2024-04-26 04:34

A look at the day ahead in European and global markets from Rae Wee The Bank of Japan's (BOJ) decision to keep interest rates around zero didn't come as a surprise, and focus now turns to Governor Kazuo Ueda's press conference late on Friday for further clues on next steps. Markets had their eye on the central bank's bond-buying amounts, where any scaling back of its aggressive purchases would have been regarded as quantitative tightening that could offer some reprieve for the battered yen. Yet, the BOJ said it will keep buying government bonds based on guidance decided in March, even as it removed a reference to the amount of government bonds it has roughly committed to buying each month. The yen fell in a knee-jerk reaction to the weaker side of 156 per dollar, marking a fresh 34-year low and leaving traders on alert for any signs of intervention from Tokyo. It's somewhat reminiscent of the BOJ's policy meeting in September 2022, though the yen's slide then was much more rapid and pronounced. That same day when the board announced its policy decision, Tokyo conducted its first yen-buying intervention since 1998. Some analysts said history could repeat itself, especially given the strong warnings from Japanese authorities in recent days against excessive yen moves. With a scant economic calendar in the UK and euro zone, the U.S. core personal consumption expenditures (PCE) price index data for March - the Federal Reserve's preferred measure of inflation - takes centre stage later on Friday. Any upside surprises could again derail the timing for Fed rate cuts, with the first currently expected to come in September. That the U.S. economy is holding up this well in the face of decades-high interest rates is somewhat astounding. While the country's first-quarter GDP missed expectations, that was due to a surge in imports and a small build-up of inventories. Domestic demand, however, remained strong, business investment picked up and the housing recovery gained steam. Economists at Wells Fargo touted the reading as a "wolf in sheep's clothing". With just days to go before the next Fed policy meeting, it remains to be seen what Chair Jerome Powell will say this time. Given the recent run of solid U.S. economic data, the narrative has changed not just to when the first rate cut could occur, but whether rate cuts may even come at all this year. Key developments that could influence markets on Friday: - U.S. core PCE price index (March) - France Consumer Confidence (April) - Reopening of 1-month, 3-month and 6-month UK government debt auctions - NatWest Group PLC Q1 2024 earnings release Sign up here. https://www.reuters.com/markets/global-markets-view-europe-2024-04-26/

2024-04-26 02:56

MUMBAI, April 26 (Reuters) - The Indian rupee is expected to open little changed on Friday, despite a pick-up in U.S. inflation which spurred a rise in U.S. Treasury yields and further reduced the likelihood of imminent Federal Reserve rate cuts. Non-deliverable forwards indicate the rupee will open at 83.30-83.32 to the U.S. dollar, compared with its close of 82.3150 in the previous session. The losses in other Asian currencies were moderate, with most down just about 0.1%. I "would have thought that Asia would be under a lot of stress. However, that has not happened, making it a dull opening," a currency trader at a bank said. The dollar/rupee pair "is now in a phase" where dips to 83.20-83.25 will find buyers, while 83.40 will bring in sellers, he said. The 10-year U.S. yield rose to the highest since November and the 2-year yield topped 5% on Thursday after data showed that a measure of inflation rose more than expected. The core PCE rose by 3.7% in the first quarter, above expectations of a 3.4% increase. The data "implies upside risks to" the monthly core PCE deflator and makes a near-term Fed rate cut all the more less likely, ING Bank. The March core PCE index, due later in the day, is forecast to rise 0.3% month-on-month. "Assuming no revisions in January and February, this quarterly print implies a monthly core PCE inflation rate for March of 0.48%, well above our prior expectations," Morgan Stanley said in a note. The odds of a Fed rate cut in July is down to 1-in-3 and investors are pricing in just 35 basis points of total cuts this year. Meanwhile, U.S. GDP increased at a 1.6% annualized rate last quarter, below expectations. It was higher inflation that caught the market's eye, rather than weaker growth, ING Bank said. KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.38; onshore one-month forward premium at 7.25 paisa ** Dollar index little changed at 105.60 ** Brent crude futures up 0.3% at $89.3 per barrel ** Ten-year U.S. note yield at 4.7% ** As per NSDL data, foreign investors bought a net $507.5 million worth of Indian shares on April 24 ** NSDL data shows foreign investors sold a net $384.1 million worth of Indian bonds on April 24 Sign up here. https://www.reuters.com/markets/currencies/rupee-see-muted-reaction-us-inflation-flare-up-2024-04-26/

