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Gulf shares tempered on tariff uncertainties, Fed rate cuts in focus
Investors weighed the uncertainty surrounding U.S. tariffs with a deadline of July fast approaching. Meanwhile, comments from U.S. Federal Reserve Chairman kept hopes alive for a rate reduction. The benchmark Abu Dhabi index dropped 0.2%. This was due to a drop of 1.4% in RAK Properties, and a dip of 0.4% in Aldar Properties. Aldar, the emirate’s top developer, has purchased warehouses and industrial properties in Al Dhafra from Waha Capital. The deal was worth 530 million dirhams. Dubai's benchmark index fell by 0.3%. Union Properties fell 1.8%, and Emirates NBD lost 0.9%. Qatar Gas Transport, the largest lender in the region, fell 1.6%, while Qatar National Bank, the benchmark index for Qatar, dropped 0.3%. Saudi Arabia's benchmark index fell 0.1%. National Shipping Company fell 3.7%, and Saudi Arabian Mining Company declined 1%. Saudi Arabia's largest mining company Ma'aden announced that it has completed the acquisition of all the stakes owned by AWA Saudi and Alcoa Saudi Maaden Aluminium Company. Arabian Drilling, a Saudi oilfield service firm, rose 5.5% on the news that it had secured 1.37 billion Saudi riyals (US$365.33 million) in contract extension for four rigs. Jerome Powell, the chair of the U.S. Federal Reserve, reiterated on Tuesday that it was going to "wait and see" what more information is available before lowering rates. According to CME's FedWatch Tool, market expectations for a cut in July have increased to 21,2% from 18,6% the previous session. Fed decisions can have a major impact on the Gulf's monetary policies, since most of the currencies in the region are pegged to U.S. dollars.
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Data shows that Russian gas exports to Europe fell 18% m/m between June and July.
Calculations showed that the average daily supply of natural gas to Europe by Russian energy giant Gazprom via the TurkStream pipeline dropped by 18.3% from a year earlier in June due to maintenance on the infrastructure. The only remaining transit route for Russian gas into Europe is through Turkey after Ukraine decided not to renew a transit agreement with Moscow that expired in January. According to available data, the total Russian gas exports into Europe between January and June fell from 15.5 billion cubic meters to 8.33 bcm, when excluding supplies via Ukraine. According to calculations based on data provided by the European Gas Transmission Group Entsog, Russian gas exports through the TurkStream pipeline decreased from 46 million cubic metres (mcm) per day per month in May to 37.6 mcm/day in June. This is also down from the 39.5 mcm that was shipped along this route in May 2024. Calculations show that Russian gas supplies via TurkStream to Europe increased by 6.8% during the first half of the year, compared to 7.8 bcm in the same period last year. Gazprom has not responded to a comment request since 2023. Gazprom's data and calculations indicate that Russia will supply 63.8 billion cubic meters of gas by different routes to Europe in 2022. This fell by 55.6% in 2023 to 28,3 bcm, but increased in 2024 to about 32 bcm. In 2018-2019 the Russian gas flow to Europe peaked between 175 and 180 billion cubic meters. (Reporting done by Oksana KOBZEVA. Vladimir Soldatkin wrote the article. Mark Potter (Editing)
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China Communist Party magazine urges crackdown on price wars
A leading publication of the Chinese Communist Party called for an end to unfair competition, which fuels price wars in different industries and reduces profits. It also criticized large companies and local government for their unfair practices. The Qiushi article, published on Tuesday, said that price wars are a "waste of social resources" and can lead to unsustainable debts. This could threaten long-term economic growth. The warning comes as a result of mounting concerns about deflationary forces in the second largest economy in the world. Also, U.S. president Donald Trump's tariffs are threatening global demand on which China heavily relies for its ambitious growth goals. In recent weeks, China has seen an increase in the number of public messages against price wars. Top leaders On Tuesday, the government pledged to tighten regulations against aggressive price cuts and state media carried front-page editorials criticizing what they called a race to bottom. It is fuelling the hopes for new policies. Unprofitable factories Close or improve consumer incomes Analysts warn that Beijing may have difficulty convincing local governments to limit access to credit because of fears about job loss. Fred Neumann is the chief Asia economist for HSBC. He said, "This is at the core of China's economy and we won't see any quick fixes." "But, I think it's encouraging that now we've seen this recognition - that there's such a thing a too much competition and an excessive price war." The Qiushi, written under pseudonyms, article focused on "involutionary competitiveness" in which firms and local governments spend capital to chase after market share despite limited demand, but fail to generate revenue growth. The report highlighted industries like photovoltaics and lithium batteries as well as electric vehicles and ecommerce platforms. Last month, solar manufacturers demanded an end to the price wars. On Tuesday, car dealers in east China complained that some automakers were pressuring them to reduce prices, citing high inventories and financial risks. The Qiushi piece also highlighted problematic corporate behavior, such