2024-05-15 17:06
LONDON/BEIJING, May 15 (Reuters) - Commodity traders Trafigura and IXM are looking to buy physical copper to deliver against large short positions on U.S. exchange CME where copper prices soared to record highs on Wednesday, five sources with direct knowledge of the matter said. Short positions can be bets on lower prices or producers hedging their output. A short squeeze occurs when parties holding such positions are forced to buy them back at a loss or deliver physical copper to close them out. Copper prices on COMEX, part of the CME Group (CME.O) New Tab, opens new tab, hit a record peak of $5.1775 a lb or $11,414 a metric ton on Wednesday, a gain of 28% so far this year and 14% over the last week. They were down 0.3% at $4.9375 at 1644 GMT. "Trafigura is one of the largest physical suppliers of copper to North America and given the premium in this market we are shipping larger quantities of the metal to COMEX," the Swiss-based trader said Geneva-based IXM, owned by China's CMOC Group (603993.SS) New Tab, opens new tab, declined to comment. "We continuously monitor our markets, which are operating as designed as market participants manage copper risk and uncertainty," the CME said in response to a request for comment. COMEX copper prices are expected to keep climbing until shipments of the metal used in the power and construction industries from South America and Australia arrive in the United States. It could be many weeks before short positions can be cut, the sources said. "Copper supply, demand fundamentals in the U.S., while not unsupportive, probably don’t justify such extremes, suggesting something else is happening in the paper market," said CRU analyst Robert Edwards. Swiss-based commodity trader IXM is one of the world's largest traders of physical non-ferrous metals. Trafigura has asked some copper producers to divert May and June shipments to the United States, the sources said. But changing destination at short notice is extremely difficult. The COMEX copper rally has outpaced gains on the London Metal Exchange (LME) and created an arbitrage opportunity, when copper producers and traders sell commodities in different locations to take advantage of price differentials. "We think arb-related and outright short covering has fuelled COMEX gains which are likely unsustainable: redirection of physical units to the US should ease the arb dislocation, but this will take some time," Citi analysts said in a note. Copper prices on the LME are trading around $10,240 a ton. Taking into account costs such as freight and insurance, traders can make around $300 a ton by taking copper from the LME system and delivering it to the CME, one source said. However, the problem is half of the available copper in LME registered warehouses is of Russian origin and cannot be delivered into the CME system. Elsewhere, several Chinese copper importers had redirected shipments to the United States, according to two of the sources. But copper cathode from China, which smelts about half of the world's copper, cannot be delivered against COMEX contracts. Sign up here. https://www.reuters.com/markets/commodities/trafigura-ixm-caught-comex-copper-short-squeeze-prices-hit-record-2024-05-15/
2024-05-15 17:02
May 15 (Reuters) - Minneapolis Federal Reserve Bank President Neel Kashkari on Wednesday reiterated his view that he is unsure how restrictive monetary policy is right now, and that borrowing costs should stay where they are as U.S. central bankers take stock of inflation. "The biggest uncertainty in my mind is how much downward pressure is monetary policy putting on the economy? That's an unknown," Kashkari told the Williston Basin Petroleum Conference in Bismarck, North Dakota. "And that tells me we probably need to sit here for a while longer until we figure out where underlying inflation is headed before we jump to any conclusions." The economy and the housing market have been more resilient than expected, he said, and Americans have been spending more than anticipated given the increase in the Fed policy rate to its current 5.25%-5.5% range. Kashkari did not comment on government data released Wednesday that showed inflation edged down in April, after proving stronger than expected during each of the first three months of the year. Sign up here. https://www.reuters.com/markets/us/feds-kashkari-rates-should-stay-hold-for-while-longer-2024-05-15/
2024-05-15 16:58
