2024-11-06 21:45

Traders mull Trump win impact on European markets Euro worst-performing developed currency, bonds gain Some banks see prospect for euro drop to parity European stocks seen fragile, facing Trump tariff risks LONDON, Nov 6 (Reuters) - Investors are bracing for further economic pain in Europe that could deepen euro losses and hurt its stocks, as a second Donald Trump presidency raises the prospects of hefty tariffs. European bonds emerged as winners, as expectations the European Central Bank will cut interest rates to counter an economic slowdown rose. But bets were generally contained as investors assess which of Trump's pledges will be implemented following his election victory on Wednesday. The stakes are high for a region that has navigated the pandemic, war in Ukraine and global trade tensions in recent years and comes at a time of political uncertainty in France and Germany. Chancellor Olaf Scholz sacked Finance Minister Christian Lindner late on Wednesday, leaving the future of the German government unclear in Europe's biggest economy. Trump has vowed a 10% tariff on imports from all countries, a big blow for the European Union which has the second-largest trade deficit with the United States globally and is the largest exporter to the U.S, according to JPMorgan. The EU faces more pain through its close ties with China, on whose imports Trump has pledged 60% tariffs, and may need to boost defence spending if Trump pulls U.S. support for Ukraine. As traders raised ECB rate cut bets, shorter-dated German bond yields slid as prices surged. Longer-dated peers resisted a jump in U.S. Treasury yields. "The bond market in Europe has responded by saying we should see lower growth, which can be offset by rate cuts from the ECB, but it's not going to be aggressive enough that it's going to push us into a nasty recession," said AXA Investment Managers' head of total return and fixed income Nick Hayes, who favours European bonds. The mood was initially brighter in European stock markets (.STOXX) , opens new tab, which rose reflecting a surge in U.S. peers and relief that the result became clear quickly. But they cut their gains and were last down 0.6% in late European trade. "The certainty is that he's back, the uncertainty is what he's going to do," said Hayes. In a clear sign of unease, the euro had plunged around 2% against the dollar and was set for its biggest daily drop since the height of the 2020 COVID crisis. JPMorgan, ING and ABN AMRO reckon a drop to parity could be repeated under a Trump presidency depending on the extent of tariffs, as well as tax cuts that could fuel U.S. inflation and limit U.S. Federal Reserve rate cuts. IN THE BALANCE What comes next depends on the extent and pace of tariffs and tax cuts, how much they reignite U.S. inflation, and the countermeasures Europe and China take, investors said. Whether Trump's Republicans take control of Congress will determine how much of his agenda he can implement. For now, traders expect around 130 bps of cuts by end-2025, versus around 120 priced in on Tuesday. Goldman Sachs said on Wednesday it expects more limited tariffs on Europe, foreseeing a 0.5% hit to euro zone output. The euro, while sharply lower at around $1.07, is far from the parity level it last breached during 2022's energy crisis. Deutsche Bank expects it to fall to $1.05 by year-end. "Yes, tariffs are a big concern, but you have to put against that what relative growth is going to do," said Arun Sai, senior multi asset strategist at Pictet Asset Management, betting on euro zone growth stabilising while U.S. growth slows. Sai, whose firm dropped a bet against the euro in recent days, said he did not expect Trump to carry out all his tariff pledges immediately. Federico Cesarini, head of developed markets FX at the Amundi Investment Institute, said traders would have to completely price out Fed rate cuts to push the euro to parity. Traders still expect a Fed rate cut on Thursday and over 100 bps of easing by the end of 2025. MIXED PICTURE While their rally lost steam, Europe's equity markets saw a key volatility tracker (.VT2X) , opens new tab on track for its biggest daily drop in seven weeks. Defence and aerospace stocks outperformed, up 2% each, helped by expectations that Europe will have to step up defence spending. Hani Redha, multi-asset portfolio manager at PineBridge Investments, said Europe's stock market reaction on Wednesday had to be seen "in the context of a pretty abysmal performance of European equities relative to pretty much every other region over the last three months." "A lot of bad news is already built into the price," he added. Any gains could be short-lived as the impact of Trump's policies become clearer, investors said. Renewables, at risk from Trump's energy policies, fell sharply, as did auto stocks, expected to bear the brunt of potential new tariffs. Denmark's Orsted (ORSTED.CO) , opens new tab plunged over 12.7% while carmakers Porsche (PSHG_p.DE) , opens new tab, BMW (BMWG.DE) , opens new tab and Volkswagen fell 5.4%-7.7%. "Europe is getting the worst of both worlds and this comes at a time when the economy is struggling," said Seema Shah, chief strategist at Principal Asset Management, which is underweight European stocks. 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2024-11-06 21:19

