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Be careful what you Warh for.
Gregor Stuart Hunter gives a look at what the European and global market will be like today. Stocks, commodities, bond yields, and the dollar are all up. The markets have become risk-off since Donald Trump announced that he had 'decided' who he would nominate as the new Federal Reserve chairman. Kevin Warsh has risen to the top of prediction markets since the two met in the White House. Warsh is a former Fed Governor who is seen to advocate lower interest rates. He is also viewed as one of the more moderate candidates amongst the many that have been proposed and is perhaps a little more cautious about heavy monetary stimuli than other candidates. S&P 500 and Nasdaq futures fell 0.4% each after it was reported that Warsh had visited the White House on Thursday for a meeting, according to sources familiar with this matter. Bloomberg News reported that the Trump administration is preparing to nominate Warsh for the next Fed Chair. The market was weighing up the implications of this 'pick', and MSCI's broadest Asia-Pacific index outside Japan fell as much as 1.3 percent, reducing the shine from the benchmark's highest'monthly' gain in the last three years. Early European trading saw pan-regional futures rise 0.6%. German DAX futures rose 0.5%, and FTSE Futures climbed by 0.2%. Brent crude fell 1.4% to $69.74, as oil markets assessed heightened geopolitical risk after Trump signed an executive orders declaring a state of emergency and setting up a process for imposing tariffs on goods coming from countries that provide or sell oil to Cuba. Trump said that he planned to speak to Iran in the face of rising tensions. There has been no word yet on what Trump thought about the premiere of "Melania", which took place on Thursday. Unnamed U.S. officials told a reporter that the attendance of cabinet members at the premiere of the high-profile documentary on First Lady Melania was mandatory. Many of them attended the event held at the Kennedy Center. The key developments that could influence the markets on Friday Results of the Company Exxon Mobil, Chevron, American Express, Verizon, Regeneron Pharmaceuticals, Aon, CaixaBank Economic Events France: preliminary GDP for Q4 and consumer spending and producer prices? Germany: Unemployment rates, CPI, HICP, and flash GDP for the third quarter, import prices in December UK: Bank of England consumer loans and mortgage lending in December Euro zone: flash preliminary GDP for Q4, unemployment rates for December Debt auctions: UK: 1 month, 3 months and 6 months government debt (Reporting and editing by Gregor Stuart Hunter)
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Australia's critical mineral strategy won't be derailed by US price floor reduction
Australia said on Friday that it would continue to support its vital mineral supply chains, after the U.S. withdrew from plans to guarantee a price minimum for such projects. Shares in?Australian rare earth miner companies fell sharply Thursday after a report by? Reports on the Trump Administration's retreat impacted shares of?Australia's rare earth miners sharply on Thursday. On Friday, the sector was still in red. Lynas, the largest producer of rare Earths outside China was down more than 4%. Trump administration officials communicated the backdown to U.S. mining executive and indicated that there was no funding from Congress for price floors, and the "complexity" of setting market prices. Madeleine King, Minister for Resources at Sky News said on Friday that "this won't stop Australia from pursuing its critical minerals strategic reserve?program to ensure Australia has the resources it needs to create a future in Australia." "We know from what we have seen in reports and we will watch that play out. The U.S. introduced a floor price for one project, but that was the only time it did it. That was a game changer." Australia is positioning itself to be a vital alternative to China, the world's largest producer of minerals, which are used in the automotive industry and defense sectors. It said that it would create a strategic reserve of A$1.2 billion ($840 million) in minerals it believes are vulnerable to disruptions in supply. Antimony, gallium, and rare earths are the first priority for this stockpile. It is expected that it will be completed by 2026's second half. As part of its overall strategy, the government may also consider setting a "price floor" to support critical local minerals projects. King explained that there will be a variety of mechanisms, including a floor price through offtake agreements. "We're determined to ensure that taxpayers get value for money from the reserve, and any floor price." (1 Australian dollar = 1.4278 dollars) (Reporting and editing by Thomas Derpinghaus in Sydney, Christine Chen reporting from Sydney)
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Stocks fall on bets that Kevin Warsh will be Trump's Fed nominee
