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Dollar slips, shares cautious as trade concerns persist
The dollar hovered around a 6-week low on Tuesday as the erratic U.S. policies of trade clouded the market's sentiment. Investors also took a defensive stance ahead of important developments in the coming week. The White House announced on Monday that U.S. president Donald Trump and Chinese President Xi Jinping would likely speak this week. This comes after Trump had accused Beijing of breaking an agreement to reduce tariffs and trade barriers. Markets will closely monitor the call between the leaders, as tensions in trade between the two world's largest economies continue to simmer due to tariffs. Data released on Monday revealed that U.S. manufacturers contracted for the third consecutive month in May, and that suppliers were taking longer than ever to deliver inputs due to tariffs. A private sector survey released on Tuesday showed that China's factory activities in May were also down for the first eight-month period. This indicates that U.S. Tariffs are beginning to affect manufacturers. U.S. Futures fell, failing to maintain the gains made overnight on Wall Street during the cash session. Nasdaq and S&P futures both fell by about 0.5%. The STOXX 600 fell by 0.45% in Europe while London's blue chip FTSE 100 dropped by 0.36%. Matt Simpson, City Index's senior analyst and market strategist, said that Trump has the sentiment of the country in his palms once more. He said that he expected to hear Trump and Xi talk about a "really great call" or something to that effect. We'll have to wait until China confirms, as they tend to be slow on this matter. Price action may be unstable until we receive concrete confirmation. We also need to consider the June 4, deadline for "best trade deals" from U.S. Trading Partners. The Trump Administration wants all countries to submit their best offers on trade negotiations before Wednesday. Officials are trying to speed up talks with several partners in order to meet a deadline they set themselves of five weeks. PAYROLLS ON DECK The dollar dropped to its lowest level in six weeks against a basket currency early on Tuesday. This was ahead of U.S. data on job openings later that day, and the U.S. nonfarm employment figures on Friday, which will provide a timely read on the state of the U.S. economic health. The Federal Reserve could ease policy again if unemployment increases, for example, despite investors' largely giving up on any cut in this month or the next. The Treasury market would benefit from a softer U.S. employment report. 30-year yields are still flirting with the 5% mark as investors continue to demand higher premiums to offset the growing supply of debt. This week, the Senate will begin considering a tax and spending bill that would add $3.8 trillion (approximately) to the $36.2 trillion federal debt. The dollar index closed the session marginally higher, at 98.89. This was a slight improvement from its earlier losses. After the Swiss inflation rate fell to zero in May, the currency rose to 0.8181 Swiss Francs. This was the first time in more than four-years that consumer prices had fallen. The Swiss National Bank is now under pressure to reduce its interest rates by a large amount later in the month. Kenneth Broux is the head of corporate FX and rates research at Societe Generale. Broux explained that if countries like Switzerland, where the inflation rate is falling and the differentials between rates are increasing, this could prompt an intervention to reduce the depreciation and appreciation of the Franc. A currency's value will usually increase if the rates in its home country are higher than elsewhere. The euro reached a six-week high before falling to $1.1416 on the day, while sterling fell 0.2% to 1.3525. Data released on Tuesday showed that euro zone inflation fell below the European Central Bank target in December, confirming expectations of another rate cut this coming week. Brent crude futures rose 0.34% to 64.885 per barrel while U.S. Crude gained 0.46% at $62.81 a barrel. Spot gold fell from its four-week high to $3,361 per ounce.
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Dealers say that India's palm oil imports in May rose 87%, reaching a six-month record.
