Euro-Zone Firms' Loan Demand Stays Weak Amid Tariff Dispute
'Loan demand was supported by declining interest rates, but dampened by global uncertainty and trade tensions,' the ECB said Tuesday in its Bank Lending Survey. While lenders saw a 'slight net increase' in the second quarter, uptake remained 'weak overall,' it said.
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Yahoo
24 minutes ago
- Yahoo
Oil Traders Race Against Time to Solve Global Diesel Crunch
(Bloomberg) -- The oil market is pulling all the levers it can to ease a global diesel crunch, but the window is narrowing to replenish stockpiles of the world's workhorse fuel before hurricanes and refinery maintenance curtail output. All Hail the Humble Speed Hump Mayor Asked to Explain $1.4 Billion of Wasted Johannesburg Funds Three Deaths Reported as NYC Legionnaires' Outbreak Spreads Major Istanbul Projects Are Stalling as City Leaders Sit in Jail PATH Train Service Resumes After Fire at Jersey City Station From the US Gulf Coast to Rotterdam and Singapore, storage tanks have only recently started rising from dramatically low levels, and traders say it's going to be a tight race to refill them. With price spikes during the Israel-Iran conflict fresh in the memory, most say it's hard to see a major easing, echoing warnings from Goldman Sachs Group Inc. and energy giant TotalEnergies SE. The fate of the fuel has wide-reaching ramifications for the global economy. Higher prices can ripple through inflation readings and dent consumer and business confidence at a time when US President Donald Trump's tariff wars also raise costs. American farmers will need large volumes of diesel to power their tractors and grain dryers during harvesting season in the fall, and drivers are already paying the most at the pump in about a year. Meanwhile, Trump's push to punish India for processing Russian crude into much needed global diesel supplies leaves Europe particularly vulnerable. The continent has become more dependent on fuel from further afield after direct imports from nearby Russia were banned. 'We're bullish for the end of the year,' said Rami Ramadan, co-head of global middle distillates at commodity trader BB Energy. 'We are going to be in for some shocks for sure because of how Europe has been disconnected from its closest sources of supply.' US stockpiles of diesel's family of fuels — used in everything from locomotives and trucks to power generation and heating — plunged to their lowest summer levels this century. While inventories should normally build over the summer, longer-term factors have made things more acute in the last few years. A slew of plant closures in the US and Europe since the Covid-driven oil market crash has tightened supplies in key hubs. Even as high margins lead refiners like Phillips 66 and Valero Energy to maximize diesel output, US inventories have only in recent weeks inched past the critical lows seen in the summer of 2022, just after Moscow's invasion of Ukraine. In Europe buyers await tankers from the Middle East and Asia. In northwest Europe, stockpiles are forecast to be 3 million barrels lower in the fourth-quarter than a year earlier. After touching the equivalent of $110 a barrel following Israel's air strikes on Iran, prices have retreated closer to $90. Diesel's strength over the summer helped support crude prices while OPEC+ restored production faster than initially planned. Before the war in Ukraine, European diesel seldom traded $15 a barrel above Brent crude. Ever since, it has rarely traded at less than that. The spread, known in market parlance as a crack, is currently above $20 in Europe and around $30 in the US. Goldman Sachs expects both spreads to stay near current levels into 2026 'on continuing structural tightness in refining capacity,' and TotalEnergies said stronger diesel prices will become a 'persistent feature' of the global oil market. 'Heading into hurricane season, if we have some type of supply disruption, I think you'll see a pretty significant market reaction with inventories as low as they are,' Gary Simmons, executive vice president and chief operating officer at Valero, said on an earnings call. 'We expect diesel cracks to remain strong.' Diesel is part of a group of refined products known as middle distillates, which includes jet fuel and heating oil. High demand from the aviation sector has also tightened the balance of supplies, and a cold winter could do the same. 