US STOCKS-U.S.-China trade tensions, earnings set to pressure Wall St - Reuters News
03-May-2018 09:03:32 PM
• AIG slides after lower-than-expected Q1 profit
• U.S. team arrives in Beijing for trade talks
• Caterpillar drops after BofA downgrade
• Futures down: Dow 97 pts, S&P 6.75 pts, Nasdaq 22 pts
Adds comments, details, updates prices
By Sruthi Shankar
May 3 (Reuters) - U.S. indexes were on track to open lower on Thursday as investors remained on edge about U.S.-China trade talks, while the latest round of earnings added little cheer.
Among early decliners were AIG, which dropped 6.7 percent after the insurer reported a lower-than-expected quarterly profit.
Tesla shed 7.7 percent, extending losses from Wednesday after Chief Executive Officer Elon Musk cut off analysts asking about the company's profit potential, despite promises that production of the troubled Model 3 electric car was on track.
At 8:48 a.m. ET, Dow e-minis were down 97 points, or 0.41 percent. S&P 500 e-minis were down 6.75 points, or 0.26 percent and Nasdaq 100 e-minis were down 22 points, or 0.33 percent.
Wall Street closed lower on Thursday, weighed down by news about potential U.S. restrictions on Chinese telecommunications companies, and after the Federal Reserve reaffirmed outlook for more rate hikes.
"We weakened post the FOMC meeting and it's a little bit of the same carrying over to today," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "Augmenting it is some worries about trade negotiations with China that are underway and what may come of that."
The central bank expressed confidence that a recent rise in inflation near to its target would be sustained, leaving it on track to raise borrowing costs in June, but emphasized the inflation target was "symmetric", suggesting it was not inclined to speed up its tightening plans.
The focus now shifts to trade issues between U.S. and China as a Trump administration delegation, including Treasury Secretary Steven Mnuchin, visits Beijing for negotiations.
Data showed trade deficit with China for politically sensitive goods dropped 11.6 percent to $25.9 billion, which will do little to ease tensions between the two countries.
First-quarter earnings continued to come in strong, with nearly 80 percent of the 343 S&P 500 firms that have reported so far topping profit estimates.
Despite that, the rewards to profit beats have been subdued as investors worry that earnings may have peaked, after bellwethers including Caterpillar flagged concerns about rising costs.
"Though we've come out of great earnings and economic news has been decent enough, for one to think equity prices should move higher, market participants don't seem to believe that they're being given enough good news," Luschini said.
Caterpillar was down 2.1 percent after BofA Merrill Lynch downgraded the stock to "neutral", citing slowing retail sales and peaking Class 8 truck orders.
Kraft Heinz rose 2.8percent after its quarterly profit beat expectations, benefiting from U.S. tax changes and price hikes to counter higher input costs.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)
UPDATE 5-Oil slips as OPEC, Iran worries bump against U.S. output - Reuters News
03-May-2018 07:37:29 PM
• Potential of new U.S. sanctions against Iran keep market on edge
• OPEC cuts bolstered by Venezuelan declines
• U.S. crude oil production hits record high of 10.62 mln bpd
• Analysts expect U.S. oil production to rise further
Recasts, updates prices
By Libby George
LONDON, May 3 (Reuters) - Oil prices slipped on Thursday as swelling U.S. crude inventories and record weekly U.S. production clashed with OPEC supply cuts and the potential for new U.S. sanctions against Iran.
Prices have seesawed, edging lower during Asian trading hours, then higher at the start of the day in Europe, as the market grappled with conflicting fundamental signals.
On Wednesday, a report from the U.S. Energy Information Administration (EIA) showed a 6.2-million-barrel jump in U.S. crude inventories.
But bullish factors, including an increase in Saudi Arabia's official oil selling price to Asia, also underpinned prices, according to Commerzbank analyst Carsten Fritsch.
"It may signal stronger-than-expected demand in Asia," Fritsch said. "This, combined with constraints in (OPEC) production, could lead to higher prices."
State-owned producer Saudi Aramco on Wednesday raised the June price for its Arab Light grade for Asian customers to a premium of $1.90 a barrel to the Oman/Dubai average, the highest since August 2014.
Additionally, the latest Reuters survey of OPEC production showed it pumped around 32 million barrels per day (bpd) in April, slightly below its target of 32.5 million bpd, due largely to plunging output in Venezuela.
Fritsch said the cuts, along with demand growth, were more than offsetting the increase in U.S. oil.
U.S. oil production rose to a record of 10.62 million bpd, putting it ahead of Saudi Arabia, the biggest OPEC producer.