Five dealers report that India's imports of palm oil in May reached a six-month record, due to lower inventories, and the discount offered by palm oil over rivals soyoil or sunflower oil. India, which is the largest buyer of vegetable oil in the world, may increase its palm oil imports and U.S. soybean oil futures. According to dealers, palm oil imports rose 87% in May compared to the previous month, to 600,000 tons. This is the highest level since November 2024. The Solvent Extractors' Association of India said that India imported more than 750,000 tonnes of palm oil per month on average during the marketing period ending in October 2024. It plans to publish its import data for May by mid-June. According to Rajesh Patel of GGN Research, a trader in edible oils, palm oil imports dropped sharply between January and April because it was more expensive than soyoil. This led to a decrease in stock levels. Patel stated that Indian buyers had returned to palm oil since palm oil began selling at a discounted price last month. According to SEA, India's stocks of vegetable oil fell to 1,35 million tonnes on May 1, the lowest level since July 2020. Dealers reported that soyoil imports rose by 10% in May, compared to the previous month, reaching 398,000 tons. This is the highest level since January. Imports of sunflower oil, on the other hand, increased by 2%, to 184,000 metric tonnes. Dealers estimate that the increase in palm oil and soybean oil imports boosted India's edible oil imports by 37% compared to a month earlier, to 1,18 million tons. This is the highest level since December. Sandeep Bajoria is the CEO of Sunvin Group. A vegetable oil brokerage. He says that palm oil imports will likely rise to 750,000 tonnes in June, and to 850,000 tons by July. Bajoria stated that the recent reduction in import duties and correction of palm oil prices is likely to boost Indian consumption. India reduced the basic import duty on crude edible oil to 10% last Friday in an effort to lower food prices and support the local refinery industry. India imports mainly palm oil from Indonesia and Malaysia. It also imports sunflower oil and soyoil from Argentina, Brazil and Ukraine. GGN Research estimates that Nepal imported 132,000 tons of edible oil in May. This is up from 87,000 tonnes in April. (Reporting and editing by Kim Coghill; Rajendra Jadhav)
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Solar spot prices rise as forecasts are cloudy.
The European spot electricity prices rose on Tuesday, as the solar power supply is expected to decrease throughout the region. LSEG data show that the German contract for day-ahead electricity rose by 13.1%, to 84.80 Euros ($96.76), while the French contract, which is equivalent, was up by 2.1%, at 24 Euros/MWh. LSEG data indicated that on the supply side Germany expected wind output to increase by 2 gigawatts to 12.4 GW while French output was predicted to grow 840 megawatts to 4.5 GW. The data revealed that the German solar power was expected to decline by 2.1 GW and reach 13.7 GW. In France, solar power would be expected to decrease by 1.4 GW and reach 3.4 GW. LSEG data shows that the German demand for power is expected to increase by 500 MW on Wednesday to 53.7 GW. In France, it is forecast to rise 130 MW to 42 GW. Marcus Eriksson, LSEG analyst, said that the residual load is expected to decrease for the first 8 hours, and then increase for the remainder of the day. The country will be a net exporter for the entire day. The French nuclear capacity fell by two percentage points, to 69% total capacity, as the Chinon 3 Reactor went offline due to an unplanned shutdown. Operator EDF reported that the Chinon 3 nuclear reactor was disconnected from the network Monday because of a problem with the electrical substation on the site. The German baseload contract for the year ahead rose by 0.5%, to 87.50 Euros/MWh. The French position for the year ahead fell by 0.1%, to 61.55 Euro/MWh. The benchmark contract for the European carbon market in 2025 rose by 0.9%, to 71.60 Euros per metric ton. Ingvild Sörhus, analyst at Veyt, says that carbon prices will likely continue to move sideways in the coming week. However there are early signs of a downward trend. Experts on the market have stated that Britain will struggle in the next seven months to link its market with the EU to avoid UK firms facing annual bills of around 800 million pounds ($1.08billion) and the EU's border tariff for carbon. ($1 = 0.8764 euro) (Reporting and editing by David Evans; Forrest Crellin)
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Dollar gains drive gold prices down as investors remain cautious