May 15 (Reuters) - The U.S. Justice Department said Boeing (BA.N) New Tab, opens new tab breached its obligations under a 2021 agreement that kept the planemaker from criminal prosecution following fatal 737 MAX crashes in 2018 and 2019 that killed 346 people. The finding raises the prospect of Boeing facing prosecution it had previously avoided, which could result in fresh penalties and deepen an ongoing corporate crisis that has already resulted in a management shakeup and government investigations. Boeing failed to "design, implement, and enforce a compliance and ethics program" to prevent violations of U.S. fraud laws, the Justice Department said in a letter to a Texas judge contained in a court filing late on Tuesday. Boeing did not immediately respond to a request for comment on Wednesday. WHAT IS THE 2021 AGREEMENT? Boeing in January 2021 agreed with the Justice Department to pay $2.5 billion to resolve a criminal investigation into the company's conduct surrounding the fatal crashes. The agreement included money to compensate victims' relatives and required Boeing to overhaul its compliance practices. The deal, known as a deferred prosecution agreement, gave the U.S. planemaker a way to avoid being prosecuted on a charge of conspiring to defraud the U.S. Federal Aviation Administration. Prosecutors agreed to ask a court to dismiss the fraud charge if they determined Boeing complied with the agreement over a three-year period. The agreement was set to expire on Jan. 7, 2024. Two days before that, a panel blew off a new Boeing 737 MAX 9 jet during an Alaska Airlines (ALK.N) New Tab, opens new tab flight. WHAT COULD AUTHORITIES DO? The Justice Department determination exposes Boeing to potential criminal prosecution over the crashes which could carry steep financial penalties and tougher oversight, widening the corporate crisis stemming from the January blowout. Prosecutors could extend the 2021 settlement for another year or push for oversight by a court-appointed monitor, a costly change from the previous agreement that allowed Boeing to oversee its own changes. The Justice Department could also push for additional fines or for the company to plead guilty. That could affect Boeing's ability to secure government contracts, according to a Reuters review of prosecutors' actions following findings that companies violated other similar agreements. However, the Justice Department said in the court filing in Texas that officials will consider steps the planemaker has taken to address and remediate violation of the pact before determining how to proceed. WHAT IS NEXT? Boeing has to respond to the Justice Department by June 13. Boeing said on Tuesday night it believes it honored the terms of the agreement. Officials are expected to decide whether to prosecute Boeing by July 7. Prosecutors are set to meet with family members of the victims of the previous fatal crashes and their lawyers on May 31 to discuss their decision, according to correspondence Reuters reviewed. Any decision would be closely watched by investors at a time when Boeing is trying to protect its investment grade rating. The planemaker is holding talks to buy supplier Spirit AeroSystems (SPR.N) New Tab, opens new tab and plans to ramp up now slumping production of its strong-selling 737 MAX in the back half of the year. A fine comparable to the $2.5 billion penalty in 2021 "would certainly put pressure" on Boeing's rating, said Ben Tsocanos, airlines director of S&P Global Ratings. "The extent would depend on timing, funding and Boeing’s circumstances, including how much progress it has made on a MAX recovery, whether it’s reached a deal to buy Spirit and how it’s funding it.” Sign up here. https://www.reuters.com/business/aerospace-defense/how-boeing-could-face-criminal-prosecution-it-avoided-2021-2024-05-15/
2024-05-15 15:48
May 15 (Reuters) - New York Community Bancorp's (NYCB.N) New Tab, opens new tab shares reversed course to trade down 4% as a deal to sell $5 billion of mortgage warehouse loans failed to assuage investors worried about the long road to profitability for the embattled lender. The deal, already hinted by NYCB, with JPMorgan Chase (JPM.N) New Tab, opens new tab on Tuesday bolsters its liquidity. However, concerns stemming from the bank's exposure to the under-pressure commercial real estate (CRE) still remained. "This (warehouse lending) is arguably one of the more profitable businesses, in our view, and the path to a respectable return on tangible equity will continue to be a difficult," KBW analysts wrote a note. Earlier this month, NYCB's new management team unveiled a plan to return to profitability next year after a turmoil sparked by a surprise quarterly loss in January wiped billions off its market value, led to a mass exodus of bankers and shrank its total deposits. "Profitability is likely to be close to zero for the next 3-5 years," Raymond James analyst Steve Moss said. NYCB has