2025-05-01 21:13
ORLANDO, Florida, May 1 (Reuters) - TRADING DAY Making sense of the forces driving global markets Sign up here. By Jamie McGeever, Markets Columnist From 'Lag 7' back to 'Mag 7'? The clouds of trade-related economic uncertainty are dark and heavy, but world markets were bathed in sunny optimism on Thursday as upbeat Microsoft and Meta earnings suggested there may be life in the U.S. 'Big Tech' trade yet. Meanwhile, debate continues to swirl on the fallout from the record hit to U.S. GDP from trade in the first quarter. Imports were the culprit, but exports won't be immune from the trade war going forward. More on that below, but first, a roundup of the main market moves. I'd love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com , opens new tab. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. Today's Key Market Moves Tech tonic! Welcome back 'U.S. exceptionalism', Wall Street has missed you! Bullish outlooks and pledges to invest heavily in artificial intelligence from Meta and Microsoft on Wednesday followed similar guidance last week from Google parent Alphabet. And although the optimism was dented by Amazon and Apple on Thursday, investors are reminded that Silicon Valley won't stand idle in the face of China's push for tech and AI dominance. The 'Magnificent Seven' have been clobbered in recent months as the emergence of Chinese AI startup DeepSeek cast doubt over bloated valuations and the assumed omnipotence of U.S. 'Big Tech'. The Roundhill 'Mag 7' exchange-traded fund lost a third of its value between December 18 and April 7. But Thursday's surge means it has rebounded 20% in the last three weeks, and is now back above its close on April 2 when U.S. President Donald Trump unveiled his sweep of global tariffs. So is the Nasdaq, more than recovering the 13% losses it incurred in the days after 'Liberation Day'. The Dow is still 3% lower, but is on its longest winning streak in almost a year - eight days and counting. The S&P 500 is flat, having clawed back its 15% 'Liberation Day' decline. It's a show of resilience, which in some ways is remarkable. The first quarter earnings season hasn't been all rosy, and dozens of companies have cut forecasts or removed guidance altogether. GDP contracted in the first quarter, the growth outlook is murky at best and cracks are starting to appear in the labor market. But perhaps reports of U.S. Big Tech's demise have been greatly exaggerated. LSEG estimates suggest the group's January-March earnings will rise 21.4% against 8.3% for the S&P 500's remaining 493 constituents. And even taking into account their underperformance in recent months, the 'Mag 7' stocks' weighting in the S&P 500 index is still around 30%, down from a record 34% in January. The question from investors now is whether the post-Liberation Day rebound has put these shares back into 'fair value' territory. Do they have more momentum, or not? It's been a crowded trade for the last two years at least, and although investors have trimmed their positions this year, they will still be heavily long. Tech benefits more than most sectors from lower interest rates, so the recent slide in Treasury yields will have helped juice the recovery. That recent run snapped back abruptly on Thursday, as Treasury yields climbed as much as 7 basis points at the short end of the curve. This helped support the dollar, but the biggest mover in FX on Thursday was the yen, which posted its biggest fall this year after the BOJ held rates as expected but slashed its economic growth outlook. Most central banks have preferred to take a 'wait and see' approach to the growth outlook in the face of heightened tariff uncertainty. But the BOJ stuck its neck out and halved its growth forecast for fiscal year ending March 2026 to 0.5% from 1.1%. It would appear that the BOJ's tightening cycle is over. After record import blow to U.S. GDP, beware export sucker punch Net trade delivered a record blow to the U.S. economy in the first quarter, as U.S. companies ramped up imports to get ahead of the Trump administration's tariff tsunami. While the focus is rightly on imports, it's also worth considering the export side of the ledger and the damage that could be caused by retaliation to Trump's trade war. Imports exploded 41.3% in the first quarter, causing a net 4.8 percentage point drag on growth. That was the largest since records began in the 1940s. Tariffs on imports make goods coming into the country more expensive, which is why businesses gobbled up as many as they could during the quarter in anticipation of Trump's levies. While a repeat on this scale in the second quarter is unlikely, imports are likely to remain a heavy drag on growth as firms stock up before the new duties on imports kick in. Exports also rose in the January-March period, but by an unremarkable 1.8%. If history is any guide, that figure could start shrinking because of retaliation in response to Trump's tariff salvos. While dozens of countries are trying to strike deals with the U.S., that does not mean they will simply roll over, especially if Washington plays hard ball. Many will retaliate in kind, making U.S. goods more expensive and uncompetitive in the international market. The Trump administration may not fully appreciate this risk. A 2021 working paper 'The Smoot-Hawley Trade War' , opens new tab by the National Bureau of Economic Research noted that Peter Navarro, then Director of Office of Trade and Manufacturing Policy and now a senior counsel to Trump, predicted that no country would retaliate against U.S. tariffs. "The evidence from the 1930s suggests it is a mistake, even for a country as wealthy and powerful as the United States, to assume that it can engage in a trade war with impunity," the paper concluded. 