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Bond yields and global equities are rising with the dollar as US inflation soars
MSCI's global equities index advanced along with the dollar Wednesday as investors?assessed higher-than-expected inflation data, while they waited for a meeting between U.S. president Donald Trump and China’s Xi Jinping. According to the Bureau of Labor Statistics of the Labor Department, U.S. producer price increases were?higher than expected for April and their largest gain since early?2022. The latest economic impact of the U.S. and Israel war on Iran is evident in the U.S. consumer price data, which showed that energy costs have increased the most since 2012. Jim Baird is the chief investment officer of Plante Moran Financial Advisors. He said that this data was a further source to increase the concern about inflation. Investors are likely to be most concerned about this narrative in the short term. He added that there are two opposing forces at play: "the concerns about inflation and the implications for Fed policy and interest rates." Wall Street's technology sector was a bright spot on Wednesday, as it helped to counter inflation fears. The S&P 500 and Nasdaq both advanced with the largest gains coming from shares related to artificial intelligence. Ryan Detrick is the chief market strategist for Carson Group in Omaha, Nebraska. After some weakness yesterday the chip stocks soared back today. Elon Musk and Nvidia CEO Jensen Huang were among the entourage of President Trump who received a warm welcome on Wednesday in Beijing as he was preparing to ask China's Xi Jinping for "openness" towards U.S. businesses at the beginning of their two-day meeting. Trump stated on Tuesday that while some investors had hoped that the talks would lead to progress in the?Middle East war, he didn't think that he needed China's assistance to end the conflict. "We'll hear a message saying that the meeting was productive. In reality, the progress will be limited. I'd be realistic in my expectations. Baird, of Plante Moran, said: "You have to be." The Dow Jones Industrial Average dropped 67.36, or 0.14 %, to 49.693.20. The S&P 500 rose by 43.29, or 0.58 %, to 7,444.25; and the Nasdaq Composite gained 314.14, or 1.20 %), to 26,402.32. MSCI's index of stocks?across the world rose 6.01 points or 0.54% to 1,109.33. The pan-European STOXX 600 closed earlier up by 0.79%. Bond markets saw longer-dated yields reach their highest level since mid-2025, before paring gains Wednesday, after producer prices rose higher than economists expected in April. The yield on the benchmark U.S. 10 year notes was flat, at 4.471% from 4.471% on Tuesday. Meanwhile, the 30-year bond rate rose?1.1 points to 5.04%. The yield on the 2-year bond, which is usually in line with expectations of interest rates for the Federal Reserve fell by 1.7 basis points, to 3.979%. The dollar reached a new two-week high after the latest U.S. Investors focused on inflation data, while Trump and China's Xi are set to start talks in Beijing. The dollar index (which measures the greenback versus a basket including the yen, euro and other currencies) rose by 0.16% at 98.49. Meanwhile, the euro fell 0.22% to $1.1711. The dollar gained 0.16% against the Japanese yen to reach 157.87. It briefly surged on Tuesday due to "rate-check" speculations, which are often viewed as a prelude?to an intervention. The pound fell 0.1% to 1.3523, as Keir starmer's hold on power began to wane. Oil futures fell as investors worried that the U.S. could raise interest rates due to inflation. They also waited for updates about the summit in Beijing. Brent crude fell 1.99% to $105.63 a barrel on Monday, while U.S. crude dropped 1.14% to $101.02 per barrel. Spot gold dropped 0.5% to $4689.91 per ounce. U.S. Gold Futures increased 0.04% at $4,679.60 per ounce. Reporting by Sinead Culp, Stephen Culp and Elizabeth Howcroft. Clarence Fernandez and Mark Potter edited by Keith Weir.
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Kashkari: Fed is "dead serious" about lowering inflation
Neel Kahkari, Minneapolis Federal Reserve President, said on Wednesday that U.S. employment looks "a bit better" now than earlier in the year, and that the Iran War has worsened an already high inflation rate. These views underscore Kashkari's preference to leave the Fed open to rate increases. Kashkari stated that he was "dead serious" about bringing the?inflation down at a St. Paul Area Chamber?event in St. Paul Minnesota. Kashkari is one of the three Fed policymakers that dissented at the Fed meeting in April. He advocated for a change in the Fed statement after the meeting to reflect an openness to interest rate increases and not only rate cuts. He spoke as 'the U.S. Senate was preparing to confirm Kevin Warsh, as the Fed’s new chairman. Donald Trump said he expected the Fed to reduce rates under Warsh. "The Federal Reserve chair has a great deal of influence." The chair sets the agenda. What topics will we be discussing? What types of?things are we going to consider in this 'deliberation?' Kashkari responded to a question on whether Warsh would deliver the rate reductions Trump desires. "But, when it comes to a vote (on interest rate), the chair is only one of twelve voters." So a new chair, no matter who it is, and whatever the situation, will need to convince his or her peers that this course of action is best.
