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MORNING BID EUROPE - Time to cash in those chips?
Tom Westbrook gives us a look at what the future holds for European and global markets. South Korea's chip heavy?KOSPI failed to convince on Wednesday after announcing the fifth largest selloff in history. BNY says that there are signs of a slowdown in the retail investor buying that has driven the index to record-breaking heights. This is especially true after regulators suddenly took a dim view of popular leveraged ETFs. Markets in Seoul were flat in the morning but climbed before noon. For months, downtown has been filled with traders hunched on phones trading stocks. In Taipei the chipmaking giant TSMC fell. The next indicator of the?mood in the industry will be Micron's earnings report after the U.S. closing. It is important to see if the chipmaker has announced long-term deals for supply and payments upfront from large customers. Positioning stretched could lead to disappointment. Bank of America's survey of fund managers in June found that?80% thought long semiconductors was the most crowded trading, a record. More than half of respondents to the same survey believe that we are in the "boom phase" of the investment cycle for artificial intelligence. We have not reached the stages of euphoria, profit-taking or panic of an asset-price-bubble bursting. INDONESIA RETAINS EM status, according to the MSCI review The index provider MSCI has left Indonesia in purgatory after its review of the market classification. Investors are waiting to see if reforms on "free float" and "ownership disclosure" will lead to a more transparent and liquid market. Jakarta's stock market was a mess after the outcome. The Ifo survey on business conditions in Germany is expected?later today, and a slight improvement is expected. The dollar is still gaining strength, but the euro remains under pressure. Investors were wary of a possible joint intervention by the U.S. and Japanese governments to support the yen, as it held at 160.56 yen in Asia after a discussion online between U.S. counterpart Scott Bessent and Japanese Finance Minister Satsuki Katayama. According to a draft of a report that was reviewed by?, Japan intends to look at ways to improve the?management?of its $1.3 trillion in foreign exchange reserves. On Wednesday, the war chest was believed to be mostly held in U.S. Treasury bonds. The following are key developments that may influence the markets on Wednesday. * German Ifo survey on Economics * Micron Earnings (By Tom Westbrook, edited by Christopher Cushing).
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Aluminium at 3-month low due to Gulf supply and strong dollar
The 'London Metal Exchange' saw aluminium prices remain near their three-month lows on Wednesday as the strong 'dollar and expectations of Middle East supply returning weighed. LME benchmark?aluminum for three months edged up by 0.17% to $3,238 per metric tonne at 0300 GMT after plunging in the previous session. The Shanghai Futures Exchange's most traded aluminium contract fell 1.12%, to 23,480 Yuan ($3,453.50), a ton. It fell earlier in the session to a three month low of 23,320 Yuan per ton. After three months of war, there was hope that tensions would ease between the U.S. The LME Cash-to-three Month?Premium On?Tuesday the price of?a ton was $-3.46, indicating an increase in?immediate supply. The U.S. Dollar rose for a fifth consecutive day, supported by safe haven buying. This made the base metals complex more expensive for buyers who use other currencies. The fear of interest rates rising for longer amid high inflation and a hawkish U.S. Federal Reserve remain macroeconomic headwinds. A tech-led stock selloff on Monday also clouded the growth outlook. Borrowing becomes more expensive, and metals linked to economic growth are less in demand. The LME copper price rose by 0.16%, but the SHFE fell?0.98%. In recent years, the red metal has benefited from strong forecasts for AI infrastructure and grid investments as well as electric vehicles. Zinc fell 0.06% among other LME metals, while lead ticked up 0.08%, nickel ticked up 0.1%, and tin dropped 0.86%. Zinc fell 1.72% on SHFE. Lead dipped by 0.31%. Nickel dropped by 1.99%. Tin dropped 4.84%.