'CATASTROPHIC' Of course, the world today is unrecognizable from that of 1930 when President Herbert Hoover signed into law the infamous 'Smoot-Hawley Tariff Act', which raised tariffs on thousands of imports into the United States. The manufacturing process today is global, complex and much more sophisticated. Some 40% of U.S. imports are inputs used in the production of other goods and services. Trade was a lot more straightforward in the 1930s. But this protectionist measure - which the U.S. Senate's website describes as "among the most catastrophic acts in congressional history" - is widely cited as a key contributor to deepening the Great Depression, partly because many of America's trading partners retaliated in kind and global trade nose-dived. The NBER paper found that U.S. exports to countries that 'protested' the Smoot-Hawley import tariffs fell by 15-22%, while exports to 'retaliators' plunged by 28-33%. And if we focus on key exports, those from 'retaliators' and 'protesters', in aggregate, fell by an average of 22.5% after Smoot-Hawley. Canada was a particularly aggressive 'retaliator' in the 1930s. And nearly 100 years later, under the leadership of newly elected Prime Minister Mark Carney, it could once again be among the world's most spirited fighters in the trade war with Washington. Canada is the USA's number one export market, and goods trade between the two countries last year totaled $762 billion. The Canadian Chamber of Commerce estimates that 3.7 million jobs across both nations are tied to that bilateral trade. ELASTIC DEMAND The U.S. is currently the world's second-largest global exporter, but net exports usually subtract from growth because the U.S. has run a trade deficit for the past 50 years. Last year, goods exports totaled $2.1 trillion, and imports totaled $3.3 trillion. Trump believes his tariffs will slash the deficit, revive U.S. industry, and bring back the manufacturing jobs that have been lost over the decades. But if U.S. companies could produce more cheaply at home, they would. And it takes years to set up factories and production lines, so even if Trump's policies do bear fruit, it won't be for a long time. Once the dust settles and trade deals have been reached, the levels of duties will probably have come down from what Trump is currently threatening. But tariffs will likely still be the highest in decades, and many countries will almost certainly have reacted in kind, for political and economic reasons. "Foreign demand is elastic, countries can substitute for American goods. Our export growth will slow down," says economist John Silvia. So net exports will almost certainly remain a drag on growth for some time to come. The only question is how big that drag will be. What could move markets tomorrow? Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles , opens new tab, is committed to integrity, independence, and freedom from bias. Trading Day is also sent by email every weekday morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here. https://www.reuters.com/markets/global-markets-trading-day-graphic-pix-2025-05-01/
2025-05-01 21:02
Fonterra hopes to wrap up a sale by mid-2025, sources say Company is still looking at the IPO process, sources say Fonterra shares up 8% this year, market value $4.3 billion HONG KONG/SYDNEY, May 1 (Reuters) - Companies including Japan's Meiji, French group Lactalis and Canada's Saputo are considering bidding for the units dairy giant Fonterra (FCG.NZ) , opens new tab is seeking to divest, two sources with knowledge of the matter said this week. The companies would be bidding for Fonterra's global consumer businesses consisting of the operations and marketing of brands such as Mainland and Anchor butter, Kapiti ice cream and cheese and the Anlene powdered milk supplement. The sale also includes the Fonterra Oceania and Fonterra Sri Lanka units with operations from milk collection to processing to supplying products to consumers and food-service companies. Sign up here. A deal for the businesses Fonterra is divesting could be valued at around NZ$4 billion ($2.37 billion), the two sources said. U.S. private equity firm Warburg Pincus is also interested in buying the businesses, said one of the two sources and a third source with knowledge of Warburg's interest. New Zealand-based Fonterra announced in November a dual track plan to either sell the units or to list them through an initial public offering so it could focus on its core activity of processing milk at home. The company hopes to wrap up a sale by the middle of this year but is still looking at the IPO process, according to the first two sources. The three sources declined to be named as the matter was private. Fonterra said on Wednesday the process is confidential and cannot comment. Lactalis and Warburg Pincus declined to comment. Meiji said it is unable to make an official comment. Saputo (SAP.TO) , opens new tab did not respond to a request seeking comment. Fonterra is concurrently pressing ahead with IPO. In February, it named key management team members for the possible company, which it will name Mainland Group if the IPO route is chosen. Before making a final decision on a sale or IPO, the company plans to seek a vote from its farmer shareholders for their preferred divestment option. The operations being considered for a possible divestment accounted for about 19% of Fonterra's operating earnings in the first half of fiscal 2024, it said in May 2024. Shares of Fonterra have climbed 8% so far this year, giving it a market value of around $4.3 billion, LSEG data showed. The company's shares were down 0.2% on Thursday at NZ$4.53. ($1 = 1.6866 New Zealand dollars) https://www.reuters.com/world/americas/meiji-lactalis-saputo-warburg-may-bid-fonterras-24-billion-sale-sources-say-2025-05-01/
