2025-08-05 22:29

Aug 5 (Reuters) - Shale producer Devon Energy (DVN.N) , opens new tab on Tuesday narrowly missed Wall Street estimate for second-quarter profit and said it had signed two natural gas supply deals amid growing demand for the fuel. The company will supply 50 million cubic feet per day of natgas to an undisclosed buyer over a 10-year period and will provide 65 mmcfd to CPV Basin Ranch Energy Center for a seven-year term as part of the agreements. Sign up here. Devon's deal comes a day after Coterra Energy (CTRA.N) , opens new tab agreed to supply 50 mmcfd of natgas to the Permian-based energy center, as U.S. energy producers tap into surging domestic electricity consumption, as well as flourishing exports of the superchilled gas. A more than 20% fall in Brent crude prices hurt Devon's quarterly performance, with its average realized price falling to $62.97 per barrel from $78.95 a year earlier. Oil production rose more than 15% and natural gas output jumped 22% to 1.39 billion cubic feet per day. Devon plans to boost annual free cash flow by $1 billion by the end of 2026 and cut its current-year capital expenditure forecast by $100 million to between $3.6 billion and $3.8 billion. The company expects current-year oil production to be in the range of 384,000-390,000 bpd, compared with a prior view of 382,000-388,000 bpd. The production outlook along with lower capital spending for 2025 is a sign the company's efforts to optimize portfolio are starting to bear fruit, RBC Capital Markets analyst Scott Hanold said. Oklahoma City-based Devon posted an adjusted profit of 84 cents per share for the second quarter, compared with the analysts' estimate of 85 cents, according to data compiled by LSEG. (This story has been refiled to fix a spelling error, in paragraph 2) https://www.reuters.com/business/energy/devon-energy-misses-quarterly-profit-estimates-signs-gas-supply-deals-2025-08-05/

2025-08-05 22:22

Brazil's economy resilient due to exemptions and China trade ties Lula dismisses Trump's tariff threats as blackmail Brazil's exports to US only 12%, China 28% BRASILIA, Aug 5 (Reuters) - Brazilian goods imported by the United States will soon carry one of the highest tariffs imposed by President Donald Trump, but that will not likely derail Latin America's largest economy, due to ample exemptions and stronger trade ties with China. The lower stakes for the Brazilian economy give President Luiz Inacio Lula da Silva more room to stand his ground against Trump than most Western leaders, after calling him an unwanted global "emperor" and comparing his tariff threats to blackmail. Sign up here. Lula has said he is open to negotiating a trade deal, but dismissed Trump's complaints about the trial of right-wing ally Jair Bolsonaro as a threat to Brazilian sovereignty and judicial independence. Brazil's Supreme Court is trying the ex-president for allegedly plotting to overturn the 2022 election he lost to Lula. Those tensions, stoked by Bolsonaro's house arrest on Monday, are likely to make negotiations about the 50% U.S. tariff on Brazilian goods between Washington and Brasilia thorny and drawn out, even as the fallout for Brazil's economy looks limited. Unlike Mexico and Canada, which sell about three-quarters of their exports to the United States, Americans buy just 12% of Brazilian exports. By comparison, Brazil's exports to China have doubled in value over the past decade, now accounting for 28% of the country's total shipments. After exemptions laid out in Trump's executive order last week, including on aircraft, energy, and orange juice, the tariff taking effect on Wednesday will apply to just under 36% of Brazilian exports to the U.S. by value, according to estimates in Brasilia. Many of the affected exports are commodities such as beef and coffee, which should find alternative markets at modest discounts, according to economists. "We were already expecting a limited impact, but it dropped further with the exemptions," said Luiza Pinese, an economist at XP, who halved her forecast for the tariff impact on Brazil's gross domestic product this year to 0.15 percentage points. Goldman Sachs maintained its projection for Brazil's economy to grow 2.3% this year in light of the "notable" exemptions, adding that government support for affected sectors, expected in the coming days, should further soften the economic blow. "Brazil depends on the United States, that's true, but also on BRICS countries, on Europe, on Mercosur," Planning Minister Simone Tebet said at a public event last week, referring to major developing nations such as China, India, and Russia and a South American trade bloc. She said almost half of Brazil's agribusiness trade, an engine for Brazil's economy in recent years, is concentrated in Asia, compared to just 10% with the United States. "When it comes to industry, the ratio is four to one - four times more to Asia than to the United States," she added. SMALLER ROLE FOR TRADE Brazil is far less open to trade than most major global economies, limiting fallout from trade disruptions. Exports and imports amounted to 36% of its GDP last year, less than half the share in Mexico and nearby Paraguay, and just a quarter of the level in trade-focused Asian economies such as Thailand and Malaysia, according to World Bank data. Much of Brazil's exports are commodities easily redirected to different markets over time, said Thiago Carlos, a PIMCO portfolio manager for emerging markets. In the short term, more domestic food supply may even help to bring down inflation, he added. "With inflation likely to trend lower, the central bank may find room to begin easing monetary policy sooner than expected," said Carlos, noting the benchmark rate at the current level of 15% keeps monetary policy extremely tight, dragging on growth. Analysts polled by Reuters estimated that even without a U.S. trade deal and before exemptions, Brazil's growth outlook for 2026 would remain virtually unchanged from their consensus of 1.6%-1.7%. Still, Luis Otavio Leal, chief economist at asset manager G5 Partners, warned of potential knock-on effects if government aid is not well targeted to protect vulnerable sectors and jobs. "Exemptions applied to nearly 700 products - and Brazil exports about 4,000 different goods to the U.S.," said Leal. "A large number of firms that sell to the U.S. were not covered." Brazil's central bank said on Monday that U.S. levies on Brazilian goods could have "significant" effects on specific sectors, but broader macroeconomic effects are uncertain and will depend on negotiations and market risk perceptions. Flavio Ataliba, a researcher at Brazilian university FGV, noted that the vast country's regional variety will result in uneven impacts. The Northeast region, in particular, could be hit harder due to its export base of low-value-added, labor-intensive goods such as fresh fruit, seafood, textiles, and footwear - all now subject to the full 50% tariff, he added. https://www.reuters.com/world/americas/brazils-economy-ready-ride-out-trumps-50-tariff-2025-08-05/