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Oil prices continue to fall on the back of expectations for smoother crude flow via Hormuz
On Wednesday, oil prices dropped more than 1%, continuing this week's losses and trading at near four-month highs. This is on signs that more oil tanks stranded in the Gulf will be moving out of the Strait of Hormuz. Brent crude futures were down 78 cents or 1.0% at $76.30 per barrel as of 3:50 GMT. U.S. West Texas Intermediate fell 78 cents or 1.1% to $72.43 a barrel. On Tuesday, both benchmarks fell by around 1% and reached their lowest levels since March. Positive signals from the Persian Gulf are fueling optimism regarding oil flow through the Strait of Hormuz. The number of vessel crossings has increased over the past few days, but they are still?well below levels seen before the war," ING commodity analysts said in a Wednesday note. The price of oil has also been under pressure in the past week, after Washington gave?Tehran 60 days of sanctions relief following initial peace negotiations, allowing them to sell their oil. Tomomichi Akuta is a senior economist at Mitsubishi UFJ Research and Consulting. He added that "further progress in the nuclear negotiations could push back prices to pre-war level." Oman and Iran decided on Tuesday to continue discussions regarding the future administration of the Strait. U.S. Secretary Marco Rubio stated that any Iranian attempt at levying transit fees would be in violation of international law. Even so, there is still uncertainty about the sustainability of the agreement. Trump said that Iran agreed to nuclear inspections "infinity" while Tehran denied this. Investors also watch how quickly Middle-Eastern producers are able to restore exports, and whether or not more ships enter the region. According to a source in the Iranian military, 'Fars News Agency', a small number of vessels is allowed through the strait every day. This is done under coordination with Iran’s Revolutionary Guards Navy. Data from ship-tracking showed that three stranded Supertankers crossed the strait Tuesday. After the U.S. and Iran 'ceasefire agreement, the U.N. Shipping Agency said that an 'evacuation plan is in place to allow hundreds of ships carrying 11,000 seafarers stranded on the Gulf coast to pass through the strait. According to market sources, crude inventories fell by 765,000 barrels during the week ending June 19. The data was released on Tuesday by the American Petroleum Institute. Nine analysts polled estimated that crude inventories had fallen by an average of 4.5 million barrels over the past week. (Reporting from Yuka Obayashi, Tokyo; Jeslyn Lerh, Singapore; editing by Sonali Paul.)
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Dollar gains as Fed hikes rates and gold falls to a two-week low
Gold fell on Wednesday, reaching its lowest level for 'almost two months, as the dollar rose amid rising bets that the U.S. would raise interest rates, and investors analyzed conflicting signals regarding the U.S. Iran peace talks. Gold spot fell 1%, to $4,067.51 an ounce, at 0236 GMT. It had earlier fallen to its lowest level since the 11th of June. U.S. gold contracts for August delivery fell 1.6% to $4.083.90. Donald Trump, the U.S. president, said that Iran agreed to nuclear inspections in "infinity" on Tuesday. Tehran denied this and said they had not made such a concession during negotiations. Both sides disagreed over the details of a provision which would give Iran access to frozen funds in overseas accounts. Ilya Spirak, the?head global macro of?Tastylive? said: "We're seeing the evolution of the?pressure that gold was under as a result of the war." The dollar has risen, gold has fallen, and bonds have fallen. The price of gold has dropped by about 23% in the last few months since the U.S. and Israel war against Iran began late February. This is because the rising inflationary pressures have led to the expectation of an interest rate increase from the U.S. Federal Reserve. Gold is traditionally viewed as a hedge against inflation, but it becomes less attractive as an asset that does not yield in a high interest rate environment. Dollar hit its highest level in over a year, causing?bullion to be more expensive for foreign buyers. CME FedWatch Tool shows that traders are betting on three interest rate increases from the US Federal Reserve this year. This is compared to bets for one hike made before the Fed meeting last week. Investors are now awaiting?the U.S. The Fed's preferred measure of inflation, Personal Consumption Spending data, is due on Thursday. This will provide further clues about monetary policy. Spivak said, "If we focus on the inflation rate and remove the $4,000 mark, we will be heading in a direction of $3800. We'll then have to discuss whether we should test $3500 next." Silver spot fell by 0.9%, to $61.44 an ounce. Platinum dropped 0.8%, to $1,638, while palladium declined 0.8%, to $1,227.41. (Reporting and editing by Subhranshu sahu, Rashmi aich and Pablo Sinha from Bengaluru)
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Indian shares are likely to open with a muted opening as US rate hikes offset oil relief
