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McGeever: Why Trump's tariffs have a lot of bark but little bite
Donald Trump's favourite word is "tariff". His continued use of the term last year sparked fear in the markets as his administration unilaterally implemented the most protectionist trade policies since 1930. The 'bark' was worse than the bite. Just over a month has passed since Trump declared "Liberation Day" and the average U.S. Tariff rate is lower in April 2025 than most feared. At just under 10% the daily effective rate of pre-substitution is still four times higher than it was at the end 2024. Tariffs are barely a factor on the financial markets. This is partly because investors are more concerned about real wars than trade wars. The economic impact of Trump’s tariffs is also not as bad as many people feared. This could be because the trade war coincided a technological boom. Perhaps that is too simplistic. It may be years before the full impact of the redrawing of geopolitical and trade alliances in the world is known. Unexpected negative shocks could be on the way. The fact that STATISTICALLY INSIGNIFICANT tariffs have had a muted impact on the economy over the last year is partly explained by a simple fact: Actual levies were lower than statutory rate. This is the main argument of a Brookings Institution article by Pablo D. Fajgelbaum of the University of California, and Amit Khhandelwal of Yale University. By December of last year, 57% or so of U.S. imported goods were still duty-free. This includes the majority of goods imported from Canada and Mexico, under the United States-Mexico-Canada Agreement (USMCA). The Trump administration is expected to announce on Wednesday it will not be extending the 32-year old North American Free Trade Zone. However, that only starts the clock for another review, as the pact does not expire until 2036. Tariffs at the border are usually lower than headline rates due to other factors, including legal loopholes or special agreements. China is the only major trading country that has offered a firm and sustained response to Trump's tariffs. Hyperscalers invested hundreds of billions of dollars in chips and infrastructure to boost global trade. According to the Brookings article, the net effect of tariffs has been only between minus 0.1 and plus 0.1% of GDP until December. The findings are in line with the analysis of The 'Budget Laboratory at Yale. The report estimates that tariffs will cause the U.S. to be 0.1% less prosperous in the long term, which is the equivalent of $30 billion in 2025 dollars. Other words, statistically significant, but not at all in the near future. Markets vs Real Economy Try telling that to U.S. customers, who are forced to pay 90% of Trump's Tariffs. In an April Federal Reserve report, the paper found that tariffs are solely responsible for the excess inflation of core goods from January 2025. The same paper, however, also indicated that the tariff pass-through is now essentially complete. It was, in other words, a price change that happened only once, as the Trump Administration had claimed. If true, this would be good news for Americans whose personal savings rate, which has fallen to the lowest level in four years due partly to higher prices, is now below 3%. Also, there's another side of the story. Tariffs are taxes that fall on the person who pays them. Usually, this is the consumer. They are a direct source of revenue for the government, reaching $264 billion in 2017. This is more than three times the revenue in 2024 and represents 0.83% GDP, which is the highest since over a century. Theoretically, the revenue generated by the tax cuts or increased spending should be able to offset some of the impact on consumers. SLOW BURN? But investors shouldn't become complacent. Although trade uncertainty has decreased, it is still very high. According to the Tax Foundation, the U.S. tariff policies have changed more than 50 times since Trump's second term began. There's no reason to think that this is the end, especially given Trump's willingness to use tariffs to threaten foreign policy negotiations. Investors have mostly ignored these concerns. "Markets are actually quite disconnected from what is happening in the real economic," says Rebecca Harding, trade economist and author of "The World at Economic War", a book published at the end of last year. The cost of doing international business and the difficulty in establishing new routes will continue to rise as trade uncertainty increases. Small and medium-sized businesses (SMEs) will struggle to keep up with the demands. It's clear that the predictions of tariff doom by many economists have been wrong, but it could be just a question of timing. Brexit is a cautionary tale. The UK economy didn't immediately crash after Britain voted to exit the European Union in 2016. 10 years later, the damage to the economy is still being felt. It is still unclear whether the slow-burning economic impact of tariffs on the U.S. will be similar. However, it's worth asking. You like this column? Check out Open Interest, your new essential source for global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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South32 sells certain aluminum assets to Alcoa up to $5.6 billion