as compromising product quality in order to reduce costs. This weakens innovation, reduces R&D investments and hurts the interests of consumers. It said that other firms increase their capacity, while delaying payment to suppliers and contractors. This squeezes the entire industrial chain. WARNING TO LOCAL OFFICIALS The magazine has also criticised local officials for not stepping up to the plate enough, stating that regulations haven't kept pace with new business models and industries. The bankruptcy mechanisms are "imperfect" and prevent curbing excessive supply. Some local governments that are focused on short-term economic growth attract investment through "artificially" creating policy havens with preferential taxation, fees, land use and subsidies, as well protectionist measures. Economists warn that China's high level of state-directed investment and low domestic demand due to a weak social safety net, as well as the deep inequalities between rural and urban areas, will make it overly dependent on its exports. This could lead to debt and deflation similar in nature to Japan during the 1990s. The article didn't mention deflation but warned that China could suffer from "development path dependence". It also needed supply-side changes to reduce excess industrial capacities and a strategy for expanding domestic demand. The report warned that the problem is "complex," and it cannot be resolved "overnight, or by a single, decisive action." (Reporting and writing by Joe Cash, with additional reporting from Laurie Chen in Beijing. Writing by Marius Zaharia. Editing by Shri Navaratnam & Christian Schmollinger).
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KLM crews strike in Amsterdam during the summer holidays
The CNV union announced on Wednesday that KLM ground crews would go on strike on July 9 at Amsterdam Airport unless Air France KLM, the Dutch subsidiary of Air France KLM, meets their demands for increased wages. The eight-hour planned strike will come at a busy time for the airport as the school holidays begin next week in some parts of the Netherlands. KLM has said that it will consider asking the court to prohibit the strike as it did successfully last month. CNV is confident that the strike will not be banned as the circumstances have changed. The court's ruling in June cited concerns about security at the airport in relation to the NATO summit that was to be held in The Hague just days before the strike announcement. KLM said last week that it had offered higher wages but CNV said the offer was still vague.
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In June, Northeast Asia sent the most jet fuel into Europe in almost a year
According to three sources and shiptrackers, traders exported the most jet-fuel from Northeast Asia to Europe since almost a full year in June, as lower freight costs and abundant Asian supplies boosted exports amid fears of Middle East supply disruption. Kpler data shows that 350,000 metric tonnes (2.8 million barrels of aviation fuel) is headed to Europe from South Korea, China and some traders estimate 465,000 tons based on bookings made in the month of June. Analysts said that these shipments will help to ease Asia's jet-fuel oversupply in the short term and set a price floor. The data revealed that Vitol and BP, Aramco Trading Gunvor, and Unipec (the trading arm of Asia’s largest refiner Sinopec) chartered five tankers in June. Vitol, Saudi Aramco, Gunvor, Unipec, and BP declined to comment. Ivan Mathews, Vortexa’s head of APAC Analysis, said that Northeast Asia jet-fuel exports rose during June, as refiners increased their production following maintenance in their plants, and as “product cracks” strengthened. Two Singapore-based sources reported that traders shifted their spot cargoes towards the West in order to take advantage of lucrative margins and a fall in freight rates. This was due to a recent lack of interest in spot purchases from regional importers. Zameer Yusof, senior research analyst at Kpler, said that these trade flows were "purely opportunistic and spurred on by geopolitical pressures which sent Northwest Europe cracks soaring". Freight rates for modern newbuild vessels also remained attractive, justifying the move. Prices of jet fuel in Northwest Europe The price of a ton in Asia is $60-$80 higher. LSEG data indicated that the majority of June was spent in warm weather. Jet fuel demand in Europe typically increases during the summer months, when travel is at its peak. Eurocontrol reported that June flight numbers were up 7.8% over the previous month and 5.2% year-over-year. Jet fuel prices rose in Europe on the fear that the Middle East conflict could disrupt the supply. Bookings made prior to the Iran-Israel conflict on June 13 saw the price of 90,000 tons jet fuel shipped on LR2 tanks fall to a low of $40-$45 per ton, a drop of one month. Two shipping sources reported that at least four new LR2 ships have been booked in June and/or July to transport jet fuel east-west. One shipbroker source stated that the first voyages of new vessels are usually cheaper, because some owners wish to collect tracking history and miles. Analysts did not expect that the price of Asian jet fuel would rise as a result of increased exports to Europe. "Asia is chronically net-long jet/kero in June and in July by about 625 kbd, and Europe bound flows will not make a significant dent in this surplus," Kpler’s Yusof stated. It's difficult to remain constructive when China targets jet/kero exports above 2 million tons per monthly. China exported 1,92 million tons jet fuel in May, a 20% increase on the previous year.
