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G7 Finance chiefs call for "lasting peace" in the Middle East and warn of war's damaging economic effects
The finance?chiefs of Group of Seven nations agreed on Thursday that it was urgent to reduce the cost of the Middle East 'war' to the global economy and "reaffirmed the pressing need to move towards a lasting peace," said a?statement?from France, which is holding the G7 Presidency this year. The war was one of three major topics that the finance ministers and governors of central banks of the richest democracies in the world discussed on the fringes of the spring meeting of the International Monetary Fund (IMF) and World Bank (WB), which took place in Washington. The two also discussed the continued support of Ukraine as well as developing alternative supply routes to China for rare Earths and critical minerals. "The conclusion was unanimous - it's urgent to limit the costs to the global economic system of a conflict that continues." The statement said that G7 members reiterated the urgent need to work toward a lasting peaceful solution. "More so than ever before, coordination between G7 members is key in addressing the impact of the energy and economic crisis on the world economy. The G7 is particularly concerned about the indirect and direct effects of the crisis on the "most vulnerable" states. Roland Lescure, the French Finance Minister, told reporters on Thursday morning that the G7 nations must be prepared to take action to reduce the risks of inflation and economic instability caused by war-related energy and supply shocks. Last month, with the support of the G7, the International Energy Agency released a record-breaking amount of oil to counter the cutoff of supplies from Gulf nations through the Strait of Hormuz. Lescure stated that "we need to ensure that we know?where the risk balance is tilting over the next few week" after the G7 Finance Ministers and Central Bank Governors' meetings on Wednesday and Thursday. Lescure said, "We will be meeting again in Paris in one month and we want make sure we monitor the situation and evaluate the impact. If we need to take action, like we did when we released inventories a couple of weeks ago, we'll do so." Lescure said that it was also important to guarantee free transit of ships through the Strait of Hormuz. He added that G7 Ministers had agreed that vessels shouldn't have to pay "one dollar" to Iran for passing through the international waterway. This year, France is the host of the G7 summit, which includes the U.S.A., Canada and Japan as well as Britain, Germany, Italy, and France. Francois Villeroy de Galhau, Governor of the Bank of France, said that the G7 central banks had also committed to?take steps necessary to ensure that Iran's energy and commodities shock does not become embedded in core inflation second and third round price impacts. We will act without hesitation if necessary but are not in a hurry. We need more data about the impact of the price shocks. Aid for Ukraine Lescure stated that the G7 finance leaders met for the first time this year in person and also pledged to continue?to help Ukraine. This includes helping it?prepare?for next winter, after a difficult year this year due to constant Russian attacks against Ukrainian energy infrastructure. Lescure stated that "Ukraine must never be collateral damage in the war currently being fought in Iran." "Russia cannot benefit from the events in Iran." Scott Bessent of the U.S. Treasury Department, who missed Thursday's G7 meeting about critical minerals, announced on Wednesday that he will not renew the?30-day waiver of sanctions for Russian oil at sea. The waiver expired on April 11 and was intended to reduce price pressures through the release of more oil onto global markets. According to the French statement, the focus of the meeting was on Ukraine's economic reforms, under the $8 billion IMF programme, as well as the need to maintain economic pressure on Russia. It also mentioned the importance of Ukraine's energy requirements and the active contribution to the repair work at Chernobyl's confinement arches. The G7 finance chiefs also discussed how to develop alternative supply chains of rare earths, critical minerals and other essential materials to reduce the countries' dependence on China. Lescure stated that the group will continue to work on "very tangible steps" which could be presented at a G7 meeting in Evian-les-Bains, a French Alpine spa city. (Reporting and editing by Andrea Ricci, Paul Simao and David Lawder)
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The US has a large supply of cargoes to cushion it from the price shock in Europe and Asia