2025-08-05 21:55

Brent and US crude fall to lowest in five weeks OPEC+ output hike, demand worries add to oversupply outlook Trump again threatens India with high tariffs over Russian oil purchases Coming Up: US oil inventory from EIA NEW YORK, Aug 5 (Reuters) - Oil prices slipped on Tuesday as rising OPEC+ supply and worries of weaker global demand countered concern about U.S. President Donald Trump's threats to India over its Russian oil purchases. Brent crude futures settled $1.12, or 1.63%, lower to $67.64 a barrel, while U.S. West Texas Intermediate crude slipped $1.13, or 1.7%, to $65.16. Both benchmarks settled to their lowest in five weeks. Sign up here. The Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, agreed on Sunday to raise oil production by 547,000 barrels per day for September, a move that will end its most recent output cut earlier than planned. "The significant increase in OPEC supplies is weighing on the market," said Andrew Lipow, president of Lipow Oil Associates. Also weighing on prices, U.S. services sector activity unexpectedly flatlined in July with little change in orders and a further weakening in employment even as input costs climbed by the most in nearly three years, underscoring the ongoing drag of uncertainty over the Trump administration's tariff policy on businesses. "The market now is going to see if India and China agree to substantially reduce the purchases of Russian crude oil, thereby looking for alternative supplies elsewhere," Lipow said. Trump on Tuesday again threatened higher tariffs on Indian goods over the country's Russian oil purchases over the next 24 hours. Trump also said declining energy prices could pressure Russian President Vladimir Putin to halt the war in Ukraine. New Delhi called Trump's threat "unjustified" and vowed to protect its economic interests, deepening a trade rift between the two countries. Oil's move since Trump's threat indicates that traders are skeptical of a supply disruption happening, John Evans of oil broker PVM said in a report. He questioned whether Trump would risk higher oil prices. "I'd call it a stable market for oil," said Giovanni Staunovo, an analyst at UBS. "Assume this likely continues until we figure out what the U.S. president announces in respect to Russia later this week and how those buyers would react." India is the biggest buyer of seaborne crude from Russia, importing about 1.75 million bpd from January to June this year, up 1% from a year ago, according to data provided to Reuters by trade sources. U.S. crude inventories fell by 4.2 million barrels last week, sources citing American Petroleum Institute figures said on Tuesday. The U.S. Energy Information Administration is due to release weekly U.S. inventory data on Wednesday, respectively., https://www.reuters.com/business/energy/oil-prices-fall-opec-output-hikes-counter-russia-disruption-concerns-2025-08-05/

