Oil Prices Mixed; Looming OPEC+ Production Increase May Weigh
0031 GMT — Oil prices are mixed in the early Asian session, but may be weighed by looming OPEC+ production increase. OPEC+ has announced that it would gradually reduce its voluntary production cuts from this week, Commerzbank Research analysts say in a recent research report. This 'de facto' increase in oil supply will probably take center stage this week and weigh on oil prices, even though there have been worries over future supply shortage, the analysts add. Front-month WTI crude oil futures are down 0.3% at $69.13/bbl; front-month Brent crude oil futures are up 0.1% at $73.71/bbl. (ronnie.harui@wsj.com)
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USA Today
an hour ago
- USA Today
US, China reach deal to ease export curbs, keep tariff truce alive
US, China reach deal to ease export curbs, keep tariff truce alive Show Caption Hide Caption Commerce Secretary Lutnick optimistic about US-China trade talks As delegations from the US and China begin a second day of trade talks, US Commerce Secretary Howard Lutnick said things are "going well." Bloomberg LONDON, June 10 (Reuters) - U.S. and Chinese officials said on Tuesday they had agreed on a framework to get their trade truce back on track and remove China's export restrictions on rare earths while offering little sign of a durable resolution to longstanding trade tensions. At the end of two days of intense negotiations in London, U.S. Commerce Secretary Howard Lutnick told reporters the framework deal puts "meat on the bones" of an agreement reached last month in Geneva to ease bilateral retaliatory tariffs that had reached crushing triple-digit levels. But the Geneva deal had faltered over China's continued curbs on critical minerals exports, prompting the Trump administration to respond with export controls of its own preventing shipments of semiconductor design software, aircraft and other goods to China. Lutnick said the agreement reached in London would remove restrictions on Chinese exports of rare earth minerals and magnets and some of the recent U.S. export restrictions "in a balanced way", but did not provide details after the talks concluded around midnight London time (2300 GMT). "We have reached a framework to implement the Geneva consensus and the call between the two presidents," Lutnick said, adding that both sides will now return to present the framework to their respective presidents for approvals. "And if that is approved, we will then implement the framework," he said. More: US stocks end up, awaiting China-US trade talk news. S&P 500 scores third straight gain In a separate briefing, China's Vice Commerce Minister Li Chenggang also said a trade framework had been reached in principle that would be taken back to U.S. and Chinese leaders. U.S. President Donald Trump's shifting tariff policies have roiled global markets, sparked congestion and confusion in major ports, and cost companies tens of billions of dollars in lost sales and higher costs. The World Bank on Tuesday slashed its global growth forecast for 2025 by four-tenths of a percentage point to 2.3%, saying higher tariffs and heightened uncertainty posed a "significant headwind" for nearly all economies. The deal may keep the Geneva agreement from unravelling over duelling export controls, but does little to resolve deep differences over Trump's unilateral tariffs and longstanding U.S. complaints about China's state-led, export-driven economic model. The two sides left Geneva with fundamentally different views of the terms of that agreement and needed to be more specific on required actions, said Josh Lipsky, senior director of the Atlantic Council's GeoEconomics Center in Washington. "They are back to square one but that's much better than square zero," Lipsky added. The two sides have until August 10 to negotiate a more comprehensive agreement to ease trade tensions, or tariff rates will snap back from about 30% to 145% on the U.S. side and from 10% to 125% on the Chinese side. MARKETS CAUTIOUS Global stocks have recovered their hefty losses after Trump's April "Liberation Day" tariff announcement and are now near record highs. Investors burned by earlier turmoil offered a cautious response to the deal and MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.57%. "The devil will be in the details, but the lack of reaction suggests this outcome was fully expected," said Chris Weston, head of research at Pepperstone in Melbourne. "The details matter, especially around the degree of rare earths bound for the U.S., and the subsequent freedom for U.S.-produced chips to head east, but for now as long as the headlines of talks between the two parties remain constructive, risk assets should remain supported." More: Trump and China's Xi break the ice with first phone call since launch of trade war Signs of the curbs loosening surfaced in China, as several Shenzhen-listed rare earth magnet firms, including JL MAG Innuovo Technology and Beijing Zhong Ke San Huan said they have obtained export licenses from Chinese authorities. China holds a near-monopoly on rare earth magnets, a crucial component in electric vehicle motors, and its decision in April to suspend exports of a wide range of critical minerals and magnets upended global supply chains. In May, the U.S. responded by halting shipments of semiconductor design software and chemicals and aviation equipment, revoking export licences that had been previously issued. CHINA EXPORTS PLUNGED A resolution to the trade war may require policy adjustments from all countries to treat financial imbalances or otherwise greatly risk mutual economic damage, European Central Bank President Christine Lagarde said on a rare visit to Beijing on Wednesday. Customs data published on Monday showed that China's overall exports to the U.S. plunged 34.5% in May, the sharpest drop since the outbreak of the COVID pandemic. While the impact on U.S. inflation and its jobs market has so far been muted, tariffs have hammered U.S. business and household confidence and the dollar remains under pressure. Beijing-based lawyer Peter Wu, 28, saw the talks as "a good signal" even if details were not fully negotiated. "I feel that fighting a trade war in the context of global integration is a lose-lose situation for both sides. I naturally hope that my motherland will be better," he said. China, Mexico, the European Union, Japan, Canada and many airlines and aerospace companies worldwide urged the Trump administration not to impose new national security tariffs on imported commercial planes and parts, according to documents released Tuesday. Just after the framework deal was announced, a U.S. appeals court allowed Trump's most sweeping tariffs to stay in effect while it reviews a lower court decision blocking them on grounds that they exceeded Trump's legal authority by imposing them. The decision keeps alive a key pressure point on China, Trump's currently suspended 34% "reciprocal" duties that had prompted swift tariff escalation. (Additional reporting by David Milliken and William James in London and Sachin Ravikumar; Ethan Wang, Shi Bu, Yuhan Lin and Alessandro Diviggiano in Beijing; Writing by David Lawder, Kate Holton and Liz Lee; Editing by David Evans, Mark Potter, Nick Zieminski and Lincoln Feast.)