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Poland claims to have intercepted Russian aircraft in the Baltic Sea
?Poland's air force intercepted an?Russian reconnaissance aircraft in international waters of the?Baltic Sea. The Russian flight was deemed a provocative act and a potential threat. The machine flew in international airspace with its?transponders off and without a flight plan. The Polish army stated in a social media post that there was no violation to?Polish airspace. Defence Minister Wladyslaw KsiniakKamysz stated that flights without transponders could be a 'threat to other aircraft' and 'that its pilots would always respond immediately. "Our aircraft intercepted an Il-20 Russian reconnaissance aircraft in international waters of the Baltic Sea." "This is yet another aggressive act by the Russian?Federation, and a test for our air defense system," he wrote in X. The Polish Army announced earlier?on Wednesday that?it?had conducted military aviation operations within Polish airspace in response to?Russian strikes against?Ukraine. The Operational Command of the Polish Armed Forces stated on X that "Ground-based radar reconnaissance and air defence systems which were activated have returned to standard operational activities."
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Gold continues to decline as inflation worries weigh on rate-cut bets
The gold price fell a second time on Wednesday as inflation fears fueled by war weighed on the expectations for interest rate reductions. Markets were also looking forward to the upcoming summit between U.S. president Donald Trump and Chinese President Xi Jinping. At 1:59 pm EDT (1759 GMT), spot gold was down by 0.6% to $4,686.35 an ounce. U.S. Gold Futures closed 0.4% higher at $ 4,706.70. U.S. Producer Prices increased more than expected in April, posting the biggest gain since early 2020. This is the latest sign that inflation has accelerated amid a 'war on Iran. Peter Grant, senior metals analyst at Zaner Metals and vice president, said that inflation remains sticky, and expectations of higher rates were reinforced. This has been pushing gold down the last two weeks. Gold is often seen as a hedge to inflation. However, higher interest rates tend to?pressurize the metal. The data released on Wednesday shows that the U.S. consumer price index increased in April by a further 3%, and its annual rate has reached its highest level in three years. Last month, the U.S. Central Bank left its benchmark interest rate at 3.50%-3.75%. According to CME Group's FedWatch, traders have priced in a U.S. interest rate cut for this year. Trump was in China to make deals, to maintain the fragile trade truce between China and the second largest economy of world, and to boost his public approval ratings, which were hurt by his war against Iran. India increased its import tariffs for?gold and?silver to 15%, up from 6%. This was done to reduce the amount of metals purchased overseas and to ease the pressure on the country's reserves of foreign currency. India is the?second largest consumer of precious metals in the world. Grant stated that the news of higher import duties from India could create a demand concern and be a long-term obstacle. After hitting its highest level in the past two months, spot silver rose 1.6% to $87.28 per ounce. Platinum rose 1.6% to $2.159.58 after reaching its highest level since 12 March. Palladium rose 1.2% to $1,508.39. Ashitha Shivprasad reported from Bengaluru, and Alexander Smith, Ali Williams and Diti Pjara edited the article.
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Gold prices in India surpass $200/ounce records amid profit-taking
Bullion dealers reported that gold discounts in India reached a record high of over $200 per ounce on Wednesday. This was due to the surge in price after the 'import duty increase, which triggered investor selling in a weakening 'demand. India raised its import tariffs for gold and silver from 6% to 15% on Wednesday as part of an effort to reduce overseas purchases of these metals and relieve pressure on the country’s foreign exchange reserves. "Discounts were insane in the physical market." "We were double-checking before we executed deals," said the bullion division chief of a Mumbai-based bank who has been trading gold for over two decades. Discounts offered by dealers in India On Wednesday, the official domestic price of gold was $17 per ounce, but that increased to up to $207 per ounce, including 15% import duty and 3% sales tax. Mumbai-based dealers at private banks said that the duty increase triggered a steep rise in gold prices in their locality, which led some investors to sell gold at deep discounts in order to take advantage of gains. The two bullion dealers refused to be identified as they weren't authorised to talk to the media. The price of gold futures on the?second largest consuming market in the world jumped 7.2% to 164 497 rupees for 10 grams. This was the highest level seen in over two months. The bullion dealer stated that investors?were also able to make profits on gold exchange-traded fund (ETFs) and this was adding to the supply?into the market. Ashok Jain of Mumbai's gold wholesaler,?Chenaji Narsinghji, stated that retail buyers and jewellers were on the sidelines. This increased selling pressure, pushing discounts up to "unusual high levels". A bullion dealer in Chennai also expressed concerns that the recent duty hike could increase smuggling as it increased?margins for gray-market operators from 9% to around 18%. Grey market operators sell gold for cash in order to avoid duty, which allows them to offer the product at a discount to market price by evading tax. (Reporting by Rajendra Jadhav)
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Sources claim that the Brazilian government will announce a measure to subsidise gasoline.
