the Deputy Governor of the Bank of Japan, may have provided a model of how to maintain a steady hand. He was able to maintain policy flexibility without scaring the markets. Uchida received some extra support from the Japanese?finance minister, who is lurking behind the scenes, threatening to intervene on the currency market if the yen falls again. Asian markets were mostly flat?on Wednesday. Warsh was the star of the show, and oil sellers took a breather to await the confirmed details of the U.S.Iran agreement. Brent futures are now trading below $80 per barrel, following reports that the U.S. is planning to lift sanctions against Iranian oil. Sweden's Riksbank will likely be on hold, but hint at a possible hike later in the year. The British inflation rate is expected to rise to 3% due to the higher oil price, while final European figures are unlikely to differ from preliminary readings. The following are key developments that may influence the markets on Wednesday. - Rate Decisions in the U.S.A. and Sweden British inflation U.S. Retail Sales Data (Editing by Muralikumar Aantharaman).
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Oil prices drop as investors consider a deal to end the Iran War, but uncertainty remains about Hormuz
The oil prices fell on Wednesday as investors evaluated the?U.S. - Iran peace deal. However, uncertainty about?the full resumption?of shipping through the?Strait?of Hormuz's?limited further drops. Brent crude futures fell 16 cents or 0.2% to $78.80 per barrel at 0340 GMT. U.S. West Texas Intermediate dropped 25 cents or 0.3% to $75.80 per barrel. On Tuesday, both benchmarks fell 5% in a second session straight to reach their lowest levels in three months on the hope that an agreement between the U.S. and Iran would allow oil to flow through Strait. "Markets have stripped out the embedded geopolitical risks premium in oil price," said Priyanka Sackdeva, Senior Market Analyst at Phillip Nova. The road to normalisation is far from straightforward. Although political agreements are progressing, the physical tanker traffic in the Strait is still not fully recovered. The United States would lift their blockade on Iran's ports and Iran would allow oil tanker travel through the Strait of Hormuz, which has been effectively blocked by U.S.-Israeli strikes since February 28. Hiroyuki Kikukawa is the chief strategist at Nissan Securities Investment. He said that oil markets have?retreated due to expectations the Strait of Hormuz will reopen after the peace agreement. However, traders are holding off on further sales pending more details. He added that WTI will likely remain volatile within a range between $10 above and below $80 per barrel. Prior to the closure of the Strait, about a quarter of the world's crude oil and natural gas liquefied supplies passed through it. Tuesday details of the interim agreement began to emerge. President Donald Trump said it would prevent Tehran from acquiring a nuclear weapon and a U.S. government official stated that it would allow Iran?to sell oil upon signing. The not-yet-public memorandum extends a flimsy ceasefire that was agreed to in April by 60 days, allowing time for further talks towards a permanent truce. Industry officials say it will take weeks, even months, to return to the pre-war levels of production and refinement. Israel has disassociated itself from both the April ceasefire agreement and the latest U.S.Iran pact. This creates uncertainty as to whether the pact will be honoured. Lebanon's National News Agency reported that Israeli drone strikes on three vehicles in southern Lebanon Tuesday killed at least four people and injured others. This prompted a rare public criticism from President Trump. Data showed that China's crude throughput in May fell by 9.1% on the previous year, to its lowest level in nearly four years. It also indicated that refiners are starting to draw on their stockpiles in the face of the Iran War. Sources said that the American Petroleum Institute's report showed that U.S. crude stock fell by 8.3 million barrels during the week ending June 12. The Energy Information Administration is expected to release official figures at 10:30 am. ET (1430 GMT), on Wednesday. Reporting by Yuka Obaashi in Tokyo, Jeslyn Lerh in Singapore and Clarence Fernandez; editing by Sonali Paul & Clarence Fernandez
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As traders await Warsh, oil prices drop on Iran's supply prospects
Crude prices falling on news that Iranian oil may soon reach global markets sparked a fall in bond yields on Wednesday. Stocks and currencies were quieter before Kevin Warsh's first meeting as Federal Reserve Chair. Brent crude 'futures' plunged below $80, the cheapest since March when the 'U.S. - Iran conflict began. According to a senior U.S. Official, the U.S. has agreed to waive sanctions against Iranian oil as part of the agreement that ends the war. This could lead millions of barrels more of Iranian oil being supplied. U.S. bonds yields dropped and rates in Asia followed, with 10-year Japanese rates down 1.5 basis points to 2.63 percent and 10-year Australian rates down almost 5 basis points to 4.78 percent. Kim Fustier is a senior oil and Gas analyst at HSBC. The bank believes it will be until the 'end of September before the markets price in a complete normalisation of the?flow of the Hormuz. The U.S. and Iran agreement is due to be signed this Friday. However, few details have been confirmed. A three-month blockade of the 'Strait of Hormuz' has drained the oil reserves of the United States, which are now at their lowest level since 1983. Overnight, Wall Street investors reduced crowded bets made on semiconductor and tech stocks, bringing the Nasdaq index down by 1.15%. Meanwhile, the Dow reached a new record, thanks to a rise in financial and industrial