South32, an Australian company, announced on Wednesday that it had agreed to sell the'majority' of its aluminium assets for up to $5.6 billion. Alcoa acquired the individual interests of the diversified mining company in Australia's Worsley Alumina, South Africa’s Hillside Aluminium and Brazil's MRN Bauxite Mine, Brazil Alumina Refinery, and Brazil Aluminium Smelter. South32 said that the U.S. aluminium giant will also assume rehabilitation provisions of around $1.2 billion. Matthew Daley, the new CEO, said that "our business will be simpler, with a portfolio of upstream operations with higher margins, reduced complexity, and greater resilience." This will allow for a leaner and lower-cost operation model, which will provide ongoing value through an anticipated US$125M reduction per year in?overhead cost as new support structures will be implemented. The transaction should be completed in the second half of 2027. Alcoa stated in a separate press release that it expects the 'deal to generate synergies of approximately $900 million through optimization across complementary assets. (Reporting by Shivangi Lahiri in Bengaluru; Editing by Vijay Kishore)
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US Issues Emergency Order for PJM Interconnection As Heatwave Approaches
U.S. Department of Energy declared an emergency on Tuesday across the nation's largest grid. They cited soaring supply and demand risks as extreme heat gripped the region. The energy secretary stated in an order under Section 202 (c) of Federal Power Act that a statutory crisis exists in the PJM Interconnection region 'due to a mixture of surging demand for electricity and?limited production capacity. PJM sent a formal request to the Federal Energy Regulatory Commission on June '29, warning that an "imminent emergency in electricity reliability" was imminent due to forecasts of temperatures?of 95 degrees Fahrenheit and higher. PJM projects "peak?loads" of approximately 159.563 megawatts(MW) on the 1st July 2026, and approximately 162,860 MW for July 2nd 2026. These levels increase the risk of grid instability due to supply shortages. Grid operator also warned that certain generation units may be restricted by a state or environmental permit. The DOE said the order was necessary to ensure a sufficient supply of electricity and protect public safety. PJM Interconnection is responsible for a 'large swath of eastern United States. Officials warned that if extreme weather conditions were not addressed, they could cause a system stress severe enough to affect the ability to meet the electricity demand.
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Oil drops the most since years, and stocks end quarter with huge gains. Gold and yen are also down.
Brent oil saw its biggest quarterly decline since 2020, as traders closely monitored a fragile truce between the United States of America and Iran. The U.S. Dollar posted its fourth consecutive quarterly gain against a basket, pushing the yen down to a low of 40 years, as expectations of U.S. rate hikes changed dramatically. The greenback gained more than 1% against the currencies of emerging markets as a group throughout the second quarter. The Strait of Hormuz reopened slowly and randomly on the energy markets as the hostilities between Iran and the U.S. dwindled into a fragile truce, resulting in a drop of almost 40% of the Brent oil price over the last three months. The equities rally continued for the third quarter as a seemingly unstoppable boom of artificial intelligence stocks drove South Korea's KOSPI to 68%, and Taiwan's benchmark index to 45%. The Nasdaq composite added more than 21%. The MSCI All-World Index gained 14.5% during the third quarter, and reached a new high in early this month. This is its best performance quarterly since 2020. The performance of emerging market stocks was 23% higher for the quarter. The STOXX 600 index in Europe, which does not have as many AI beneficiaries than many Asian or U.S. indices, finished the quarter up 10%. Oliver Pursche is a senior vice president at Wealthspire Advisors, located in Westport, Connecticut. He said, "Despite all the geopolitical issues, the U.S. economic performance and corporate earnings remain strong." We've had an excellent first half of the season, better than many expected." The Dow Jones Industrial Average closed the day up 136.46, or 0.26% to 52,319.20. This was a record high. The S&P500?rose 58.93, or 0.79% to 7,499.36, and the Nasdaq Composite?rose 393.58, or 1.52% to 26,213.72. The MSCI index of global stocks rose by 8.32 points or 0.75% to 1,120.37. The STOXX 600 pan-European index rose by 0.88% while the FTSEurofirst 300 index in Europe rose by 23.73 or 0.93%. Emerging market stocks gained 16.86 points or 0.99% to 1,723.79 while Japan's Nikkei rose 594.21 or 0.86% to 70,062.32. Dollar Up The dollar was the biggest winner among developed currencies this quarter, with a gain of 1.3% compared to a basket. Emerging market currencies also gained 1.3% against the dollar this quarter. As markets price in more likely Federal Reserve rate increases, the dollar has gained support. The U.S. economy is growing, inflation in the