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BASF's operating profit falls due to forex effects and pressure from competitors
BASF reported on Thursday that its quarterly adjusted operating profits had declined 5.6%. It cited 'negative currency effects and 'competitive pressures.?It also added that the impact of the Iran War was uncertain. BASF reported that its first-quarter earnings were 2.36 billion euros ($2.75 billion), after adjusting for special items. This was a decline from the 2.19 billion euro average analyst estimate. The German chemical company reaffirmed that the adjusted EBITDA is likely to reach?6.2-7.0 billion this year compared with 6.6?billion in 2025. The company also projected a Brent crude oil average price of $65 per barrel in 2026. This was unchanged from February's assumptions, and a little more than half the current price. It added that this was due to the "high degree of uncertainty" about the outcome of the conflict in the Middle East. "The assumptions that were made in February about growth in the global GDP, industrial production and chemical production could prove to be overly optimistic." "The oil price could?be higher that our current assumption," the report?added. Brent crude futures rose over 6% to a four-year high of $125 per barrel on Thursday, following a report stating that the U.S. was considering further military action against Iran. ($1 = 0.8578 euro) (Reporting and Editing by Friederike Hiene, Ludwig Burger and Patricia Weiss)
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MORNING BID - Central bank hawks scare off bonds but tech is unaffected
Stella Qiu gives us a look at what the future holds for European and global markets. Jerome Powell’s parting gift was a hawkish one - the U.S. Central Bank held interest rates steady, but in the most polarized vote since 1992, three regional presidents disagreed over language that indicated an “easing bias”, claiming such language was not appropriate due to a?elevated? inflation and the massive uncertainty regarding oil prices resulting from the U.S. supported war against Iran. It is not uncommon for central banks, including the BoC, to raise the alarm about inflation when Brent oil reaches a four-year-high of $125 per barrel. According to media reports, U.S. president Donald Trump will receive a briefing today on the new military options against Iran. Peace talks have appeared to be stalled. Powell confirmed that he will remain as a Fed Governor until the outlook is clearer. He has essentially taken over for Stephen Miran, who was a Trump supporter and voted in favor of a rate reduction on Wednesday. Many analysts believe Powell will join the hawks in order to oppose further attempts from Trump and his new Fed chair Kevin Warsh to reduce interest rates. Treasury yields spiked as traders priced in any?chance that rates would be cut this year. The traders now see an equal chance of a Fed rate hike by April 2027. This is a complete reversal of the situation before the start of the war at the end February. The equities were, however, in a world created by AI. Nasdaq Futures rose by around 0.4% due to the generally positive earnings of four tech giants in the first quarter. Alphabet, the parent company of Google, soared by 7% after exceeding forecasts. Microsoft and Amazon.com also delivered, but Meta Platforms disappointed due to concerns about its AI spending. Apple is expected to continue the party later today. South Korea's KOSPI is set to rise 32% in April. This would be the biggest monthly gain since 1998. Taiwan stocks are expected to increase 24.5% over the course of the month. Stock futures for the entire region are down by 0.4% due to the gulf that exists between macro fear and micro euphoria. Investors are nervously watching the European Central Bank (ECB) and Bank of England who will both announce their?decisions in the near future, for fear that they may turn even more hawkish. The March inflation figures from Europe and America will also be released and reveal the first impact of the Iran War. The rise in petrol prices will almost certainly lead to a spike in headline inflation, but everyone knows that the worst is still yet to come. The following are key developments that may influence the markets on Thursday. Estimates for the eurozone and U.S. GDP in Q1 Inflation in the EU for March U.S. PCE Inflation and Spending for March Apple Q1 earnings -- ECB, BOE decisions
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Reports that the US is considering military options for Iran's break-out have caused oil prices to rise.