2025-05-01 21:01
May 1(Reuters) - EOG Resources (EOG.N) , opens new tab beat estimates for first-quarter profit on Thursday, as the company benefited from higher natural gas prices and production, but reduced its capital expenditure plan for the year on tariff uncertainty. Benchmark price for natural gas during the quarter jumped 63.4% year-over-year at $3.66 per thousand cubic feet(Mcf), while total quarterly production rose 4.8% to 98.1 million barrels of oil equivalent (MMBoe) the company said. Sign up here. Average natural gas prices have been on an upward trajectory over the past few quarters and touched a two-year high on March 10, supported by record flows to liquefied natural gas (LNG) export facilities and concerns over supply in the lead-up to the summer season. The Houston, Texas-based EOG said it was reducing 2025 capital expenditure plan by $200 million to between $5.8 billion to $6.2 billion, "on potential near-term impacts on global demand due to ongoing discussions regarding tariffs." U.S. President Donald Trump's expansive tariffs has heightened uncertainty in the oil and gas industry as it stoked worries over global economic growth and its impact on demand for energy. EOG said as a result of the reduction it expects to maintain oil production at first quarter levels for the balance of the year and deliver a total production growth of 5%. The company reported an adjusted profit of $2.87 per share for the quarter ended March 31, compared with analysts' average estimate of $2.79, according to data compiled by LSEG. https://www.reuters.com/business/energy/eog-resources-beats-first-quarter-profit-estimates-higher-natural-gas-prices-2025-05-01/
2025-05-01 21:00
OTTAWA, May 1 (Reuters) - The Canadian government said on Thursday it laid 200 charges against steelmaker ArcelorMittal's (MT.LU) , opens new tab Canada unit for violating the country's Fisheries Act. The charges stem from several investigations launched by the Canadian environment ministry's enforcement officers. Sign up here. The concerned subsection of the law prohibits depositing or permitting "the deposit of a deleterious substance in water frequented by fish or in any place where the deleterious substance may enter any such water," the government said. https://www.reuters.com/markets/commodities/canada-lays-200-charges-against-arcelormittal-alleged-violation-fisheries-act-2025-05-01/
2025-05-01 20:47
Lithium price too low to build U.S. lithium refinery CEO says governments will need to support industry Albemarle doesn't have 'war chest' for M&A Auctions for lithium paused, may soon resume May 1 (Reuters) - Albemarle's (ALB.N) , opens new tab stalled plans to build the largest U.S. lithium refinery remain on hold due to the ongoing global glut of the battery metal that has dragged down market prices, the company's CEO told Reuters on Thursday. That market malaise leaves the U.S. without a major site to process lithium - the cornerstone metal of the energy transition - and essentially dampens efforts by U.S. President Donald Trump and other Washington officials to bolster the country's minerals supply chain and curb its reliance on China. Sign up here. The U.S. refines only small amounts of the ultralight metal and has only one lithium mine, in Nevada, controlled by Albemarle. Last year, the company paused plans to build a $1.3 billion processing plant in South Carolina due in part to overproduction from Chinese rivals. While lithium prices can vary by region and type, an index of prices tracked by Benchmark Mineral Intelligence has dropped by 74% in the past two years. "We've been wanting to build this Western supply chain. The economics just aren't there to build that plant out in South Carolina," Albemarle CEO Kent Masters told Reuters. "The math doesn't work today." The company, which posted better-than-expected quarterly results on Wednesday, has a lithium price at which it would resume the project's development, but Masters declined to name it. "We don't have the confidence to say where (the lithium price) is or where it's going, which is why we've kind of gone to the strategy we have of making sure that we can compete at the bottom of the cycle," said Masters. Western minerals supply chains may need some kind of government support in order to develop projects and offset global competition, he added. "I don't think private companies are going to be able to do it on their own," Masters said. M&A While Rio Tinto (RIO.L) , opens new tab and other rivals have been buying lithium assets during the downturn, Masters said that Albemarle has yet to find an interesting target. "We don't have that war chest to go out and look at M&A activity the way we might have if prices were at a different level," he said. "If we saw some super quality