2024-04-26 01:01

PetroChina not able to unload a cargo for nearly a month Refinery reaches half its designed capacity Regular sellers are NNPC, Trafigura, Mercuria, Vitol, Shell April 25 (Reuters) - Chinese state energy major PetroChina has been waiting to unload a cargo of U.S. crude at Nigeria's giant new refinery for nearly a month due to payment issues, according to four trading sources and shipping data. The impasse highlights difficulties the $20 billion plant funded by Africa's richest man Aliko Dangote faces in its aim to be the biggest refinery on the continent and in Europe when it reaches full capacity this or next year. Dangote aims to reverse the trend by which the oil-rich country exports its crude but almost totally relies on imports of fuel and other refined products. The 2-million-barrel West Texas Intermediate (WTI) crude cargo shipped by PetroChina onboard supertanker Maran Mira has, however, been floating off Nigeria since March 28, shipping data on LSEG and Kpler showed. The completion of the oil sale from PetroChina to Dangote has been delayed as the refinery has yet to issue a letter of credit to the Chinese trader, one source familiar with the matter said. A letter of credit is the most common form of trade finance. A buyer's bank sends a letter to the seller's bank guaranteeing payment to the seller once goods arrive. PetroChina was also not keen to receive oil products as payment, one of the ways that Dangote has been paying for its crude, the source said. Two of the sources also told Reuters that the refinery has had difficulty accessing dollars through the Nigerian government, with the naira's slide against the U.S. dollar as global oil prices have risen straining Nigeria's finances. The government did not immediately respond to a request for comment and a Dangote executive did not directly address the issue in comments to Reuters. PetroChina has another 2 million barrels of WTI crude onboard supertanker Kondor that is making its way to Nigeria, according to another source and LSEG shiptracking data. Potential sellers of U.S. WTI crude to Dangote have been confronted with difficult payment terms: either a 60 to 90 credit or an exchange of refined products for the crude oil, three of the sources said. Credit terms for oil deals are typically 30 days. PetroChina did not respond to a Reuters request for comment. A shipbroker estimated that the ship is incurring demurrage costs of around $65,000 a day. Dangote group executive Edwin Devakumar told Reuters that seeking favourable sale prices and credit terms were normal business practices. "If someone gives me one year credit, I'll grab it and if not, I'll negotiate the best possible deal," he said. "When you go to a shop to buy something ... You'll try the best possible deal and I do the same". "We are not delayed. If someone's business is delayed, he is not giving us a good deal," Devakumar said, without specifically addressing the issue with PetroChina. RAMPING UP The refinery started operations in January and has reached half its capacity in recent weeks but a further increase is being slowed by its need to borrow billions of dollars in working capital to be able to buy large volumes of crude, trading sources said. Devakumar declined to comment on the current run rates at the refinery. The facility is importing around 10 crude oil cargoes a month, two traders said, roughly half the capacity of 650,000 barrels per day (bpd) it seeks to reach this year or next, which would make it the largest refinery in Africa and Europe. The amount of Nigerian and U.S. crude discharged at Dangote totalled 8.4 million barrels in March and 5.4 million barrels so far in April, Kpler data showed. Another 1 million barrels of Nigerian crude is expected to arrive on April 27. Trafigura, Mercuria, Vitol, Shell and NNPC were among Dangote's suppliers of crude last month, according to Kpler. Sign up here. https://www.reuters.com/markets/commodities/stranded-cargo-shows-credit-challenges-nigerias-dangote-refinery-2024-04-25/