'Over the next three to four months, we're quite constructive on diesel cracks being sustained at levels similar to where they're at today,' Marathon Petroleum Corp.'s Chief Commercial Officer Rick Hessling said on an earnings call, adding that trucking and agriculture demand is 'very healthy.' Hedge funds have rushed into bullish oil and diesel bets in recent weeks as Trump threatened additional levies on buyers of Russian crude. Money managers' net long position in US diesel futures was at the highest in almost four years, according to US Commodity Futures Trading Commission data released in the first week of August. Those bets so far haven't paid off, with diesel and crude futures dropping this week after OPEC+ announced a supply increase over the weekend and traders wait to see how Trump's approach to Russia pans out. Not all traders are bullish, though, as there has been some relief in the past few weeks. As well as stockpiles showing signs of recovering, more diesel and jet fuel cargoes left Asia and the Middle East for Europe in July than any time in the last 11 months, according to Kpler data. One diesel-laden supertanker of 2 million barrels is currently sailing to Europe, and another has been booked, according to a person involved in the flows, adding momentum to the resupply. 'One of the things we're doing is watching the Mideast and India, where the global net-distillate length exists for potential imports into Europe,' Brian Mandell, executive vice president of marketing and commercial at Phillips 66, said on an earnings call. Mandell said that prices are likely to eventually ease as the Organization of the Petroleum Exporting Countries and its partners add extra supplies of heavy crude that's better for making diesel. But it takes time for the group to go from targets to actual production, and then for the barrels to be shipped, processed into diesel and finally reach the fuel's buyers. 'We would think that distillate margins will remain strong through the year, eventually coming off some when you get these extra barrels — heavy crude barrels — back onto the market,' he said. --With assistance from Devika Krishna Kumar, Jack Wittels, Rachel Graham, Archie Hunter and Prejula Prem. (Updates with hedge fund positioning in 14th paragraph.) 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Yahoo
24 minutes ago
- Yahoo
Trump's planned 100% computer chip tariff sparks confusion among businesses and trading partners
President Donald Trump's plans for 100% tariffs on computer chips that aren't made in the U.S. are stoking confusion among businesses and trading partners — boosting stocks for leading semiconductor companies while leaving smaller producers scrambling to understand the implications. The U.S. imports a relatively small number of chips because most of the foreign-made chips in a device — from an iPhone to a car — were already assembled into a product, or part of a product, before it landed in the country. "The real question everybody in the industry is asking is whether there will be a component tariff, where the chips in a device would require some sort of separate tariff calculation,' said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. Trump said Wednesday that companies that "made a commitment to build" in the U.S. would be spared the import tax, even if they are not yet producing those chips in American factories. 'We'll be putting a tariff of approximately 100% on chips and semiconductors,' Trump said in the Oval Office while meeting with Apple CEO Tim Cook. 'But if you're building in the United States of America, there's no charge.' Wall Street investors interpreted that as good news not just for U.S. companies like AMD, Intel and Nvidia, but also for the biggest Asian chipmakers like Samsung and Taiwan Semiconductor Manufacturing Company that have been working to build U.S. factories. But it left greater uncertainty for smaller chipmakers in Europe and Asia that have little exposure to the AI boom but still make semiconductors inserted into essential products like cars or washing machines. These producers "probably aren't large enough to get on the map for an exemption and quite probably wouldn't have the kind of excess capital and margins to be able to add investment at a large scale into the United States,' Chorzempa said. The announcement came more than three months after Trump temporarily exempted most electronics from his administration's most onerous tariffs. During the COVID-19 pandemic, a shortage of computer chips increased the price of autos and contributed to higher inflation. Chorzempa said chip tariffs could again raise prices by hundreds of dollars per vehicle if the semiconductors inside a car are not exempt. 'There's a chip that allows you to open and close the window," Chorzempa said. "There's a chip that is running the entertainment system. There is a chip that's kind of running all the electronics. There are chips, especially in EVs, that are doing power management, all that kind of stuff.' Much of the investment into building U.S. chip factories began with the bipartisan CHIPS and Science Act that President Joe Biden signed into law in 2022, providing more than $50 billion to support new computer chip plants, fund research and train workers for the industry. Trump has vocally opposed those financial incentives and taken a different approach, betting that the threat of dramatically higher chip costs would force most companies to open factories domestically, despite the risk that tariffs could squeeze corporate profits and push up prices for electronics. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