2025-08-05 21:20

Aug 5 (Reuters) - Rivian Automotive (RIVN.O) , opens new tab reported a higher-than-expected quarterly loss on Tuesday as disruption in supply of rare earth metals used to make parts of its electric vehicles raised costs and income from credits sold to traditional automakers dwindled. Shares of the automaker fell nearly 5% in trading after the bell. Sign up here. China's curbs on the export of heavy rare earth metals —essential components for motors — sharply increased material costs and disrupted supply chains, driving up the cost of EV production in the U.S. Rivian's cost of revenue for each vehicle produced rose about 8% to $118,375 per unit sold from a year earlier, according to Reuters calculations. "That's really reflecting a much lower production volume, which was largely driven because of challenges we had within our supply base as a result of a lot of the changes in policy," CEO RJ Scaringe told Reuters. "Therefore, our costs look higher, but it's not as if our bill of materials grew or as if we became operationally less efficient." Rivian will shut down production for three weeks in September, after a one-week pause in the second quarter, to integrate key components and prepare for the launch of the R2 SUV next year. The company reported an adjusted loss per share of 80 cents for the second quarter, compared with analysts' average estimate of 65 cents, according to data compiled by LSEG. Rivian also flagged a bigger adjusted core loss this year, expecting it to be between $2 billion and $2.25 billion, compared with $1.7 billion to $1.9 billion previously forecast. The company largely blamed a tapering in the value of U.S. regulatory credits for the higher loss estimate. The elimination of penalties for automakers not meeting fuel economy standards by President Donald Trump's administration has drastically reduced demand for regulatory credits, which companies like Rivian previously sold to traditional automakers to help them avoid emissions fines. Meanwhile, Lucid (LCID.O) , opens new tab cut its annual production forecast and missed Wall Street estimates for quarterly revenue as trade tensions took a toll on demand. The luxury EV maker's shares slid more than 7% in extended trading after the company also said it had issues with the supply of magnets, but had resolved it by using substitutes. The $7,500 federal EV tax credit expires at the end of September, eliminating a key competitive advantage that has driven demand, but analysts anticipate a surge in third-quarter sales as customers rush to make purchases before losing access to the incentive. Rivian said on Tuesday it expected record deliveries in the third quarter across its consumer and commercial segments. The Amazon-backed company's revenue for the second quarter stood at $1.3 billion, surpassing analysts' average estimate of $1.28 billion, according to data compiled by LSEG. Rivian delivered 10,661 vehicles in the second quarter, marking a 22% decline from the same period a year earlier, as the company limited production to prepare for its 2026 model year launch. https://www.reuters.com/business/autos-transportation/rivians-loss-bigger-than-expected-rare-earth-curbs-raise-costs-credits-fade-2025-08-05/