U.S. remains above target and nine out of 19 Fed policymakers expect a rate increase by the end of the year. The dollar has strengthened since the Fed meeting. This is due to the widening of growth differentials between the U.S. The dollar has strengthened further since the (Fed) meeting, supported by widening growth differentials that we've started to see between the?U.S. Kevin Warsh is the new Federal Reserve chair and he will address the gathering on Wednesday. Gold's 14% drop in a quarter, the largest since 2013, was partly due to the dollar's increase. The yen also fell to its lowest point in over 40 years as it traded around 162.57 to the dollar on Tuesday night. The yen fell to its weakest point in 40 years, trading at 162.57 per dollar late on Tuesday. Traders were worried about a potential Japanese intervention. Finance Minister Satsuki Catayama issued another warning. Katayama’s comments "avoided verbal escalation which often precedes an buying effort and instead reiterated that authorities are ready to respond at anytime," said Karl Schamotta. Chief market strategist at Corpay. Brent crude futures settled at $72.92 a barrel, 0.3% less than the previous day. The contract has seen its third consecutive monthly decline. It was down more than 20% in June, and 38% for the entire quarter. U.S. crude dropped 31% this quarter, but both Brent and WTI have risen close to 20% year-to-date. The market may not have priced in a risk premium, but the increased number of ships leaving the Gulf has created a temporary surge of new supply. This was said by UBS analyst Giovanni Staunovo. Morgan Stanley has said that it models a global oil surplus of 4.8 millions barrels per day by 2027. (Reporting from Rodrigo Campos, in New York, and Amanda Cooper, in London. Additional reporting by Karen Brettell and Alun John; Additional reporting by Niket Nishant and Dhara Ranasinghe; Editing and editing by Alexander Smith and Matthew Lewis; Nick Zieminski, Cynthia Osterman and Alexander Smith.
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The top cases heard by the US Supreme Court during its term
The U.S. Supreme Court has decided several important cases in its current term, including those involving President Donald Trump, birthright citizenship and immigration, voting rights, tariffs on guns, race, transgender sportspeople, campaign finance laws, and LGBT "conversion therapies." This is a list of some of the cases decided by the court during the current term. The term began in October, and ended June 30, 2009. Birthright Citizenship The court rejected Trump's attempt on June 30, to restrict birthright citizenship in the United States - a right that has been woven into American society for centuries - scuttling his top priority in his crackdown against immigration. Trump's executive orders directed U.S. government agencies to not recognize citizenship for children born in the United States when neither parent was an American citizen, or a legal permanent resident (also known as a "green-card" holder). The court ruled that Trump's executive order violated the 14th Amendment of the U.S. Constitution, which guarantees citizenship to anyone born in America with a few exceptions. TRUMP'S FIRE OF FED OFFICIAL On June 29, the court refused to allow Trump to fire Federal Reserve Governor Lisa Cook, as it was determined to protect the independence of the central bank against a challenge unprecedented by the president. The court prevented Trump from removing Cook, providing a safety net for the Fed. Since the founding of the central bank in 1913, no president has attempted to remove a Fed Governor. Trump claimed that Cook's firing was justified by unproven allegations of mortgage fraud, which Cook denied. Cook said the allegations were a pretext for firing her over monetary policies differences, as Trump is pressing the Fed to reduce interest rates. FEDERAL TRADE COMMISSION FIRE The court on 29 June backed Trump in his firing of a Democratic member of the Federal Trade Commission, expanding Trump's powers over the Government and overturning the 1935 precedent which recognized Congress as the only authority to protect certain regulatory agency leaders from being removed by the president at will. The Justices invalidated tenure provisions for FTC employees enacted more than a century ago by Congress. The justices did this by 'overruling' the court's pivotal ruling in the case Humphrey’s Executor v. United States. Trump fired Rebecca Slaughter, the FTC's Rebecca Slaughter last year over policy differences. VOTING RIGHTS ACT On April 29, the court gutted a crucial provision of the Voting Right Act, making minorities less likely to challenge a map as racially biased under this landmark civil rights act. The court invalidated an electoral map which would have given Louisiana a U.S. Congress district with a majority of Black people. The court's ruling undermined Section 2 the Voting Rights Act which Congress passed to prohibit electoral maps that could dilute the power of minority voters. The ruling allowed Republican-led Southern States to demolish Democratic-held districts with majority-Black or majority-Latino voters ahead of November's midterm elections. After the Supreme Court gutted another