What matters in U.S. and global markets today By Mike Dolan, Editor-At-Large, Finance and Markets
Oil prices jumped 4% on a wave of new retaliatory sanctions on Russian crude over Moscow’s repeated bombardment of Ukraine, adding to fresh trade and inflation anxiety on Wall Street just as megacap Tesla tumbled overnight on a big profits miss. U.S. President Donald Trump hit Russia’s two biggest oil companies, Rosneft and Lukoil, with the sanctions in a turnaround that also saw him cancel a meeting with Russian counterpart Vladimir Putin. Although still down 15% year-on-year, U.S. crude jumped above $60 per barrel to two week highs. Former Russian President Dmitry Medvedev said the latest Trump moves over Ukraine were “an act of war against Russia.” Britain sanctioned Rosneft and Lukoil last week. Separately, EU countries approved a 19th package of sanctions against Russia for the war that includes a ban on imports of Russian LNG. And the move came as industry sources told Reuters Indian refiners were poised to sharply curtail imports of Russian oil to ensure they were in compliance with U.S. sanctions. New Delhi is under pressure from stiff U.S. trade tariffs over the issue.
The energy jolt comes as Wall Street awaits the September U.S. inflation report tomorrow and pushed up Treasury yields despite a decent 20-year bond auction on Wednesday. The dollar firmed too, with the yen hitting its weakest since October 10.
Gold regained some of its poise after steep losses earlier in the week. Hit by a 10% earnings-day drop in Netflix and a 6% drop in chipmaker Texas Instruments, the S&P500 lost 0.5% on Wednesday as U.S.-China trade tensions heated up once again. Tesla’s 4% stock drop overnight adds to the jitters after the electric car giant’s fourth consecutive profit miss and Wall Street index futures failed to rebound ahead of Thursday’s bell.
Intel tops Thursday’s heavy earnings diary.
The China trade worries jangled more broadly. According to a Reuters report, the Trump administration is considering a plan to curb an array of software-powered exports to China to retaliate against Beijing’s latest round of rare earth export restrictions. Trump said the long-awaited meeting with Chinese leader Xi Jinping may now not happen as the November 1 deadline for more severe U.S. tariffs looms.
The Philadelphia Semiconductor index tumbled 2.4%.
Trump’s cabinet secretaries view China’s move on rare earths as “full-blown economic war”, a person familiar with administration thinking told Reuters. “The prospect for escalation is severe.” China’s ruling Communist Party Central Committee, meanwhile, released a communique on its latest five-year plan, emphasizing a strong domestic market and an expansion of domestic demand.
Elsewhere, markets were more mixed as global political and trade issues jostled with waves of corporate earnings. China’s stocks advanced, but Japan’s Nikkei fell back more than 1%. In today’s column, I take a look at how Europe navigates the trade crosswinds from both Washington and Beijing.
Today’s Market Minute
* The United States hit Russia’s major oil companies with sanctions on Wednesday and accused the Russians of a lack of commitment toward ending the war in Ukraine, as Moscow conducted a major training exercise involving nuclear arms.
* Just a month after U.S. President Donald Trump hailed “progress” in talks with China, the world’s two most powerful nations are scrambling to salvage a planned summit of their leaders, now just a week away, while trading blame for a spike in tension.
* The Trump administration is considering a plan to curb a dizzying array of software-powered exports to China, from laptops to jet engines, to retaliate against Beijing’s latest round of rare earth export restrictions, according to a U.S. official and three people briefed by U.S. authorities.
* Critical minerals, and especially rare earths, as well as the ongoing need to decarbonise and a bigger role for governments are the three top areas of concern for the global mining industry. Read the latest from ROI Asia Commodities Columnist Clyde Russell.
Chart of the day
Trump hit Russia’s two biggest oil companies with sanctions in his latest sharp policy shift on Moscow’s war in Ukraine, prompting global oil prices to rise by 3% on Thursday and India to consider cutting Russian imports. Oil and gas revenue, which is currently down by 21% year-on-year, accounts for around a quarter of Russia’s budget and is the most important source of cash for Moscow’s war in Ukraine, now in its fourth year.
Today’s events to watch (All times EDT)
* U.S. September existing home sales (1000), Kansas City Federal Reserve October business survey (1100); euro zone October consumer confidence (1000); Canada August retail sales (0830)
* Federal Reserve Vice Chair for Supervision Michelle Bowman and Board Governor Michael Barr speak; European Central Bank chief economist Philip Lane speaks; Bank of England policymaker Swati Dhingra speaks * European Union summit in Brussels, with ECB President Christine Lagarde attending
* U.S. corporate earnings: Intel, Blackstone, Ford, Dow, PG&E, Honeywell, Newmont, Norfolk Southern, Union Pacific, VeriSign, Mohawk, Valero, Dover, Allegion, Hasbro, Southwest Airlines, Textron, Pool, CBRE, Roper etc
* U.S. Treasury sells 5-year inflation-protected notes
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Mike Dolan; Editing by Alison Williams)