Indian shares will likely open Wednesday with little change, as the fall in crude prices due to U.S. - Iran peace negotiations has been tempered by "growing expectations" of a tighter Federal Reserve policy. The GIFT Nifty Futures are at 23,861.50 points as of 7:58 am IST. This means that the Nifty 50 may open near to Tuesday's close of 23,824.10, when Indian blue chips fell by about 1.2%. IT and metal stocks were the main culprits. The shares had risen by more than 4% over the seven previous sessions up to Monday as the Middle East Peace Talks pushed crude oil prices down, improving the outlook for growth and inflation in the world's third largest oil importer and consumer. The world's No. 3 oil consumer and importer. Wall Street stocks fell overnight due to a sell-off of technology and semiconductor shares. Profit-taking following a prolonged rally as well as expectations for a more hawkish Fed also weighed. Asian markets rose 0.4%, after losing 3.8% the previous session. The higher U.S. rates could reduce the appeal of emerging economies such as India to foreign investors, and cloud the outlook for growth in the largest economy on earth. This would affect sectors that are exposed to the United States. Brent crude futures dropped 0.5% and traded near four-month lows on signs more oil tankers stuck in the Gulf after the Iran War began are about to leave the Strait of Hormuz. On Tuesday, foreign portfolio investors bought Indian stocks worth 178.6 millions rupees ($1.9m) while domestic institutional investors bought?stocks valued at 6.80 billion rupees. Two traders say that the lower crude prices and measures to stabilize the rupee, as well as the increase in foreign inflows have helped moderate the overseas sales over the last two weeks. They said that a revival of monsoon rains and improved earnings could also attract?global investor, who sold Indian stocks worth a record amount of $29.84 billion so far this year. STOCKS TO WATCH ** The Indian government has announced that it will sell up to 2% of Indian Railway Finance Corp through an offer for sales ** Wipro extends partnership with cybersecurity company Palo Alto. Company also extends the 'timeline for buying Alpha Net Consulting?to September 30, from the original June 30 target ** NLC India signs an agreement with Indian Oil Corporation for a joint venture that will develop large-scale power plants using renewable energy in Tamil Nadu
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Iron ore prices rebound from multi-month lows due to dip buying
The iron ore price rebounded from the multi-month lows that were hit on Tuesday, thanks to a 'wave of dip buying and a short covering by some traders. After touching a 11-month-low on Tuesday, the most-traded contract for iron ore on China's Dalian Commodity Exchange rose 0.34% by 0305 GMT to 741 Yuan ($109.16). As of 0255 GMT the benchmark?July ore traded on the Singapore Exchange had risen 0.64% to $98.05 per?ton after having hit a four-month low?Tuesday. In anticipation of a seasonal slowdown in demand and a rising supply, Dalian and Singapore prices declined by 7.7% and 7% respectively in the last?month. According to data from Mysteel, lower prices fueled the buying interest among steelmakers and traders. The daily transaction volume of seaborne cargoes increased by 87% from Tuesday's previous day. Two analysts, who spoke on condition of anonymity because they are not authorized to speak with media, attribute the price rebound to a normal upward adjustment following "sharp drops". Analysts said that some traders have closed their short positions due to the increased buying interest in the spot market. This will eventually permeate the futures markets. Coking coal fell 0.64% while coke remained flat. Steel benchmarks at the Shanghai Futures Exchange have been moving in a narrow range. The price of rebar and hot-rolled coil was little changed. Wire rod rose by 0.48%, while stainless steel fell by 1.31%. ($1 = 6.7884 Chinese Yuan) (Reporting and editing by Amy Lv, Lewis Jackson)
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Asian stocks wobble following tech-led saledown, volatility risks highlighted
Analysts warned about the possibility of a new bout of volatility after the?day-long global selloff? in technology and semiconductor stocks. MSCI's broadest Asia-Pacific share index outside Japan fell 0.02%. South Korean shares, that plunged 10% in one day, their biggest drop since March, rose 2.2%. Japan's Nikkei fluctuated between gains and losses. It was last down 0.8%. Michael McCarthy, a market analyst with Moomoo Securities Australia, said that the price action on markets in the past seven days was alarming. Not only when it fell, but also when it rose. When markets are moving so quickly, either in one direction or the other, this is a sign of instability. Overnight, Wall Street was swept by a risk-off mood that tracked movements in Europe and Asia. U.S. shares fell due to concerns over debt-funded AI spending and speculation the Federal Reserve would adopt a more hawkish position. Treasury yields also declined as investors sought safety in government debt. The Dow Jones Industrial Average fell 0.09%. The S&P 500 dropped 1.4% and the Nasdaq Composite declined 2.2%. The yield on benchmark U.S. 10 year notes fell by 1.41 basis points, to 4.493%. The oil price extended its losses this week, trading at four-month lows, which were hit the previous session. This is on the back of signs that there will be more oil tankers leaving the Strait of Hormuz, after being stranded since the beginning of the Iran War. The durability of the agreement is still uncertain. Both the U.S.A. and Iran gave conflicting reports on the peace agreement, which included key elements like nuclear inspections and the control of the Strait of Hormuz. The strength of the dollar has put pressure on the Japanese yen. It is hovering?near a 40-year low at 161.57 to the dollar. This has kept markets on edge about a possible currency intervention to 'prop up the battered currency. The summary of the opinions expressed by the Bank of Japan board at its meeting earlier this month in which it decided to increase interest rates to a new 31-year high of 1.00% was released on Wednesday. It showed that some members wanted to see further rate increases to bring the central banks policy rate to levels considered neutral for the economy. The dollar index (which measures the greenback versus a basket of currencies including the yen, the euro and others) rose by 0.02%, to 101.43. It is now near its year-high. The euro fell 0.06% to $1.1375. The pound GBP= fell 0.08% in Britain to $1.3192. Spot gold continued to decline, falling 0.48%, to $4,088.71 per ounce, as expectations of higher rates reduced the appeal for non-yielding investments. Bitcoin gained 0.84%, reaching $62,914.94. Ethereum gained 0.43%, to $1.669.35. (Reporting and editing by Satoshi Feast; reporting by Satoshi sugiyama)