part of the Voting rights Act in 2013, Section 2 became a more important bulwark to combat racial bias in voting. Black and Latinos tend to vote for Democratic candidates. TRUMP'S TARIFS The Supreme Court ruled on February 20, 2018 that Trump's tariffs were illegal because they were imposed under a law intended to be used in emergencies. This ruling has major implications for global economics. The ruling, which was 6-3 in favor of the lower court decision that Trump had exceeded his authority by using this 1977 law, upheld a previous court's ruling. The court ruled that Trump's claim to be able to impose tariffs was not supported by the law in question, the International Emergency Economic Powers Act (IEEPA). Congress has the power to impose taxes and tariffs, not the President, according to the U.S. Constitution. Tariffs are at the heart of a global trade conflict that Trump started after he entered his second term in office. This war has alienated trading partner, affected financial markets, and created global economic uncertainty. IMMIGRANTS WITH PROTECTED STATUS The court cleared the way on June 25, allowing the Trump administration the ability to strip hundreds and thousands of Haitian, Syrian, and other immigrants of their humanitarian status which protects them against deportation. The court overturned federal judge's decisions that had stopped the Trump administration from terminating Temporary Protected Status (TPS) for more than 350,000 Haitians and 6,100 Syrians. The State Department warns travelers against visiting either Haiti or Syria due to widespread crime, terrorism, and kidnapping. TPS is an designation that allows migrants from countries affected by war, natural catastrophe or other disasters to live and work in America while it's unsafe to return home. TRANSGENDER SPORTS PARTIcipation The court cleared the way on June 30, allowing states to place restrictions on transgender students athletes. It upheld laws in West Virginia, Idaho and other states that prohibit them from joining female sports teams. The court overturned lower court decisions siding with transgender student athletes who challenged the bans on female sports teams in West Virginia and Idaho as being against the U.S. Constitution. Idaho and West Virginia law designates?sports team at public schools, including universities, according to "biological gender" and bars "students from the male sex". Idaho and West Virginia claim the laws protect fair competition and safety for girls and women, but critics say the laws are part of an assault on transgender Americans' rights. LGBT "CONVERSION THERAPEUTY" The court rejected on March 31, a Democratic-backed Colorado Law that prohibited psychotherapists from using conversion talk therapy to change a LGBT minor's gender identity or sexual orientation. The 8-1 decision sided with the Christian licensed counselor who argued that the ban was an intrusion into free speech rights. The court rejected Colorado’s argument that the law only protected speech, but regulated professional conduct. The court reversed a lower-court decision which had upheld a law brought by counsel?Kaley Chis who argued it violated First Amendment protections from government abridgment. HAWAII GUNS LAW On June 25, the Justices struck down a Hawaii gun law that restricted the carrying of handguns in public places, such as most businesses, and without permission from the owner. This is the latest ruling expanding gun rights. The justices found that Hawaii's law violated the Second Amendment of the U.S. Constitution, which gives citizens the right to "keep & bear arms." The justices reversed a lower court decision that Hawaii’s Democratic-backed measure probably complied to the Second Amendment. Hawaii's law requires "express permission" from the property owner before a handgun can be brought onto public property. Drug Users and Guns The court, on June 18, limited the application of an U.S. Law that prohibits firearms possession by some drug users. It rejected a Trump administration position that had "threatened" the gun rights for millions of Americans that use marijuana and who own firearms. The justices upheld the decision of a lower court to dismiss a charge of illegal gun possession brought under the law in question against Ali Hemani. Hemani is an American-Pakistani who lives in Texas and told authorities that he regularly used marijuana. The Supreme Court found the government failed to prove that Hemani's prosecution was in compliance with the Second Amendment rights to "keep and carry arms" guaranteed by the U.S. Constitution. CAMPAIGN FUNDING The court again struck down limits on campaign spending on June 30, this time on the basis of free speech. The ruling was made as Republican major committees were preparing for the midterm elections in November with a substantial cash advantage. The court sided with Vice President JDVance and 'other Republican challengers in ruling that a limit on how much money can be spent on campaigns by parties with input from the candidates would violate the First Amendment protections of the U.S. Constitution against government abridgment. MAIL-IN BOARDS On June 29, the court upheld state laws that allowed mail-in votes received after Election Day in