stocks. Futures in Asia were slightly positive, but chip-heavy markets like Taiwan and South Korea slid lower. MSCI's broadest Asia-Pacific share index outside Japan also fell by about 0.3%. Japan's Nikkei rose 0.4%. Hong Kong and Shanghai stock markets were largely steady. FED?ON HOLD WARSH IN FOCUS The dollar has been held in a state of anticipation as traders wait to see if Warsh can balance his dovish presidency with the expectations of the markets for a rise this year. The euro was only slightly firmer?this past week to hover around $1.16. The expected rate increase in Japan on Tuesday failed to lift the Japanese yen. However, the downside was protected due to the possibility of an official intervention. The Fed funds rate is unlikely to change, so focus on the committee's projections and the press conference. In March, most members predicted that rates would be cut this year. "We expect Warsh will downplay 'forward guidance' and instead advocate patience on policy rate?and inflation – leaning dovish in relation to market pricing," said Xiao Cui senior economist at Pictet Wealth Management. If Warsh does not oppose market pricing and embraces the possibility for rate increases, it could be perceived as hawkish. (Reporting and editing by Jacqueline Wong; Tom Westbrook)
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Investors weigh the impact of Iran's war ending and Hormuz reopening on oil prices as they stabilize.
Investors questioned whether the Iran War will end and the Strait of Hormuz will reopen. Brent crude futures rose 47 cents (0.6%), to $79.43 per barrel. U.S. West Texas Intermediate was up 48 cents (0.6%), to $76.53 per barrel as of 0038 GMT. The benchmarks for both fell 5% on Tuesday, a second consecutive session. They reached three-month lows in hopes that a U.S. Iran deal would allow oil to flow through the Strait. Oil markets fell on the expectation that the Strait of Hormuz will reopen after the?peace accord, but traders held back further sales pending more details, said Hiroyuki Kikukawa. Kikukawa is the chief strategist of Nissan Securities Investment. He added that WTI will likely remain volatile between $10 above and below $80 per barrel. Tuesday, details of the interim peace agreement began to emerge. U.S. president Donald Trump said it would 'rule out' a nuclear weapon for Tehran. A U.S. official stated that it would allow Iran oil sales upon signing. The not-yet-public memorandum extends the tenuous ceasefire that was announced in April for another 60 days, allowing talks to lead to a permanent truce. The deal would see the United States lift its blockade on Iran's ports while Tehran would allow oil tanker traffic to flow through the Strait which has been effectively blocked since U.S.-Israeli strikes?on February 28, 2009. Officials in the industry say it will take weeks, even months, to return to levels of production and refinement that existed before World War II. Israel has disassociated itself from the April ceasefire as well as the latest U.S. Iran agreement, increasing uncertainty about whether the new truce is going to hold. Lebanon's National News Agency reported that Israeli drone strikes on three vehicles in the southern Lebanon killed at least four people, and injured others. Trump has issued a rare public rebuke to Israel's military tactics. Data showed that China's crude throughput in may?fell by 9.1% over the past year, to its lowest level in nearly four years. This also indicated that refiners are starting to draw down on stockpiles in the face of the Iran War. According to sources, the American Petroleum Institute's report revealed that U.S. crude stockpiles fell by 8.3 million barrels during the week ending June 12. The Energy Information Administration is expected to release official figures at 10:30 am. This exceeded the expectations of a 4.6-million barrel draw. ET (1430 GMT), on Wednesday. Reporting by Yuka Obabayashi, Editing by Sonali Paul
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Russian-held Crimea restricts motorcycle use, claiming they sound like drones
Moscow-installed officials in Crimea have banned motorised vehicles such as quad bikes, motorcycles and scooters from being used at night. They claim that they sound like drone attacks. The peninsula's Russian-installed Governor, Sergei Aksyonov said that the ban would be enforced between 8 p.m. to 6 a.m. on Wednesday. He called it a temporary measure for the protection of military and important facilities. The moped's noise interferes with the operation of defense systems. "Their engines sound like drones,"?Oleg?Kryuchkov, Aksyonov’s advisor, said on Telegram separately on Tuesday. "The enemy is enlisting your children for nighttime rides." The Crimea ban does not apply to larger vehicles or cars. Ukraine recently intensified drone attacks against?Crimea - home to Russia's Black Sea Fleet - targeting the peninsula’s supply routes, causing a fuel shortage as the holiday season begins. Mikhail Razvozhayev said that the limit of 20 litres of fuel (5.3 gallons of gasoline) per car would remain at local petrol stations, in a Telegram message posted late Tuesday. Sources say that a Ukrainian drone attack on Tuesday halted the operations of the oil refinery in Moscow, adding to the damage done by the strike and spreading the fuel crisis further into the country. On Wednesday morning, Sergei Sobyanin, the Mayor of Moscow, said that Russian defence systems had shot down 10 drones headed for Moscow overnight. Donald Trump, the U.S. president, said that Russia should make peace in Ukraine after a "very successful" meeting with President Volodymyr Zelenskiy on Tuesday. His comments sparked cautious optimism from G7 leaders about the possibility of a peace agreement. (Reporting and editing by Lincoln Feast in Tokyo. Reporting by Jekaterina Glubkova.