The dollar and bond yields soared on Friday, after U.S. president Donald?Trump announced that he had made a decision on his pick for the new Federal Reserve chief. Reports point to?Kevin?Warsh? as the most likely candidate. Warsh is a former Fed governor who is seen to advocate lower interest rates. He is also viewed as one of the more moderate choices of all the names that were raised, and may be more conservative on the heavy monetary stimuli than other candidates. The MSCI broadest Asia-Pacific index outside Japan fell as much as 1.3%. This was the largest one-day drop in the last month. S&P 500 futures fell?0.4%. Nasdaq futures dropped 0.5%. Precious metals also plunged after a report that Warsh had visited the White House on Thursday for a meeting. Bloomberg News reported also that the Trump Administration is preparing Warsh to be the next Fed Chair. Warsh is on record saying that he prefers lower rates, said Damien Boey of Wilson Asset Management, Sydney. "But, the trade-off he makes for lower rates is he wants to see the Fed have a smaller balanced sheet," he added. The markets react as if they were thinking: "What would the world be like with a smaller Fed Balance Sheet?" " The implied probability that Trump will nominate Warsh as the new central bank chief has risen from 35% to 92% on prediction market Polymarket. The U.S. Dollar Index, which measures the strength of the greenback against a basket six currencies, rose 0.3% to 96.481 in recent trading, reversing recent weakness. Tim Kelleher said, "We have definitely seen dollar buying immediately on the back of this," Tim Kelleher is head of institutional FX Sales for Commonwealth Bank Auckland. He's well-known to the market and will likely calm things down a little. Asian stocks fell by 2.1%, led by a decline in China. A gauge of Chinese firms with Hong Kong listings was down. MSCI's broadest index of stocks outside Japan is on track to achieve its best performance monthly in over three years. The Nikkei fell 0.1% in Tokyo. Jakarta's stocks rose 1% following the resignation of the head of Indonesian stock exchange, who took responsibility for a selloff that was triggered by an MSCI warning about a possible downgrade. This was the biggest stock crash since the Asian Financial Crisis of 1998. Fed funds futures are pricing an implied 86.6% probability?that the U.S. central bank will hold steady on rates at its next two-day meeting on March 18, compared to a 87.5% chance a day earlier, according to CME Group's FedWatch tool. Fed funds futures indicate an implied 86.6% chance that the U.S. Central Bank will keep rates the same at its next 2-day meeting on 18 March, compared to 87.5% a day before. After a turbulent session on Thursday, precious metals' rebound faltered. Silver fell 6% and gold was down 3.7% at $5,195.91. Brent crude fell 1.4% to $69.70, as oil markets assessed geopolitical risk after Trump signed an executive ordering declaring a state of emergency and setting up a process for imposing tariffs on goods coming from countries who sell or supply oil to Cuba. Trump also said on Thursday that he planned to speak to Iran in the face of rising tensions. Bitcoin fell 2.7% to $82,089.96 while ether dropped 2.8% to $2738.30. (Reporting and editing by Thomas Derpinghaus, Sam Holmes and Gregor Stuart Hunter)
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Iron ore prices drop as portside inventories increase, but demand is expected to rise
Dalian iron-ore futures dropped on Friday as China's portside inventories accumulated towards the end of the pre Lunar New Year restocking period, but?demand is expected to increase. As of 0326 GMT, the?most-traded?May iron ore contract at China's Dalian Commodity Exchange traded 0.32% higher at 788.5 Yuan ($113.46). The contract is expected to continue declining for the second consecutive week. The benchmark March Iron Ore at the Singapore Exchange fell 0.79% to $103.95 per?ton and decreased 0.84% in this week. According to a report from the Shanghai Metals Market, China's iron ore portside inventories are continuing to grow, but that transaction volumes have been slow. The note said that coarse fines, fine ore, and lump ore as well as pellets, experienced a'significant inventory buildup. Everbright Futures, a Chinese broker, claims that the recent "bullish" run in commodities and precious metals has supported ferrous metals prices. The iron ore restocking period is nearing the end with only 12 trading days remaining until the Chinese Lunar New Year. This means that the upside potential for the metals market will be limited, according to a report by Shanghai Steel Union's chief steel analyst, Wang Jianhua. Forty-four independent electric-arc-furnaces (EAF) will be shutting down from February 1-8 ?for maintenance, according to a Mysteel survey. According to Mysteel, the EAF currently accounts for 10% of China's steel production, and blast furnaces for 90%. The demand for steel feedstock is expected to rise as more steel mills re-start production next week following planned maintenance. Coking coal and coke both increased by 0.97% and 1.01% respectively. The benchmarks for steel on the Shanghai Futures Exchange have fallen. Rebar fell by 0.54%. Hot-rolled coils dropped by 0.36%. Wire rods were down 0.06%. Stainless steel was down 2.28%. ($1 = 6.9493 Yuan) (Reporting and editing by Ronojoy Mazumdar).