Analysts and traders say that U.S. crude cargo prices have fallen from recent price spikes, while in Europe and Asia prices continue to reach record highs, seven weeks after the Iran 'war. The war in Iran disrupted the global oil flow with the closure of the Strait of Hormuz - a vital trade route - and caused damage to oil facilities in the entire region. This pushed the price of crude oil in Europe, the Middle East and Asia up to record highs. As the world's largest oil producer, the U.S. has been able, through its refineries, to access the medium-sour crude that they prefer, as well as recent product from Venezuela to cushion some of the shock. According to Argus Media data, physical cargoes of Mars Crude, a medium sour crude produced in the U.S. Gulf of Mexico traded at an outright rate of $97 a bar on Wednesday. This is down from $128.70 a bar on April 2. The price of Dubai benchmark crude oil in the Middle East became the most expensive benchmark at $170 per barrel. "European buyers and Asian buyers require immediate physical barrels. U.S. refiners are "on the supply-side of the equation" and not "price-takers", according to David Jorbenaze. As part of an international effort to address shortages caused by the war, the U.S. is releasing 172 million barrels from its Strategic Petroleum Reserve. Gus Vasquez is Argus Media's crude editor. He said that the SPR release will feed into markets in which Mars will directly compete. "So an increase in supply of its product is likely to have a negative impact on prices, as we have historically seen when there has been an SPR released." VENEZUELAN CRUDE Imports Rise The crude oil released by the SPR has a medium-sour taste, just like the Venezuelan crude that more U.S. refining companies have access to since the capture of Nicolas Maduro, the former Venezuelan president, in January. In the first quarter of 2019, the U.S. imported 295,000 barrels of Venezuelan crude per day, an increase of 14% over the previous year and the highest quarterly amount since the fourth quarter 2018. The combination of SPR releases, Venezuelan barrels and high freight risks for?Europeans or Asians are keeping a lid the U.S. Physical Market," said Neil Crosby. Analyst at Sparta Commodities. He added that, from a sour perspective, the region is well supplied. However, not all U.S. crude oil prices have dropped. WTI Midland, a lighter, lower-sulfur oil, delivered to Europe by refiners'scrambling' for alternatives to Middle Eastern imports, reached a record high on Tuesday of $22.80 per barrel over Brent. Janiv Shah, Rystad Energy vice president for oil markets analysis and Rystad Energy, stated that Mars is rarely exported because it's consumed in the United States. The export-oriented WTI, however, would have the most upside due to the increased competition. Reporting by Robert Harvey, London; editing by Liz Hampton and Bill Berkrot.
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The US Energy Secretary is criticized by lawmakers for forcing coal-fired plants to continue operating
U.S. legislators criticized Energy secretary Chris Wright for ordering that aging coal plant remain open in hearings held on Wednesday and Thursday, saying: 'the action will raise the already high power bills for steelmakers and consumers. Wright's department ordered in December that two Indiana coal plants, which had planned to?close permanently?, remain open. They said this would reduce the risk of power outages and provide affordable electricity. CenterPoint Energy's and Northern Indiana Public Service Company's coal plants were to be replaced with natural gas or other sources of power. NIPSCO estimates that it will cost them $100 million to maintain their plant. Representative Frank Mrvan of Indiana said that keeping the plants open could lead to higher power rates, as the Federal Energy Regulatory Commission has authorized the regional grid operators to recover costs for compliance. Mrvan said to Wright on Wednesday that Northwest Indiana was the largest steel-producing region in the United States. Utility rates affect the price of steel and therefore the price of all the products we produce. Please explain how the forced emergency order benefits those who are being crushed by these policies. Wright stated that the ultimate goal was to drive down prices and protect the grid against blackouts, in a region populated by data centers which are power hungry. Wright has agreed to review his orders for the plants to remain open in Indiana and Washington State. CenterPoint sent Wright a letter on February 17 asking him to withdraw the order to keep its?F.B. Culley 2, stating that it would be costly to maintain the "inefficient, and increasingly unreliable" asset. Citizens Action Coalition, a public interest group, obtained the letter published on Thursday. Wright's department instead issued another order to CenterPoint in March, directing them to "run the plant" until at least June 21, Ben Inskeep said that the orders were an "outrageous misuse of power" and would cause the energy bills of Americans to continue to rise. Wright also ordered TransAlta 'to keep a coal-fired unit open in its Centralia facility, Washington State that was planning to retire by the end of 2025. Kim Schrier said that consumers are paying for the cost of keeping this unit in standby, even though it's not producing power. Hydropower and natural gases are replacing it. She said the order was a result of the administration's "obsession" with coal. (Reporting and editing by Nick Zieminski; Additional reporting by Valerie Volcovici, with additional reporting by Timothy Gardner)
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California gasoline stock drops to record lows due to disruptions caused by Hormuz