Only Russia pumps more, at around 11 million bpd.
U.S. drilling for new production is also increasing, encouraged by rising prices following OPEC's production curbs.
The May 12 deadline for U.S. President Donald Trump to decide whether to continue waiving U.S. sanctions against Iran was also buffeting downward pressure on prices.
"Overall, we continue to trade a waiting game for the U.S. decision on Iran, waiting to have sanction headlines trigger some frenzied buying," said Olivier Jakob, managing director of energy consultancy PetroMatrix.
Trump has all but decided to withdraw from the 2015 Iran nuclear accord by May 12, sources said, though exactly how he will do so remains unclear.
Iran re-emerged as a major oil exporter in January 2016 when international sanctions against Tehran were suspended in return for curbs on Iran's nuclear programme.
(Additional reporting by Henning Gloystein in Singapore; editing by Jason Neely and Adrian Croft)
China opens iron ore market to the world in pricing, image push - Reuters News
03-May-2018 01:06:07 PM
• China to allow foreign investors in iron ore futures from Friday
• Trading volumes on Dalian were 20 times global iron ore trade
• But it has become a magnet for heavy speculative trades
• Traders say it should boost arbitrage opportunities with SGX
By Manolo Serapio Jr and Muyu Xu
MANILA/BEIJING, May 3 (Reuters) - China opens trade in Dalian iron ore futures to foreign investors from Friday, aiming to boost its pricing clout for one of its top imports and hoping traders will take a market notorious for retail speculators more seriously.
Iron ore is the second commodity China is opening to outside investors after launching crude oil futures in late March. Unlike crude oil, though, the iron ore contract on the Dalian Commodity Exchange (DCE) - launched in 2013 - has a deep pool of liquidity and major Western traders have already had access through local Chinese entities.
With trading volumes last year that reached 20 times global iron ore trade, and 25 times volumes done in rival contracts on the Singapore Exchange, iron ore futures in China regularly sway benchmark spot pricing. Giving foreign investors direct access can only boost that influence.
"DCE will always be a leading indicator. It has been and will always be (because of) the sheer volume of it," said Kelly Teoh, an iron ore derivatives broker at Clarkson Asia Pte Ltd.
Global commodity traders including Glencore, Trafigura and Cargill already trade Dalian futures via China-registered units, sources with knowledge of their participation say.
Cargill said it has been trading DCE's iron ore futures since the contract launch, using it as a price reference to manage its own inventory risk.
"The internationalization of the DCE iron ore contracts will give greater access to the global commodity community to trade in the world's biggest onshore ferrous market," Lee Kirk, managing director at Cargill Metals, said in an email.
More global players on the DCE should lead to "more efficient pricing and increased liquidity," he said.
Officials for Trafigura and Glencore declined to comment.
Twenty-one foreign trading agencies have so far registered at the DCE, according to the China Securities Journal, the official publication of China's top securities regulator, although the DCE has declined to name the agencies.
The move should also boost arbitrage opportunities between Dalian and Singapore, said William Chin, head of commodities at the Singapore Exchange.
It "will make it easier for foreign participants to take advantage of price movements across both exchanges," he said.
MASSIVE VOLUMES
Unlike oil, gold and copper, for which prices are set in London and New York, iron ore is one of the few commodities whose global pricing takes its cue from China.
With massive volumes of iron ore futures traded on the Dalian exchange, prices there virtually dictate the path for the physical market. In 2017, Dalian iron ore volumes reached nearly 33 billion tonnes versus global annual trade of about 1.5 billion tonnes.
The huge volumes make the DCE a magnet for speculative retail investors, who have triggered wild price swings and prompted regulators to impose trading curbs over the past two years.
Nev Power, former boss of world No. 4 iron ore miner Fortescue Metals Group, had criticised the speculative trade on Dalian, saying producers and users should be the main participants.
Fortescue's new CEO, Elizabeth Gaines, who took over in February, said "it remains to be seen what impact (the internationalisation) will have on speculative trading and volatility in the market."
"We ... support pricing mechanisms which accurately reflect supply and demand for iron ore and provide certainty for the industry," Gaines said in an email.
Miners such as Vale, Rio Tinto, BHP Billiton and Fortescue typically don't hedge or fix prices for future sales because that means their earnings can be lower if prices increase.
"We will have to wait and see how this develops as there has been limited use so far by the miners to hedge on SGX," said Jamie Pearce, head of commodity derivatives at SSY Futures.
But even if miners don't join the fray, DCE's internationalisation is expected to boost its image as a venue for price discovery, participants say.