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Report: National Grid failures caused the fire that shut down Heathrow.
The failure of an electrical substation component that was not properly maintained caused the fire at Heathrow Airport in March, according to Britain's National Energy System Operator. Ofgem, Britain's energy regulator, said that it had launched a formal enforcement investigation into National Grid Electricity Transmission in response to the findings of the report. The Heathrow airport closure on March 21, the busiest in Europe, cost airlines tens and millions of pounds. It also left thousands of passengers stranded. The incident also raised concerns about the resilience and stability of Britain's transport infrastructure. The National Energy System Operator's report stated that "this review has seen evidence of a catastrophic failure in one of the high voltage bushings on the transformer at National Grid Electricity Transmission’s 275kV Substation". This was probably caused by moisture getting into the bushing and causing an electric fault. The report stated that National Grid's controls were ineffective and that they failed to recognize that no action was taken regarding an elevated moisture reading for 2018. Ed Miliband, the Energy Minister, said that the report is "deeply worrying". National Grid did respond immediately to a comment request. (Reporting and editing by William James)
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INDIA RUPEE-Rupee dips alongside Asian peers; tariff deadline, Fed cut path in focus
The Indian rupee fell slightly on Wednesday. It followed modest declines among its regional peers, while investors focused on an upcoming U.S. deadline for tariffs as well as clues about the future direction of the Federal Reserve’s benchmark policy rate. As of 11:15 am IST, the rupee was down about 0.2% at 85.6850 to the U.S. Dollar. Asian currencies were mostly lower as well, while the dollar index rose 0.1% to 96.7, supported by stronger-than-expected U.S. economic data that lent credence to the Fed's stance of being patient on cutting interest rates. Fed Chair Jerome Powell reiterated on Tuesday that the U.S. Central Bank plans to "wait" and "learn more" about the effect of tariffs on the inflation rate before lowering rates. The U.S. Non-Farm Payrolls Report due Thursday, and the developments in U.S. India trade negotiations are expected to give traders directional clues. A trader from a private bank told Reuters that the rupee will likely experience a two-way price movement, with resistance in the zone between 85.45 and 85.50. The persistent dollar bids by state-run banks at that level has also led traders to speculate that the Reserve Bank of India could be stepping up to absorb dollar inflows. Donald Trump, the president of the United States, said that the United States and India could come to a deal on trade, which would allow India to avoid the 26% tax announced in April, but paused until July 9. MUFG stated in a report that "we continue to forecast USD/INR moving lower due to domestic factors supporting the currency and a potential trade agreement with the U.S. with an implicit assumption of a geopolitical status quo." The firm anticipates that USD/INR will decline to 84 in the first quarter 2026. (Reporting and editing by Janane Vekatraman; Jaspreet Klra)
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China Communist Party magazine urges crackdown on price wars
A leading Chinese Communist Party publication has called for an end to unfair competition, which fuels price wars in different industries and reduces profits. It also criticised big companies and local governments. The Qiushi article, published on Tuesday, was the strongest warning the Communist Party has ever issued on the dangers of industrial overcapacity. It said that the phenomenon leads to "enormous loss of social resources" and unsustainable debt which could threaten long-term economic growth. The article was written under a pseudonym and focused on "involutionary competitiveness" where it stated that firms and local governments invested vast amounts of money to chase market shares in an environment with limited demand while failing to achieve revenue increases. The report highlighted industries like photovoltaics and lithium batteries as well as electric vehicles and ecommerce platforms. Qiushi stated that some companies cut corners to save money, compromising on the quality of their products. This, he said, discourages innovation and investment in R&D and damages consumer interests, as "bad money drives away good money." Some companies are expanding capacity while delaying payment to contractors and suppliers, which is squeezing out the entire industry chain. Qiushi stated that e-commerce platforms compete in price by using their advantage to put pressure on merchants who use them to reach customers. The magazine has also made some rare criticisms of local officials. It accuses them of "absence and overreach." It said that officials should intervene more, as the regulations haven't kept up with new business models and industries. The bankruptcy mechanisms are "imperfect" and prevent curbs on excessive supply. Some local governments that are focused on short-term economic growth attract investments by "artificially" creating policy havens with preferential taxation, fees, land use and subsidies, as well protectionist measures. Since years, many economists have warned Beijing that China's high levels of state-guided investments and subdued demand - due in part to a feeble safety net and severe rural-urban inequality - make it overly dependent on the export market for growth and create debt and deflation risk similar to those experienced by Japan in 1990s. Qiushi didn't mention deflation but warned China could suffer from "development path dependence". He also said that China needed to implement supply-side reforms, which would reduce excess industrial capacity as well as a strategy for expanding domestic demand. The warning was that it would take some time. The magazine stated that "Rectifying the 'involutionary" competition is a complex systemic engineering project which cannot be completed overnight or in a single decisive step." (Writing and Editing by Shri Navaratnam).