pledged to shrink its CRE lending footprint. CRE loans made up 16% of the bank's total at the end of the first quarter. However, analysts have said NYCB will have to lure buyers for such loans with steep discounts. Warehouse loans are lines of credit given to lenders who can use the funds to provide mortgages. They are repaid when the mortgage lender sells the loans to an investor. Such loans accounted for 6%, or $5.2 billion, of NYCB's total $82.3 billion, as of March 31. NYCB's shares were last down 4% at $3.74 on Wednesday after rising as much as 6% before the bell. The stock is down roughly 62% so far this year. TALENT MIGRATION NYCB's net interest margin will continue to face pressure due to deposit challenges, stemming from the departure of certain teams it acquired as part of its Signature Bank buyout, Raymond James wrote. Nearly 200 bankers from its private and commercial banking teams have left, the bank's executives disclosed on an earnings call earlier this month. NYCB will invest proceeds from the sale in cash and securities, it has said. It expects the deal to close in the third quarter. Sign up here. https://www.reuters.com/business/finance/nycb-shares-rise-deal-sell-5-billion-mortgage-warehouse-loans-jpmorgan-2024-05-15/
2024-05-15 15:37
May 15 (Reuters) - Neuralink's disclosure last week that tiny wires inside the brain of its first patient had pulled out of position is an issue the Elon Musk company has known about for years, according to five people familiar with the matter. The company knew from animal testing it had conducted ahead of its U.S. approval last year that the wires might retract, removing with them the sensitive electrodes that decode brain signals, three of the sources said. Neuralink deemed the risk low enough for a redesign not to be merited, the sources added. Neuralink is testing its implant to give paralyzed patients the ability to use digital devices by thinking alone, a prospect that could help people with spinal cord injuries. The company said last week that the implant's tiny wires, which are thinner than a human hair, retracted from a patient's brain in its first human trial, resulting in fewer electrodes that could measure brain signals. The signals get translated into actions, such as moving a mouse cursor on a computer screen. The company said it managed to restore the implant's ability to monitor its patient’s brain signals by making changes that included modifying its algorithm to be more sensitive. The sources declined to be identified, citing confidentiality agreements they had signed with the company. Neuralink and its executives did not respond to calls and emails seeking comment. The U.S. Food and Drug Administration was aware of the potential issue with the wires because the company shared the animal testing results as part of its application to begin human trials, one of the people said. The FDA declined to comment on whether it was aware of the issue or its possible significance. The agency told Reuters it would continue to monitor the safety of patients enrolled in Neuralink's study. Were Neuralink to continue the trials without a redesign, it could face challenges should more wires pull out and its tweak to the algorithm proves insufficient, one of the sources said. But redesigning the threads comes with its own risks. Anchoring them in the brain, for example, could result in brain tissue damage if the threads dislodge or if the company needs to remove the device, two of the sources said. The company has sought to design the threads in a way that makes their removal seamless, so that the implant can be updated over time as the technology improves, current and former employees say. In January, Neuralink implanted the device in the brain of its first patient, Noland Arbaugh, who is paralyzed from the shoulders down due to a 2016 diving accident. In the weeks after the surgery, “a number of threads retracted from the brain,” Neuralink said in a blog update last week. The post made no mention of adverse health effects to Arbaugh and did not disclose how many of the device’s 64 threads pulled out or stopped collecting brain data. So far, the device has allowed Arbaugh to play video games, browse the internet and move a computer cursor on his laptop by thinking alone, according to company blog posts and videos. Neuralink says that soon after the surgery, Arbaugh surpassed the world record for the speed at which he can control a cursor with thoughts alone. It is common for medical device companies to troubleshoot different designs during animal trials and for issues to arise during animal and clinical testing, according to outside researchers and sources who have worked at