Two sources familiar with the matter said that the Brazilian government will announce an executive order on Wednesday to subsidize gasoline. The goal is to cushion consumers from the higher oil prices caused by the Middle East conflict. In a?statement, the government announced that it would hold a?press conference at 3 p.m. local (1800 GMT) on?Monday to announce "measures" for the fuel industry aimed at "addressing war's effects," but did not give any further details. According to a?source, the?subsidy would be paid to producers and importers of gasoline who will then pass on savings to consumers. The goal is an effect that's?similar to partial reductions in federal fuel tax. Last month, the government announced subsidies for diesel fuel and liquefied petroleum gas (LPG), as well as lower taxes on biodiesel and jet fuel. High fuel prices are a concern to?President Luiz nacio Lula da Silva who is expected to run for reelection in this year. (Reporting and writing by Bernardo Caram, Editing by Gabriel Araujo).
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Egypt signs $1.5 billion loan agreement with ITFC for food and energy security
Egypt and the Islamic Trade Finance Corporation signed a $1.5 billion loan on Wednesday, to support the food and energy security of the country in the north. ITFC CEO Adib Yourssef Al?Aama stated during the signing ceremony that the ITFC had approved more than $24 billion of funding for Egypt since?2008 to support the energy sector, food security and small and medium enterprises. The funding includes $8.8 Billion for the General Authority for Supply Commodities to support Egypt’s imports of?food?commodities. This includes 12.6 Million tons of wheat. The ITFC has also helped Egypt to pay off arrears owed by foreign oil companies that it has pledged to fully repay by the end June. Egypt's bread subsidy program, which costs up to $2.6 billion per year and relies on by 70 million people, is one of the largest wheat importers in the world. The government announced last week that it could end the current subsidy programme and replace it with cash transfers beginning in July. The loan is coming as Egypt's economy absorbs the shockwaves from the war in Iran. This will put fresh pressure on the?country that is still navigating its fragile reform path under the $8 billion IMF program. The war cast a shadow on Egypt's fragile economic stability. It remains heavily reliant upon hot money inflows for financing, and on gas imports for energy.
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Tyson Foods CFO: 'Spotty' expansion of US cattle herd by Tyson Foods.
Tyson Foods' Chief Financial Officer Curt calaway stated on Wednesday that U.S. producers are "spotty",?in their efforts to rebuild a nation's reduced herd. Supplies will remain tight as low inventories pushed beef prices to record levels. As part of his efforts to reduce domestic beef prices, President Donald 'Trump' has been considering possible executive actions that would lower tariffs on imported beef and regulations for producers. Prices for milk, eggs and other grocery staples are down since Trump's presidency in January 2025. However, beef prices have increased by over 16%. HIGH?PRICES AND DROUGHT WORRIES Ranchers are slow to keep female cows, also known as heifers, for breeding. This is a crucial step in rebuilding herds, and increasing beef production. Cattle supplies have dropped to their lowest level in 75 years by 2026. Producers have instead sent animals to be slaughtered in order to profit from high prices, and due concerns about the 'dry weather' limiting grazing land. Calaway, speaking at the BMO Investor Conference in New York, said that cattle supplies would remain tight until 2027. He added that heifer retention is "spotty" and "regional." He said, "We will still manage with a limited cattle supply." Meatpackers are losing money on their beef business because rising cattle costs outweigh the gains made by higher beef prices. Tyson closed a beef facility in Nebraska and reduced operations at another one in Texas, laying off thousands workers. The beef prices rose due to a strong 'demand' and ranchers cutting their herds as grazing lands in the western U.S. were affected by drought. The Trump?administration also halted the imports of Mexican cows to prevent the New World Screwworm parasite. Calaway stated that Tyson's business of prepared foods, which uses raw materials such as beef and pork, had seen commodity inflation in seven out of eight quarters. The Iran War has accelerated inflation for consumers. Producer prices in April posted their largest increase in four-years. Donnie King, CEO of Donnie King Enterprises, said that there is a "point" where consumers will turn away from a product because of the price. "Inflation" is a real thing. It persists. "We don't think that will change in any meaningful way."