Mississippi to be counted. The ruling rejected a Republican-led appeal against a grace period of five days. The court overturned the decision of a lower-court that found Mississippi's laws incompatible with U.S. statutes governing federal elections for the president, Senate, and House of Representatives. The Trump administration supported the challenge against Mississippi's law that allows mail-in votes sent by certain voters be counted as long as they are postmarked before Election Day and received within five days of a federal election. U.S. ASYLUM - PROCESSING On June 25, the court handed Trump a win by confirming that the federal government has the authority to reject asylum seekers if officials determine that border crossings between Mexico and America are too overburdened for additional claims. The court overturned the lower court's ruling that the policy was illegal. After former president Joe Biden dropped the policy known as "metering", the Trump administration said that it might seek to revive it. The policy of metering allowed U.S. Immigration officials to refuse to process asylum claims indefinitely and stop asylum seekers on the border. WEEDKILLER CANER CLAIMS On June 25, the justices ruled against thousands of lawsuits filed in state courts that accused Bayer of failing warn users of the dangers of the active ingredient of the German company Roundup weedkiller. The Missouri jury had awarded $1.25million to John Durnell, who claimed he was diagnosed as having non-Hodgkin's lymphoma following years of exposure to Roundup. The court agreed that Bayer's argument that the U.S. pesticide law prohibits claims of failure to warn that are brought in state court cannot be heard. Human Rights Abuses Abroad The Justices further limited the scope of a federal statute used to hold companies liable for abuses of human rights committed abroad on June 23, as they released a ruling that ended a lawsuit brought by members of Falun Gong accusing Cisco Systems facilitating religious persecutors in China. The justices overturned a lower court decision that gave new life to the 2011 lawsuit brought under the Alien Tort Statute of 1789. In the suit, Cisco was accused of 'knowingly developing technology that allowed China to spy on and persecute Falun-Gong practitioners. The Alien Tort Statute allows non-U.S. Citizens to seek damages from American courts for violations against international law. SEC "DISGORGEMENT" POWER On June 4, the court rejected a challenge against the U.S. Securities and Exchange Commission’s broad authority to recover illicit profits through a financial remedy known as disgorgement. This strengthened one of the key powers of the Wall Street watchdog. The court upheld the decision of a lower-court that endorsed an extensive use of disgorgement powers by the SEC. In this case, the Trump administration defended the SEC. A defendant brought the challenge after a California court ordered him to pay back more than $3,000,000 in unjustified gains and interest in connection with a financial fraud case. FCC FINES FOR WIRELESS CARRIERIES The Supreme Court ruled on June 4, defending the Federal Communications Commission system of levying fines and ruling against AT&T's and Verizon's challenge against the agency. Trump's administration defended FCC's system of assessing financial penalties known as forfeiture order. The carriers argued that the agency's internal proceedings denied them their right to a trial by jury under the U.S. Constitution. Compensation from Cuba The Justices on June 23, made it easier for U.S. firms to seek compensation for property seized by the former government of Fidel Castro, ruling in ExxonMobil's lawsuit against Cuban State-owned Firm Corporacion CIMEX. The court ruled that a defense known as foreign sovereign immunity which prohibits U.S. suits against foreign governments or their agents is not applicable in cases such as the one Exxon filed against CIMEX, under the 1996 Helms-Burton Act. In a separate case, on May 21, the court ruled against four American cruise operators who contested $440,000,000 in combined judgments brought by an American company accusing them for using docks that they built in Cuba and later seized. CRISIS PREGNANCY COUNTER The court sided on April 29, with the operator in New Jersey of Christian faith-based "crisis pregnancies centers" that are anti-abortion and trying to impede an investigation by the state into whether these facilities engage in misleading practices. First Choice Women's Resource Centers brought a federal suit against a subpoena issued by the state attorney general in 2023 seeking information about the organization's doctors and donors. The lawsuit had been dismissed by a lower court. First Choice's facilities are designed to discourage women from getting abortions. RASTAFARIAN INMATES The Justices refused on June 23, to allow a Rastafarian inmate in Louisiana to sue prison officials after they shaved his head and held him down, in violation of the Rastafarian's religious beliefs. This was a case brought by a Rastafarian inmate under a federal statute protecting inmates from religious discrimination. The justices upheld the lower court's dismissal of Damon Landor’s lawsuit, because the law at issue