The gold price fell on Tuesday, after reaching a high of four weeks earlier in the day. A slight rise in the dollar, and investors' profit-taking, added to the pressure. Gold spot fell 0.5% at 0842 GMT to $3,361.26 per ounce, after reaching its highest level since May 8 earlier in session. U.S. Gold Futures fell 0.3% to $3386.20. Gold costs more for foreign buyers as the dollar rose slightly from its over-a-month-low earlier in session. Ole Hansen is the head of commodity strategy for Saxo Bank. He said, "This move in gold (is boosted by a lower dollar) and heightened geopolitical tensions and increased demand for alternative investment." These developments are the main reasons why we see some profit-taking after yesterday's strong gains. Investors are closely following a possible phone call between U.S. president Donald Trump and Chinese leader Xi Jinping this week, confirmed by White House press secretary Karoline leavitt. This comes just days after Trump had accused China of breaking an agreement to lower tariffs and trade barriers. The European Commission announced Monday that it would press the U.S. for a reduction or elimination of tariffs despite Trump's plans to double steel and aluminum duties to 50% on Wednesday. According to a draft of the letter, seen by The Associated Press, the Trump Administration is encouraging countries to submit their most competitive trade offers before Wednesday in order to speed up negotiations ahead of a deadline set for five weeks. The OECD said on Tuesday that the global economy will slow down from 3.3% in 2018 to 2.9% by 2025 or 2026. It has also revised its March forecasts for growth to 3.1% this year, and 3.0% in 2019. Investors will be looking for clues about the future of interest rates this week in the non-farm payrolls released by the U.S. on Friday, as well as speeches from Federal Reserve policymakers. In an environment of low interest rates, zero-yielding gold bullion is likely to perform well. Silver spot fell by 1.6%, to $34.25 per ounce. Platinum lost 0.4%, to $1,058.85, and palladium remained at $989. (Reporting by Anushree Mukherjee in Bengaluru; editing by David Evans)
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London copper prices fall on fears of US tariff
London copper prices fell on Tuesday due to concerns about possible U.S. duties on the metal, but a weaker dollar helped cushion the fall. The London Metal Exchange's three-month copper contract fell 0.7%, to $9.554 per ton at 0708 GMT. Shanghai Futures Exchange's most traded copper contract fell by 0.1% to $10,796.72 per metric ton. The U.S. president Donald Trump announced on Friday that he would double the tariffs on steel and aluminum imports, increasing them to 50% on Wednesday. This renewed concerns about potential tariffs for copper. ANZ Research reported that "U.S. Trade officials are reviewing the impact on local industry of U.S. Copper imports, and a report is due in the coming weeks." The dollar index (which measures the U.S. currencies against six major counterparts) hovered around the six-week low that was hit earlier in this session. The greenback is softer, making assets dominated by the greenback more affordable for holders of other currencies. Caixin/S&P Global Manufacturing PMI for China dropped to 48.3 from 50.4 in May, the lowest reading since 32 months. China's official PMI remained in contraction territory for May. The LME registered warehouses reported a drop in copper stocks on Monday The 45% drop since mid-February has brought the total to 148.450 tons. This is the lowest level in over a year. Other London metals fell by 0.9%, to $2.443.5 per ton. Zinc dropped 1% to $2.670, while lead declined 0.8% to $1.965.5, and nickel lost 0.7% to $15.425. Tin dropped 0.2% to $30,005. SHFE aluminium dropped 1.1% to 19,860 Chinese yuan per ton. Lead fell 0.3% to 16570 yuan. Zinc fell 0.5% at 22,180 yuan. Tin eased by 1.2% to 248,800 yuan. Nickel rose 0.1% to 121,250 yuan. $1 = 7.1991 Chinese Yuan (Reporting and editing by Sumana Niandy)
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KKR pulls out of Thames Water Rescue Deal
Thames Water announced that U.S. Private Equity firm KKR pulled out of a multi-billion pound plan to save the company. This has reignited fears about Britain's largest supplier needing to be nationalised in order to avoid a financial collapse. The company's 18 billion pound ($24.35billion) debt load has pushed it to the edge. It was counting on KKR to invest about 4 billion pounds of new equity in order to stabilize its finances. The government said that it was prepared to temporarily nationalise Thames Water if the company failed to recapitalise. The utility has become the focus of public anger against the water industry, which is being blamed for polluting Britain’s rivers and oceans while increasing bills, paying dividends, and failing to invest infrastructure. Separately on Tuesday, a government-commissioned review said water regulation in England and Wales needed to be overhauled after multiple financial and environmental failures. Thames Water bosses stated in mid-May the company will need to be relieved from fines imposed by regulators. The company estimated that these fines could amount to 900 million pounds per year between 2025 and 2030. This would help attract equity, and prevent nationalisation. Last week, Thames was fined over 123 million pounds due to sewage failures. SENIOR CREDITOR PLAN KKR didn't immediately reply to a question about why it pulled out, after Thames Water stated in its statement that "KKR indicated that it would not be able to proceed". Thames Water Chairman Adrian Montague stated that