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MORNING BID AMERICAS - Alphabet mistakes, Yen surges and China returns
Mike Dolan gives us a look at what the U.S. market and global markets will be like today. As the tariff rollercoaster of the past week has leveled out, Wall Street is once again tilting down, due to a bad reception for Alphabet’s results, the lingering China tariff increase plans, and the fresh speculation about interest rate hikes in Japan. U.S. Stock Futures are back in red before Wednesday's bell, as Alphabet shares plunged by 7% over night. The drop was due to doubts surrounding the Google parent company's cloud computing, similar to Microsoft's last week, as well as anxiety over its massive investment in artificial intelligent, especially after last week's DeepSeek announcement. Alphabet, following the day before's slap from Beijing, which was a rebuke of an anti-monopoly investigation into Google in China, said that it would spend 75 billion dollars on its AI buildout, 29% higher than Wall Street had expected. It also missed its cloud revenue goal. Shares of Advanced Micro Devices dropped 9% overnight after its AI chip revenue did not meet expectations. The news about global macro-policy did not help, either. This week has seen a flood of updates on earnings around the globe. The yen rose to its highest levels of the current year after domestic wage data rekindled talks of another Bank of Japan interest rate hike in this year. The December real wages in Japan, adjusted for inflation, rose by 0.6% compared to the previous year. This was due to an increase in winter bonuses. Government officials expressed optimism that wage growth momentum is increasing. Kazuhiro Maaki, director general of the BOJ’s monetary affairs division, said in parliament that "we will continue to increase interest rates and adjust degree of monetary assistance, if the underlying inflation accelerates towards 2%, as we project." Chinese markets are back from the lunar new year holidays. There is a lot of information to digest, including the 10% tariff increase on Chinese imports this week, the planned retaliation by Beijing for Feb. 10, and the DeepSeek AI development. Both mainland China and Hong Kong's stock indexes dropped on Wednesday, as hopes that a meeting would be held between U.S. president Donald Trump and China’s president Xi Jinping in order to avoid a tariff war had been dashed. The U.S.'s plans to impose tariffs on Canada, Mexico and other countries were put off for a whole month after Trump made similar calls with the leaders of these countries. Trump said Tuesday night that he wasn't in a hurry to talk to Xi. Karoline Leavitt, White House spokesperson, told reporters that a Trump-Xi phone call was still to be scheduled. EMPLOYMENT NUMBERS The U.S. Postal Service announced that it would temporarily stop accepting parcels from China or Hong Kong, as Trump terminated a provision in the trade agreement used by Temu and Shein retailers to send low-value packages to America duty-free. In the background, surveys of the private sector showed that China's service activity expanded at a lower pace in January. The Lunar New Year holidays also worsened employment. Currency reactions were mixed. The onshore yuan was slightly weaker, as the People's Bank of China closely guided the currency after the holiday, but the offshore yuan grew for a second day. The dollar index was impacted by the combined gains of the yuan and yen. The 10-year Treasury note fell below 4.5%, and the dollar was also dragged down by a decline in U.S. Treasury rates. Treasury yields fell on a combination of trade war anxiety and the latest employment report, which showed that U.S. jobs openings were lower than expected in December. This takes the heat off the labor market, and gives the Federal Reserve more room to ease policy. On Tuesday, Fed Vice-Chair Philip Jefferson stated that he continues to see the level of monetary policies restraint being placed on the economy gradually decreasing as we move towards a neutral stance. "That being said, I don't think we should be in a rush to change our position." The two Fed cuts for this year have been priced out almost fully. They will resume around the middle of the year. ADP will release the private sector payrolls of January later on Wednesday, and Friday is when ADP releases its national payrolls report. Geopolitical tensions have also added to the trade war concerns. Trump's comments on the United States retaking Gaza has confused many, who thought he was trying to pull the United States out of foreign conflicts and withdraw expensive U.S. aid and military funds. The statement was confusing, just as it had been before with similar contradictions in currency and trade policy. Gold was the only asset that seemed to benefit from the uncertainty. It set a new record for gains this year, with almost 10%. The Nikkei reported that Nissan, a Japanese automaker, will end merger talks with Honda. This would have resulted in the third largest automaker in the world. Honda shares rose 8% and Nissan's fell 4%. The following developments should help to guide U.S. stock markets on Wednesday:
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Kyiv: IAEA delays rotation of mission to nuclear plant because of lack Russian guarantees