Fuel prices are soaring across the country due to 'the war against Iran.' Analysts warn that California has not yet felt the full impact of supply disruptions caused by the closing of the Strait of Hormuz. According to the American Automobile Association, California motorists paid an average of $5.86 per gallon on Thursday, the highest price in the U.S. This is far higher than the national average of $4.09 per gallon. Analysts say that because California relies heavily on Asian refined products, the supply crunch will worsen. This means California is among the first states in the U.S. who are likely to feel the effects of the Strait of Hormuz closure, which affects a fifth of world oil and gas. The Energy Commission's Niki Woodard, spokesperson for the agency, said that the commission is in constant communication with the state refineries to ensure an adequate supply of transportation fuels during this volatile time of reduced supply due to the closure of the Strait of Hormuz. The average state gasoline stock for the four-week period ended April 10 was 9.44 million barrels, the lowest since 2005. These inventories consist of California blend gasoline, blending ingredients and non-California gas. Because it is not connected to the country's fuel pipelines it is more vulnerable to price shocks. This forces it to import from Asia where refiners refine Middle Eastern crude oil into gasoline and other products that are used on the U.S. West Coast. According to AAA, the $5.86 average statewide represents a 26 percent increase since the start of the Iran War. California's gas prices are higher due to taxes and extra costs to produce the unique gasoline blend developed to reduce the smog which was once a common sight over Los Angeles. DECLINE IN Inventory Michael Mische, a professor at the University of Southern California wrote this week in an analysis that the full impact of decreasing gasoline and crude imports have not yet been seen in California's fuel systems. It takes about a month to ship refined products from Asia to California. The analysis predicts that gasoline imports will drop sharply in the next two to three weeks. The analysis said that this will be the moment when the impact of the import shock is fully felt in the terminal supply, and ultimately at the pump. Susan Bell, of Rystad energy, said that California's gasoline inventories may worsen over the next few weeks. California was once a major oil producer. However, in recent years the state has become more reliant on fuel and crude imports due to two refineries that accounted for 20% of California’s refining capability closing. According to the CEC, its crude oil inventory was 10.09 million barrels, a decrease of more than 23% compared to a year ago. Woodard, a California refinery official, said that the refineries are using alternative sources of crude oil and gasoline to compensate for the loss in Middle East cargoes. "We do not predict a supply problem in the near future." The agency has enough stock to last until mid-May. Californians consume about 36 million gallons per day.
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Valero Port Arthur refinery partially restarts after blast, according to sources
Two people familiar with the plant's operations said that Valero Energy Corp. has partially restarted their 380,000 barrels per day Port Arthur, Texas refinery after an explosion and fire on March 23. Valero repairs the heater on the 210,000 bpd crude distillation unit (CDU) while the production line of the 115,000 bpd CDU is running. This production line is closed. A Valero spokesperson failed to respond to a question for comment. During an inspection of the units of the refinery following the 23 March shutdown of the unit due to the fire, Valero found a damaged tube within the AVU-146?heater. Valero intends to restart the CDU once the heater tube is repaired. AVU 146 is a crude distillation unit that accounts for 2% or 9.62 million bpd of the crude oil refinery capacity of the U.S. Gulf Coast States of Texas, Mississippi, and Louisiana. This represents over half of 'the U.S. overall. AVU 146 is capable of 3.4% of Texas' total atmospheric crude distillation capability of 6.13 millions bpd. CDUs work at atmospheric pressure, converting crude oil to?feedstocks? for other refinery units. The March '23 explosion and fire at the diesel hydrotreater did not result in any injuries, but a?person filed a suit, claiming he was injured after being knocked down. Valero had previously refused to comment on the lawsuit. Due to the shutdown of the refinery, the price of diesel rose by 16 cents per barrel the day after the explosion. (Reporting and editing by Nathan Crooks, Nick Zieminski, and Erwin Seba)
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Oil rallies and stock market record highs follow the ceasefire between Israel and Lebanon