didn't allow him to sue individual prison officials or guards for money damages. Landor's religious beliefs require him to grow his hair. DEATH ROW INMATE A man convicted in Alabama of a murder committed in 1997 was spared the execution on May 21, after the court upheld a ruling that the inmate is?intellectually disabled' and therefore ineligible to receive the death sentence. Alabama officials appealed a lower court's decision on how to determine Joseph Clifton Smith’s intellectual capacity. The justices rejected the appeal. This method involved weighing the multiple intelligence quotient (IQ) test scores along with expert testimony. In a 2002 Supreme Court decision, the court ruled that executing a person with intellectual disabilities violates the Eighth Amendment of the U.S. Constitution prohibiting cruel and unusual punishment. JURY COMPOSITION On May 28, the justices sided with an inmate on death row who claimed that prosecutors had discriminated against him by excluding Black potential jurors in a 2006 trial where he was found guilty for his involvement in the murder of grocery store owner. The justices ruled that the state courts of Mississippi had not evaluated Terry Pitchford’s claim that four Black prospective jurors were unlawfully dismissed, in violation of a landmark Supreme Court?precedent from 1986 known as Batson v. Kentucky which prohibits excluding jury members based on race. SENTENCE REDUCTIONS The court ruled that on May 28, judges could not order early release of prisoners "on the basis that they would receive shorter sentences now following the 2018 criminal justice reform act." The court upheld lower-court decisions against two Pennsylvania men who were convicted of armed burglaries and sought compassionate release on the basis of the First Step Act that Congress passed years after they were sentenced. SECURITIES LITIGATION The court on 11 June sided with an investment fund group affiliated with BlackRock, and other asset management firms in their attempt to defend against certain lawsuits filed by private plaintiffs pursuant to a federal securities law. The court reversed an earlier ruling which allowed the hedge fund Saba Capital Master Fund, to sue the Investment Company Act of 1941 to invalidate fund bylaws that restricted the voting rights of activist shareholders. The Trump administration backed BlackRock and FS Credit Opportunities, as well as other funds in the case including Adams Diversified Equity Funds, Adams Natural Resources Funds and Royce Global Trust. COX COPYRIGHT DISSENSION The court ruled that Cox Communications could not be held responsible for the piracy of songs by subscribers to its internet service. These labels include Sony Music, Warner Music Group Universal Music Group and others. This ended their multi-billion dollar music copyright suit. The ruling of 9-0 overturned the decision by a lower court to order a trial to determine the amount the internet service provider was liable for the record labels under a form liability known as contributory copyright violation. Cox said that a retrial would have resulted in a verdict of up to $1.5 billion against the Atlanta ISP. PHARMACEUTICAL SKINNY LABELS The court ruled that the generic version of Amarin Pharma Vascepa, a cardiovascular medication made by Hikma, did not violate Amarin Pharma patents. This decision could make generic drugmakers more resistant to patent suits involving "skinny label" claims. The justices reversed a decision by a lower court in favor of Amarin. Generic drugmakers argued that Amarin's victory in the case could have deterred them from producing and selling their cheaper drugs, and raised U.S. drug costs.
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Brazil will partially scrap diesel subsidies after Brent prices ease
Dario Durigan, the Finance Minister, said on Tuesday that Brazil will eliminate a portion of its diesel subsidy. The program was introduced this year to help limit the impact if higher oil prices in the global market. Durigan, a journalist in Brasilia, said that Brazil will cut its 0.35 reais per liter subsidy from July. Durigan told journalists in Brasilia that the Brazilian government will cut a subsidy of 0.35 reais ($0.068) per liter from July. Durigan stated that Brent crude oil is now above its pre-war level but has dropped significantly since its peak. This allows for the move to be made. Durigan said that the government has pledged to not keep fuel prices artificially low. Other fuel subsidies such as diesel and gasoline are still in place but will be reevaluated when oil prices fall. He said that a 12% tax announced in March on crude oil was being reassessed. At the same press conference, Planning Minister Bruno 'Moretti stated that the government had already committed around 16 billion reais (3.09 billion dollars) in'subsidies to offset the effect of the war on?consumers. He noted that the figures were still being refined. The government estimated that the conflict would boost revenues for Latin America's biggest economy, which is also a net oil exporter. Rogerio Ceron said in the same briefing that the fiscal impact of the conflict has been neutral, after taking windfall revenue and additional expenditure into account.
