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Fed markets are jittery as the Mideast conflict continues
On Wednesday, investors were urged to seek safety in U.S. Treasuries or the dollar as they dumped stocks. Investors are becoming increasingly concerned about the possibility of an increased direct U.S. involvement in the Israel-Iran war, as it enters its sixth day. President Donald Trump has called for Iran to surrender unconditionally and warned that the patience of the United States is wearing thin. Joseph Capurso is the head of sustainable and international economics for Commonwealth Bank of Australia. The markets are trying hard to assess the risk of a large U.S. Military intervention. The market may not be thinking clearly, but the oil and currency prices indicate that they are pricing in some risk of a very bad outcome. Brent crude futures rose 0.33% on Wednesday to $76.70 a barrel, while U.S. Crude increased 0.45% to 75.18 per barrel. Both prices had increased by more than 4% the previous session. Risk-off movements across the markets have also been gaining momentum. The MSCI broadest Asia-Pacific share index outside Japan dropped 0.26%, as did the EUROSTOXX futures which fell 0.4%. The U.S. Stock futures are little changed from the overnight cash session in Wall Street, which ended in the negative. The dollar strengthened at its one-week peak of 145.445 Japanese yen, and maintained most of its gains versus other currencies. The euro was last seen buying $1.1487, after a 0.7% drop on Tuesday. The pound rose to $1.3435 after a 1.1% drop in the previous session. The rise in oil prices has a marginal negative impact on the yen, as Japan and the EU import a lot of energy while the United States exports it. The war has shown that the U.S. Dollar still has a haven status under certain circumstances, for example, when it is perceived to increase the risk of disruption of global oil supply and when it diverts the attention of traders away from risks that are U.S. centric," said Thierry Witzman, global FX rates and rates strategist, Macquarie Group. FED OUTCOME The Middle East conflict, coupled with the prolonged uncertainty surrounding Trump's tariffs, and signs of fragility within the U.S. economic system, create a difficult backdrop for the Federal Reserve to make its policy decision on Wednesday. Data released on Tuesday showed that U.S. retails sales dropped by more than expected 0.9% in May. This was the largest drop in four month. The Fed is expected to maintain its current interest rates. However, the focus will be on updated central bank projections of the economy and benchmark rate. Erik Weisman is the chief economist of MFS Investment Management. He said, "We don't expect much innovation from the Fed." The new forecasts in the Summary of Economic Projection may indicate a slightly slower growth combined with a slightly higher inflation. Investors piled into safe-haven bonds after the latest developments in Israel-Iran conflict. Bond yields are inversely related to bond prices. The benchmark 10-year rate was at 4.4027% last, after falling roughly 6 basis points the previous session. The yield on the two-year bond was 3.9581%. Spot gold fell 0.12% elsewhere to $3,384.73 per ounce.
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Mamelodi Sundowns wins the opening match to top Group F at Club World Cup
Mamelodi Sundowns, the South African champions, won their first game at the Club World Cup Tuesday. Striker Iqraam Raymonds scored the only goal as they defeated South Korea's UlsanHD 1-0. After Borussia Dortmund was held to a 0-0 draw by Fluminense in the morning, this result placed this month's African Champions League runner-up at the top of Group F. Esperance from Tunisia also lost their first match to Flamengo, while Egypt's Al Ahly had drawn in the opening round. Rayners scored nine minutes before the halftime break at the Inter & Co Stadium, in a match which was delayed for just over an hour because of the threat from lightning in central Florida. As a precaution, French referee Clement Turpin sent the teams back to their changing rooms after the teams came onto the pitch for the start of the match. After VAR checks, Rayners' two other first half strikes were ruled out - one was for handball while the other was inches offside. It was the Brazilian playmaker Lucas Ribeiro who slipped a pass past the Ulsan defense for the striker. Ribeiro's shot was blocked after some clever passing created a chance. Sundowns dominated the game with more than 70% possession. However, their passing was at times pedestrian and they wasted goals. Ulsan tried to find chances in the counter-attack. After a quick break, the Brazilian forward Erick Fairios missed the chance with the goal right at his fingertips. Ulsan rarely had the initiative but Sundowns missed two chances.