The global stock market rose to a new record high on Thursday, as the announcement of the ceasefire between Israel & Lebanon lifted sentiment. However, oil prices also increased as the global supply buffers continue dwindling with the Strait of Hormuz still being blocked. Donald Trump, the U.S. president, announced that Israel and Lebanon had agreed to a 10-day truce. He also said the next U.S.-Iran meeting could take place this weekend. Two Iranian sources said that the negotiations have scaled down their goals for the talks because the U.S. Navy has also stopped Iranian vessels from crossing the Strait. Israel is waging an parallel campaign in Lebanon against the Iran-backed militant Hezbollah. In a Thursday post on Truth Social, Trump said that Israeli leaders and Lebanese officials had agreed to a 10-day truce. The S&P 500 and Nasdaq Composite closed at record levels for the second session in a row, led by an increase of 1.6% in the S&P 500 Energy index. The Nasdaq is now up for a record?12 consecutive sessions, which is its longest winning streak ever since July 2009. MSCI's global stock index rose 0.3% or 3.26 points to 1,064.19, after reaching an intraday high of 1,065.59. The?pan-European STOXX 600 Index edged down by 0.05%. Is a PULLBACK in the Offing? Some investors believe that the market is due for a?retrenchment'. The war is still a major driver for the market. It would be unusual for us not to stall and go back to retest, even though we broke through to new highs yesterday, said Robert Phipps. He is a director of Per Stirling Capital Management, in Austin, Texas. The rubber band was stretched very far to the bottom. The rubber band has now snapped back, and it is no longer twisted to the bottom. Crude futures prices have been fluctuating wildly in recent days. This is often due to Trump's latest optimistic pronouncements about an imminent end to conflict, which would result in the Strait of Hormuz being reopened to allow for the movement of one-fifth of world oil and gas supplies. Oil prices rose on Thursday. U.S. crude settled up 3.7% at $94.69 per barrel while Brent settled up 4.7% at $99.39. The Dow Jones Industrial Average grew 115 points or 0.2% to 48,578.72. The S&P 500 rose 18.33 points or 0.3% to 7,041.28. And the Nasdaq Composite increased 86.69 or 0.4% to 24,102.70. U.S. beverage giant PepsiCo grew 2.3% as it exceeded quarterly profit expectations. Abbott Laboratories in the healthcare industry, Charles?Schwab brokerage and Travelers insurer all suffered losses after releasing results. After the U.S. weekly initial jobless claims came in lower than expected, the U.S. Dollar rose and retraced some of its recent loss. The index that measures the greenback versus a basket including the yen, the euro and other currencies rose by 0.22%. The index had fallen for eight consecutive sessions?throughout Wednesday. It had lost most of its gains?as war increased the appeal of the country as a haven. Gold prices were not much changed. Gold prices were little changed. Spot gold rose by 0.02%, to $4.790.79 per ounce, while U.S. futures rose by 0.08%, to $4.803.70 per ounce.
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US sanctions Nicaraguan officials involved in gold sector
The U.S. Treasury Department imposed sanctions Thursday on a number of individuals and companies operating?in Nicaragua’s gold sector. This included two sons?of?the co-presidents?of the country. The Treasury Department announced in a press release that Santiago Hernan Bermudez Tapia is also sanctioned. He is Nicaragua's vice-minister of energy and mining. The Treasury Department also announced sanctions against a number of companies that they said were complicit in helping Nicaragua's government to generate money through gold and maintain its political control. Treasury Secretary Scott Bessent stated that the Nicaraguan Government, led by?Rosario Murillo, her husband Daniel Ortega and their family, sought to "confiscate American investments" by the country. He said: "The United States will not permit the illegal confiscation of American assets, and will continue to target the revenue streams that empower Murillo-Ortega's corrupt regime." Washington has used economic and diplomatic pressure on Managua to reform since April 2018, when a violent crackdown began following mass protests. Last year, the?United Nations accused dozens of officials in Ortega's Government of grave human rights violations and crimes. It described this as "a tightly coordinated system of repression", following protests. Treasury said that the sanctions imposed Thursday were a result of the occupation of 2025 and the forced seizure by BHMB Mine Nicaragua S.A. in Nicaragua, a Nicaraguan firm founded in 2019 using foreign investment from a U.S.-based company. The report said that high-ranking officials of the Murillo Ortega government had benefited from Nicaragua’s increased gold exports over the past few years, as well as state-owned Empresa Nicaraguense de Minas' actions to funnel profits to “private sector partners” and to give "kickbacks" to "regime?insiders." Treasury's Office of Foreign Assets Control has sanctioned two of the ruling family's sons: Maurice Facundo Ortega Murillo who is the Nicaraguan president's delegate for sport and Daniel Edmundo Ortega Murillo who leads the Communication and Citizenship Council of Nicaragua. Santa Rita Mining Co. was given land concessions to extract minerals. Exportadora de Metales Sociedad Anonima in Nicaragua sells gold 'to the U.S. Treasury also announced that Grupo Minero Xiloa S.A. was sanctioned. Treasury accused the company of using U.S. financial systems to legitimize illegal funds, and then using the proceeds to fund the political machinery of the government. The companies and individuals listed did not immediately respond to requests for comment.
