Commodities

Marketmind: Midyear market mettle, Nike clipped

Published

2 years ago

June 30, 2023

Marketmind: Midyear market mettle, Nike clipped

A look at the day ahead in U.S. and global markets from Mike Dolan

The glass appears half full at half time.

The U.S. economy and markets look to be in rude health as they hit the midyear mark on Friday, with both stock prices and interest rates climbing in tandem and the dollar on the rise.

U.S. jobless claims posted their biggest drop in 20 months last week, first-quarter economic growth was revised higher and inflation below forecast. The Federal Reserve’s favoured PCE inflation gauge for May is due for release later.

Only Nike (NYSE:)’s forecast miss on downbeat sportwear sales, which knocked its shares 4% after hours, acted as a domestic cloud.

The constellation of resilient growth, a tight labour market, buoyant consumer confidence and a rebounding housing market are pushing back recession fears despite sharply rising interest rates that the Fed is signalling could rise twice more.

The banking stress of the spring has been put aside, with financial stocks climbing again this week as the major banks easily passed mid-year stress tests.

The sheer stamina of the economy is lifting both stocks and bond yields, with the added tech excitement of the year’s artificial intelligence boom.

The , up almost 15% so far in 2023, hit a near two week high again on Thursday and is set to advance. The small-cap , up 7% this year, is set for its best week since March.

But the tech-heavy Nasdaq has stolen the show in the first half, on track for a gain of more than 29% – the biggest such gain in 40 years.

And with ‘core’ annual PCE inflation expected to be as high as 4.7% last month – still more twice the Fed’s 2% target – futures are at last starting to believe the central bank’s clear signal of two more quarter-point rate rises this year.

Another hike next month is baked in and pricing now suggests almost a 50% chance of yet another move in the Fed’s policy to the 5.50-5.75% range by November. Two-year Treasury yields are homing in on 5%, hitting their highest on Friday since March 9 and up 30 basis points since early Tuesday.

The macro picture is not as rosy elsewhere, adding heft to the dollar’s fresh climb to two-week highs.

China’s factory activity declined for a third straight month in June and weakness in other sectors deepened, official surveys showed on Friday. The hit its weakest since Nov. 4 as pressure for lower domestic interest rates builds – in contrast to the U.S. direction of travel.

Below-forecast Japanese inflation readings also pressured the yen, which weakened to above 145 per dollar for the first time this year even amid government warnings against excessive lurches.

And even though euro zone inflation for June came in below forecast for June, German joblessness rose more than expected during the month. Britain underlined a weak start to the year for its economy.

In emerging markets, the International Monetary Fund reached a staff-level pact with Pakistan on a $3 billion stand-by arrangement that may pull it back from the brink of default.

Events to watch for later on Friday:

* U.S. May personal income, spending and PCE inflation gauge. Dallas Fed PCE. Chicago June PMI business survey, University of Michigan’s final June confidence number

* European Union summit in Brussels

* U.S. corporate earnings: Constellation Brands (NYSE:)

(By Mike Dolan, editing by XXXX mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)

Commodities

Oil prices steady; traders digest mixed US inventories, weak China data

Published

21 hours ago

January 9, 2025

Investing.com– Oil prices steadied Thursday as traders digested data showing an unexpected increase in US product inventories, while weak economic data from top importer China weighed.

At 05:25 ET (10:25 GMT), expiring in March gained 0.1% to $76.25 a barrel, while rose 0.1% to $73.37 a barrel.

The crude benchmarks had slumped more than 1% on Wednesday, but trading ranges, and volumes, are likely to be limited throughout Thursday with the US market closed to honor former President Jimmy Carter, ahead of a state funeral later in the session.

China inflation muted in December

Chinese inflation, as measured by the , remained unchanged in December, while the shrank for a 27th consecutive month, data showed on Thursday.

The reading pointed to limited improvement in China’s prolonged disinflationary trend, even as the government doled out its most aggressive round of stimulus measures yet through late-2024.

China is the world’s biggest oil importer, and has been a key source of anxiety for crude markets. Traders fear that weak economic growth in the country will eat into oil demand.

The country is also facing potential economic headwinds from the incoming Donald Trump administration in the US, as Trump has vowed to impose steep trade tariffs on Beijing.

US oil product inventories rise sharply

U.S. gasoline and distillate inventories grew substantially more than expected in the week to January 3, government data showed on Wednesday.

inventories grew 6.3 million barrels against expectations of 0.5 mb, while grew 6.1 mb on expectations of 0.5 mb.

Overall crude also shrank less than expected, at 0.96 mb, against expectations of 1.8 mb.

The build in product inventories marked an eighth straight week of outsized product builds, and spurred concerns that demand in the world’s biggest fuel consumer was cooling.

While cold weather in the country spurred some demand for heating, it also disrupted holiday travel in several areas.