Business Insider
2 hours ago
- Business Insider
Lululemon Athletica Stock (LULU) Plunges 23% as Tariff Pressures Eclipse Earnings Beat
Lululemon Athletica (LULU) shares have declined more than 20% following the release of its quarterly earnings report last week, as investors react to tariff-driven margin concerns and slowing revenue growth. The Canadian athletic apparel brand is beginning to feel the weight of reality in the Trump era following the introduction of sweeping tariffs, while also facing headwinds in its core U.S. market due to tightening discretionary spending and intensifying competition. Confident Investing Starts Here: Several analysts have since lowered their price targets on the stock. Upon closer examination, several underlying trends raise concerns, prompting a cautiously neutral stance. Strong Performance Overshadowed by Margin Concerns in Q1 Despite posting a solid earnings beat for Q1 FY2025, Lululemon (LULU) experienced its steepest single-day drop in years after trimming its full-year EPS guidance by $0.37 per share. While gross margins improved to 58.3% thanks to lower production costs, operating margins slipped 110 basis points to 18.5%, highlighting mounting pressure on profitability. Additionally, comparable store sales grew just 1%, with a 2% decline in the Americas—a concerning trend for the brand's largest market. Notably, it's not just the top-line numbers that tell the story. Lululemon's inventory levels increased 23% versus planned high-teens growth. More and more of its products are collecting dust on its shelves. This could signal demand softness. Lululemon has struggled in the past with its women's apparel aligning with ever-changing trends. How Tariffs Impact the Canadian Apparel Company Though based in Vancouver, Canada, Lululemon is still exposed to the impact of President Trump's tariffs. Like many apparel retailers, the company relies on Asian manufacturing partners in countries such as Vietnam and Indonesia, importing finished goods into key markets, particularly the U.S., which remains its largest. As a result, the renewed import levies are a significant factor behind the company's downward revision to its earnings guidance. Regardless of the troubles the company faces on a macro level, its store count continues to rise as expansion beckons. LULU's Pricing Strategy Faces Risks Amid Consumer Budget Sensitivity Lululemon plans to implement targeted price increases on a select group of products. While this strategy can help support margins, it also carries the risk of dampening demand. After all, Lululemon isn't selling necessities—it's offering premium athletic apparel. In tougher financial climates, price-sensitive consumers may opt to delay purchases or explore more affordable alternatives. A recent Intuit survey found that over 80% of young adults would reduce non-essential spending if economic conditions deteriorate. That puts Lululemon in a position where it must balance profitability with consumer sensitivity. Indeed, other retailers are facing similar challenges, but it's not all negative news for Lululemon. While domestic growth has slowed, the company is seeing strong international momentum. Comparable sales outside the U.S. increased by 6%, with particularly auspicious results in China, where Lululemon ranks as the third-largest foreign sports apparel brand, following Nike and Adidas. Building on this success, Lululemon plans to expand its presence by opening additional stores in China and Europe. In the meantime, other companies competing directly with LULU are shown below. Valuation Still Commands Premium Despite Selloff Perhaps the most significant factor in LULU's volatile stock reaction was the fact that it was priced for perfection. Even after the selloff, Lululemon trades at a Price to Earnings (P/E) ratio of 22.7, which is still a premium relative to its peers in retail. Financially, Lululemon remains in great shape. It generated over $1.5 billion in free cash flow in 2024 and maintains a balance sheet of $1.3 billion in cash and zero debt. Is LULU a Good Stock to Own? On Wall Street, LULU sports a Moderate Buy consensus rating based on 16 Buy, 12 Hold, and two Sell ratings in the past three months. LULU's average stock price target of $313.75 implies ~21% upside potential over the next twelve months. Following its first quarter earnings report, analyst Tom Nikic of Needham lowered his price target on LUL from $366 to $317. Although he believes the selloff was overdone due to the guidance cut being predominantly tariff-driven, he expressed caution over the company's lackluster domestic growth. Moreover, he noted that Lululemon's international comparable growth decelerated, 'raising questions about the growth algo from here.' Randal Konik from Jefferies has a Sell rating on LULU due to slowing growth and increasing competition. On the last point, he notes that the company's attempts to diversify its core offerings have 'not been well-received, leading to lower customer conversion rates.' Lululemon Faces Headwinds Beyond Tariffs Lululemon's challenges can't be attributed solely to President Trump's tariffs. Beyond the impact of import levies on profitability, the company's growth is showing signs of slowing, especially in mature domestic markets. Coupled with a premium valuation and a lowered guidance, these factors contributed to a staggering $8 billion loss in market value. Looking forward, Lululemon must navigate the ongoing tariff pressures alongside intense competition and an American economy marked by consumer uncertainty and inflation. Fortunately, the company has the financial strength to weather these headwinds, and its brand remains strong, especially among younger consumers. That said, the difficulty of protecting profit margins while sustaining high growth in an increasingly competitive athleisure market suggests that investors should approach with caution.