Ukraine's Foreign Ministry announced on Wednesday that the International Atomic Energy Agency has delayed the rotation of their mission to the Russian controlled Zaporizhzhia Nuclear Power Plant due to the lack of security assurances from Russia. A senior Russian diplomat rejected Ukraine's assertion. A Ukrainian Ministry spokesman stated that this was not the first instance the Kremlin used blackmail to intimidate and subvert the independence of international experts. "We won't allow Russia to undermine the Agency’s independence and neutrality to achieve their criminal goals," he stated in a press release. Russia captured Europe's biggest nuclear power plant soon after the full scale invasion of Ukraine in Febuary 2022. Since September 2022, the IAEA has sent staff to the facility. In a statement made on X by senior Russian diplomat Mikhail Ulyanov he accused Ukraine of lying in a report about the lack of security assurances. The Vienna-based diplomatic said that the Russian Ministry of Defence has provided "all assurances", while Ukraine is trying to introduce new requirements. IAEA Chief Rafael Grossi announced that he will visit Russia this week to discuss conditions in Ukraine and the Zaporizhzhia nuclear plant. Grossi said at a Kyiv press conference on Tuesday that it was essential for him to keep communication channels open in order to fulfill his obligations. He inspected a substation for electricity distribution during the visit and warned that an attack on Ukraine's grid could lead to a nuclear disaster by disrupting power supply. Moscow has repeatedly attacked Ukraine's infrastructure, including its substations. However, it has avoided direct attacks on the nuclear plants that produce more than half the country's power. (Reporting and editing by Anastasiia malenko)
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Aluminium and copper both gain while aluminium declines due to concerns about increased supply
On Wednesday, copper prices rose to their highest level in over a week due to a weaker dollar. Aluminium prices fell as raw materials prices dropped, raising the expectation of increased supply. The price of three-month copper at the London Metal Exchange was up by 0.1% to $9,160 per metric tonne at 1030 GMT, after reaching its highest level since January 27 at $9204. The dollar index was weaker, but the yen was stronger. The dollar is weaker, making commodities priced in U.S. dollars less expensive for buyers of other currencies. On the first trading day since the Lunar New Year holiday, the most active copper contract at the Shanghai Futures Exchange dropped 0.3%, to 75,290 Yuan ($10342.60), per ton. LME Aluminium fell by 0.9%, to $2.613.50 per ton. On Jan. 20 the metal, which is used for transport, packaging, and construction, was at its highest price in over two months, partly because of concerns about shortages and high prices of alumina, a raw material. "The bullishness of aluminium was overdone. "With alumina prices much lower, there's a very strong incentive to increase output", said Dan Smith. He is the head of research for Amalgamated Metal Trading. The price of alumina on SHFE has dropped by one-third this year, to 3,588 yuan a ton. This is after the prices reached record highs in 2017. Smith was also skeptical that the government's 45 million ton annual cap on aluminum smelter output in China would be strictly adhered to. I have a hunch it's not as secure as you think. It wouldn't be surprising to me if China's supply side surprised me on the upside." Other metals include LME zinc, which fell 1%, to $2,779.50 per ton, while lead rose 0.7% to 1,984, nickel climbed 0.4% to 15,335 and tin grew 0.9% to 30,530. Reporting by Eric Onstad. ($1 = 7.2796 Chinese Yuan). Editing by Jane Merriman
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Elektrarne receives 3.6 billion euro loan as part of Slovakia's largest corporate debt refinancing
Slovenske Elektrarne, Slovakia's largest utility, announced on Wednesday that it had secured a loan facility of 3.6 billion euros ($3.75 billion), with a consortium of banks. This was the largest corporate debt refinancing ever in the Eurozone country. Lenders are providing 1.665 billion euro in an amortizing three-year loan. They will also provide an equal amount as a bullet-five-year term loan. There is also a revolving credit facility of 250 million euros. The company stated that the proceeds will be used for refinancing as well as corporate purposes. UniCredit was the global coordinator. Branislav Stycek, CEO of Slovenske Elektrarne said: "This will mean we pay lower interest and our collateralised asset will be released." In 2023, the company completed its new nuclear power unit of 471 megawatts at Mochovce and is nearing completion of another at the same site. The company also operates hydro, solar and nuclear power plants that supply most of the electricity in the country. Slovenske Elektrarne is owned by the Slovak government to the tune of 34%. Enel, the Italian company, and Daniel Kretinsky’s EPH group, the Czech billionaire's company, jointly own the remainder. However the companies announced in December that EPH would acquire Enel’s stake. Reporting by Jan Lopatka in Prague and Jason Hovet. Editing by Jane Merriman
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SSE's UK renewables production jumps, but profits are soft