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Officials say that four people were killed in Russian attacks on eastern Ukrainian towns
Officials and prosecutors reported late Tuesday that Russian 'attacks' on cities in Ukraine’s east and south-east had killed four people and set a residence and shopping centre ablaze. In the Donetsk Region, which is the center of Ukraine's frontline, prosecutors said that three people died in two bombings in the city of Slovansk. Five people were also injured. Sloviansk forms part of the "fortress belt" heavily defended by military forces and is seen as a key location in containing a slow-moving Russian attack on Donetsk. National police in?the southeast Ukrainian city of Zaporizhzhia? said that a wave dozens of drones had killed one man and injured seven other people. Online pictures showed flames on the roof and inside of a building. At least one façade was reduced to rubble. Regional Governor Ivan Fedorov confirmed that there were five attacks?on the city. Fire broke out at a home and shopping centre, and an education institution was damaged. Could not independently verify these reports. Russia and Ukraine deny that they deliberately targeted civilians during the war which began with Russia's full scale invasion of Ukraine in 2020. Reporting by Ron Popeski, Oleksandr Kozoukhar and Mark Porter; editing by Jamie Freed and Mark Porter
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Oil prices tumble again on US-Iran deal; S&P 500 falls
Oil prices dropped more than 5% Tuesday, continuing this week's losses, on hopes that a U.S. Iran deal will end the Middle East war and allow oil to flow through the Strait of Hormuz. Meanwhile, technology shares weighed on the S&P 500 & Nasdaq. The details of the U.S.-Iran interim agreement began to emerge. U.S. president Donald Trump said it would rule out Tehran acquiring a nuclear weapon, and an official from the U.S. stated that it allowed Iran to immediately sell oil after signing. Brent crude futures dropped $4.21 or 5.1% to settle at 78.96 per barrel. U.S. West Texas Intermediate crude (WTI crude) fell $4.70 or 5.8% to $76.05. SpaceX's stock valuation soared above that of Amazon and briefly overtook Microsoft's, amidst a frantic trading day driven by the newly listed option contracts of the company. SpaceX, which began trading on the Nasdaq last Friday, was up 4.8% for the day. Bruce Zaro is the managing director of Granite Wealth Management, Plymouth, Massachusetts. He said that the second quarter U.S. earnings are still a few weeks away. Nvidia, the most valuable AI chip maker in the world, surprised investors by tapping into the bond market for $25 billion. The company stated that the money would be used to fund general corporate needs and that the debt sale was a benchmark for future issuance. Nvidia shares dropped 2.4%. Investors also remained cautious in advance of the Federal Reserve policy update scheduled for Wednesday afternoon. Some investors were concerned that new Fed Chair Kevin Warsh might adopt a more hawkish stance at his first meeting. It is expected that the Fed will hold rates at between 3.50% and 3.75%, but it could also drop its easing policy. The Dow rose for the second day in a row. While the S&P 500, Nasdaq and other major indices ended the day lower, the Dow closed at a record high. The S&P 500 saw a decline in technology, but a rise in financials. A semiconductor index fell 5.7%. The Dow Jones Industrial Average rose by 328.64, or 0.6%, to 51,999.67. The S&P 500 dropped 42.94, or 0.5%, to 7,511.35. And the Nasdaq Composite fell 307,60, or 1.15, points to 26,376.35. MSCI's index of global?stocks fell by 2.98 points or 0.26% to 1,128,30. The pan-European STOXX 600 rose by 0.25%, and closed at a record high. The dollar fell in foreign exchange due to the optimism surrounding a possible peace agreement with Iran. The dollar index (which measures the greenback versus a basket including the yen, the euro and others) fell by 0.14%, to 99.55. Meanwhile, the euro was up 0.16%, at $1.1609. The Japanese yen fell 0.06% to 160.43 dollars after the Bank Of Japan raised its benchmark rate as expected by 25 basis points, reaching 1%. Reserve Bank of Australia held rates at 4.35%, in an unanimous decision. This was its first pause of the year despite high inflation. The Australian dollar was barely changed at $0.707 The yield on the 10-year U.S. Treasury bill was down 4.5 basis points at 4.424%. The auction of $13 billion in 20-year notes was successful. 20-year yields, which peaked at 4,938% on the trading day, are now at 4.93%. Gold spot rose by 0.59%, to $4331.14 per ounce. Reporting by Caroline Valetkevitch and Amanda Cooper, both in New York; Additional reporting from Alun John and Gregor Stuart Hunter, both in London; Editing by Jacqueline Wong and Rod Nickel; Jamie Freed.