the company will proceed with discussions with senior creditor who have their own alternative plan. This is likely to include a debt-for-equity swap. In February, a group of these creditors gave an additional loan to Thames Water that will only support its finances until May 2026. Montague called it "disappointing", that the preferred partner of the company had pulled out after two months of due diligence. Thames Water announced in March that it aimed to secure new funding before the end of June after an equity raising process involving six bidders. In an effort to put an end to the scandal, the Labour government tasked former deputy governor of Bank of England Jon Cunliffe with reviewing the industry. At that time, the Labour government ruled out the renationalisation of the privatised water sector in England and Wales. In his interim report, released on Tuesday, he said that stronger and better coordinated regulation is needed, as well as a reduction in the risk around companies to attract investors who are willing to accept lower long-term returns.
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RBA minutes and Australian main index lead to rate-cut bets
Banks helped to boost Australian shares on Tuesday as investors' expectations of further rate reductions were boosted after minutes of the May central bank meeting revealed that it considered a large cut. S&P/ASX 200 rose 0.6% at the close of trading to 8,466.70. The benchmark index is still a few points short of the 8,500-point psychologically significant level last seen in mid February. The minutes of the Reserve Bank of Australia (RBA), May meeting revealed that policymakers considered a 50-basis-point cut as "insurance" against trade risks. The RBA Watch tool says that this marks a change in tone for the central bank, after the rate cut in May. This has increased the likelihood of an easing during the RBA's meeting next week on July 8, from 59% the previous week. The country's first quarter gross domestic product, which is due to be published on Wednesday, should show a modest increase of 0.4%. Recent data shows that both net exports as well as government spending slowed down the economy last quarter. The RBA believes that the tariffs, and wider trade dispute will reduce inflation rather than increase it. The RBA's language has changed from April's equivocal statement that "the implications for inflation will be more complex". Westpac analysts said this in a recent note. The benchmark rose by 1.2% on Tuesday as banks led the gains, mirroring the gains of the 'Big Four lenders', who rose between 1.2% and 1.4%. The mining sub-index saw gold stocks as the leading advancers, backed by strong prices. Prices retreated Tuesday, but still remained near a four-week high. IDP Education, a provider of placement services for students, saw its shares plummet 48.1%. It was the worst performing stock on the ASX 200 due to tighter visa rules that affected the company's key markets and lowered the projected annual profit. The benchmark S&P/NZX50 index in New Zealand fell 0.7%, finishing the session at 12,327.23 point. (Reporting by Shivangi Lahiri in Bengaluru)
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China's data weakens and iron ore falls to a 2-month low in response to Trump's tariff increase plan
Tuesday, iron ore futures dropped to their lowest level in almost two months due to fears about demand sparked by President Donald Trump’s plan to double the tariffs on imports of steel and weak factory data from China, the top consumer. The September contract for iron ore on China's Dalian Commodity Exchange ended the daytime trading 1.14% lower, at 695.5 Yuan ($96.69). Early in the session, the contract reached its lowest level since April 10, at 690.5 Yuan per ton. As of 0700 GMT the benchmark July iron ore traded on the Singapore Exchange was down 1.13% at $94.15 per ton, after hitting its lowest level since April 10, when it hit $93.8. Trump announced his intention to impose 50% tariffs on steel and aluminum imports. This will increase pressure on steel producers around the world and escalate global trade tensions. On Monday, U.S. steel and aluminum prices spiked while the shares of foreign steelmakers fell. Due to a holiday, Chinese markets were closed Monday. The ongoing tariff war between two of the largest economies in the world has affected the Chinese manufacturing industry, and cast a shadow over the outlook for steel demand. This sector has now overtaken infrastructure and real estate as the largest steel consumers in the country. A private sector survey revealed on Tuesday that China's manufacturing activity contracted for the first month in eight in May. Official data had reported a second contraction. Coking coal and coke also fell, falling by 3.03% and 1,1% respectively to levels nearing nine-year lows. The Shanghai Futures Exchange has seen a decline in the steel benchmarks due to lower raw material costs. Rebar fell 1.18%. Hot-rolled coil dropped 1.04%. Stainless steel slipped 0.59% while wire rod remained unchanged. ($1 = 7.1932 Chinese Yuan) (Reporting and editing by Amy Lv, Lewis Jackson and Sonia Cheema).