PANAMA CITY, Nov 6 (Reuters) - Panama's Maritime Authority said on Wednesday it has begun a process to cancel flag registrations on four LNG vessels sanctioned by the United States over their links with Russian gas producer Novatek (NVTK.MM) , opens new tab. The vessels - North Air, North Mountain, North Way and North Sky - are managed by UAE-registered White Fox Ship Management. The four switched to Panama's flag registry earlier this year from Singapore, according to maritime database Equasis. The targeted vessels transferred LNG from Russia's Yamal and Arctic LNG 2 projects as part of a lease agreement with Novatek and its UAE-based affiliate New Transshipment FZE, the State Department said. White Fox Ship Management was sanctioned by Washington in August. The State Department said last week that Russian firms had sought to obtain secondhand LNG tankers through third-country front companies like White Fox to circumvent U.S. sanctions and revitalize Russia's Arctic LNG 2 project. The United States has imposed several rounds of sanctions on companies supporting Russia's Arctic LNG 2 project, including its developer Novatek, and its LNG shipments. The project had been due to become Russia's largest LNG plant with eventual output of 19.8 million metric tons per year. The sanctions have succeeded in blocking the LNG project and making it difficult for potential buyers to accept cargoes, said sanction experts. The tankers had previously been identified as part of Russia's dark tanker fleet, according to media reports quoted by the authority. Sign up here. https://www.reuters.com/world/americas/panama-cancel-flags-four-us-sanctioned-lng-vessels-2024-11-06/

2024-11-06 20:54

HAVANA, Nov 6 (Reuters) - Cuba's energy grid suffered a complete blackout on Wednesday as Hurricane Rafael barreled toward the Caribbean island, according to grid operator UNE. UNE said in a post on X that the hurricane's strong winds had brought the system offline and that emergency protocols had been activated. Sign up here. https://www.reuters.com/business/energy/cubas-energy-grid-goes-dark-hurricane-rafael-swirls-toward-island-2024-11-06/

2024-11-06 20:33

LONDON, Nov 6 (Reuters) - Hedge funds including BlueBay were turning their attentions to crude oil, U.S. Treasuries, tech and U.S. banks on Wednesday, after Donald Trump was elected president. Trump's victory gives him a clear mandate to implement his policy agenda, which includes plans to cut U.S. corporate taxes, said Russel Matthews, lead portfolio manager of BlueBay's macro hedge fund in London, part of the $468 billion asset manager RBC Global Asset Management. A macro hedge fund uses financial instruments to make bets on the economic health of a country. As U.S. Treasury yields climbed to four-month highs in the wake of the election result, Matthews said he had seen "glimmers of bond vigilantism being back," in a reference to investors dumping or shorting government debt over worries about higher borrowing. A short bet expects asset values to decline. U.S. Treasury prices fell sharply on Wednesday as yields rose - 30-year yields hit a roughly six-month high of 4.68% . "Irresponsible fiscal policies and growing debt piles - there is a point at which the market just starts to revolt against that," said Matthews. BlueBay's hedge fund strategy as of Wednesday, was short 30-year U.S. Treasuries and long 10-year German Bunds , he said, adding the firm was long the dollar and short the euro and pound , . The dollar was up almost 2% against a basket of currencies, and on track for its biggest one-day jump in four years. A steeper bond yield curve might aid undervalued finance firms like Citigroup (C.N) , opens new tab, said Matein Khalid, chief investment officer of family office Phoenix Holdings in Dubai. Banks will likely benefit from easier financial regulations on capital, risk management, asset management and mergers and acquisitions which have been floated as possible Trump policies, Khalid added. Nick Ferres, CIO of Vantage Point Asset Management in Singapore agreed and added that Asia-Pacific banks would also benefit from growth and higher yields under Trump. Whereas in the long run, tech stocks may fare differently, suggested Dan Taylor chief investment officer of Man Numeric, a fund within the $174.9 billion hedge fund Man Group. The so-called "Magnificent 7" biggest tech firms, whose stocks have benefited in the last two years from positive sentiment from not only hedge funds but investors, globally might face headwinds under a Trump presidency, said Taylor. "One would think less regulation would be good for big tech companies, but they may end up the exception if Trump and policy makers see them as too powerful and hostile to national interest," he told Reuters. "It wouldn't be a stretch to imagine one of them being broken up. There is precedent for that in the U.S., in terms of large companies seen as pseudo monopolies getting broken up. We could see this again." 'DRILL, DRILL, DRILL' Trump's support of the oil industry, including easing environmental regulations, could result in lower crude oil prices. "Trump has said he will 'drill, drill, drill,' which will increase U.S. supply," said Sam Berridge, a portfolio manager at the Strategic Natural Resources Fund, a part of the larger A$7 billion ($4.61 billion) Perennial Value Management, in Perth, Australia. "A balancing factor may be a more aggressive stance on Iran oil exports should the U.S. impose stiffer sanctions. This would be supportive for oil prices but it's difficult to say by how much as most of Iran's oil exports go to China," he said. (This story has been corrected to clarify that the Man Group is focused on tech, not bonds and oil, in the headline and paragraph 1) Sign up here. https://www.reuters.com/markets/us/bluebay-man-group-turn-focus-bank-bond-oil-trades-under-trump-2024-11-06/