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The oil price continues to rise as the Iran-Israel conflict enters its sixth day
The oil prices rose in the early hours of trading on Wednesday, after the previous session ended with a gain of more than 4%. This was due to fears that the conflict between Israel and Iran could disrupt supply. Brent crude futures were up 19 cents or 0.25% to $76.64 per barrel at 0029 GMT. U.S. West Texas Intermediate Crude Futures increased 23 cents or 0.31% to $75.07 a barrel. The U.S. president Donald Trump called on Iran to "surrender unconditionally" Tuesday as the Iran-Israel war entered its sixth day. Three officials confirmed on Tuesday that the U.S. Military is sending more fighter planes to the region in order to strengthen its forces. Analysts say the market is primarily concerned about disruptions to the supply of oil in the Strait of Hormuz. This area carries around a fifth of all the seaborne crude oil. On Tuesday, two oil tankers collided and caught fire near the strait. United Kingdom Maritime Trade Operations warned on Monday of electronic interference affecting navigation systems. Iran is OPEC’s third largest producer, extracting approximately 3.3 million barrels of crude oil per day. Analysts say that other members of the Organization of the Petroleum Exporting Countries (OPEC) could use their spare capacities to compensate for a decrease in Iranian production. The markets are also anticipating a second session of U.S. Federal Reserve meetings on Wednesday. It is expected that the central bank will keep its overnight benchmark interest rate between 4.25% and 4.50%. Tony Sycamore is a market analyst at IG. He said that the Fed could cut rates in July by 25 basis points, earlier than what the market expects. Sycamore stated that "the situation in the Middle East may become a catalyst to the Fed sounding more dovish as it did after the Hamas attack on October 7, 2023." Low interest rates boost the economy and increase demand for oil. The Middle East conflict creates new sources of inflation, including a surge in oil prices, which makes the Fed's decision difficult. Market sources cited American Petroleum Institute data on Tuesday to report that U.S. crude, gasoline, and distillate stocks decreased last week, while inventories increased.
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Santos’ Barossa Liquefied Natural Gas project is progressing towards its final commissioning plan
Santos announced on Wednesday that it has progressed towards the final commissioning of its Barossa LNG Project following the arrival and deployment of a floating storage, production and offloading vessel (FPSO) at the Barossa Gas Field. The number two independent gas producer in Australia said that five of the six wells have been drilled. The final well is expected to be finished by the third quarter. In a press release, Australia's No. 2 independent gas producer stated that five wells of the six-well programme have been drilled. The final well is expected to be completed in the third quarter. Santos stated that the project remains on schedule for first gas to be produced in the third quarter 2025. The joint venture partners SK E&S, JERA Co and Santos have already invested $3.95billion in this project. Santos said that the Barossa Project, along with the Pikka Phase 1 in Alaska, will deliver a 30 percent increase in production in the next 18-months compared to the year 2024. Santos Darwin LNG, located in Australia's Northern Territory, will receive natural gas from Barossa. This update follows the announcement on Monday of a $18,7 billion all-cash bid by an international consortium led Abu Dhabi's National Oil Company to buy Santos. Santos joining the consortium will give it control over two Australian LNG plants - Gladstone LNG, and Darwin LNG - as well as stakes PNG LNG, and undeveloped Papua LNG. (Reporting from John Biju, Bengaluru. Editing by Rashmi aich)
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Mexico fines Slim’s Telcel $94 Million for SIM card deal With Oxxo convenience store
Mexico's telecoms regulator fined America Movil subsidiary Telcel 1,78 billion pesos (93.61 millions dollars) on Tuesday for signing exclusive deals with convenience-store chain Oxxo in order to sell its SIM card. America Movil, a telecommunications company controlled by the Mexican billionaire Carlos Slim's family, has denied the findings of the regulator and vowed to contest the investigation and fine. The fine is the result of an investigation that was launched by the Federal Telecommunications Institute in 2021 at the request from a competitor regarding the alleged monopolistic practice by Telcel. IFT fined Oxxo, Mexico’s ubiquitous Femsa convenience chain, as well as IMMEX (another Femsa subordinate) for their roles in the deal. Femsa didn't immediately respond to an inquiry for comment. The IFT stated that "the... monopolistic practices consisted of Telcel giving incentives to Oxxo, IMMEX and IMMEX on condition that they wouldn't sell SIM cards by competitors." Telcel will appeal the decision through "all available legal means," America Movil stated in a press release, calling the IFT investigation "biased" as well as "lacking in evidence." $1 = 19,0150 Mexican Pesos (Reporting and editing by Bill Berkrot, Stephen Coates and Brendan O'Boyle)
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Russia notes Iran's commitment towards NPT and says Israeli attacks against Iran are illegal
The Russian Foreign Ministry condemned on Tuesday the continued Israeli attacks against Iran and said that a diplomatic solution could only be reached to resolve the conflict regarding Tehran's nuclear program. The ministry posted a statement on Telegram saying that "Israel's continued intensive attacks on Iran’s peaceful nuclear sites violate international law, create unacceptable threats to the international security of the world and lead to a nuclear disaster ...,"." The report said that the widespread condemnation of Israeli action showed that Israel only found support "from states that are actually co-participants, and who act for opportunistic purposes." The Ministry noted Iran's 'clear statements' about its commitment to the Nuclear Non-Proliferation Treaty and its willingness to renew contact with the United States in order to find possible solutions. This removed all doubts regarding Tehran's nuclear program. It said: "Moscow fully supports this position and is convinced that the solution sought can only be achieved reliably through diplomacy, and negotiation." In the statement, Moscow said it was also waiting for an "as quickly as possible" detailed written report from the International Atomic Energy Agency that would include a "objective and unvarnished evaluation of damage" caused to Iran's nucleonic facilities. The Kremlin announced on Monday that Russia is ready to serve as a mediating force in the conflict between Israel & Iran. Its previous proposal of storing Iranian uranium within Russia remains on the table.