Official: Gulf trio reviews sovereign investments to offset Iran War Impact
Gulf officials said that three Gulf states were reviewing the way they invest trillions of dollars from their sovereign wealth funds to offset the losses caused by the U.S. and Israeli war against Iran.
The official who spoke on condition of anonymity said that the review could include divestments, reversals of investment pledges, and a reevaluation of global sponsoring deals. This is because the oil and gas-rich states are assessing how to deal with the financial shock.
The top four economies of the Gulf Cooperation Council are Saudi Arabia, Qatar and Kuwait.
Three of the four largest economies in the GCC will be assessing current and future investments and sponsorships to see if the situation lasts.
The official said that "a review of their investment strategies for sovereign wealth funds has already begun."
The official said that the talks were between representatives from the government and not the funds, and that the assessments are not coordinated.
In only 12 days, this conflict has dealt a serious economic blow to some of the largest economies in the Gulf, crippling the aviation, tourism, port and logistics networks. It also cut off 'key commercial arteries.
5 TRILLION DOLLARS IN WEALTH
The UAE has said that it will stick to its investment plan.
In a recent statement, the UAE Ministry of Foreign Affairs said that it had adopted "forward-looking economic strategies" which would enhance its ability to absorb geopolitical or economic pressures. In this regard, the UAE has not changed its investment plans or economic priorities for the long term.
A Saudi source said that the Public Investment Fund of the Kingdom is crucial to its economic transformation agenda. It is not expected to change long-term investments plans because of the current geopolitical environment.
The Saudi Arabian finance ministry did not respond to a request for comment.
Qatar's Finance Ministry has not responded to our request for comment. Kuwait's Ministry for Economic Affairs and Investment was unable comment.
Analysts say a fiscal shock could lead to a review of the way the $5 trillion in sovereign wealth funds accumulated by the region is used. But the official's remarks show that this process is already underway.
The official stated that "once the war is finished, we'll see the balance sheet and figure out how to cover our losses."
Analysts at JPMorgan cut their growth predictions for non-oil industries by 1.2 percentage point for GCC countries and 2.3 points for the UAE. This was the most drastic revision in the group.
JPMorgan analysts warn that, while the hydrocarbon industry could recover depending on the length of the conflict in the coming year, there will be some lasting damage to the non-hydrocarbon activities and this could affect the diversification plans for the region.
WIDE REACH and BIG COMMITMENT
Gulf States have tried to diversify their economies but oil and Gas revenues still anchor the public finances which are very different in strength throughout the region.
Kuwait's KIA, the UAE's ADIA, Saudi Arabia's PIF and Qatar's QIA are among the largest sovereign funds in the world, with assets accumulated over decades of investment at home and abroad.
Officials said that the reassessment includes global assets, not just U.S. assets. The United States is already one of most popular destinations for Gulf sovereign funds, with governments having pledged trillions in future investments since President Donald Trump's return to the White House.
US. Gulf sovereign investors weigh the impact of the conflict on global sponsorship and investment deals.
The size of the overseas pledges and sponsorship is huge.
The UAE, for instance, agreed to invest $50 billion in Canada last year. QIA, which is backed by Qatari Diar, signed a landmark coastal development worth $30 billion on an undeveloped stretch of Egypt's Mediterranean coast.
Qatar Airways is sponsoring Formula 1 motorsports until 2027. Mubadala has a title sponsorship in a number of ATP and WTA events. PIF became an official partner for the FIFA World Cup this year.
SLOWING NEW COMMITMENTS
Analysts predict that these positions will not be unwinded immediately. However, they said the pace and direction for new capital deployments may change.
The first reaction should not be to sell off global assets. "Before unwinding any overseas assets, they will evaluate the potential impact, and whether there is a value-add in redirecting this capital locally," said Jahangir Aka founder of London's Aka & Associates.
Aka said, "For the time being, the 'Gulf Investments' global investments provide resilience as a diverter, and it is unlikely that you will see a'significant trimming, as these assets continue to produce income for governments in their home countries."
Aka explained that "you may instead see a slower pace in new commitments, and defer money to overseas countries until there is more clarity about any structural impact the current conflict." Reporting by Andrew Mills, Rachna uppal, Federico Maccioni, and Hadeel al Sayegh, in Doha; Additional reporting by Ahmed Hagagy. Writing by Federico Maccioni, Andrew Mills, and Andrew Mills. Editing by Mahal Dahan, ElisaMartinuzzi, Anousha Sakowi, and Alexander Smith.
(source: Reuters)