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Oil prices continue to decline as oil flows through Hormuz are expected to be smoother
On Wednesday, oil prices continued to fall, and traded 'near the four-month lows reached in the previous session. This was on the back of signs that more oil tankers stuck in the Gulf after the Iran war were set to leave the Strait of Hormuz. Brent crude futures fell 37 cents or 0.5% to $76.71 per barrel at 0043 GMT. U.S. West Texas Intermediate dropped 36 cents or 0.5% to $72.85 per barrel. Both benchmarks fell nearly 1% Tuesday, reaching their lowest levels since March. The price of oil has been under pressure since this week, after Washington gave Tehran a waiver from sanctions for 60 days following the initial peace talks. This allowed it to sell its oil. Tomomichi Akuta is a senior economist with Mitsubishi UFJ Research and Consulting. He said that crude oil prices fell due to hopes of easing U.S. - Iran tensions and a possible recovery in oil shipments across the Strait of Hormuz. He added that "further progress in the nuclear negotiations could push prices to pre-war levels." Oman and Iran agreed to continue discussions on Tuesday about the future administration of the Strait. U.S. Secretary Marco Rubio stated that any Iranian attempt at levying transit fees would be a violation of international law. The durability of the agreement remains uncertain. Donald Trump, the U.S. president, said that Iran agreed to "infinity" of nuclear inspections. Tehran denied this claim. Investors also watch to see how quickly Middle Eastern producers are able to restore exports, and whether or not more ships enter the region. A military source in Iran told the Fars News Agency that only a few vessels were allowed to?pass?through?the strait every day, under coordination with Iran’s Revolutionary Guards Navy. Data from ship-tracking showed that three supertankers stranded in the Gulf passed through the strait Tuesday. After the U.S. and Iran ceasefire agreement, the U.N. Shipping Agency said that an evacuation plan is in place to allow hundreds of ships carrying 11,000 seafarers stranded on the Gulf coast to pass through the strait. According to market sources, crude stocks dropped by 765,00 barrels in the week ending June 19. The data was released on Tuesday by the American Petroleum Institute. Nine analysts surveyed by estimated that crude inventories had fallen by an average of 4.5 million barrels over the past week. (Reporting and editing by Yuka Obayashi)
Sources say India is nearing 50% domestic coal usage in power plants that import imported coal.
India, the world's largest thermal coal importer, is reducing the cost of overseas purchases by increasing the percentage of domestic fuel used in power plants that run on imported coal.
They said that the South Asian nation has already used domestic coal to operate 5.7 gigawatts of its total 18.7 GW capacity in imported coal-based plants this year.
The switch is being expanded to 4.3 GW.
Import-based plants previously used coal from Indonesia and South Africa, as well as Russia. Data from Indian coal trader iEnergy Natural Resources show that imports from Indonesia and South Africa dropped by 21% and 68% respectively in 'January to April' compared with a year ago.
The increased power generated?from renewable resources frees up domestic fuel supplies. This allows more coal from the local area to be diverted towards coastal plants built to run?on imports.
India has been trying to reduce its coal imports for power generation for many years. However, efforts have been hampered because imported coal-based plant were designed to process higher-quality fuels and struggled with lower-quality local supplies.
One government official stated that operators have modified their units over time to accommodate greater volumes of coal from the local area, which contains more ash.
Sources said that companies use a mixture of domestic and imported coal to optimize operations. Some facilities are now using up to 70% local coal. The coal ministry offers doorstep delivery to imported-coal facilities, which can provide the quality and quantity needed without any problems.
A third official stated that imported coal-based plants had already reserved?16 millions metric tons?of domestic coal to meet their needs.
They could not be identified as they were not authorized to speak with the media.
Grid-India data shows that India's coal-fired production increased 10% from the previous year in May, marking the highest growth rate since May 2024. This is because utilities increased their generation to meet electricity demands.
India's thermal?coal?imports dropped to a 4-year low of 65 million metric ton in January to May, due to increased local production and increasing renewable energy generation.
India's coal and power ministries did not respond to our inquiries. (Reporting and editing by Nidhi verma, Sonali Paul and Sethuraman N.)
(source: Reuters)