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Brazil's Copersucar predicts sugarcane harvest in 2025/26 to be equal or greater than previous year
Tomas Manzano said that the sugarcane harvest by Brazilian Copersucar partners in the 2025/26 season is expected to be at or above the levels of 2024/25. Manzano, a Copersucar partner, said that the partners would crush 107 millions metric tons sugarcane by 2024/25. He added that the company is expecting similar or even better results for the current cycle due to an increase in the size and quality of the sugarcane harvest, as well as other investments. This forecast contradicts the expectations of the industry as a whole, who expect a decline in production. "Copersucar's area is expanding and shouldn't see a decline, but perhaps stability, or even growth," he stated during a conference call to discuss 2024/25 company results. The company announced earlier that the external sugar sales for the crop reached a record of 13.7 million metric tonnes. Domestic sugar sales, however, declined by 4.8% to 2 million tons during the season. The record sales led to a 43.1% increase in the net profit for the year, which reached 402 million Brazilian Reis ($73.4m) after revenues grew by 15.3% to reach 62.3 billion Reis. Copersucar said that its ethanol sales in the United States where it expanded operations increased by 23.4%, to 9.5 billions liters. Sales from Brazil also rose 1.1%, to 9.6 billions liters. Copersucar anticipates crushing between 590 and 600 millions tons in the center-south area, along with sugar production of 40 to 41 million tonnes, for the 2025/26 harvest, Manzano stated. The company has said that the growing global attention to decarbonizing energy offers opportunities for Copersucar in areas such as sustainable aviation fuel. It also added that it had started to build a trading firm to take advantage of the emerging market.
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European truckmakers address rare-earths shortage with stockpiling and supply chain changes
Daimler Trucks is building up inventory to address supply problems linked to Chinese export restrictions. Daimler Trucks says it has learned lessons from the chip crisis. Recent export regulations in China are causing concern for the automotive industry. They fear that this will affect supply of rare Earths which is needed to make magnets. Exporters are required to apply for new licenses since April. These licences are being granted slowly. China is the dominant market for raw materials used in various components, from electric motors to the window mechanisms of cars and trucks. Karin Radstrom, CEO of Daimler Truck, told reporters Tuesday, on the sidelines a conference held in Gothenburg, that the group, like during the COVID-19 epidemic, was increasing inventory levels and not relying on a "just-in-time" strategy. Radstrom stated that "with everything going on around the world, this strategy seems like a good one and necessary." She stated that Daimler is closely monitoring the situation. She added that "so far, it seems we are getting what we require", saying there has been no production interruptions so far. Volvo Group CTO Lars Stenqvist noted that there was "a little bit" of turmoil around the rare earth supply and stated in the long-term, "there had been a clear movement" to become less dependent on these minerals. Stenqvist also stated that the group's production had not been affected. He added, like Radstrom, that many lessons had been learned from the crisis. He said that during the chip crisis, a few year ago, we learned that maybe we had worked too much with tier one suppliers. "We will never hesitate to move down the value chain to tier 2, 3 or 4 if needed." Stenqvist said, "During the (chip) crises we learned to navigate to the mines. And that's what we need to do in regards to rare earth minerals and metals." Reporting by OzanErgenay, Marie Mannes, and IlonaKnowledgebach; editing by Jan Harvey
Trump Budget proposes closing Northeast Heating Oil Reserve
The budget of President Donald Trump proposes that the Northeast Home Heating Oil Reserve be closed as soon as a few weeks. This reserve, which contains 1 million barrels and was created to protect consumers, stores diesel.
The reserve created by the former president Bill Clinton in 2000 is enough to heat homes for approximately 10 days. The reserve hasn't been used since 2012 when emergency responders were provided with fuel in the wake of Hurricane Sandy.
According to the proposal, proceeds from the sale of ultra-low sulfur fuel in fiscal year 2020 would be used for deficit reduction. The proposal said that at current prices the proceeds from a sale of ultra-low sulfur diesel would amount to $86 million. However, closing the plant could reduce maintenance costs.
The U.S. Budget proposals outline an administration's policy, but what legislators ultimately adopt can differ from the White House requests.
Former President Joe Biden had proposed to increase the reserve in November 2022 as a way to protect against inflation and spikes in heating oil costs after Russia's invasion of Ukraine.
This plan was never implemented, but it would have funded the purchase of the reserve with revenue from the sale of the Strategic Petroleum Reserve (the world's largest stockpile for emergency crude oil).
The Department of Energy didn't immediately respond to an inquiry about the proposed closure of the heating oil reserves. (Reporting and editing by Timothy Gardner)
(source: Reuters)