2024-11-21 11:42
A look at the day ahead in U.S. and global markets from Mike Dolan There's not too much to worry about at the world's most valuable company - or the artificial intelligence theme - but just conceding that triple-digit growth can't last forever has been enough to stall Nvidia's (NVDA.O) , opens new tab share price and dampen global tech stocks. The $3.6 trillion chip giant's revenue forecast on Wednesday disappointed Wall Street, with its stock down more than 3% premarket - with peers Advanced Micro Devices (AMD.O) , opens new tab, Intel (INTC.O) , opens new tab and Qualcomm (QCOM.O) , opens new tab off about 1% in sympathy and European chipmakers down as well. Although it beat most metrics and consensus estimates yet again, Nvidia forecast its slowest revenue growth in seven quarters and flagged supply chain constraints through next year. Its executives warned investors the company's margins would sink several percentage points to the low-70% range until production kinks are ironed out. But don't shed too many tears. The AI bellwether's latest earnings report was by most standards still extraordinary - sales in its main data center segment more than doubled and the company's forecast revenue of $37.5 billion for fourth quarter was above average estimates of $37.09 billion. And in many respects, the price reaction is modest. After another 20% share surge over the past two months, markets feel most of the ongoing boom is already in the price for now. More worrying on Wednesday was U.S. retailer Target's (TGT.N) , opens new tab big miss on its profit and holiday-quarter sales forecast - which sent its stock plummeting more than 20% and stood in contrast to the previous day's beat from the world's no. 1 retailer Walmart (WMT.N) , opens new tab. The politics of President-elect Donald Trump's incoming administration still dominated thinking in the background - with no sign yet of his pick for Treasury Secretary - and geopolitical worries rumbled abroad. One of the few post-election trades to keep on moving was Bitcoin - and the dominant crypto asset zoomed close to a record $98,000 overnight, up more than 40% over the past month. Overall, the broader market was more subdued, with stock futures marginally in the red on Thursday and most European and Asian indexes lower too. U.S. Treasury yields slipped back despite a poorly received 20-year bond auction on Wednesday - but the dollar (.DXY) , opens new tab remained firm. Bank of Japan Governor Kazuo Ueda said on Thursday the central bank would "seriously" take into account foreign exchange rate moves in compiling its economic and price forecasts and noted there would be more information to digest before next month's policy meeting. Another dominant market story overseas was in India as firms of the Adani Group conglomerate lost as much as $34 billion in market value after U.S. prosecutors charged its billionaire chairman in an alleged bribery and fraud scheme. Gautam Adani's flagship Adani Enterprises (ADEL.NS) , opens new tab tumbled as much as 23% to its lowest since November 2023 for its worst one-day drop since February last year. Key developments that should provide more direction to U.S. markets later on Thursday: * Philadelphia Federal Reserve's November business survey, Kansas City Fed's November business surveys; US weekly jobless claims, US October existing home sales; Euro zone November consumer confidence; Canada October producer prices * US corporate earnings: Intuit, NetApp, Deere, Ross Stores, Copart, PDD * Chicago Federal Reserve President Austan Goolsbee, Cleveland Fed President Beth Hammack and Fed Vice Chair for Supervision Michael Barr all speak. European Central Bank chief economist Philip Lane speaks, Bank of Spain governor Jose Luis Escriva and Bank of Cyprus governor Christodoulos Patsalides all speak; Bank of England policymaker Catherine Mann speaks * US Treasury sells $17 billion of 10-year inflation-protected securities (This story has been refiled to fix the share RIC in paragraph 1) Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-2024-11-21/
2024-11-21 11:41
Nov 21 (Reuters) - The U.S. is more vulnerable to inflationary shocks than in the past, Federal Reserve Bank of Richmond President Tom Barkin said in an interview with the Financial Times published on Thursday. Barkin said he expected inflation to continue dropping across the U.S, while cautioning that businesses were passing on costs to consumers more readily than in the past. "We're somewhat more vulnerable to cost shocks on the inflation side, whether they be wage-[related] or otherwise, than we might have been five years ago," Barkin told the FT. (This story has been refiled to fix the day reference in paragraph 1) Sign up here. https://www.reuters.com/markets/us/feds-barkin-says-us-is-vulnerable-inflation-shocks-ft-reports-2024-11-21/