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US eases sanctions on Venezuelan oil sales
On Thursday, the administration of Donald Trump lifted sanctions against Venezuela's oil sector to make it easier for U.S. firms to sell crude oil from Venezuela. It also said that more restrictions would be lifted soon. The Office of Foreign Assets Control of the Treasury authorizes U.S. firms to purchase, sell, transport and store Venezuelan crude oil but does not lift U.S. production sanctions. An official at the White House said that the measure would "help flow existing product" out of Venezuela, and that more announcements will be made soon on easing sanctions. Trump said that the United States will control Venezuela's oil revenues and sales indefinitely, since U.S. troops seized Nicolas Maduro as the leader of the country in a raid in the capital Caracas in January?3. He also said he wants U.S. companies to invest 100 billion dollars in order to restore the OPEC member nation's production back to its historical peaks after years of mismanagement and underinvestment. Washington and Caracas, in the meantime, have already reached an agreement to sell 50,000,000 barrels of Venezuelan crude, which will be marketed by European trading houses Vitol & Trafigura. Treasury's latest authorization, also known as a "general license", opens Venezuela oil trade up to more companies, if they are American. The law allows transactions between the Venezuelan government and the state oil company PDVSA relating to "the lifting of Venezuelan oil from storage, the exportation or reexportation of that oil, the sale, the resale of the oil, the supply, the marketing, the purchase, the delivery or the transportation of Venezuelan oil by a U.S. entity." This excludes firms, individuals, and companies from countries like China, Iran North Korea, Cuba, and Russia. Treasury, under President Donald Trump’s first administration in office, designated Venezuela’s entire energy sector as subject to U.S. sanction after Maduro’s first reelection which Washington didn't recognize, in 2019. The new license prohibits payment terms that do not meet commercial standards, include debt swaps, payments in gold or digital currency, or are not denominated in a reasonable amount of money. AMERICA FIRST In recent weeks, oil producers Chevron and Repsol, refiner Reliance Industries and some U.S. service providers of oil sought licenses to increase output or exports. To expand production in the United States, additional authorizations would be required. Jeremy Paner is a lawyer with Hughes Hubbard & Reed, and a former OFAC investigator. He said that the authorization was broad, in the sense it allows for many operations, including the refining, transporting and "lifting' of Venezuelan crude oil. He said that the scope of the law is limited, as it only applies to U.S.-based companies. Kevin Book, an analyst at ClearView Energy Partners said that the authorization could bring clarity to U.S.-based companies, while maintaining the standard of case by case review for non U.S.-based entities. It appears to be offering sanctions relief based on the 'America First' principle. Two sources told me this week that the large number of requests made to the U.S. Government had slowed down progress on plans to increase exports to Venezuela and to get investment flowing quickly. The new 'OFAC licence, meanwhile, was issued as lawmakers in Venezuela approved on Thursday a sweetened revision of the main oil law in the country that is expected to give autonomy to private producers through joint ventures and new contracts for the operation of their projects and the commercialization. The agreement formalizes a model of oil production sharing that was first developed by Maduro, and which he negotiated in recent years with "little-known" energy companies. Francisco Monaldi of Rice University's Baker Institute, Houston, is the director of the Latin American Energy Program. He asked if the exclusion from these ventures of Russian and Chinese entities might make it difficult for PDVSA. He said that ventures with these countries produce 22% of oil. "If they can't export the oil that comes from these ventures, then it is a serious problem." (Reporting and Editing by Rod Nickel and Nathan Crooks; Reporting and Editing by Timothy Gardner and Marianna Psaledakis.