Neuralink and other medical device companies. Specialists who have studied brain implants say the issue of threads moving can be hard to solve, partly due to the mechanics of how the brain moves inside the skull. Robert Gaunt, a neural engineer at the University of Pittsburgh, described the movement of the wires so soon after the surgery as disappointing but said that is not unforeseen. “In the immediate days, weeks, months after an implant like this, it’s probably the most vulnerable time,” he said. PIG HEAVING In 2022, the FDA initially rejected Neuralink’s application to begin human trials, and raised safety concerns about the threads, Reuters exclusively reported last year. Neuralink conducted additional animal testing to address those concerns, and the FDA last year granted the company approval to begin human testing. The company found that a subset of pigs implanted with its device developed a type of inflammation in the brain called granulomas, raising concerns among Neuralink’s researchers that the threads could be the cause, according to three sources familiar with the matter and records seen by Reuters. Granulomas are an inflammatory tissue response that can form around a foreign object or an infection. In at least one case, a pig developed a severe case of the condition. Company records reviewed by Reuters show that the pig developed a fever and was heaving after surgery. Neuralink’s researchers did not recognize the extent of the problem until examining the pig’s brain post-mortem. Inside Neuralink, researchers debated how to rectify the issue and commenced a months-long investigation, said the sources familiar with the events. Ultimately, the company could not determine the cause of the granulomas, but concluded that the device and the attached threads were not to blame, one of the sources said. Sign up here. https://www.reuters.com/technology/musks-neuralink-has-faced-issues-with-its-tiny-wires-years-sources-say-2024-05-15/
2024-05-15 12:43
BRASILIA, May 15 (Reuters) - Brazil's central bank is firmly committed to pursuing its 3% inflation target, board members said on Wednesday, noting that they share concerns about rising price expectations despite disagreements about lowering interest rates at last week's monetary policy meeting. Governor Roberto Campos Neto stressed that the bank will not shy away from the target, while monetary policy director Gabriel Galipolo said the goal is not up for discussion. Their remarks reinforced the bank's hawkish tone after its split decision last week to cut interest rates by 25 basis points to 10.50% after six consecutive cuts twice that size. All four appointees of President Luiz Inacio Lula da Silva to the nine-member board voted for a 50-basis-point cut, adhering to a March guidance. The officials' remarks helped to further fuel bets embedded in interest rates futures that the bank would pause its easing cycle as soon as its next monetary policy meeting in June. "Our mandate is clear, well-defined and it will be pursued," Campos Neto said at a central bank event in Brasilia, emphasizing that policy discussions should exclude the target's tolerance band of plus or minus 1.5 percentage points. Shortly after his speech, Galipolo said at an event in New York that he agreed with Campos Neto's sentiments. Galipolo, seen as the frontrunner to succeed Campos Neto when his term ends in December, said he had contemplated voting for a 25-basis-point cut and would have been comfortable with it. Galipolo said he ended up voting for a 50-basis-point reduction because he thought the bank's reputation would suffer from abandoning its previous guidance, and he wanted to be consistent in his public statements and actions. Campos Neto, who led the group that sealed the 25-basis-point cut, highlighted that policymakers discussed how inflation expectations are extremely relevant. Galipolo noted significant discomfort with them drifting away from the inflation target. "It's very valuable to convey this sense of concern by slowing down the pace, as proposed by the five colleagues who voted for the 25 (basis-point cut)," said Galipolo. Policymakers have noted that inflation expectations have risen, as seen in market prices and a weekly survey of economists, after remaining steady for months. Campos Neto said a smaller rate cut was justified by factors such as expectations that U.S. interest rates would remain high for a longer period, labor market strength in Brazil and its impact on prices of services, food inflation risk and uncertainties about oil prices. Sign up here. https://www.reuters.com/world/americas/brazils-central-bank-fully-committed-3-inflation-target-governor-says-2024-05-15/