Iran's ruling class caught between Trump's repression and an economy in trouble
Iran's clerical leadership may find that engaging the "Great Satan" in order to negotiate a nuclear agreement and ease crippling economic sanctions is the lesser evil.
Four Iranian officials have said that despite its deep mistrust for the United States and in particular President Donald Trump, Tehran is growing increasingly worried about public anger at economic hardships escalating into massive protests.
People said that despite the defiant and unyielding rhetoric of Iran's clerical leadership in public, there was a pragmatic desire within Tehran's power corridors to strike a bargain with Washington.
Tehran's fears were exacerbated when Trump revived his "maximum-pressure" campaign from his first term, which aimed to reduce Iran's oil sales to zero by imposing more sanctions. This would bring Iran's fragile economy to its knees.
Masoud Pezeshkian, the president of the Islamic Republic of Iran, has repeatedly emphasized the severity of its economic situation, saying that it was more difficult than the Iran-Iraq War in the 1980s. He also pointed this month at the latest round U.S. sanction targeting oil tankers transporting Iranian oil.
According to one of the Iranian officials, leaders are concerned that cutting off diplomatic avenues could further fuel discontent in Iran against Ayatollah Ali Khamenei. This is because he is the final decision maker for the Islamic Republic.
Alex Vatanka is the director of the Middle East Institute's Iran Program in Washington. He said that there was no doubt whatsoever that the man, who has been the supreme leader since 1989, and his foreign policies preferences are the most responsible for the current state of affairs.
Iran's poor economy prompted Khamenei, who was then president of Iran, to back the nuclear deal struck in 2015 with major powers. This led to the lifting of Western sanctions as well as an improvement in economic circumstances. Then-President Trump’s renewed attack on Iran after he withdrew from the nuclear agreement in 2018 squeezed life standards again.
The situation is getting worse every day. I cannot afford to pay rent, bills or clothes for my kids," Alireza Yousefi said, 42, an Isfahan teacher. "Now, even more sanctions make it impossible to survive."
The Iranian Foreign Ministry did not reply to a comment request.
"ON EQUAL TERMS"
Trump, while increasing the pressure on Iran through new sanctions and military threats, also opened the doors to negotiations when he sent a letter to Khamenei suggesting nuclear talks.
Khamenei rejected the offer Wednesday, repeatedly saying that Washington had made excessive demands and that Tehran wouldn't be pushed into negotiations.
In an interview published Thursday, Abbas Araqchi, Iran's top diplomatic official said: "If we negotiate while the other party is exerting maximum pressure on us, we will be in a weaker position and achieve nothing."
He said that "the other side must be convinced of the ineffectiveness of the pressure policy - then we can sit down at the table and negotiate on equal terms."
A senior Iranian official stated that there was no other option but to reach a deal, and it was possible. However, the road ahead was bumpy, given Iran's mistrust of Trump following his abandonment of the 2015 agreement.
