2025-01-08 11:08
A look at the day ahead in U.S. and global markets from Mike Dolan Dragging up government borrowing costs across the world, the new year spike in long-term U.S. Treasury yields is flashing red as a long-absent risk premium in debt markets re-builds alarmingly amid fiscal policy and interest rate fears. The New York Federal Reserve's estimate of the 10-year 'term premium' - seen as the compensation investors seek for holding long-term Treasuries to maturity instead of rolling over short-term debt holdings - topped 50 basis points this week for the first time since 2014. Partly reflecting uncertainty about long-term inflation expectations and debt supply and an incoming U.S. administration intent on tax cuts, immigration curbs and tariff rises, the 30-year Treasury yield hit its highest since 2023 on Tuesday and 10-year yields hit their highest in almost 9 months. At almost 64bps, the 2-to-30 year yield curve gap on Wednesday reached its widest since the Fed started raising interest rates in March 2022. With this week's latest heavy Treasury debt sales frontloaded due to Thursday's market holiday and high seasonal corporate bond issuance in the background, $22 billion of 30-year 'long bonds' go under the hammer later today. The more immediate cause of bond market anxiety - which sideswiped stock markets (.SPX) , opens new tab, (.IXIC) , opens new tab again on Tuesday - comes from the week's persistently 'hot' economic releases - adding concern about future Fed rate cuts as President-elect Donald Trump's economic policies are parsed. ISM's December survey of U.S. services sector businesses showed activity accelerated in December, while a measure of prices paid for inputs surged to near a two-year high. And in a big week for U.S. labor market updates, data showed job openings in November grew to 8.098 million, exceeding forecasts for a 7.7 million rise, and higher than October's numbers of 7.839 million. ADP's private sector job reading for last month and the latest weekly jobless claims numbers are due later on Wednesday ahead of Friday's national employment report. Markets and government offices are closed Thursday for former President Jimmy Carter's funeral. 'HIGHLY UNUSUAL' The brisk growth and inflation readouts are pushing back expectations for Fed easing, with futures not seeing another quarter point cut until June and doubting any more this year. Only 38bps of Fed easing is now priced for the whole of 2025. Minutes from the Fed's latest policy meeting, where policymakers indicated just 50bps of additional rate cuts for this year, are due for release later on Wednesday. But even given that recalibration, the movement of bond yields - where 10-year yields have risen 100bps since September as the Fed has cut 100bps over the same period - is "highly unusual", according to Apollo Chief Economist Torsten Slok. "The market is telling us something, and it is very important for investors to have a view on why long rates are going up when the Fed is cutting," Slok told clients, positing fiscal worries, less bond demand from abroad or unjustified Fed cuts as possible reasons. Rising Treasury yields, meantime, have lifted the dollar anew (.DXY) , opens new tab and also boosted long-term borrowing costs in other G7 economies in the slipstream. Most notably on Tuesday, 30-year British 'gilt' yields hit their highest since 1998. While 10 and 30-year Treasury yields ticked back a touch early Wednesday, they have retained the bulk of the week's sharp rise. Adding to the bond market tension, oil prices rose again on Wednesday as supplies from Russia and OPEC members tightened while U.S. crude oil stocks fell last week, market sources said, citing American Petroleum Institute figures. At 5%, the year-on-year rise in U.S. crude is at its highest since July. U.S. stock futures recovered a fraction of Tuesday's heavy tech-led losses early today, although Japanese (.N225) , opens new tab and Chinese (.CSI300) , opens new tab bourses fell again alongside a 0.8% drop in emerging markets indexes (.MSCIEF) , opens new tab. Chinese stock losses were narrowed in late trading there as markets digested Beijing's latest measures to expand the scope of consumer trade-ins. But leading the decline onshore, shares of semiconductor firms (.CSI931865) , opens new tab fell 0.7% as the U.S. Defense Department expanded the list of firms allegedly aiding Beijing's military. Back stateside, uncertainties around the policies of the Trump administration were heightened by the President-elect's refusal to rule out using military or economic action to pursue acquisition of the Panama Canal and Greenland, part of a broader expansionist agenda he has promoted since winning election. Trump also criticized American spending on Canadian goods and military support for Canada, saying the U.S. derives no benefits from doing so, and called the border between the two countries an "artificially drawn line." With a domestic political hiatus following Canadian Prime Minister Justin Trudeau's decision to stand down as Liberal Party leader, the Canadian dollar remained calm. In Europe, stocks seemed to buck the wider global nerves and hit three-week highs. European shares (.STOXX) , opens new tab advanced on Wednesday, led by heavyweight financial stocks and as defence firms got a boost after Trump called for higher spending from NATO allies. Trump said he believes European members of NATO should spend 5% of their GDP on the alliance's defense. Key developments that should provide more direction to U.S. markets later on Wednesday: * US December ADP private sector payrolls, weekly jobless claims, November consumer credit * Federal Reserve's Federal Open Market Committee releases minutes of latest meeting * Federal Reserve Board Governor Christopher Waller speaks * US Treasury sells $22 billion of 30-year bonds Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-2025-01-08/