26 minutes ago
- Business Insider
'Stagflation-lite': The worst-case scenario for the US economy looks like it's getting more likely
The worst-case scenario for the US economy is looking a lot more likely. Investors have recently taken in a slew of data points that suggest the economic environment is rolling closer to stagflation — a dreaded scenario where inflation rises while economic growth slows and unemployment spikes. That situation is thought of as even worse for policymakers to resolve than a typical recession, as high inflation prevents the Federal Reserve from cutting interest rates to spur economic growth. Stagflation first floated onto Wall Street's radar after President Donald Trump introduced his sweeping array of tariffs on April 2. Tariffs are thought to stoke inflation, as companies are likely to pass along at least part of the cost of import duties by raising prices. Meanwhile, they can slow growth by raising costs for businesses that rely on imported inputs. Now, the trend is beginning to show in the data, according to economic forecasters. Here are the stagflation warning signs they were watching in the past week: Fed's preferred inflation gauge was hotter than expected Personal Consumption Expenditure inflation, the Fed's preferred inflation measure, rose 2.6% year-over-year in June, above the 2.5% year-over-year increase that economists were expecting and a tick up from May's 2.4% rate. "The Fed's key measures of inflation are no longer in obvious decline relative to what we saw to start the year, and we are still about 80 basis points above the Fed's inflation target on most of the critical inflation gauges. The US economy appears to be hitting a mild form of stagflation," Skanda Amarnath, a former Fed economist and the executive director of Employ America, wrote in a note. The risk of stagflation could keep climbing as markets assess the full impact of Trump's tariffs, according to Emily Bowersock Hill, the CEO of Bowersock Capital Partners. After multiple delays, a broad set of tariffs on dozens of countries finally went into effect on Thursday. "A trade war is a stagflation shock," Bowersock wrote in a July note, adding that companies could hike prices through the third and fourth quarters this year. "While this may be partially offset in the short term by deregulation and tax cuts, the end result will be lower growth and higher inflation." Hiring is slowing The job market sputtered in July, with the US adding 73,000 jobs for the month, lower than the 100,000 payrolls economists were expecting. Meanwhile, job gains over May and June were down by a collective 258,000, sending a major signal that the labor market has been significantly weaker than initially thought. "This morning's massive NFP revisions, concentrated in tariff-exposed sectors now flag that our 'stagflation lite' scenario is materializing," economists at RBC wrote in a note last week, referring to the downward payrolls revision for the last two months. They added that the stagflationary dynamic is unfolding because the uncertainty surrounding Trump's trade policy is choking off hiring. The bank said that it expected future labor market data in the US to come in weak. Services prices are moving higher The Institute for Supply Management's services price index, a measure of how much Americans paid for services, rose to 69.9%, up from June's 67.5%. That marks the 98th straight month prices in the services sector have climbed, and the highest index reading since October 2022, the ISM said in its latest Services PMI. Torsten Sløk, the chief economist at Apollo Global Management, said the increase was a sign that inflation in the services side of the economy was "intensifying," which could spark upside risk to headline inflation over the coming months. "At the same time, employment growth is slowing down and the unemployment rate is rising. The sources of this stagflation impulse are tariffs, deportations, and the depreciation of the dollar," Slok wrote in a note to clients. "The bottom line is that the stagflation theme in markets is intensifying." More Americans are making unemployment claims More Americans filed for unemployment than expected in the last week, flashing another sign of weakness in the economy. Initial jobless claims surged to 226,000 in the week ending August 2, according to data from the Labor Department, above the 221,000 initial claims economists were expecting. Meanwhile, continuing claims — or the number of Americans filing a repeat application for unemployment benefits — rose to 1.97 million. That's the highest number of recurring applications the US has seen since the pandemic.