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IG4 negocia o controle da Raizen com Moelis e Journey
O banco ?de investimentos independente Moelis & Company e ?a consultoria financeira Journey Capital, assessores dos credores ?da produtora de ?acucar e ?etanol Raizen, receberam ?ofertas nao vinculantes da gestora de private equity IG4 na noite de segunda-feira para adquirir creditos e o controle da empresa, de acordo com tres pessoas familiarizadas com ?o assunto. Duas delas, entretanto, alertaram que qualquer acordo ainda esta ?longe de ser certo, sendo que uma acrescentou que os credores ?dificilmente chegarao a uma decisao em breve. Ainda, uma das tres pessoas disse ?que os credores aceitaram a proposta da ?Raizen de converter ?divida em participacao acionaria por ser a melhor alternativa disponivel naquele momento, mas que prefeririam nao permanecer como acionistas. "Portanto, (o sucesso da proposta) vai depender 100% das condicoes oferecidas pela IG4", disse a ?pessoa. IG4, Moelis e Journey Capital nao quiseram comentar. A IG4, que recentemente se tornou ?co-controladora da petroquimica Braskem ao lado da gigante do ?petroleo Petrobras, ?busca adquirir o controle da Raizen, que acaba de concluir uma reestruturacao de ?divida de cerca de R$65 ?bilhoes com credores locais e internacionais, a maior reestruturacao extrajudicial ja registrada no ?Brasil. Conhecida por buscar o ?controle ou co-controle de ?suas aquisicoes, a IG4 so avancara com a oferta se garantir ao menos 50% mais um dos creditos reestruturados, disseram as pessoas.
Gold gains as bets on rate hikes decline ahead of Fed decision
Gold rose for a 'fifth consecutive day' on Wednesday, as a sigh of relief over a U.S. - Iran peace deal eased expectations that the U.S. would raise interest rates. Investors awaited more details about the agreement and the Federal Reserve policy meeting.
As of 0230 GMT spot gold was trading at $4,341.12 an ounce. This is near the one-week high reached on Monday. U.S. Gold Futures for August Delivery?rose by 0.2% to $4361.10.
Details are beginning to emerge about a U.S. - Iran interim deal that will end the Middle East conflict. Donald Trump said it would prevent Tehran from acquiring a nuclear weapon and a U.S. government official stated that the deal would allow Iran oil sales once signed.
The oil price hovered at a low of three months after news broke that Iranian fuel could?soon' hit the global market, which eased inflationary fears.
The pullback in oil has cooled expectations of rate hikes and eased some upward pressure on rates. The rally in gold is losing steam, as attention turns to the Fed's monetary policy announcement, said Ilya SPivak, Tastylive's head of global macro.
Investors are focusing on the U.S. Fed's policy announcement and remarks due later today, with rates expected to stay unchanged.
Spivak stated that "this marks the first FOMC meeting chaired Kevin Warsh, and traders are still unsure of how he'll reconcile his hawkish record with rising inflation and pressure from a White House requesting a pivot to a more dovish stance."
According to the 'CME FedWatch' tool, traders now expect a?59% probability of a?U.S. rate increase in December. This is down from 70% the week prior to the announcement of the U.S./Iran peace agreement.
When rates are high, gold loses its appeal because it does not earn interest.
Westpac analysts wrote in a research report that "Over the long term, structural support for gold is expected to continue, driven by continued Asian demand and continuing central bank purchases as hedges?against?geopolitical and political risks."
Silver spot rose 0.3% to $70.38 an ounce. Platinum was up 0.5% at $1,812.80 and palladium gained 0.3%.
(source: Reuters)