The British utility SSE announced on Wednesday that it had increased its renewables production in the nine-month period ending December 31, aided by capacity growth. However, the power generator/network operator gave a cautious outlook for profit. SSE's adjusted earnings are expected to be between 154-163 pence for the fiscal year ending March 31 or 158.5 pence at the midpoint. This compares with the analysts' estimates of 163.1 pence. Analysts at Jefferies said that the forecast was in accordance with their consensus. SSE's renewables division, which focuses primarily on the UK and Ireland and is a key part of its business, has still seen a 26% increase in output for the nine-month period ending Dec. 31, despite the cold snap and low wind speed. SSE said that the record-breaking wind speed from Storm Eowyn, which left many homes and businesses in Ireland without power, also presented challenges to its grids in the current quarter, but they were overcome. Last month, Britain was also hit by heavy rain, snow and flooding. Our teams were able provide a rapid and effective response to Storm Eowyn. At 1025 GMT, its shares were up by 0.6%. The FTSE-100 component didn't provide an update on the search for a replacement chief executive before Alistair Phillips-Davies retires this year. SSE has maintained its profit forecast of 175-200 pence for the year ending on March 31, 2027 as it increases investments to meet UK electricity and decarbonisation goals. SSE's last fiscal year saw a profit per share of 158.5 pence. SSE's power network arm SSEN Transmission announced in December that it will invest at minimum 22 billion pounds ($27.50billion) over a period of five years beginning April 2026 in grid infrastructure.
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Iran declares U.S. sanctions on oil and energy markets will cause instability
The SHANA news outlet of the Ministry reported that Iran's Oil Minister said unilateral sanctions against crude producers would destabilise the energy markets. This was after U.S. president Donald Trump stated he would try to drive Tehran's exports of oil to zero. "Depoliticising of the oil market is vital for energy security." Mohsen Paknejad, OPEC's Secretary General Haitham Al Ghais said that unilateral sanctions and pressure against major oil producers will destabilise the oil and energy market and harm consumers worldwide. Paknejad made his comments after Trump restored the Iranian president's rights. "maximum pressure" Campaign against Iran, which includes efforts to reduce its oil exports to zero to prevent Tehran from obtaining nuclear weapons. The campaign began during Trump's second term in 2018. It led to a dramatic drop in Iranian oil imports, which fell to as low as 200,000 barrels a day in certain months of 2020. The Iranian oil exports have risen to around 1.5 million barrels a day under the administration of U.S. president Joe Biden, with most of them going to China. Paknejad told the state television on Wednesday, that Tehran has prepared strategies in case of U.S. sanctions. Paknejad stated that the upstream investment issue was the biggest challenge facing the global oil markets in the medium- to long-term. He said that if today, some major oil users are worried about the oil supply, it is because they have put pressure on OPEC+ by pushing for regulations on new upstream investment and by putting political pressure on OPEC+. Paknejad, who was elected as the president of OPEC for 2025 in December, is a member of the OPEC. Reporting by Dubai Newsroom Editing Bernadettebaum and Gareth Jones
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Reduced German renewable supply boosts spot prices
The price of European prompt electricity rose on Wednesday, as lower wind and sun output was forecast for Germany's main market. Demand increased in the region due to the cold temperatures. At 0945 GMT, the German power day-ahead was up 7.4% at 152 Euros ($158.20 per megawatt-hour). The French baseload rate for the day ahead rose 1.7% to 146 euros/MWh. According to LSEG, Germany's wind power production fell by 5.1 gigawatts to 11.6 GW. Solar generation also dropped to 2.7 GW compared to 4.8 GW. The French nuclear availability was unchanged at 81%, after losing two percentage points the day before. On Thursday, Germany's power consumption is expected to rise by 0.3 GW. In France, the demand should increase by the same amount. The average temperature in both countries is in the positive low degrees Celsius range. The German baseload for the year ahead was almost unchanged at 96.7 Euros/MWh. However, the French position was not traded after it settled at 69.0 Euros/MWh. The benchmark contract for 2025 on the European carbon market fell 1.1% to 80.05 euros per metric tonne. The VDMA said that the orders of German equipment and plant manufacturers grew a little in the last month of the year due to large contracts from overseas, but the year 2024 overall marked the second consecutive year of decline. LSEG data shows that the gas-fired generation in January was the highest since 2022. This is a jump of more than 10% compared to January 2024. The price of gas in the region has risen to its highest level since early 2023. This could lead some people to switch from gas to coal. ($1 = 0.9608 euro) (Reporting and editing by Vijay Kishore, Vera Eckert)
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Officials say that the South Korean industry ministry has temporarily banned access to DeepSeek due to security concerns.