"I expect China's iron ore futures market will be more mature and rational when more foreign investors enter the Chinese market," said Jacky Wang, chairman of Shanghai LC Assets Management Co Ltd.
(Reporting by Manolo Serapio Jr. in MANILA and Muyu Xu in BEIJING; Writing by Manolo Serapio Jr.; Editing by Tom Hogue)
Copper market in 33,000 tonnes surplus in Jan 2018 - ICSG - Reuters News
03-May-2018 06:47:39 PM
LONDON, May 3, The global world refined copper market showed a 33,000 tonnes surplus in January, compared with a 14,000 tonnes surplus in December, the International Copper Study Group (ICSG) said in its latest monthly bulletin. For the first month of the year, the market was in a 33,000 tonnes surplus compared with a 37,000 tonnes surplus in the same period a year earlier, the ICSG said. World refined copper output in January was 2.05 million tonnes , while consumption was 2.02 million tonnes. Bonded stocks of copper in China showed a 28,000 tonnes surplus in January compared with a 11,000 tonnes deficit in December.
PRECIOUS-Gold climbs on Fed meeting and geopolitics - Reuters News
03-May-2018 08:36:42 PM
• Spot gold needs to break above $1,322 -analyst
• U.S. delegation in Beijing on Thursday and Friday
(Adds Julius Baer analyst, updates prices)
By Eric Onstad
LONDON, May 3 (Reuters) - Gold prices gained on Thursday after the U.S. central bank reassured investors that increases to interest rates would be gradual, with geopolitical uncertainties also providing support.
Spot gold rose for a second session, firming by 0.9 percent to $1,316.63 an ounce by 1225 GMT, while U.S. gold futures for June delivery added 0.9 percent to $1,317.30.
The U.S. Federal Reserve said that inflation on a 12-month basis was "expected to run near the committee's symmetric 2 percent objective".
"Yesterday's FOMC meeting didn't spark much fireworks, but it eased concerns over whether the Fed was going to stick to its gradual tightening policy, which I believe they are," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
"The key change is they added the word 'symmetric', which was taken as a sign that they would allow inflation to overshoot, which is positive for gold."
Gold is highly sensitive to rising U.S. interest rates because it becomes less attractive compared with interest-bearing assets.
Julius Baer economists expect the Fed to shift its guidance to four rate hikes this year, from three, which will weigh on gold, said Carsten Menke, commodities analyst at the Swiss bank.
"Rising rates and a temporarily stronger dollar should bring sufficient headwinds to push prices below $1,300 over the coming months," he added.
Uncertainties were providing a supportive background for bullion, including U.S.-China trade talks and the potential U.S. withdrawal from the Iranian nuclear accord.
"Safe-haven buying has been absent of late ... But there have been some signals for the past few days that the (U.S.-China) negotiations won't be as smooth as expected. That would definitely be a focus, particularly now we have got past the FOMC meeting," said ANZ analyst Daniel Hynes.
Meanwhile, gold demand has made its weakest start to a year since 2008, the World Gold Council said on Thursday, with stagnant prices and the threat of rising interest rates leading investors to seek better returns elsewhere.
Among other precious metals, spot silver rose 1.1 percent to $16.53 an ounce, platinum climbed by 1.6 percent to $903.80 and palladium was up 1.2 percent at $971.20.
(Additional reporting by Eileen Soreng in Bengaluru Editing by David Goodman)
METALS-Copper touches one-week high as dollar slips from four-month peak - Reuters News
03-May-2018 08:51:53 PM
Recasts, updates prices
By Zandi Shabalala
LONDON, May 3 (Reuters) - Copper rose on Thursday on a weaker dollar and as the market awaited cues from China-U.S. trade talks that have started in Beijing.
The world's two biggest economies have imposed import tariffs on each other's goods, including Chinese aluminium and U.S. aluminium scrap, and threatened more action in a trade dispute that has roiled metals markets.
Copper added 0.8 percent to $6,873 a tonne in official rings, close to one-week highs and marking the second straight session of gains.
"The dollar is a little weaker this morning, meaning higher metal prices, and that is what we see across the board in precious metals as well," said Julius Baer analyst Carsten Menke.
He added that trade talks between China and the United States could drag on for weeks and that the first round of talks are unlikely to yield much.
TRADE: A U.S. trade delegation arrived in Beijing on Thursday for tariffs talks, with Chinese state media saying that China will stand up to U.S. bullying if needed but that it is better to work things out at the negotiating table.