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Trump threatens to impose tariffs on nations that supply Cuba with oil
Donald Trump, the U.S. president, threatened new tariffs against countries that supply oil to Cuba on Thursday. This is part of a pressure campaign aimed at the Communist-run island and long-time enemy of the United States. The executive order, which was issued under the national emergency declaration, did not specify tariff rates, nor did it single out any specific countries whose goods could be subject to U.S. duties. Cuba's state media reacted'shortly' after Trump's announcement. They warned that the order could paralyze electrical generation, agricultural production, water supply, and health services in an island already experiencing a crippling financial crisis. What is the goal? Cuban government stated in a statement broadcast on a?nightly television newscast that the goal was 'genocide of Cuban people. "The U.S. government will suffocate all spheres of the Cuban people's lives." government." Trump, enthused by the U.S. military’s capture of Venezuelan President Nicolas Maduro during a deadly raid in early this month has spoken repeatedly of taking action against Cuba and its leadership. Trump said that "Cuba is going to fail pretty soon" and that Venezuela, the island's former top oil supplier, had not sent money or oil to Cuba in recent times. Exclusively reported last week, Mexico - 'Cuba's leading supplier after Venezuela cut-off shipments in December- was also evaluating whether to continue sending oil amid increasing fears that it might face reprisals from United States. Trump has used tariff threats to further his foreign policy throughout his second term as president. Cuba's President, Miguel Diaz-Canel said this month Washington has?nomoral authority to force a Cuban deal after Trump suggested that the Communist-run Island should strike an accord with the U.S. (Reporting and editing by Ross Colvin, Lisa Shumaker, and Jasper Ward, in Washington)
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Chinalco and Rio Tinto purchase control of Brazilian aluminum firm CBA for $904 millions
The firms announced on Thursday that the Aluminium Corporation of China (Chinalco), and Rio Tinto had agreed to purchase a controlling interest in Companhia Brasileira de Aluminio, for a total amount of 4.69 billion Reis ($903.61 millions). The companies said that together they will purchase 68.6% or 446.6 millions shares of Brazilian aluminium manufacturer CBA at a price of 10.50 reais per share. They added that the Brazilian conglomerate Grupo Votrorantim will purchase the controlling stake. Both will launch a tender for the remaining CBA shares, a move that is required by Brazilian regulations and could lead to the removal of the company from the Sao Paulo B3 exchange. Reports earlier indicated that Chinalco was close to finalizing a deal with Rio Tinto for a "controlling stake" in CBA. Chinalco, the largest shareholder of Rio Tinto in the UK listing, is also a partner in a massive iron ore mine in Guinea. The purchase price was 1.4% higher than CBA's Thursday closing price. "It's a bullish?signal," CLSA analyst Baden Moore said in Sydney. He said that Chinese aluminium producers' investments in overseas production highlighted their limited production opportunities at home. This suggested a limited growth of supply for the light metal. He said that Rio Tinto's investment, which will announce a possible tie up with Glencore on February 5, does not change the dial but is in line its strategy of promoting?low carbon aluminium. The government's energy-related policies are expected to boost the low-carbon aluminium industry. Chinalco said that Rio Tinto will manage the CBA stake through a joint venture owned by Rio Tinto and a Chinese subsidiary. Rio Tinto and Chinalco are both mining companies. Rio Tinto's shares dropped 1.2% on a market which was down. CBA has a low-carbon integrated aluminium production system that includes bauxite mining and refining, as well as smelting. It also produces diverse primary aluminum products. According to LSEG, the Brazilian company's shares grew by more than twofold in just 12 months. Its market capitalization reached $1.27 billion on Thursday. Emirates Global Aluminium, a UAE company owned jointly by Abu Dhabi’s Mubadala sovereign fund and Dubai’s Investment Corporation of Dubai (DCD), also expressed interest in the sale process. Negotiations with EGA failed to progress. Reporting by Luciana and Andre Romani from Sao Paulo, and Sherin in Bengaluru. Melanie Burton, Melbourne, contributed additional reporting; Kyrin Madry edited the story.