2024-11-06 19:59

Brent, WTI recoup some losses after falling over $2 a barrel in early trade Trump recaptures White House after divisive campaign U.S. crude inventories rise more than expected, EIA HOUSTON, Nov 6 (Reuters) - Oil prices settled lower on Wednesday as investors weighed a strong U.S. dollar against the potential that U.S. President-elect Donald Trump's foreign-policy plans could squeeze global oil supply. Brent crude oil futures settled down 61 cents, or 0.81%, at $74.92 per barrel. U.S. West Texas Intermediate (WTI) crude settled down 30 cents or 0.42%, to $71.69. Trump's election triggered a large sell-off that pushed oil prices down by more than $2 per barrel during early trade as the U.S. dollar rallied, currently at its highest level since September 2022. A stronger dollar makes greenback-denominated commodities such as oil more expensive for holders of other currencies and tends to weigh on prices. "All the excitement and initial selling enthusiasm has since waned, and I think there is more upside rather than downside in the short term," said Phil Flynn, senior analyst at Price Futures Group, noting that investors on Wednesday looked more at the short-term supply, demand outlook. "There was an over-reaction to the election results, and that a Trump victory could have caused the U.S. industry to sort of drill itself into oblivion and cause a glut," said John Kilduff, partner at Again Capital in New York. "But cooler heads have prevailed and this market has a lot of problems on its hands," he added, citing the war in the Middle East as a supportive factor because it could weigh on supply. Trump's reelection could also mean the renewal of sanctions on Iran and Venezuela, removing barrels from the market, which would be bullish, UBS analyst Giovanni Staunovo said. Iran is an OPEC member with production of around 3.2 million barrels per day, or 3% of global output. However, a crackdown on Iran may be more difficult as the country has become adept at evading sanctions, Alex Hodes, oil analyst at brokerage firm StoneX, said in a note. Trump's support for Israeli Prime Minister Benjamin Netanyahu could heighten instability in the Middle East, according to Andrew Lipow, president of Lipow Oil Associates. That could boost oil prices as investors price in a potential disruption to global oil supplies. Trump is expected to continue arming Israel. But setting aside the U.S. election and geopolitical uncertainties, persistent trends in oil markets are likely to shape the outlook ahead, Mukesh Sahdev, global head of commodity markets, oil at Rystad Energy, said in a note. OPEC+ still pulls the strings, refinery margins battle weaker demand, and higher supply and oil trade flows continue to battle inefficiencies, according to Sahdev. U.S. crude oil, gasoline and distillate inventories rose last week, the U.S. Energy Information Administration said. Crude inventories climbed by 2.1 million barrels to 427.7 million barrels in the week ending Nov. 1, the EIA said, compared with analysts' expectations in a Reuters poll for a 1.1-million-barrel rise. Sign up here. https://www.reuters.com/business/energy/wti-crude-oil-futures-fall-polls-start-closing-us-election-2024-11-06/

2024-11-06 19:56

Nov 6 (Reuters) - About 17% of crude oil production and 7% of natural gas output in the U.S. Gulf of Mexico was shut in response to Hurricane Rafael, the U.S. Bureau of Safety and Environmental Enforcement said on Wednesday. Energy producers had shut in 304,418 barrels per day of oil production and nearly 131 million cubic feet of natural gas from Gulf waters, the bureau said. Rafael, a Category 3 hurricane, was located about 70 miles (110 km) south of Havana in Cuba, with maximum sustained winds of 115 mph (185 kph), per the latest advisory from the U.S. National Hurricane Center. Oil and gas producers began shutting U.S. Gulf of Mexico output and pulling workers off platforms this week ahead of a late-season storm threatening offshore fields. Eleven production platforms, about 3% of the Gulf of Mexico total, and one drilling rig were evacuated, the offshore regulator said, citing reports from producers. The U.S. Gulf of Mexico accounts for about 15% of all domestic oil production and 2% of natural gas output, according to federal data. Sign up here. https://www.reuters.com/business/energy/about-17-oil-production-shut-us-gulf-mexico-due-hurricane-rafael-2024-11-06/