US sources claim that Iran has made preparations for the mining of the Strait of Hormuz.
Two U.S. officials claim that the Iranian military loaded mines on vessels in the Persian Gulf in late November. This move heightened concerns in Washington about Tehran's plans to blockade Strait of Hormuz in response to Israel's attacks against Iranian sites.
Officials who spoke on condition of anonymity in order to discuss sensitive intelligence issues said that the previously unknown preparations took place some time after Israel's initial missile attack against Iran, which occurred on June 13. The mines were not deployed in the Strait, but the loading suggests that Tehran was serious about shutting down one of the busiest shipping routes on the planet.
A fifth of all oil and gas exports pass through the Strait of Hormuz, and a closure would have likely pushed up energy prices worldwide.
The global benchmark oil price has fallen by more than 10% in recent months, largely due to relief that the U.S. strike on Iran's nucleus facilities did not cause significant disruptions in oil trade. Iran's Parliament reportedly supported a measure on June 22 to block the Strait of Hormuz. This was shortly after U.S. forces bombed Iran's three most important nuclear sites to try to cripple Tehran’s nuclear program.
Press TV in Iran said that the decision was not final and the Supreme National Security Council of Iran would have to decide. Iran has threatened to close the Strait over the years, but never carried out that threat.
It was impossible to pinpoint the exact time that Tehran had loaded the mines during the Israel-Iran war, which if used would have stopped the ships from passing through the main thoroughfare.
The mines may have been detonated since then, but it is not clear.
Sources did not reveal how the United States determined the mines were placed on the Iranian vessels. However, such intelligence is usually gathered by satellite imagery, clandestine sources, or a combination.
A White House official was asked to comment on Iran's plans. He said: "Thanks for the President's brilliant implementation of Operation Midnight Hammer and his successful campaign against Houthis and maximum pressure campaign the Strait of Hormuz is open, freedom of movement has been restored and Iran has significantly been weakened."
The Pentagon didn't immediately respond to an inquiry for comment. The Iranian Mission at the United Nations did not immediately respond to a request for comment.
Key THOROUGHFARE
Two officials stated that the U.S. has not ruled the possibility of a ruse in loading the mines. Officials said that the Iranians may have loaded the mines in order to fool Washington into thinking that Tehran is serious about closing down the Strait.
Iran's military may have been preparing for the worst in case the Iranian leaders had given the order.
The Strait of Hormuz is located between Oman, Iran, and the Gulf of Oman in the south. It also connects the Persian Gulf to the Arabian Sea.
The shipping lane is only 2 miles wide either way. It's 21 miles (34km) wide at the narrowest point.
Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates are all OPEC countries that export the majority of their crude oil via the strait. This is primarily to Asia. Qatar, one of the largest LNG exporters in the world, sends most of its LNG via the strait.
Iran exports the majority of its crude oil through the passage which, in theory, limits Tehran's desire to close the strait. Tehran has invested significant resources in ensuring it is able to do this if necessary.
The U.S. Defense Intelligence Agency reported that Iran had more than 5,000 mines in its arsenal as of 2019. These could be quickly deployed by small boats with high speeds, according to the estimate at the time.
Fifth Fleet of the United States, based in Bahrain is responsible for protecting trade in the region. The U.S. Navy typically keeps four mine countermeasure ships, or MCM vessels in Bahrain. However, these vessels are now being replaced by a different type of vessel, a littoral battle ship, or LCS. This vessel also has antimine capabilities. In the days before the U.S. strike on Iran, all anti-mine vessels had been temporarily taken out of Bahrain to prepare for a possible retaliatory assault on Fifth Fleet Headquarters. Iran's immediate response was a missile strike on a U.S. base in Qatar.
Officials in the United States have not, however, ruled out any further retaliatory actions by Iran.
(source: Reuters)