2024-11-21 11:25
Full pipelines hinder Argentina's gas-export potential Private-sector investment needed for $58 billion worth of infrastructure Skepticism grows over Argentina's LNG-export plans by 2032 NEUQUEN, Argentina, Nov 21 (Reuters) - Natural gas production is booming in Argentina’s vast Vaca Muerta shale lands, but full pipelines and the government's free-market approach to paying for new ones may prevent the country from becoming a major gas exporter by early next decade. About $58 billion worth of new or upgraded pipelines, processing plants and export terminals is needed to handle Argentina's growing production from the world's second-largest shale gas reserves Vaca Muerta, which is Spanish for "dead cow". But libertarian President Javier Milei has replaced direct investment by the national government in gas infrastructure with tax breaks and other incentives, a radical shift from his predecessors. The government's goal is to export $15 billion worth of liquefied natural gas annually by 2032, up from zero currently. "Until now, all gas projects were done by the state as public works. Now that's not an option," said Daniel Dreizzen, Argentina's former secretary of energy planning and now director of Aleph Energy, a consulting firm. The country's newest, $710-million pipeline opened this month, funded by the government and a loan from the Development Bank of Latin America and the Caribbean. Milei's government called it the last state project. Milei's austerity drive has driven down inflation and lowered Argentina's investment risk, but some investors are still waiting to see if the changes will last to pay off long-term investments. They fear a swing back to leftist Peronism that intervened in the energy industry before Milei took office last year, setting prices and breaking international contracts. "This has happened lots of times in Argentina's history and completely stopped development," Dreizzen said. "The biggest risk is that destabilization." FALLING PRICES While Argentina has sufficient oil-export infrastructure and privately-funded expansions under way, Dreizzen said investors view gas as less profitable, its markets more difficult to reach and subject to tougher government regulations. Global gas prices are about a third of their peak in 2022 due to increased supply and lower demand from a milder-than-expected winter. The long-term contracts needed to justify building new infrastructure could be hampered by the early 2030s by LNG export capacity coming online in Qatar and the United States, buyers' preference for spot contracts and the European Union's goals of reducing greenhouse-gas emissions, said Alex Jones, an LNG analyst at research firm Energy Aspects. Vaca Muerta's gas output has increased five-fold to nearly 100 million cubic meters per day since 2018, but the country's pipelines cannot even deliver enough for use by Argentina and neighboring countries. Argentina can transport around 130 MCM per day and another 20-40 MCM per day is needed to meet current domestic and regional demand, said Daniel Ridelener, executive president of the country's largest gas pipeline operator TGN (TGNO2m.BA) , opens new tab. Pipeline capacity would need to expand by an additional 40-130 MCM to support the country's plans to export LNG, Ridelener said. Investment interest from U.S. oil and gas companies in expanding Argentina's production is at an all-time high, said Ariel Bosio, founder and vice president of the U.S.-based Argentina-Texas Chamber of Commerce. "This doesn't mean they're going to invest immediately, but there's interest," Bosio said, adding that companies want to see the outcome of 2025 legislative elections and currency controls lifted before committing. TGS (TGS.OL) , opens new tab, Argentina's other main pipeline company, has a $700-million plan to boost its capacity out of Vaca Muerta by 14 MCM per day. The project is waiting for government approval before seeking financing. A $2-billion plan to expand a state-owned pipeline by 20 MCM per day is expected to go to an international tender process. The pipeline plans depend on construction of LNG export terminals to buy