A ministry official revealed on Wednesday that the South Korean industry ministry temporarily blocked employee access to DeepSeek, a Chinese artificial intelligence startup, due to security reasons. The government is urging caution with generative AI services. Officials said that the government published a notice Tuesday urging ministries and agencies to be cautious when using AI services, such as DeepSeek or ChatGPT, at work. The state-run Korea Hydro & Nuclear Power announced that it has blocked the use of AI services, including DeepSeek, earlier this month. A spokesperson for Kakao Corp said that the tech giant has asked its employees not to use DeepSeek because of security concerns. With the temporary ban, South Korea is now the latest government to issue a warning about DeepSeek. The U.S. Department of Homeland Security is also examining DeepSeek and its national security implications. DeepSeek, South Korea's privacy watchdog, plans to question the company about the management of personal information. The launch of DeepSeek’s latest AI models by the Chinese startup sent shockwaves throughout the tech industry. The company claims that its models are as good or better than those developed in the United States, and at a fraction the price. Reporting by Hyunjoo Ji, Joyce Lee, Hyonhee Shi, writing by Ju Min Park, editing by Bernadette B. Baum and Kate Mayberry
Officials say that if the renewable energy sector is slow, Japan's LNG demand may increase. Canada will be there to supply it.
A senior official from the industry ministry said that Japan's demand may increase by more than 10 percent to 74 million tons of liquefied gas by 2040, under a scenario in which renewable energy is not implemented as quickly as expected.
Japan's domestic LNG consumption continued to decline last year. It fell by 0.4%, to 66,000,000 tons, due to the weaker economy, an increasing share of renewable energies, and restarted nuclear power plants.
Yuya Hasegawa, division director of the Ministry of Economy, Trade and Industry in Japan (METI), said at a conference held in Tokyo that the growing number of data centres is expected to increase the demand for power.
He said that if we don't have a massive expansion of renewable energies, or if the cost of ammonia, hydrogen, and CCUS (carbon storage, utilization, and capture) cannot be reduced, our gas demand would increase.
Hasegawa said that under a METI scenario for an alternative energy strategy, Japan's demand for LNG will increase to 74 millions tons by 2040 or almost 10% if the METI scenarios do not include a significant expansion of renewable energy.
Australia, Malaysia, and the United States provide the most LNG to Japan. However, Canada, where Mitsubishi is an investor, is planning to begin exports later this year.
Canada has turned its attention towards other markets. Japan is the second largest LNG buyer in the world after China.
Trump has promised to increase the oil and gas production of the U.S. which is already the largest in the world, increasing the competition between sellers for the top buyers including Japan.
Rebecca Schulz of the Alberta Government's Ministry of Environment and Protected Areas, who spoke at the same conference, said that Alberta wants to double its production to supply other countries, such as Asia and Japan.
"Just because of the shipping time - half the time comes from the U.S. Gulf Coast - it makes us the perfect partner for Japan," she said. (Reporting and editing by PhilippaFletcher; KatyaGolubkova)
(source: Reuters)