2024-04-26 00:40

Reuters poll graphic on monetary policy forecasts - BENGALURU, April 26 (Reuters) - The global economy is likely to carry its solid momentum for the rest of the year and into 2025, defying earlier expectations of a slowdown, according to a Reuters poll of economists who said stronger growth than forecast was more likely than weakness. That shift in the growth outlook brings its own set of challenges for central banks, which raised rates in quick succession to try and drive inflation down to target but now may have to wait even longer before considering rate reductions. Among bigger economies, the United States and India were expected to contribute the most to the pickup in growth. There was no deterioration in the consensus view for the euro zone or No. 2 economy China either, according to a March 27-April 25 Reuters poll of 500 economists covering 48 economies. Global growth was forecast at 2.9% this year, faster than 2.6% in a January poll, followed by 3.0% in 2025. More than 90% of common contributors upgraded their views and still said there was a significant chance growth could be even stronger. A 60% majority of economists, 98 of 162, said the global economy this year was more likely to grow faster than they expected than undercut their predictions. "We are continuing to be surprised by the resilience of the global economy. Now, part of that is we entered the year with subdued expectations, we thought that there would be a deceleration this year," said Nathan Sheets, global chief economist at Citi. "So far we've been marking up growth for the global economy in a number of places including major economies like the U.S. and China, Europe to some extent as well. So it's feeling solid." On the flip-side, strong growth was expected to keep inflation and interest rates higher for longer. More than three-quarters of the central banks covered, 16 of 21, were expected to still be dealing with above-target inflation by year-end, up from 10 in the January quarterly poll. Economists still expect major central banks to cut rates either this quarter or next, broadly in line with financial market pricing. But most now forecast fewer cuts by year-end as inflation remains sticky. The U.S. Federal Reserve is expected to start cutting in September and once more in Q4, according to the poll, much later than a March start and a total of six cuts financial markets had priced in at the beginning of the year. In January, the Reuters consensus had a more modest outlook, with four cuts starting in June. Despite lackluster Q1 GDP growth reported on Thursday, risks were still for the Fed to go for fewer rate cuts this year as underlying inflation data that accompanied the report suggested pressures were building, not easing. The European Central Bank was still forecast to cut rates by 25 basis points in June, followed by two more in the second half of the year to support growth in the currency bloc which was expected to only grow an average 0.5% in 2024. That widening gap is already priced into the strong dollar, up over 4% this year against a basket of currencies. "A question we've been getting quite a lot is 'can Europe start cutting before the Fed?'," said James Rossiter, head of global macro strategy at TD Securities. "And I would say...when we look back in history, whether the ECB starts in June and the Fed starts in September, it will all look like it's part of the same cutting cycle." The Bank of England, which was the first among major central banks to raise borrowing costs in December 2021, will also wait until next quarter to lower them, the survey showed. (For other stories from the Reuters global economic poll:) Sign up here. https://www.reuters.com/business/global-economy-set-stay-roll-rest-year-2024-04-26/

2024-04-26 00:31

Anglo says offer significantly undervalues the company BHP shares close 4.6% lower in Australia Some investors say higher price needed to seal a deal Anglo shares rise 5.7% on Elliott stakebuilding LONDON, April 26 (Reuters) - Anglo American (AAL.L) New Tab, opens new tab rejected rival miner BHP Group's (BHP.AX) New Tab, opens new tab 31.1 billion pound ($39 billion) takeover proposal on Friday, saying the bid significantly undervalued the London-listed company and its future prospects. Australia's BHP, which has until May 22 to make a binding bid, is expected to sweeten its offer to try to clinch a deal that would create the world's biggest miner of copper, a metal central to the clean energy shift, accounting for about 10% of global output. Anglo's London-listed shares were trading 5.7% higher at 27.04 pounds by 1303 GMT. Activist fund Elliott has built a $1 billion position, according to a person with knowledge of the stake, which buoyed the stock. Anglo said the complex structure of the deal created uncertainty and that it was well-positioned to create significant value from assets aligned with the energy transition and other major demand trends. The company started a strategic review of its assets in February in response to a 94% fall in annual profit and a series of writedowns caused by lower commodity demand. "The BHP proposal is opportunistic and fails to value Anglo American's prospects, while significantly diluting the relative value upside participation of Anglo American's shareholders relative to BHP's shareholders," Anglo Chairman Stuart Chambers said in a statement. Reuters reported on Thursday, citing two sources, that Anglo's management did not consider the proposal attractive, and analysts and investors on Friday predicted BHP would come back with a higher offer. "With regards to a price, I think it's pretty clear that the initial shot fired is just that," said Todd Warren, a portfolio manager at Tribeca Investment Partners in Sydney, which holds shares in Anglo. "We would need to see more money on the table before we sold our shares." BHP's shares closed 4.6% lower in Australia on Friday. The world's largest listed mining company on Thursday offered Anglo's shareholders 25.08 pounds per share, a premium of 31% to Wednesday's market close. Copper prices in London hit a two-year peak above $10,000 a metric ton on Friday as fund buying intensified. SOUTH AFRICA CONCERNS A condition of BHP's proposal is that Anglo first distributes to shareholders its stakes in Anglo American Platinum (Amplats) (AMSJ.J) New Tab, opens new tab and Kumba Iron Ore (KIOJ.J) New Tab, opens new tab, both of which operate in South Africa where BHP has no assets. A source familiar with BHP's thinking said those assets would be better managed locally. BHP got rid of its smaller assets through a demerger years ago to focus on higher-volume commodities. Kumba is hobbled by a failing logistics network and Amplats faces lower metal prices and falling demand. Amplats said in February it was embarking on a restructuring that could affect about 3,700 jobs. Any exit by Anglo, which was founded in Johannesburg in 1917 and employs more than 40,000 people in South Africa, would be a further economic blow to the country, which has seen the platinum it mines fall out of favour. South Africa's Public Investment Corporation (PIC) holds 6.99% of Anglo American, according to LSEG data. South Africa's government is scrutinising BHP's proposed offer, which comes weeks before a general election in which voter anger about a stagnant economy and high unemployment could cost the long-governing African National Congress its majority. On Friday, Impala Platinum (IMPJ.J) New Tab, opens new tab announced it could cut 3,900 jobs in South Africa due to lower metal prices. BHP investors may also have concerns about the merits of the deal as it faces different regional jurisdictions and some Anglo American businesses are lower margin than BHP's, analysts said. "It's not clear how BHP adds value to the deal if it is required to offer considerably more," said Brenton Saunders, a portfolio manager at Pendal, commenting on the complicated structure of the deal. BHP CEO Mike Henry and executives including Chief Financial Officer Vandita Pant will be briefing investors next week, fund managers said. A deal, if successful, would be the largest mining takeover globally in 2024 and in the top 10 largest deals for the sector ever, according to LSEG data. The mining sector has seen a mergers and acquisitions rush as companies seek more exposure to metals needed for the global energy transition, and further consolidation could follow if this deal goes through. Aside from South Africa, attention was also drawn to potential antitrust hurdles BHP might face in China, the world's biggest buyer of copper, and in Japan and India, which take its steel-making coal. Glencore (GLEN.L) New Tab, opens new tab was forced to sell its interest in Xstrata's Las Bambas copper project in 2013 to clear a hurdle set by Chinese regulators for its $35 billion deal. Sign up here. https://www.reuters.com/markets/commodities/bhp-shares-fall-36-after-making-39-bln-bid-rival-anglo-american-2024-04-26/