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Kobe defeats Al-Sadd to advance to the Asian Champions League semifinals
After a thrilling 3-3 draw,?Vissel KOBE advanced to the Asian Champions League Elite semi-finals on Thursday?as they eliminated Roberto Mancini's Al Sadd on penalties?by a score of 5-4. Claudinho missed the third round penalty kicks, leaving substitute Jean Patric with the opportunity to score the winning spot-kick for the J-League team. The club advanced to the final four for the first time in its history. Michael Skibbe said that Japanese teams never give up. His team, Kobe, equalised in stoppage time through Yoshinori Muto to send the match into extra time. We tried to score until the very last second, and we did it even at the last moment. Al Sadd took the lead at the end of the sixth minute after a flowing counterattack that was sparked off by a clever backheel by Roberto Firmino towards Claudinho inside his own half. The Brazilian quickly moved the ball to Akram Afif, and his incisive?pass found Rafa mujica at the?edges of the penalty box. From?there the Spaniard?scored a clinical?first-time finish over Daiya maekawa. The Japanese team took 18 minutes to reply. Former Japan international Yuya Okasako found himself unmarked at 12 yards from the goal when he received Gotoku Sakai’s cross on the right. He powered a header past Meshaal Barrsham. Osako nearly added a second goal when he headed the ball against the crossbar ten minutes before the end of an entertaining first-half. Al Sadd won the game with two goals in just four minutes of the second half. Mujica scored his team's second goal in the 61st, after Firmino redirected Claudinho’s pass to the penalty area with his chest. Mujica, the former Las Palmas striker, then provided the third Al Sadd goal. He grabbed Afif's deep pass and set up Firmino when he was unmarked in the Kobe penalty zone. Yusuke?ideguchi gave Kobe a chance with?16 mins remaining, when he shot from 10 yards into the bottom right corner. Muto then?head in Rikuto?Hirose's?cross with the final touch of regulation time to send the game into extra-time. Maekawa's three saves kept Kobe in the match in extra time, and moved the game to a shootout. Vissel's penalty takers were perfect in the shootout. They set up a meeting in the last four with either Al Ahli champions or Malaysia's Johor Darul Ta'zim. (Reporting and editing by Christian Radnedge, Michael Church)
Oil shock, war, and uncertainty: McGeever: Time to increase US equity outlook
It might seem odd to be more bullish about stocks at a time when the U.S. economy is masked by a fog of war, and oil costs $100 per barrel. From a valuation perspective, the case is compelling.
Barclays strategists outlined this?this past week, when they increased their S&P500 price?and earning forecasts. They are not the only bulls. They argue that corporate America won't be able to escape the economic impact of the Iran war or energy shock. However, it is still in a relatively good position.
Take technology, the engine that has driven Wall Street's recent boom. Recent concerns that firms overspend on artificial intelligence have caused the market to sputter. Concerns about AI disruption has also roiled software company shares.
The "Big Tech' selloff was pretty large. Roundhill's "Magnificent 7" ETF is down by 10%, which is three times more than the S&P 500. The tech sector, measured by the 12-month forward price/earnings rate, is now cheaper than it was during the 'Liberation Day' turmoil of a year earlier.
This multiple hovers around 21, which is the lowest it has been in three years, and down by a third since last October. This is a remarkable turnaround of a key sector in a short period of time.
The valuation premium that technology enjoyed in the past over the stock market is almost gone and now the smallest it has been in seven years. According to Jefferies equity strategists, a narrower measure of this premium - "Mag Six" over the S&P 500 – is the smallest it has been since 2008-09.
The Re-Rating Game
It is reasonable to argue that a "sweeping reset" was long overdue, as tech stocks had become far too costly. The current valuations are simply returning to their long-term mean.
It's not just that tech is cheaper, but it looks cheap compared to the earnings forecasts of these companies.
The LSEG's latest consensus estimate of tech earnings growth for calendar year 2026 stands at 42.5%. This is up from 30.8% in January and almost double the previous six-month estimate.
Barclays strategists said this week that they believe the U.S. will continue to grow faster than other major economies, and technology is a growth engine with a long-term outlook.
The S&P 500's earnings per share for this year were raised to $321, up from $305. They also increased the price target of the index to 7650, up from 7400. This would mean gains of about 16% since Wednesday's closing.
They added, "We are incrementally optimistic about U.S. stocks. However, the road is likely to remain bumpy until we turn a corner."
OVERWEIGHT AND SEE
It's notable that U.S. consensus earnings estimates have been steadily rising over the past two months, while the S&P 500 continues to fall. Does this indicate an unjustifiably positive outlook for U.S. corporations, or a market overreacting to the external environment?
It looks as if it might be the former.
Wall Street has performed better than its global peers since the Middle East war broke out four weeks ago. This is partly because of the relative strength in the U.S. for growth, technology, earnings and energy.
This situation is unlikely to drastically change in the near future.
In their outlook for the second quarter, HSBC Private bank analysts stated that they remain "overweight on U.S. equities" due to a "resilient growth," solid corporate earnings, and continued innovation."
The fear of rising U.S. inflation - which is currently at 3% and climbing - shouldn't be a deterrent for America Inc., as higher prices should increase nominal earnings in particular in sectors that have strong pricing power.
Holding an over-weight position in any equity market at this time is risky, but Wall Street may be the safest place to do so.
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(source: Reuters)