Iran's economic collapse has been largely prevented by China, its main oil buyer and one of the few countries still trading with Tehran in spite of sanctions.
According to estimates by the U.S. Energy Information Administration, oil exports dropped after Trump abandoned the nuclear deal, but recovered in recent years. They are expected to generate more than $50 billion of revenue between 2022 and 2023, as Iran finds ways to avoid sanctions.
But uncertainty still looms about the future of exports, as Trump's policy of maximum pressure aims to choke off Iran's crude oil sales by imposing multiple rounds of sanctions against tankers and other entities involved in trade.
PUBLIC ANGER SIMMERS
Iran's rulers also face a series of crises: energy and water shortages; a collapsing dollar; military setbacks for regional allies, and growing fear of an Israeli attack on its nuclear facilities. All of these are exacerbated by Trump's hard stance.
Lack of infrastructure investment, excessive consumption driven by subsidies and declining natural gas production, as well as inefficient irrigation are all contributing to the energy and water sector's problems. This leads to blackouts, and water shortages.
According to foreign exchange websites and officials, the Iranian rial's value has dropped by more than 90 percent against the dollar ever since sanctions were reinstated in 2018.
State media reported that Iranians, worried about Trump's harsh approach, have bought dollars, other hard currency, gold, or cryptocurrency, indicating further weakness in the rial.
State media reported that the price of rice had risen 200% in the past year. Media reports indicate that housing and utility costs in Tehran and other major cities have risen sharply in recent months. They climbed roughly 60%, mainly due to the steep decline of the rial and the rising cost of raw materials.
Some Iranian experts claim that the official inflation rate is over 50%, but it hovers at around 40%. The Statistical Center of Iran has reported a dramatic rise in food costs. In January, the prices of a third of the most essential commodities increased by 40%. They were now more than twice as high as they had been in the previous month.
According to the Tasnim News Agency, Ebrahim Sadeghifar, head of Iran's Institute of Labor and Social Welfare (IILSW), 22%-27% of Iranians are now living below the poverty level.
Last week, Iran's Jomhuri-ye Eslami daily reported that the poverty rate was around 50%.
I can't pay the rent on my carpet shop, or my employees' wages. No one can afford to buy carpets. "If this situation continues, I'll have to layoff my staff," Morteza (39), said over the phone, from Tehran's Grand Bazaar. He gave only his first name.
How can they hope to resolve the economic crisis without talking to Trump? Talk to him, and you will reach an agreement. "You cannot afford to be proud on an empty stomach."
NUCLEAR RED LINE
According to Iranian state media, at least 216 protests took place in Iran during February. These included retirees and workers, as well as students, health professionals, merchants, and healthcare professionals. According to reports, the protests were mainly focused on economic hardships such as low wages and unpaid salaries for months.
Officials fear that a decline in living standards, despite the small scale of most protests, could explode.
One of the four officials who was close to the government said, "The country is a powder-keg and any further economic strains could ignite it."
The officials stated that Iran's ruling class is aware of the possibility of a return of unrest, similar to protests from 2022-2023 over the death of Mahsa Amin in custody or nationwide protests of 2019 over the rise in fuel prices.
Senior Iranian officials said that there were several high-level discussions to discuss the potential of new mass demonstrations and possible measures to prevent them.
Iranian officials, however, said that despite concerns about possible unrest, Tehran would only go so far with any discussions with Trump. They stressed that "excessive requests" such as the dismantling of Iran's nuclear program or conventional missile capability were not on the table.
The senior official stated that "yes, there is concern about increased economic pressure and there are concerns regarding the nation's anger growing, but we cannot give up our right to produce nuclear energy just because Trump wants it."
Ali Vaez is the Iran project director for International Crisis Group. He said that Iran's leaders believed that negotiations with Trump would be a sign of weakness and could lead to more pressure rather than less.
He said: "Ayatollah Khmenei appears to believe that surrendering is the only thing more dangerous than sanctions." (Reporting, Writing and Editing by Parisa Hafezi)
(source: Reuters)