2025-01-08 11:05
Two-thirds of Guyana's exports went to Europe last year Asia accounted for nearly 24% of exports, U.S. took 4% Guyana's oil benefited as Middle Eastern flows disrupted HOUSTON/GEORGETOWN, Jan 8 (Reuters) - Guyana's oil exports rose 54% last year to some 582,000 barrels per day (bpd), fueled by European refiners' demand for easy-to-process sweet crudes to replace some Middle Eastern grades, according to traders and shipping data from financial firm LSEG. Since it started exporting oil in early 2020, the burgeoning oil nation has emerged as the fifth largest Latin American crude exporter after Brazil, Mexico, Venezuela and Colombia. But unlike Latin America's usual offer of heavy sour oil, Guyana's lighter and sweeter crude grades have carved out a rising share in Europe, where most refineries are not as complex as the majority of Latin American and U.S. Gulf Coast plants that turn heavy grades into motor fuels. "Europe is the ideal market for Guyana's crudes," said a trader of Latin American grades, who was not authorized to speak to media. Guyana's three crude grades - Liza, Unity Gold and Payara Gold - have been tested and adopted faster in Europe than in any other region due to proximity, quality and easy access to sellers, he added. In 2024, 66% of Guyana's crude exports or some 388,000 bpd went to Europe, compared with 62% the previous year, the shipping data showed. Guyana's oil began gaining favor in Europe in the aftermath of Russia's invasion of Ukraine in 2022, which pushed many refiners to avoid sanctioned Russian crude and seek alternative supplies. Last year, attacks in the Red Sea affected oil flows from the Middle East, giving crudes from Guyana and Brazil better chances of finding buyers in Europe, said Homayoun Falakshahi, a senior analyst of crude markets at data analytics platform Kpler. "Higher freight costs to move oil from the Persian Gulf to the Mediterranean or Northwest Europe have made Guyanese crude comparatively more interesting for European refiners," he added. OPENING ROUTES Producers in Guyana also almost doubled shipments to the United States last year to some 23,000 bpd, while exports to Asia increased in smaller magnitude to around 139,000 bpd, the LSEG data showed. Sales to Latin America and the Caribbean were almost unchanged at around 32,000 bpd. The rise in exports has been possible due to a consortium led by U.S. oil major Exxon Mobil (XOM.N) , opens new tab expanding output rapidly through three floating production facilities, with a fourth expected to add about 250,000 bpd of capacity this year. Exxon's Fawley refinery in the United Kingdom remains the single largest taker of Guyanese crude in Europe, according to Kpler. Exxon, Hess (HES.N) , opens new tab and CNOOC (600938.SS) , opens new tab, which control all oil and gas output in Guyana, individually sell the barrels they are entitled to, while the Guyanese government every year awards a marketing contract to allocate its portion of output. For 2025, European trading firms BB Energy and JE Energy won that contract for a second year in a row in a competitive auction where global producers also participated. The government this time secured a larger premium over market prices, it said in October. Since the two trading firms are based in the United Kingdom, their successful marketing of the crudes in Europe was expected, Guyana's energy minister Vickram Bharrat told Reuters. "However, there is no preference," he said, referring to the markets the government would like its oil to reach. The Exxon-led consortium has three active projects - Liza 1 and 2, and Payara - that were producing around 675,000 bpd late last year following upgrades. The next project, Yellowtail, is set to start this year once Exxon receives a fourth floating production vessel in the coming months. Exxon did not provide comment on its Guyanese crude marketing efforts, but last month said it expects that 60% of its upstream production by 2030 will come from "advantaged assets" including Guyana. Sign up here. https://www.reuters.com/business/energy/guyana-oil-exports-jump-gain-europe-market-share-2024-2025-01-08/
2025-01-08 10:24
NEW DELHI, Jan 8 (Reuters) - The Indian government is looking at two more blocks in the federally administered region of Jammu and Kashmir for lithium exploration, government officials directly aware of the matter said on Wednesday. Estimated reserves in the two blocks will be known by October, the officials added, but declined to be identified as the matter is not public. Sign up here. https://www.reuters.com/world/india/india-eyes-two-more-lithium-blocks-jammu-kashmir-government-sources-says-2025-01-08/
2025-01-08 07:54