2025-08-05 21:15

Aug 5 (Reuters) - Canadian oil producer Suncor Energy (SU.TO) , opens new tab exceeded analysts' second-quarter profit expectations on Tuesday, as higher output helped offset the impact of weak commodity prices. Even as volatility in oil prices drives the broader energy industry into a downturn, Canada's oil sands sector remains resilient. Sign up here. Canadian producers are benefiting from the expansion of the Trans Mountain pipeline, which provides them access to international markets, reducing reliance on the U.S. pipeline network, and now accounts for 9% of Canada's total crude exports. Canada exports nearly 4 million barrels of oil per day (bpd) to the United States. Suncor's upstream quarterly production rose to 808,100 bpd from 770,600 bpd a year ago. Its refinery throughput climbed 2.6% to 442,000 bpd during the quarter, while refinery utilization improved to 95% from 92% a year earlier. The results are in contrast to Suncor's peer Imperial Oil(IMO.TO) , opens new tab, which last week said declines in refinery throughput and weak oil prices weighed on its second-quarter profit. The Canadian oil industry typically undergoes peak maintenance during the second quarter, which can keep production offline for weeks or even months. Suncor CEO Rich Kruger said the company's strong quarterly performance was driven by "the outstanding execution of major upstream and downstream turnaround activities, completed safely and ahead of schedule". The Canadian producer also lowered its current-year forecast for capital expenditure, which is now expected to be in the range of C$5.7 billion to C$5.9 billion, compared with its prior forecast of C$6.1 billion to C$6.3 billion. The Calgary, Alberta-based company reported an adjusted profit of 71 Canadian cents per share ($0.5154) for the quarter ended June 30, beating analysts' average estimate of 69 Canadian cents per share, according to data compiled by LSEG. ($1 = 1.3776 Canadian dollars) https://www.reuters.com/business/energy/suncor-energy-tops-quarterly-profit-estimates-higher-production-2025-08-05/