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Oil drops the most since years, and gold, yen are also falling.
Brent oil, meanwhile, posted its biggest quarterly drop since 2020 as traders stayed on top of a fragile truce between the United States &?Iran. The U.S. Dollar was expected to post its fourth consecutive quarterly gain against a basket, pushing the yen down to a low of 40 years, as expectations of U.S. rate hikes changed dramatically on the last day. The greenback gained more than 1% against the currencies of emerging markets as a group throughout the second quarter. The Strait of Hormuz reopened slowly and randomly on the energy markets as the hostilities between Iran and the U.S. dwindled into a fragile truce, resulting in a drop of almost 40% of the Brent oil price over the last three months. The equities rally continued for the third quarter as a seemingly unstoppable boom of artificial intelligence stocks led to South Korea's KOSPI rising 68%, and Taiwan's benchmark index increasing 45%. Nasdaq Composite gained more than 21%. The MSCI All-World Index has risen 14% in the first quarter. It reached a new record high this month and is on track to be its best performance quarterly since 2020. Emerging Markets stocks are up by 23% during the period. The STOXX 600 index in Europe, which has not had as many AI beneficiaries, as other Asian or U.S. indices, still rose nearly 10% during the third quarter. It's been rising every month since march. David Morrison is a senior market analyst at Trade Nation. "Whenever there is a little selloff, you seem to get a new impetus to purchase." The Dow Jones Industrial Average gained 164.85, or 0.32% to 52,347.59; the S&P 500 gained 64.63, or 0.87% to 7,505.06; and the Nasdaq Composite increased 398.23, or 1.54% to 26,218.37. The MSCI index of global stocks rose by 8.86 points or 0.80% to 1,120.91. The pan-European STOXX 600 rose?0.88% while Europe's FTSEurofirst 300 rose 23.73 or?0.93%. Emerging market stocks increased 17.47 points or 1.02% to 1,724.40. Nikkei, the Japanese stock market index, rose 594.21 or 0.86% to 70,062.32. Dollar Up The dollar was the biggest winner among developed currencies this quarter, rising 1.4% versus a basket. Emerging market currencies, however, have gained 1.3% against the dollar this quarter. As markets price in the possibility of Federal Reserve rate increases, the dollar has gained support. The U.S. economy is growing, inflation in the U.S. remains above target and nine out of 19 Fed policymakers expect a rate increase by the end of the year. James Lord, head of FX and EM strategy for Morgan Stanley, said that the dollar had strengthened since the Fed meeting. This was due to the widening growth differences between the U.S. economy and other major economies, which were amplified because of higher oil prices. "Recent data shows that the U.S. is performing better than the eurozone. Growth indicators in the eurozone have been relatively softer," said James Lord,?head of FX EM strategy at Morgan Stanley. The European Central Bank annual meeting takes place in Sintra, Portugal this week. Gold's 14% drop in a quarter, the largest in over a decade is partly due to the dollar's increase. The yen, on the other hand, has fallen to its lowest point in 40-years, trading at 162.38 to dollar, Tuesday. The possibility of a Japanese intervention was causing traders to be on edge. Finance Minister Satsuki Catayama issued another warning. Katayama’s comments avoided the verbal escalation which often precedes an effort to buy, instead reiterating authorities are ready to respond anytime, said Karl Schamotta. Chief market strategist at Corpay. Schamotta noted that "the Thursday non-farm payrolls and the Friday Independence Day holiday, when U.S. liquidity will be dramatically thinned out, could offer attractive opportunities to wrong-foot speculative positions." Brent crude futures settled at $72.92 a barrel, 0.3% lower than the previous day. The contract has seen its third consecutive monthly decline. It was down more than 20% in June, and 38% for the entire quarter. U.S. crude oil was on course to drop 31% this quarter. However, both Brent and WTI have been close to 20% higher so far in the year. The market may not have priced in a risk premium but the increased number of ships leaving the Gulf has created a temporary surge of new supply. This was said by UBS analyst Giovanni Staunovo. Morgan Stanley has said that it models a global oil surplus of 4.8 millions barrels per day by 2027.