LONDON, Jan 8 (Reuters) - Shell (SHEL.L) , opens new tab trimmed its liquefied natural gas production outlook for the fourth quarter on Wednesday and said oil and gas trading results are expected to be significantly lower than in the previous three months. In a trading update ahead of Jan. 30 full-year results, Shell also said it would take $1.5 billion to $3 billion of non-cash, post-tax impairments, including up to $1.2 billion in its renewables division, linked to European and North American assets. Shell last month said it was stepping back from new offshore wind investments and splitting its power division following an extensive review of the business, part of CEO Wael Sawan's drive to focus on the most profitable parts. Shell shares were down 1.5% by 1125 GMT. The world's top oil and gas companies have seen profits decline throughout 2024 following record earnings in the previous two years as energy prices steadied and global oil demand faltered. U.S. oil giant Exxon Mobil (XOM.N) , opens new tab on Tuesday signalled that sharply lower oil refining profits and weakness across all its businesses would reduce its fourth-quarter earnings by about $1.75 billion from the prior quarter. Shell, the world's largest LNG trader, said trading results for the division in the fourth quarter would be significantly lower than in the previous three months due to the expiry of hedging contracts Shell took in 2022 to protect itself against a potential loss of Russian production following the invasion of Ukraine. Trading in its chemicals and oil products division was also expected to be significantly lower quarter-on-quarter due to lower seasonal demand. Shell does not provide earnings figures for its trading operations. The British company trimmed its LNG production forecast for the quarter to 6.8-7.2 million metric tons, from a previous forecast , opens new tab of 6.9-7.5 million tons, citing lower feedgas deliveries into liquefaction facilities and fewer cargo deliveries. "We see the release as negative, with weakness across a number of divisions and weaker trading across oil, gas and power," RBC Capital Markets analyst Biraj Borkhataria said in a note, adding that this was not expected to impact shareholder returns. Sign up here. https://www.reuters.com/business/energy/shell-trims-q4-lng-production-outlook-2025-01-08/
2025-01-08 07:30
MUMBAI, Jan 9 (Reuters) - The Indian rupee hit a lifetime low on Thursday, pressured by a rise in U.S. bond yields and strong dollar bids in the non-deliverable forwards (NDF) market while the central bank likely stepped in to cap losses, traders said. The rupee declined to 85.93 per U.S. dollar, weakening past its previous record low of 85.8575 hit in the last session. The currency was at 85.92 as of 9:45 a.m. IST. State-run banks were spotted offering dollars, most likely on behalf of the Reserve Bank of India, which helped limit the rupee's losses, four traders told Reuters. The RBI is "active as usual", which should help the rupee stay above the 86 handle in the near-term, a trader at a private bank said. The dollar index was at 109 after rising 0.3% on Wednesday while Asian currencies were mixed. The 10-year U.S. Treasury yield hit a peak of 4.73% on Wednesday, its highest since April 2024, before edging lower in Asia trading. Expectations of cautious rate cuts by the Federal Reserve amid the potential inflationary impact of incoming U.S. President Donald Trump's policies have pushed up the dollar and U.S. bond yields over recent weeks. Uncertainty about Trump's policies has clouded the economic outlook with U.S. central bank officials raising new inflation concerns, the minutes of the Fed's December meeting released on Wednesday showed. "With Trump's tariffs arriving at the outset of his second term in less than two weeks, amid a resilient U.S. economy compared to a lacklustre Chinese economy and stagnation in the Eurozone, the FOMC minutes should support the case for the USD to extend its Trump Trade rally into this year," DBS Bank said. Meanwhile, dollar-rupee forward premiums surged with the 1-year implied yield rising to 2.74%, its highest level since October 2022. The rise in forward premiums came on the back of a persistent arbitrage between dollar-rupee outright and non-deliverable forwards, traders said. Sign up here. https://www.reuters.com/markets/currencies/rupee-hits-lifetime-low-dollars-bounce-hurts-asian-currencies-2025-01-08/
2025-01-08 07:28
Jan 8 (Reuters) - India's top explorer Oil And Natural Gas Corp (ONGC.NS) , opens new tab on Wednesday said energy major BP (BP.L) , opens new tab will act as technical service provider to help boost oil and gas output from the country's largest producing field, off India's west coast. BP has promised an increase of up to 60% in production of oil and gas output from the Mumbai High field, discovered in 1974, ONGC said in a stock exchange filing. The field reached a peak production level of 471,000 barrels per day of oil in March 1985, and its output had declined to about 134,000 bpd in April 2024, according to the tender document floated last year. India, the world's third-biggest oil importer and consumer, wants to quickly raise its oil and gas output, which has been stagnant for years. In June, the government said that ONGC was seeking a technical tie-up with a global oil major to boost production and BP's board had met India's Oil Minister Hardeep Singh Puri in September 2024. The country has been asking foreign companies to participate in India's exploration programmes, Puri had said last year. BP will act as a technical service provider for the field. "We look forward to bringing our long experience of optimising performance and recovery from major mature fields around the world to help unlock and enhance production from Mumbai High," BP said in a statement. BP, in a tie-up with Reliance Industries (RELI.NS) , opens new tab, operates 1,900 fuel retail stations across India and produces oil and gas from a deepwater block in the Krishna-Godavari basin, off the country's east coast. The Reliance-BP tie-up has teamed up with ONGC to bid for exploration rights for an offshore block in India. Sign up here. https://www.reuters.com/business/energy/indias-ongc-engages-bp-boost-production-largest-oil-field-2025-01-08/