Oil prices rose Thursday after a report that the U.S. was considering military action against Iran to break the deadlock of negotiations to end the conflict. This increased concerns about more supply disruptions for already curtailed Middle East Exports. Brent crude futures, for June, rose by $5.27 or 4.5% to $123.30 per barrel at 0347 GMT, after rising 6.1% the previous session. The June contract expires Thursday. It has been increasing for nine days. The more active contract, the July contract, was trading at $113.10 up $2.66 or 2.4% after rising 5.8% the previous session. U.S. West Texas Intermediate futures were up $2.42 or 2.3% at $109.30 per barrel after climbing 7% the previous session. They have risen in eight of nine sessions. Both benchmarks have a chance to reach their fourth consecutive month of gains. According to a report published by Axios late Wednesday, U.S. president Donald Trump will receive a briefing Thursday about plans for a series of military attacks on Iran to encourage it to return to negotiations over its nuclear program. U.S., Israel and other countries began air strikes against Iran on 28 February. In retaliation, the U.S. closed off shipping in the Strait of Hormuz - a chokepoint of energy from Middle Eastern producers. The U.S. has blocked Iranian ports amid a ceasefire which has stopped active combat. The talks to end the conflict have reached a deadlock. The U.S. insisted on talking about Iran's alleged nuke weapons programme, while Iran demanded some control over the Strait of Hormuz and compensation for the damage caused by the war. In a recent note, ING analysts said that the oil market had moved from an overly optimistic state to the reality we are now seeing in the Persian Gulf. A White House official stated that Trump had spoken with oil companies on Wednesday about ways to reduce the impact of a possible U.S. Blockade lasting months. Tony Sycamore, IG's market analyst, said that the prospects for a near-term solution to the Iran conflict and a reopening of 'Strait of Hormuz' remain dim. Sources said on Wednesday that the OPEC+ grouping of Organization of the Petroleum Exporting Countries members and their allies will?likely agree on a small increase of 188,000 barrels a day in oil production quotas by Sunday. The meeting is held just one week after the United Arab Emirates withdrew from OPEC on May 1. This withdrawal will have a major impact on the ability of the oil producer 'group to control the prices. The Gulf nation's departure would allow them to increase production once exports resume, but analysts believe that this will not affect the market fundamentals in the coming year. This is especially true with the closure of the Hormuz and other production disruptions due to the war. Wood Mackenzie analysts stated in a report that it would take several months for Gulf countries, including UAE, to reach pre-war levels of production.
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India's Torrent Power sells its largest debt to date to finance coal deal
Three merchant bankers told a group of 'tourists' on Thursday that India's Torrent Power will 'launch' the first acquisition-funded bond issue 'of the current fiscal year. This would be the 'largest debt issuance' for the company to date. Bankers say that the power producer is planning to raise up to 40 billion rupees (421.8 million dollars) by selling bonds with a longer maturity, and may have staggered redemptions, similar to the previous issue. The company expects to tap the market in May. Discussions are expected to be concluded within the next few days. One of the bankers stated that the company had also made a deal with mutual funds. It is therefore possible that the firm will split the amount into shorter and longer tenors. The bankers asked for anonymity because they were not authorized to speak with the media. Torrent Power has not?responded immediately to a comment request. Crisil Ratings and India ratings have rated the bonds AA+. The company raised 20 billion rupees in March through staggered redemption bond maturing over eight years, nine and ten years at an annual coupon rate of 7.97%. The proceeds from Torrent Power’s?latest bond sale?will be used to purchase another company after India’s competition regulator approved Torrent Power’s purchase of Nabha Power's 100%?shares earlier this month. In February, Torrent Power announced that it would buy a coal-fired plant operator from Larsen & Toubro, for approximately 69 billion rupees including debt, in order to increase its capacity in the area. Nabha Power has a coal-based 1,400 megawatt?plant located in the northern province of Punjab. It supplies its entire output to the state-owned power corporation under a 25-year agreement. The deal will add to Torrent Power’s?recent push? to scale up its thermal capacity, as utilities look to coal-based capacities to meet India's growing electricity demand. ($1 = 94,8400 Indian Rupees)
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Dalian iron ore companies on positive China factory activity data