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Asia stocks are choppy but on track to have the best month for three years
Early Asian trading on Friday was volatile after U.S. president Donald Trump endorsed bipartisan agreement to avoid a new government shutdown. He also said that he has decided who will be nominated to lead the Federal Reserve. MSCI's broadest Asia-Pacific share index outside Japan fluctuated between gains and losses. It was recently down by 0.2%. This extended the day before's declines, as it headed towards its best month performance in over three years. S&P 500 and Nasdaq futures both fell 0.4%, while precious metals are choppy following a recent flash crash. Shoki Omori is the chief desk strategist at Mizuho, Tokyo, for rates and foreign exchange. Wall Street stocks dropped on Thursday after Microsoft's lackluster earnings raised concerns about the success of its artificial intelligence bets. The S&P 500 fell 0.1% and the Nasdaq Composite dropped 0.7%. Analysts from Westpac stated in a report that there was a lot of drama on the market. "Sentiment changed during U.S. Trading Hours when concerns about equity valuations in the technology industry resurfaced." Just under a third (32%) of S&P500 companies have reported earnings. 76% of these companies beat their estimates. The earnings season for major U.S. technology firms, which dominate the index, has been mixed. Microsoft shares fell 10% on Thursday. This wiped out more than $350 Billion in market value. Meta's ad-targeting was boosted by its AI investments, which helped boost a positive first-quarter outlook. Apple forecast on Thursday a revenue surge of up 16% for the March quarter. This was well in advance of Wall Street expectations. The strong demand for iPhones, and a sharp recovery in China, were to blame. The Nikkei was flat in Japan after data released on Friday showed core consumer prices rose by 2.0% from January of last year, slower than the previous month, but still matching the Bank of Japan target. This eased pressure on the central banks. The U.S. Dollar Index, which measures the strength of the greenback against a basket six currencies, rose last 0.3% to 96.441, after Trump announced he would announce his choice for Federal Reserve Chair Jerome Powell's replacement on Friday. The implied probability of contracts bet on the prediction market Polymarket that former Fed Governor Kevin Warsh will lead the central banks has risen to 88%. The yield on 10-year Treasury bonds in the United States was last up by?3.8 basis point at 4.263%. Fed funds futures indicate an implied 86.6% chance that the U.S. Central Bank will keep rates unchanged at its next 2-day meeting on 18 March, compared to?an 87.5% probability a day before. After a turbulent session on Thursday, precious metals' rebound faltered. Silver fell 0.2% and gold was down 0.7% to $5,357.9404. Chris Weston is the head of research for Pepperstone Group, a Melbourne-based company. He said: "The liquidation... of what had become grossly extended positions... was not overly shocking, especially in precious metals? space." WTI crude oil was down last by 0.7% to $64,95, as oil markets assessed geopolitical risk after Trump signed an executive orders declaring a state of emergency and setting up a process for imposing tariffs on goods coming from countries who sell or supply oil to Cuba. Trump also said Thursday that he planned to speak to Iran in the face of rising tensions. Last week, Bitcoin fell by 2.0% to $82,684.51, and ether = dropped 1.7% to $2,768.01. (Reporting and editing by Thomas Derpinghaus; Reporting by Gregor Stuart Hunter)
Valero refiner buys Venezuelan crude oil from three authorized sellers
Valero Energy announced on Thursday that it had 'purchased' Venezuelan crude oil from authorized sellers. The company expects this grade to be a major part of the heavy oil diet for its refineries as soon as next month.
U.S. refining companies are expected to gain from President Donald Trump’s efforts to increase oil production in Venezuela and to rebuild the country’s deplorable oil sector after the capture of Nicolas Maduro this month.
Valero said that it had engaged with all three authorized sellers, and bought barrels from each of them. This was in an email sent to customers on Thursday following a conference call. "As we stated in the conference call, we anticipate that Venezuelan crude will account for a significant share of heavy crude consumption as we move into February and March."
The refiner refused to identify the sellers.
Washington has authorized the oil major Chevron, trading houses Vitol, and Trafigura to export Venezuelan crude to the U.S.
Valero, Phillips 66 and others bought Venezuelan crude oil earlier this month. They are among the first U.S. Gulf Coast refining companies to enter into deals as part of Washington’s agreement with Caracas for exports of up to '50 million barrels.
Randy Hawkins said, "We evaluate Venezuelan crude as we do with all of our alternatives," during a conference call with investors.
Hawkins stated that the company was able to refine up to 240,000 barrels of Venezuelan heavy crude per day in its system prior an expansion of its 435,000 bpd Port Arthur, Texas refinery,?in?2023. This would have significantly increased its ability of processing heavy crude oil. He said that "we expect our Venezuelan oil processing capacity to be significantly higher than this number."
(source: Reuters)