EIA data also showed that US imports from Canada rose last week to the highest on record, ahead of incoming U.S. president Donald Trump’s plans to levy a 25% tariff on Canadian imports.

Canada has been the top source of U.S. oil imports for many years, and supplied more than half of the total U.S. crude imports in 2023.

Strength in the also weighed on crude prices, as the greenback shot back up to more than two-year highs on hawkish signals from the Federal Reserve.

A strong dollar pressures oil demand by making crude more expensive for international buyers.

(Ambar Warrick contributed to this article.)

Commodities

Trump’s possible tariffs could put downward pressure on oil prices – RBC

Published

21 hours ago

January 9, 2025

Investing.com – President-elect Donald Trump’s plan to implement sweeping import tariffs during his second term in the White House is potentially the “most bearish” policy development for the energy sector this year, according to analysts at RBC Capital Markets.

Trump, who is set to come to power in less than two weeks, has vowed to impose tariffs of as much as 10% on global imports into the US and 60% on items coming from China. He has also pledged to slap a 25% surcharge on products from Canada and Mexico.

Economists have flagged that the proposal would not only rattle global trade activity, but also threaten to reignite inflationary pressures and spark possible retaliation.

The uncertainty in markets was heightened on Wednesday after CNN reported that Trump is mulling declaring a national economic emergency in order to provide the legal underpinning for the tariffs. Earlier this week, Trump also denied a separate report that his team was mulling scaling back the levies to cover only critical goods.

In a note to clients on Thursday, analysts at RBC led by Helima Croft said that while the ultimate scope of the tariffs remains unclear, the headline duties on China could soften demand in the country and place downward pressure on oil prices. China is the world’s largest crude importer.

Business leaders with significant ties to China may advise Trump to stay away from instituting strict tariffs on the country, Croft predicted.

“We have also heard a view in Washington that President Trump could be amenable to a deal with China if Beijing offered to make large headline purchases of US goods, such as aircraft or even US [liquefied natural gas] imports,” Croft wrote.

“Beijing could also potentially seek to trade a reduction in Iranian crude imports for a tariff reprieve.”

However, Croft flagged that the overall market effect of the tariffs is still “challenging to forecast” because the Trump administration — unlike a prior round of trade tensions in 2018 — will have to weight the impact of the policies with broader macroeconomic worries “still front of mind for many in Washington”.

(Reuters contributed reporting.)

Commodities

Gold prices edge higher; demand boosted by Trump-inspired uncertainty

Published

21 hours ago

January 9, 2025

Investing.com– Gold prices edged higher Thursday, continuing the recent gains, as heightened uncertainty over a hawkish Federal Reserve and President-elect Donald Trump’s plan for trade tariffs fueled some safe haven demand.

At 06:15 ET (11:15 GMT), {68|Spot gold}} rose 0.4% to $2,683.84 an ounce, while expiring in February rose 0.3% to $2,668.60 an ounce.

Trading activity is likely to be limited Thursday, with US traders on holiday to honor former President Jimmy Carter, with a state funeral due later in the session.

Safe haven demand on economic uncertainty

Bullion prices benefited from some safe haven demand this week, as uncertainty over Trump’s trade and immigration policies dented risk appetite.

A CNN report said Trump could declare a national economic emergency to legally justify his plans to impose universal trade tariffs.

Concerns over Trump’s policies also came into focus after the of the Fed’s December meeting showed policymakers expressing some concerns over sticky inflation.

Specifically, Fed officials were growing concerned that Trump’s expansionary and protectionist policies could underpin inflation in the long term.

The minutes also largely reiterated the Fed’s plans to cut interest rates at a slower pace in 2025, after the central bank effectively halved its projected rate cuts to two from four in 2025.

Treasury yields shot up after the Fed’s minutes, as did the dollar.

Higher for longer rates bode poorly for non-yielding assets such as metals, given that they increase the opportunity cost of investing in the sector.

Other precious metals were edged higher Thursday. fell 0.1% to $983.85 an ounce, while rose 0.8% to $30.930 an ounce.

Copper rises as weak China inflation fuels stimulus hopes

Benchmark on the London Metal Exchange rose 0.7% to $9,093.0 a ton, while March rose 1.2% to $4.3115 a pound.

Chinese were flat in December, while shrank for a 27th consecutive month, indicating little improvement in disinflation.

Inflation remained weak even as Beijing doled out its most aggressive round of stimulus measures through late-2024.

But Thursday’s inflation data fueled increased bets that Beijing will do more to shore up Chinese growth, especially on the fiscal front.

(Ambar Warrick contributed to this article.)

Among industrial metals, copper prices firmed as weak inflation data from top importer China spurred bets on more stimulus measures from Beijing.

But metal markets remained under pressure from strength in the dollar, which came back in sight of over two-year highs on hawkish signals from the Fed.