resources we could go after, that might be a little different." In Chile, Albemarle is "pretty focused" on its work in the Salar de Atacama and while it considered bidding to access other salars, the company "didn't find them interesting," Masters said. Albemarle also is investing in direct lithium extraction projects in Chile and the United States, but Masters declined to say when either might progress. Amid the market turmoil, Albemarle held auctions for the battery metal as part of a bid to generate higher returns. Those auctions were paused while the company prepared for its quarterly earnings and may soon resume, Masters said. "We kind of like the idea of understanding pricing better and getting more transparency in the market," he said. https://www.reuters.com/business/energy/albemarle-ceo-says-math-doesnt-work-us-lithium-refinery-project-2025-05-01/
2025-05-01 20:47
Justice Department calls planned laws, lawsuits an overreach Lawsuits challenge New York and Vermont climate "superfund" laws Hawaii sued fossil fuel industry after Justice Department case May 1 (Reuters) - President Donald Trump's administration said on Thursday it is suing four Democratic-led states to prevent them from enforcing "burdensome and ideologically motivated" laws and pursuing lawsuits against the fossil fuel industry over the harms caused by climate change. The U.S. Department of Justice in a pair of lawsuits argued that recent laws New York , opens new tab and Vermont , opens new tab adopted requiring oil companies to contribute billions of dollars into funds to pay for damage caused by climate change were unconstitutional. Sign up here. New York alone hopes to raise $75 billion through its "superfund" law, which the Justice Department called a "transparent monetary-extraction scheme" designed to fund the state's infrastructure projects with money from out-of-state businesses. The Justice Department filed those cases on Thursday, a day after it launched two preemptive cases seeking to stop Hawaii and Michigan from filing planned lawsuits against major oil companies over climate change, cases the administration said would imperil domestic energy production. The Justice Department in its lawsuits against Hawaii , opens new tab and Michigan , opens new tab said such lawsuits constitute an "extraordinary extraterritorial reach" that unlawfully undermine federal regulation of greenhouse gas emissions and the administration's foreign policy objectives. Despite the Justice Department's announcement, Hawaii plowed ahead with filing a lawsuit , opens new tab on Thursday in state court against companies including BP (BP.L) , opens new tab, Chevron (CVX.N) , opens new tab, Exxon Mobil (XOM.N) , opens new tab and Shell (SHEL.L) , opens new tab, accusing them of failing to warn about their fossil fuel products’ climate change danger. Numerous other Democratic-led states have in recent years filed similar lawsuits accusing the companies of deceiving the public about the role fossil fuels have played in causing climate change. The companies have denied wrongdoing. Michigan has not filed a lawsuit to date, but Michigan Attorney General Dana Nessel last year retained law firms to represent it in climate change-related litigation. In a statement, she called the Trump administration's preemptive lawsuit "at best frivolous and arguably sanctionable." "I remain undeterred in my intention to file this lawsuit the President and his Big Oil donors so fear," Nessel, a Democrat, said. The Justice Department's four lawsuits follow a pledge by Trump's campaign during the 2024 election to "stop the wave of frivolous litigation from environmental extremists." The Justice Department in the lawsuits cited an executive order that the Republican president signed on his first day back in office on January 20, declaring a national energy emergency to speed permitting of energy projects, rolling back environmental protections and withdrawing the United States from an international pact to fight climate change. “These burdensome and ideologically motivated laws and lawsuits threaten American energy independence and our country’s economic and national security," Attorney General Pamela Bondi said in a statement. The Justice Department's lawsuits said all four states are standing in the way of the administration's efforts to boost domestic energy supply. "This nation's Constitution and laws do not tolerate this interference," the lawsuits said. New York Attorney General Letitia James, a Democrat, in a statement defended the state's superfund law, saying it "ensures that those who contributed to the climate crisis help pay for the damage they caused." The laws New York and Vermont adopted to create an industry-financed "superfunds" are already the subject of ongoing legal challenges by Republican-led states and the U.S. Chamber of Commerce, which have sued to block the novel laws. The climate-related litigation against oil companies by states remains in its early stages after years of litigation by oil companies over whether the states could sue in state courts rather than federal court. The U.S. Supreme Court in March rejected a bid by 19 Republican-led states, led by Alabama, to block five Democratic-led states from pursuing such lawsuits. The Republican-led states raised similar claims as the Justice Department's case. https://www.reuters.com/legal/trump-administration-sues-michigan-block-planned-climate-change-lawsuit-2025-05-01/