DOLLAR: The dollar index edged 0.1 percent lower, slipping from four-month highs. A weaker U.S. currency makes dollar-denominated commodities such as zinc cheaper for non-U.S. firms, which could boost demand.
ZINC: Benchmark zinc touched a low of $3,034 a tonne but in official trading was down 0.1 percent at $3,043.
STOCKS: Headline inventories of zinc in LME-approved warehouses dropped by 225 tonnes to 236,775 tonnes. The amount of cancelled inventory - stock earmarked for delivery - was very low at 5.6 percent, LME data showed.
ZINC TREATMENT CHARGES: The zinc industry agreed a 15 percent drop in annual zinc processing fees to $147 a tonne, miner and metals smelting company Nyrstar said, with supply dwindling in a tight market.
GLENCORE: The miner and trader said that copper output in its first quarter rose 7 percent to 345,000 tonnes and that the ramp-up of its Katanga cobalt and copper mine in the Democratic Republic of Congo was on track.
RIO TINTO: Rio Tinto's majority-owned aluminium smelter in New Zealand is expanding output after securing a new energy deal, the plant said this week, as a recovery in the price of the metal boosts interest among global producers.
RUSAL: The chairman of En+ Group on Wednesday said he was working on implementing a plan that En+ hopes will lead to the United States lifting sanctions on the company, the biggest shareholder in aluminium giant Rusal.
PRICES: Aluminium was bid 0.8 percent higher at $2,340 a tonne, lead was bid up 0.4 percent at $2,278, tin was bid at a steady $21,110 and nickel was bid up 2.5 percent at $14,335.
(Additional reporting by Tom Daly
Editing by Jason Neely and David Goodman)
CBOT Trends-Wheat down 5-6 cents, corn steady-down 1, soybeans mixed - Reuters News
03-May-2018 09:29:38 PM
CHICAGO, May 3 (Reuters) - Following are U.S. trade expectations for the resumption of grain and soy complex trading at the Chicago Board of Trade at 8:30 a.m. CDT (1330 GMT) on Thursday.
WHEAT - Down 5 to 6 cents per bushel
• Wheat lower on profit-taking a day after the benchmark CBOT July soft red winter wheat contract reached a near nine-month top, and on beneficial rains in parts of the U.S. Plains winter wheat belt.
• The USDA reported export sales of U.S. wheat in the week to April 26 at 445,100 tonnes (old and new crop years combined), in line with trade expectations.
• Yield prospects for hard red winter wheat in southwest Kansas were estimated at 35.2 bushels per acre, the smallest since 2015, scouts on the second day of an annual three-day crop tour said Wednesday.
• Saudi Arabia's main state wheat buying agency issued an international tender to purchase 540,000 tonnes of hard wheat.
• The CBOT reported no May wheat deliveries and 86 K.C. May wheat deliveries. The MGEX reported no May spring wheat deliveries.
• CBOT July soft red winter wheat last traded down 5 cents at $5.21-3/4 per bushel. K.C. July hard red winter wheat was last down 4-1/2 cents at $5.50-3/4 and MGEX July spring wheat was down 4-3/4 cents at $6.19-3/4 a bushel.
CORN - Steady to down 1 cent per bushel
• Corn steady to lower, with the CBOT July contract consolidating near Tuesday's near nine-month high. Market underpinned by strong weekly export sales and worries about dry conditions stressing Brazil's second-crop corn. Rains in the Midwest in the last day should slow planting progress but offer welcome soil moisture.
• The USDA reported export sales of U.S. corn in the week to April 26 at 1,069,200 tonnes (old and new crop years combined), in line with trade expectations.
• The CBOT reported 478 deliveries against May corn futures.
• CBOT July corn last traded unchanged at $4.05 a bushel.
SOYBEANS - Mixed, down 1 cent per bushel to up 1
• Soybeans mixed, seeking direction. Rains in the Midwest in the last day should slow planting progress but offer welcome soil moisture.
• The USDA reported export sales of U.S. soybeans in the week to April 26 at 886,200 tonnes (old and new crop years combined), in line with trade expectations for 450,000 to 950,000 tonnes.
• Through its daily reporting system, the USDA said private exporters sold 30,000 tonnes of U.S. soyoil to Peru.
• China is taking extra efforts to increase its soybean output this year amid an ongoing trade spat with the United States that threatens to curb imports from its second supplier.
• Deliveries against CBOT May soybeans totaled 68 contracts. The CBOT reported four May soymeal deliveries and 280 May soyoil deliveries.
• CBOT July soybeans last traded down 1/4 cent at $10.42-3/4 per bushel.
(Reporting by Julie Ingwersen)
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