2024-04-26 00:25

HOUSTON, April 26 (Reuters) - Oil prices settled higher on Friday, garnering support from tensions in the Middle East, but a strong dollar and U.S. inflation data quashed hopes that the Federal Reserve would cut interest rates soon, giving prices a ceiling. Brent crude futures settled up 49 cents, or 0.55%, to $89.50 a barrel. U.S. West Texas Intermediate crude futures settled up 28 cents, or 0.34%, to $83.85 a barrel. Supply concerns supported prices as tensions continue in the Middle East. Benjamin Netanyahu, Israel's prime minister, said any rulings by the International Criminal Court, which is investigating Hamas' Oct. 7 attacks on Israel and Israel's military assault on Gaza, would not affect Israel's actions but would "set a dangerous precedent." As tensions escalate, Israel's military said on Friday that its air force struck in Lebanon's West Beqaa District and killed a militant who advanced attacks against Israel. Israel stepped up air strikes on Rafah on Thursday after saying it would evacuate civilians from city in southern Gaza and launch an all-out assault despite allies' warnings that doing so could cause mass casualties. "Israel is not afraid to come and support themselves on their own if they have to, people are watching to see what happens between Netanyahu and Biden," said Tim Snyder, chief economist at Matador Economics. "The geopolitical element is not over, the proxy battles going on right now will continue," and this is still providing support and helping to offset the negative pressure from the inflationary data, Snyder added. Meanwhile, macroeconomic pressures capped gains after data released on Friday showed growing inflation. In the 12 months through March, U.S. inflation rose 2.7% after an advance of 2.5% in February. Last month's increase was broadly in line with economists' expectations. The Fed has a 2% inflation target. The U.S. central bank is expected to leave rates unchanged at its policy meeting next week. "The economic data this morning was enough for market participants to conclude that the Fed is not going to be forthcoming with interest rate cuts any time soon," said John Kilduff, partner with Again Capital LLC. "Geopolitical jitters in the market are what is keeping us aloft. Those two competing forces should keep us in check," Kilduff added. U.S. Treasury Secretary Janet Yellen told Reuters on Thursday that U.S. GDP growth for the first quarter could be revised higher, and inflation will ease after a clutch of "peculiar" factors held the economy to its weakest showing in nearly two years. U.S. economic growth was likely stronger than suggested by the weaker quarterly data, Yellen said. Oil prices have flip-flopped since Yellen's comments and the release of the inflation data on Friday. Meanwhile, the dollar soared to a fresh 34-year high against the yen on Friday, bolstered in part by the U.S. inflation data. "Dollar strength is helping to exert negative pressure today," Kilduff said. Elsewhere, OPEC Secretary General Haitham Al Ghais said in an op-ed article that the end of oil is not in sight, as the pace of energy demand growth means that alternatives cannot replace it at the needed scale, and the focus should be on cutting emissions not oil use. Sign up here. https://www.reuters.com/markets/commodities/oil-prices-rise-us-official-eases-market-concerns-over-economic-headwinds-2024-04-26/