and export the gas. Argentina state-owned energy company YPF (YPFDm.BA) , opens new tab plans on using floating LNG barges as early as 2027 with Pan American Energy (PNRG.CD) , opens new tab, but YPF's crown jewel is Argentina LNG, a proposed $55-billion megaproject in partnership with Malaysia's Petronas (PETRA.UL) that would produce 30 million metric tons per year onshore by 2032. Jones sees the floating LNG barges as realistic but he is skeptical about Argentina LNG. "It's a coin flip ... less than a coin flip," Jones said. Argentina LNG talks have been wavering between the partners, according to local media, although YPF CEO Horacio Marin said the company would move forward even if Petronas pulls out. Milei's cabinet chief said this month that Shell (SHEL.L) , opens new tab had strong interest in investing in the terminal. The company said in a statement it is always exploring opportunities. During an October oil and gas conference in Neuquen, Shell senior vice president German Burmeister said Vaca Muerta's assets are technically competitive, but Argentina needs more infrastructure, including roads, that require foreign-exchange restrictions to be lifted. "The world will talk more about Vaca Muerta when we're a more credible and trustworthy country," Burmeister said. Sign up here. https://www.reuters.com/business/energy/argentinas-vaca-muerta-gas-export-plan-is-pipe-dream-2024-11-21/
2024-11-21 11:19
US gas output to fall in 2024 for first time since 2020 US spot gas prices to rise over 40% in 2025 from 2024 levels US LNG exports to jump 14% in 2025 over levels in 2024 Nov 21 (Reuters) - U.S. natural gas producers will boost output in 2025 following a series of production cuts this year, as rising demand from liquefied natural gas export plants is expected to increase prices that had fallen to multi-decade lows. U.S. production is on track to decline in 2024 for the first time since 2020, when the COVID pandemic reduced demand, according to the U.S. Energy Information Administration's latest outlook. Drillers started cutting gas production after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low in March, and have remained relatively low since then. In some markets, spot gas prices have even traded at negative levels throughout the year, meaning producers had to pay others to take their product. But rising demand for exports should boost average annual gas prices next year by more than 40% over the levels seen in 2024, according to analysts' estimates. The EIA projects annual average dry gas production will slide from a record 103.8 billion cubic feet per day (bcfd) in 2023 to 103.3 bcfd in 2024, but climb to 104.5 bcfd in 2025. It expects total gas demand, including LNG and pipeline exports, will rise from a record 109.9 bcfd in 2023 to 111.2 bcfd in 2024 and 113.0 bcfd in 2025. Most of 2025's expected demand increase is due to a 14% jump in LNG exports, while domestic use - such as gas used for power generation - will likely see a decline. From 2019 to 2023, U.S. LNG exports have soared by an average of 34% per year, while domestic gas usage has edged up by just 2% a year. Two plants under construction are due to enter service in test mode by the end of this year, including the first 1.8-bcfd phase of Venture Global's Plaquemines facility in Louisiana and the 1.5-bcfd Stage 3 expansion at Cheniere Energy's (LNG.N) , opens new tab Corpus Christi facility in Texas. WAITING FOR HIGHER PRICES To meet growing export demand, several of the biggest U.S. gas producers said in their third-quarter earnings that they expect to boost output in the fourth quarter and throughout 2025. "Producers are waiting for higher prices to deliver several bcfd of production held back ... the likely start-up of Plaquemines and Corpus Christi Stage 3 should lead to much higher flows next year," analysts at Bank of America said in a report. Analysts forecast average annual Henry Hub gas prices would jump to a three-year high of around $3.27 per million British thermal units in 2025, up from a four-year low of $2.29 in 2024. "The combination of growing LNG exports, increased electrical generation demand and the prospect of winter weather suggests a tighter supply-demand picture for natural gas in 2025 and beyond," Thomas Jorden, the CEO at Coterra Energy (CTRA.N) , opens new tab, told analysts on a call to discuss the producer's earnings. Jorden, however, said Coterra would continue to curtail output until it sees materially better spot gas prices. EQT (EQT.N) , opens new tab, the nation's second-biggest gas producer, boosted its fourth-quarter production guidance to 6.03-6.58 billion cubic feet of gas equivalent per day (bcfed), up from prior guidance of 5.60-6.14 bcfed. That compares with actual output of around 6.32 bcfed in the third quarter. "I do expect (production) to come up a little bit as we get into 2025," EQT Chief Financial Officer Jeremy Knop told analysts in an earnings call. EOG Resources (EOG.N) , opens new tab, another of the nation's biggest gas producers, expects its U.S. gas output to rise from 1.745 bcfd in the third quarter to an estimated 1.800-1.850 bcfd in the fourth quarter. That puts EOG on track to boost U.S. gas output by around 11% in 2024, up from an annual average of 1.551 bcfd in 2023. Expand Energy (EXE.O) , opens new tab, the biggest U.S. gas producer following the merger of Chesapeake Energy and Southwestern Energy, said it could boost gas output to around 7 bcfed in 2025, up from around 6.75 bcfed in the third quarter of 2024. But whether Expand produces that extra output in 2025 depends on market conditions. "The company intends to prudently activate production as market conditions warrant," Expand said, noting that by the end of 2024 it expects to be able to deliver another 1.0 bcfd of short-cycle capacity - if needed. Sign up here. https://www.reuters.com/markets/commodities/us-natural-gas-drillers-lift-2025-output-reversing-year-cuts-2024-11-21/
2024-11-21 11:19
LONDON, Nov 21 (Reuters) - The pound eased modestly against the dollar, which held firm on Thursday, as investors remained laser-focused on who President-elect Donald Trump's Treasury Secretary pick might be and what that might mean for his policies on growth, trade and taxes. With the dollar in the ascendant, sterling wilted, last down 0.1% at $1.26405. It's risen 1.2% against the euro , which has come under intense pressure against the dollar in particular, as traders try to factor in the potential hit to euro zone growth from an aggressive stance on tariffs from the incoming Trump administration. The pound got a brief lift the day before from data that showed UK consumer inflation staged an unwelcome pickup in October, confirming the belief in the market that the Bank of England will be one of the slowest among the big central banks to lower rates meaningfully over the coming year. Even against that backdrop, sterling has fallen by close to 2% against the dollar this month and turned negative on the year. Money markets currently show traders believe the BoE could lower rates by around 68 basis points by next December. For the Bank's next meeting on Dec. 19, there's no expectation of any move at all. Commerzbank strategist Michael Pfister noted that there is barely a 50% chance priced in for a rate cut in February either. "We still believe that the next rate cut will take place then. The argument in favour of this is that monetary policy is still likely to be seen as quite restrictive and policymakers will certainly want to avoid falling behind the curve," he said. He added that if inflation data shows a sustained pickup, the discussions around a February cut are "likely to intensify". Next up on the macro calendar are preliminary surveys of business activity for November for the UK, the euro zone, the United States and elsewhere due on Friday. The most recent Purchasing Managers' Index (PMI) for October came in at 52 for Britain, above the 50 mark that separates growth from contraction and ranking the UK second behind the United States, which logged a reading of 54 last month. Friday's PMI is expected to come in at 51.8, according to a Reuters poll of economists. Sign up here. https://www.reuters.com/markets/currencies/sterling-sags-trump-bump-lifts-dollar-2024-11-21/
2024-11-21 11:18
MOSCOW/DUBAI, Nov 21 (Reuters) - Russian President Vladimir Putin held a phone call with Iraqi Prime Minister Mohammed Shia al-Sudani on Thursday during which they discussed the OPEC+ oil agreement and the situation in the Middle East, the Kremlin said. In a later statement, al-Sudani's office said that on the call the two had discussed the importance of coordination between OPEC and OPEC+ members on oil price stability in a manner that guarantees fair prices for exporters and consumers. OPEC+ groups members of the Organization of the Petroleum Exporting Countries and allies led by Russia. Sign up here. https://www.reuters.com/world/russias-putin-iraqi-pm-discuss-opec-coordination-oil-price-stability-2024-11-21/