3 hours ago
Asian shares climb after China and the US say they have a framework for seeking a trade deal
TOKYO -- Asian shares mostly rose Wednesday after China and the U.S. said they had agreed on a framework for following up on the trade truce reached last month in Geneva. U.S. futures fell while oil prices edged higher. Japan's benchmark Nikkei 225 surged 0.6% in afternoon trading to 38,450.76. Data from the Bank of Japan data showed wholesale inflation slowed in May, meaning there might be less pressure for the central bank to raise interest rates in its next policy board meeting. Hong Kong's Hang Seng gained 0.9% to 24,381.39, while the Shanghai Composite rose 0.5% to 3,402.97. Australia's S&P/ASX 200 edged up 0.2% to 8,603.70. South Korea's Kospi added 1.0% to 2,900.05. Tuesday on Wall Street, the S&P 500 rose 0.5% to 6,038.81 as the trade talks between the world's two largest economies carried into a second day. The Dow Jones Industrial Average added 0.2% to 42,866.87, and the Nasdaq composite gained 0.6% to 19,714.99. Stocks have roared higher since dropping roughly 20% below their record two months ago, when President Donald Trump shocked financial markets with his announcement of tariffs that were so stiff that they raised worries about a possible recession. Much of the rally has been due to hopes that Trump would lower his tariffs after reaching trade deals with countries around the world, and the S&P 500 is back within 1.7% of its record set in February. Analysts said that after two days of discussion in London, the late-night agreement reached appeared to be a consensus on what was already agreed upon before. Even so, Trump's approval is still needed. 'So what did 48 hours of talks actually produce? Apparently, a reaffirmation to eventually do what they had already said they would do. If markets were expecting substance, they got process instead,' said Stephen Innes, managing partner at SPI Asset Management. U.S. Secretary of Commerce Howard Lutnick said Tuesday evening in London that talks with China were going 'really, really well.' Both the United States and China have put many of their tariffs on each other's exports on pause as talks continue. Still, uncertainty over what is to come is still affecting companies and their ability to make profits. Designer Brands, the company behind the DSW shoe store chain, became the latest U.S. company to yank its financial forecasts for 2025 because of 'uncertainty stemming primarily from global trade policies.' The company, which also owns the Keds, Jessica Simpson and other shoe brands, reported a larger loss for the start of the year than analysts were expecting, and its revenue also fell short of forecasts. CEO Doug Howe pointed to 'persistent instability and pressure on consumer discretionary' spending, and the company's stock tumbled 18.2%. The uncertainty is moving in both directions, to be sure. A survey released Tuesday of optimism among small U.S. businesses improved a bit in May. 'While the economy will continue to stumble along until the major sources of uncertainty are resolved, owners reported more positive expectations on business conditions and sales growth,' according to Bill Dunkelberg, chief economist at the National Federation of Independent Business. Tesla helped to make up for such losses by rising 5.7%. The electric vehicle company has been recovering since tumbling last week as Elon Musk's relationship with Trump imploded. That raised fear about possible retaliation by the U.S. government against Tesla. Shares that trade in the United States of chipmaking giant Taiwan Semiconductor Manufacturing Co. rose 2.6% after the company known as TSMC said its revenue in May jumped nearly 40% from the year earlier. In other dealings early Wednesday, the yield on the 10-year Treasury eased to 4.48% from 4.47% late Tuesday. Benchmark U.S. crude oil gained 8 cents to $65.06 a barrel. Brent crude, the international standard, edged up 2 cents to $66.89 a barrel. The U.S. dollar rose to 145.08 Japanese yen from 144.84 yen. The euro cost $1.1418, down from $1.1425.