Dalian iron-ore futures rose on Thursday for the second session in a row, as positive factory activity data from China boosted demand prospects. As of 0222 GMT, the most-traded contract for?September Iron Ore? on China's Dalian Commodity Exchange was?0.51% higher. It stood at 787.5 Yuan ($115.15), per metric ton. The contract is up 0.19% this week. From May 1 to 5, the markets in China will be closed for holiday. The benchmark June Iron Ore at the Singapore Exchange is?0.06% less expensive, $106.35 per ton. The contract is up 0.37% this week. An official survey revealed that China's factory activity increased for the second consecutive month in April, largely due to higher output and increased stockpiling. This suggests that the growth momentum continued despite external shocks from Middle East war. According to a National Bureau of Statistics survey, the official manufacturing purchasing managers' (PMI), which measures growth, fell to 50.3, from 50.4, in March, but remained above the 50 mark that separates contraction from growth. The median poll forecast was 50.1. The survey, which followed better-than expected first-quarter growth showed the resilience and strength of the Chinese economy. However, prolonged inflationary pressures may also affect?external consumption, on which the country depends to offset its tepid internal consumption. Baoshan Iron & Steel Co., China's largest listed steelmaker, announced on Wednesday a?fall of 8.6% in its net profit for the first quarter,?due to?higher feedstock costs related to Iran war. Steel prices dropped 4.4% while iron ore prices rose 3.2% in the first three months of the year, according to Baosteel. This subsidiary is owned by the China Baowu Steel Group. It is the largest steel producer in the world. Coking coal and coke, which are used to make steel, also rose, by 0.91% each. The majority of steel benchmarks traded on the Shanghai Futures Exchange rose. Rebar gained 0.57%; hot-rolled coil 0.59%; stainless steel rose 0.97% and wire rod lost 1.01%. ($1 = 6.8388 yuan) (Reporting by Ruth Chai; Editing by Subhranshu Sahu)
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Axios reports that US military commanders will brief Trump on new options for Iran
Brad Cooper, the head of the U.S. Central Command (Axios) reported Wednesday that U.S. president Donald Trump will receive a briefing on new 'plans' for a?potential armed action against Iran. According to a report citing unidentified sources, the briefing will be held on 'Thursday. The 'White House didn't immediately respond to an inquiry for comment. Axios cited sources to report that CENTCOM had prepared a plan of a "short, powerful" strike on Iran. This would likely include infrastructure targets. The report said that Washington would hope to see Iran be more flexible at the table when it comes to nuclear issues. The'report' added that a plan to take over part of the Strait of Hormuz and reopen it for commercial shipping may include ground forces. Axios reported that a?special forces?operation could be discussed in the briefing to secure Iran's?stockpile of highly enriched Uranium. Axios reports that the U.S. Joint Chiefs of Staff Chairman General Dan 'Caine will also attend Thursday's briefing. Kanishka Singh, Chandni?Shah in Bengaluru and Himani Sarkar and Lincoln Feast edited the report.
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Sources say Indian refiners are limiting the use of a special FX credit facility, causing rupee pressure.
Three sources with knowledge of the situation said that India's state-run oil refineries are using a special FX credit line provided by the largest bank in the country to help ease the pressure on the rupee. This is a sign that the rupee may fall even further. Three sources familiar with the matter said that India's?state-run oil refiners are making limited use of a special FX?credit line offered by the country's largest bank to ease pressure on?the rupee. This is indicating concerns about a further fall in the rupee. Forex traders claim that the currency has been affected by dollar purchases related to oil in recent sessions. India's biggest imports are crude oil and petroleum products, which have added $12 billion to $13 billion per month over the last three months. India offered state-run refineries a special FX line through State Bank of India mid-April, allowing them the ability to borrow dollars for oil import payments. This was done to curb spot dollar buying for oil imports. Two sources from state-run refineries said that refiners are hesitant to tap the facility because they believe 'the rupee will weaken even further,' which would increase their repayment burden. One source said that using the special FX line was not cost-effective when the rupee will likely weaken. His company uses the facility to meet a portion of its dollar needs, while the remainder is met through spot purchases. Second source: His company has resorted to a short-term borrowing from the market, in addition to the limited use of credit facilities. The source stated that the weakening rupee and the persistently high price of oil are reducing its appeal. Sources spoke under condition of anonymity as they weren't authorised to make public comments. OIL WORRYS The rupee is down about 2% in the last eight sessions. This pace is similar to other Asian countries that import oil, such as Thailand and the Philippines. Brent crude has risen from $86 per barrel to $112.9 since mid-April, when it had fallen to that level on the?optimism of a resolution to the U.S./Iran conflict. The third source who is familiar with the thinking of the central bank said that dollar purchases by oil refining companies on the spot market are among the factors putting pressure on the rupee. This source, who did not elaborate, said that it is not the only factor. The RBI didn't immediately respond to our request for a comment.