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The Fed's hawkish stance on gold could lead to the worst quarter-end loss for gold in 13 years
Gold rose a little?on Tuesday, but it was on track to suffer its biggest quarterly drop?in the last 13 years as inflation fears arising from the Middle East conflict fueled expectations that the U.S. Federal Reserve would raise interest rates. By 1:40 pm, spot gold had risen 0.3% to $4 027.03 an ounce. ET (1740 GMT), after reaching its lowest level in November. Prices have fallen 11.2% so far in June. U.S. gold futures settled at $4,038.50 an ounce, a largely unchanged price. The precious metal is headed for its first quarter decline since 2024, and its steepest drop since the second quarter 2013, when inflation fears were stoked by the Gulf conflict. Gold is often seen as a "hedge" against inflation. However, rising rates can weigh heavily on this non-yielding material. Edward Meir is a Marex analyst. He said that the markets were a bit uneasy over the stability of the MOU. This has put pressure on the price of gold, as people don't see much light at the end. A Qatari official has said that top U.S. diplomats in Doha won't hold a meeting at a high level with Iran. This casts doubt on progress made to end the Iran War. The U.S. readings of inflation remain stubbornly high, and far above the Fed's target of 2%. The Federal Reserve is expected to maintain interest rates at a high level for a long time and could even consider further rate increases," Meir stated, noting these expectations are weighing down on gold prices. According to the CME FedWatch tool, traders are pricing in an?approximately 67% chance that interest rates will be raised in September. Investors will now be watching the ADP Employment Data due on Wednesday, and the U.S. nonfarm payrolls due on Thursday in order to gauge the Fed's monetary policies. A survey by OMFIF revealed that central banks are more likely to reduce their U.S. Dollar exposure in the coming decade, due to increased geopolitical worries, and increase gold holdings over the near term. Silver spot?rose by 1.9%, to $59.42 an ounce. It was on track for its worst quarterly decline since the first quarter 2020. Palladium dropped 0.6% and platinum 1.6%, respectively, to $1,206.17. Both metals are on course to record monthly and quarterly losses.
Oil prices rise as Iran's refusal of US envoys to meet Iran dims ceasefire hope
The oil prices rose on Wednesday morning as investors reacted to the news that Iran will not be meeting with U.S. ambassadors. This puts further pressure on the interim truce agreed between both countries in the four-month long war.
Brent futures increased 50 cents (0.69%) to $73.45 per barrel at 1208 GMT. U.S. West Texas Intermediate crude rose 63 cents (0.91%) to $70.13 per barrel.
The White House said that Jared?Kushner, the son-in law of Donald Trump, and Steve Witkoff, the envoy, arrived in Doha on Tuesday for "high-level" talks, but Iran and Qatar stated they would only meet with mediators and not the Iranians.
Qatar reported that Sheikh Mohammed bin Abdulrahman al-Thani, the Prime Minister of Qatar, was one of those who met with Witkoff. Brent dropped by $45 between the first and second quarters this year. This was its biggest quarterly loss since 2008. ?U.S. Crude futures fell by around $31, the largest quarterly drop since 2020 when the Covid-19 pandemic ravaged global oil demand.
The declines came after progress in ending the Middle East Conflict, and a retreat from the gains that were made earlier as a result of the hostilities.
A poll on Tuesday showed that analysts have reduced their oil price forecasts 2026 for the first since the Iran War began. This comes after five consecutive monthly increases. The reopening of the Strait of Hormuz has eased fears of prolonged supply disruptions.
JD Vance, U.S. Vice-President, said that Iran will not be able to collect tolls from ships passing through the Strait of Hormuz. He told The Michael Knowles Show: "This won't?end with the Iranians collecting tolls."
Vance claims that the oil flow through the Strait has been restored to pre-war levels.
Market sources cited data released by the American Petroleum Institute on Tuesday, which showed that U.S. crude inventories dropped again last week, while gasoline stocks declined as well.
Sources, who spoke on condition of anonymity, said that crude stocks dropped by 6.1 million barrels during the week ending June 26.
The markets are awaiting official U.S. crude oil stock data to be released by the Energy Information Administration at 10:30 am EDT on Tuesday. (Reporting and editing by Shri Navaratnam in Houston)
(source: Reuters)