2025-08-05 21:02

ORLANDO, Florida, Aug 5 (Reuters) - Wall Street bucked the positive global equity trend and closed mostly lower on Tuesday, as U.S. service sector data rekindled stagflation fears and shined a light on the difficult position the Federal Reserve may find itself in next month. More on that below. In my column today I look at the tumult of the last few days that has seen the worlds of U.S. politics, policy, and company earnings collide, exposing the big divergences that run through the country's equity and bond markets. Sign up here. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. Today's Key Market Moves Stagflation-ISM The stagflation red flags raised by U.S. service sector activity figures on Tuesday are a reminder that the world's largest economy and most important central bank face significant challenges in the months ahead. Investors took their cue more from the bubbling price pressures in the ISM services report than the signs of softening activity. Treasury yields crept up and rate cut expectations were trimmed as a result. Still, it's a curious one. Wall Street's slump on Friday went hand in glove with plunging yields and a dramatic surge in rate cut bets. Today, a hawkish tilt in the bond and rates futures markets was accompanied by a broad-based equity selloff. There are other factors at play, not least the barrage of Q2 earnings, tariff headlines, and a renewed spike in policy uncertainty. But these moves are a reminder that there can be good and bad reasons driving yields up or down, and that the correlation with stocks can flip from one day to the next. The ISM report showed service sector activity in June flatlined while the prices paid index rose to its highest in nearly three years. Tariffs, inflation pressures, growth fears are all in the mix. Contrast this with China's services activity data released on Tuesday, which showed the fastest pace of expansion in July in 14 months. U.S. corporate earnings have generally been strong. Of the 330 companies in the S&P 500 that had reported through last Friday, 80.6% reported consensus-beating profits, compared with the long-term average of 67.1%, according to LSEG data. But Caterpillar warned on Tuesday that tariffs pose significant challenges and could cost the firm up to $1.5 billion this year. Meanwhile, U.S. President Donald Trump told CNBC on Tuesday that he will not nominate Treasury Secretary Scott Bessent for a position on the Fed's Board of Governors, thus ruling him out as a candidate for Fed chair. Trump said he will announce Governor Adriana Kugler's replacement "very shortly." Trump also said the U.S. is "very close" to a trade deal with China and that he would meet his Chinese counterpart Xi Jinping before the end of the year if an agreement is struck. Looking ahead to Wednesday, there are two highlights in the Asian calendar for investors to home in on - the latest Chinese trade figures, and an interest rate decision from the Reserve Bank of India. The RBI is expected to keep its benchmark repo rate on hold at 5.50%. But in light of the steep tariffs recently imposed on Indian exports by the U.S., traders are putting a near one-in-six chance of a rate cut. Likely RBI intervention on Tuesday kept the rupee from hitting new lows through 88.00 per dollar. China's trade figures, meanwhile, will be closely watched after official U.S. data on Tuesday showed America's trade deficit with its Asian rival shrank in June to its lowest in more than 21 years. In light of the contrasting PMI figures on Tuesday, this will be worth keeping an eye on. Navigating US markets' split personalities During an extraordinary few days when the worlds of U.S. politics, policy, economics and company earnings collided, the divergences that run through the country's equity and bond markets have come into sharp relief. For the bond market, the split separates short-dated Treasuries that price off the Fed's policy rate and longer maturities that are more sensitive to U.S. debt and deficit concerns. For the benchmark S&P 500, that line is between the 'Magnificent Seven', along with a few other tech and artificial intelligence-focused megacaps, and everyone else. These types of divides have always existed to some extent, but they have become more apparent this year given the historic concentration on Wall Street and rapid deterioration in the U.S. fiscal outlook. The dramatic moves in U.S. assets over the last few days serve as a microcosm of these deeper divergences. LONG AND SHORT OF IT The split in the bond market burst open on Friday. Triggered by surprisingly weak jobs figures and Trump's shock decision to fire a senior official in the agency responsible for collecting the data, the two-year Treasury yield plunged 25 basis points and the 2s/30s yield curve steepened by 20 basis points. These were the biggest moves in one year and two and a half years, respectively. The slump in yields, especially at the short end of the curve, indicates that investors' supposed concerns about fiscal indiscipline quickly evaporate as soon as growth-sapping cracks in the labor market appear. So much for the bond vigilantes. Tellingly, there was no pullback on Monday. Indeed, Treasury prices climbed even higher, pushing the two-year yield as low as 3.66%, its nadir since May. Long-dated yields have declined too, but not as aggressively, resulting in Friday's dramatic steepening of the 2s/30s curve to levels that, with the exception of April's brief tariff tantrum, haven't been seen for more than three years. Investors may wince at the size of the federal debt and the Treasury's funding needs but still want to load up on two-year bonds when they think rate cuts are coming. This parallel thinking isn't new, but the stark difference in the narratives driving the front and back ends of the curve is notable. STAY NIMBLE The U.S. equity market concentration story is familiar to everyone by now, but the last few days underscore how jaw-dropping - and seemingly entrenched - it is. Blockbuster earnings reports from 'Mag 7' constituents Meta (META.O) , opens new tab, Microsoft (MSFT.O) , opens new tab and Apple (AAPL.O) , opens new tab juiced another wave of outperformance in Big Tech stocks, reviving debate about concentration risk, bubbles and the long-term benefits of AI. By some measures, a few Big Tech firms now account for as much as 40% of the total U.S. stock market cap. Tech is more expensive relative to the broader S&P 500 index than ever, even compared to the dotcom bubble, according to Bank of America. Wall Street's average valuations and earnings growth are therefore increasingly being driven by Big Tech. Strip out the top 10 firms, and the rump S&P 490 has barely registered any earnings growth in the last three years, according to SocGen's Andrew Lapthorne. Again, there are multiple narratives at work here. It may be true that overseas investors want to reduce their U.S. equity exposure, but don't want to miss out on the Big Tech boom. So even if foreign investors start shedding some U.S. assets – and that's debatable – they aren't apt to be jettisoning the likes of Nvidia (NVDA.O) , opens new tab and Microsoft. This is a delicate juncture for investors. Wall Street is at record highs, but concentration risk has also rarely been higher. The outlook for long-dated bonds is worrying given current fiscal and inflation dynamics, yet the short end looks much more attractive, though even that is complicated by the economic and unique political pressures bearing down on the Fed. The divergences in U.S. markets may narrow, gradually or suddenly, or they may continue unabated for some time. Without a crystal ball, it's tough to know exactly what the catalyst for mean reversion would be. One thing is likely guaranteed though: in this environment, it will pay to be nimble. What could move markets tomorrow? Want to receive Trading Day in your inbox every weekday morning? Sign up for my newsletter here. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles , opens new tab, is committed to integrity, independence, and freedom from bias. https://www.reuters.com/business/global-markets-trading-day-graphic-2025-08-05/