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US sanctions against China's Hengli marks an escalation of Iran oil crackdown
Treasury Department imposed sanctions against China's Hengli Petrochemical Refinery (Dalian), accusing it of "buying billions in Iranian oil", in a significant increase in Washington's effort to curb Tehran's oil revenues. Hengli Petrochemical, the parent company listed on Shanghai's Stock Exchange, denied doing business in Iran and said that sanctions lacked legal and factual basis. It also stated it would work to lift them. The following are?key facts: Why is this an escalation? Hengli operates in Dalian in the north-east a refining facility that can process 400,000 barrels per day. This makes it the biggest Chinese refiner sanctioned by the United States, since the United States re-enforced its crackdown against Iranian oil exports. The designation came shortly after a waiver of 30 days of sanctions for importing Iranian crude oil that had already been loaded had expired, and after U.S. Treasury Sec. Scott Bessent had threatened to sanction 'buyers of Iranian Oil' on April 15, and had said the Treasury Department had sent warning letters to 2 Chinese banks. The move is in anticipation of U.S. president Donald Trump's planned visit to Beijing, which is scheduled for May. Prior to this, the U.S. had imposed sanctions against Chinese entities based on their relationship with Iran. These included three small independent refiners, and several import terminal operators. What has been the impact so far? Hengli Petrochemical shares fell 10% on Monday. Hengli Petrochemical International in Singapore was also restructured by the Hengli Group, which reduced the firm's 100% ownership stake to 5%. The remaining 5% is now owned by a Chinese government entity. Trading executives expressed skepticism that the U.S. measure would protect the Singapore unit against the wariness of its counterparties, given the ownership at the time it was announced. Hengli Petrochemical stated that it had enough crude to cover its processing needs for over three months. It will continue to settle oil purchases in Chinese Yuan. What are the pre-conditions? The U.S. sanctioned several Chinese entities, including three small refiners. According to sources, this caused difficulties in receiving crude oil and forced two of the companies to sell their product under different names. In October of last year, the U.S. Sinopec, the state-owned refinery in China, received one fifth of its crude through an import terminal sanctioned by the U.S. This led to the terminal being idle for months and disrupting crude flow. It also forced cargo diversions because traders avoided the terminal for fear of secondary sanctions. Sinopec's logistics unit sold its stake to a local port operator. Shandong Yulong Petrochemical is another Chinese?refiner that produces 400,000 barrels per day and has a presence in Singapore. Last year, non-Russian customers, foreign banks, and vendors stopped doing business with the company after they were sanctioned by Britain and European Union for dealing with Russian oil. Yulong became more dependent on Russian oil as a result of the measures. What has been the impact of U.S. sanctions on Iranian oil? China, which is the largest oil importer in the world, has been the main buyer of Iranian oil for many years. Vortexa Analytics reports that China brought in a record-breaking 1.8 million barrels per day (bpd) in March. According to traders, China's giant state refiners are not buying Iranian crude after the U.S. reinstated sanctions in 2019. Instead, independent "teapots", who buy discounted Iranian barrels, are the only ones willing to purchase them. Iranian oil shipped to China is usually transshipped on the way and is mainly branded as Malaysian, or Indonesian. Beijing has defended the legitimacy of its trade with Iran and rejected unilateral sanctions it has called "illegal". (Reporting and editing by Raju Gopikrishnan; Tony Munroe)
US growth is likely to have picked up in the first quarter but consumer spending has probably cooled
The U.S. economy accelerated in the 1st quarter, likely due to a rebound of government spending following a crippling shutdown. However, the improvement is expected to be short lived as the war against Iran will drive up gasoline prices and squeeze household budgets.
The expected increase in gross national product for the last quarter would also'reflect robust growth of business investment in equipment. Fueled by an artificial intelligence spending boom, and the construction of data centers that underpin the technology.
The 'Commerce Department's' advance estimate of the first-quarter Gross Domestic Product on Thursday will show that consumer spending has weakened further, even before the U.S. and Israel war with Iran increased the average U.S. gas price to over $4 a gallon.
Brian Bethune is an economist at Boston College. He said, "We are still in a relatively slow-growth mode. Nothing exciting." There's not much to start a fire. "There are a few warm embers but no fire."
A survey of economists suggested that GDP growth increased at an annualized rate of 2.3% last quarter. The estimates ranged from 0.2% contraction to 3.9% growth. The survey ended before Wednesday's data showed that non-defense capital orders, excluding aircraft - a proxy closely watched for business spending – jumped by 3.3% in march. This increase was partly offset by an accelerated widening of the goods trade surplus due to imports. However, some of these products ended up in inventory at business warehouses.
The economy grew at a pace of 0.5% in the quarter October-December. The federal government's spending was cut by 1.16 percentage points in the third quarter, the largest drop since the first.
Economists predicted a partial reverse, with estimates that government spending contributed at least one full percentage point of GDP growth in the last quarter. The Federal Reserve would hold rates at the current level, perhaps until 2027, if the economy did not deteriorate. On?Wednesday, the U.S. Central Bank left its benchmark interest rate at 3.50% to 3.75%. It noted rising inflation concerns.
In the current environment, they don't have to do anything to support the labor markets," said Gus Faucher, chief economist of PNC Financial. They can maintain rates at the current level through 2026 and 2027, until we have a clearer picture of the future of the Iranian situation and energy prices as well as the state of the labor market. In the first quarter, employment growth averaged 68,000 new jobs per month compared to 20,000 monthly gains during the same time last year. Some economists blamed President Donald Trump's immigration and trade policies for the labor market slowdown compared to that of 2023 and 2024.
The weak labor market has dampened wage growth. Tariffs increased the price of certain goods, despite the fact that inflation was relatively moderate. Economists say consumers are relying on their savings, or saving less than they used to in order to maintain spending. This cannot continue forever. In February, the saving rate was at 4.0%.
WEATHERING CONSUMER SPENDING IS ANTICIPATED
The growth of consumer spending, which makes up more than two thirds of the GDP, will have slowed from the 1.9% rate in the fourth quarter. The Personal Consumption Expenditures Index, which measures the growth of consumer spending in the economy, is expected to have increased by 3.8% last quarter after increasing at a pace of 2.9% during the previous quarter. This index is one measure of inflation that the Fed uses to track its 2% target. Economists warn that higher inflation could offset some of anticipated stimulus from tax cuts. Economists predicted that the boost from tax refunds would soon fade, resulting in weaker spending for this year.
Bethune, from Boston College, said: "The savings rate has gone down to support the consumer spending. I don't believe it will go any lower." "With inflation on the rise, real wages have remained pretty flat." "There's nothing that will propel consumer spending in a meaningful way."
Business spending on equipment is expected to grow by double-digits, taking up the slack in consumer spending. Business spending, outside of AI-related investments was likely not as impressive due to the ongoing weakness in nonresidential structures such as factories.
AI spending is causing imports to increase, which has led to an increase in the trade surplus. This likely lowered GDP growth in the last quarter. The fact that some imports ended up in warehouses due to a slowdown in consumer spending likely masked the impact of the shortfall.
The housing market is still being stifled by high mortgage rates, which are expected to continue to dampen residential investment for the fifth consecutive quarter. Economists predict that the Middle East war will weigh on the economic growth in the second quarter.
Oren Klachkin is a financial market analyst at Nationwide. He said that the impact of the conflict on the economy peaks in the second quarter. Consumer discretionary spending was the hardest hit. There is a danger that the damage will spill over to the second half. (Reporting and editing by Paul Simao; Lucia Mutikani)
(source: Reuters)