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Developed economies

  • Q2 manufacturing growth in Singapore slowed to 8.6% from 9.7% in Q1. Commentators are putting the slowing in growth down to trade tensions between the US and China reducing regional capex spending.
  • The latest Australian GDP forecast are for 2.9% growth this year, shrinking to 2.7% by 2020. Inflation is expected to hit 2.2% this year and increase to 2.4% by 2020. This is a median economic poll.
  • The New Zealand government is moving to formally add employment levels to the New Zealand central bank’s monetary policy targeting mandate alongside inflation via parliamentary act. The bank has already been temporarily focusing on employment levels when considering rate setting. The government is also looking to introduce a committee to set monetary policy instead of the current system of leaving the decision to the bank governor.

Emerging economies

  • Expectations are that the Turkish central bank will hike its key interest rate this week. The rate is currently at 17.75% and analyst are expected a 100 to 150 basis point hike. The bank targets a 5% inflation rate with inflation currently running at 15.39% per annum.
  • The Indonesian central bank stated that the widening Indonesian trade deficit is not a symptom of the Indonesian economy. Rather the bank puts this trade deficit down to increasing capital goods imports for infrastructure projects.
  • The Philippines has also entered a trade deficit situation with May’s deficit reaching a 5-month high of $3.7bn. According to the country’s statistical agency this widening is primarily due to a shift from being a majority food exporter to a majority food importer. The country’s economic growth was 6.8% annualized in Q1.

Agriculture

  • US wheat markets are at a six-week high on the prospects of supplying wheat to dryness-stricken Europe. Front month Chicago SRW wheat is trading at $5.17/bushel and Kansas City wheat is at $5.11/bushel. Currently it looks like the North American wheat crop will be better than normal this year but there are some dryness concerns in Canada. Poor harvests in Australia, Russia and Europe will likely provide support for US wheat futures for the near future as European consumers develop a taste for American flour.
  • Chinese imports of sorghum jumped upwards in June as the Chinese government eased trade restrictions. In mid-April a punitive 178.6% deposit on US sorghum imports was implemented as part of the ongoing US-China trade dispute. The deposit requirement was lifted in June. China is a major market for US agricultural commodities.
  • Argentina is expected to have a bumper wheat harvest this year. This comes after the country’s soy crop was devastated by drought. This year’s harvest is expected to be 20m MT vs last year’s 18.2m MT. These estimates come down to good planting conditions with estimates of a 7% increase in wheat planted areas.

Energy 

  • North Sea oil and gas platforms will be hit by a 24 hour strike this week. Three platforms run by Total will be affected. Combined they provide 10% of the UK’s domestic gas output. The reduction in oil output will made up for by stored crude onshore, but the reduction in gas supplies will push up near term gas prices. Further strikes are planned for late July and August.
  • Tensions in the Persian Gulf are heating up again with the USA’s Trump and Iran’s Rouhani trading angry threats. Iran’s Khamenei said on Saturday that if Iran’s oil exports are blocked then the country should seek to block all oil exports from the Persian Gulf. Crude oil markets show no signs of being rattled by these tirades. Dubai crude is trading at $71/bbl and Shanghai crude is trading at ¥491/bbl, with the markets bouncing off price floor levels set last week ($70 and ¥480 for Dubai and Shanghai respectively) rather than reacting to geopolitics.
  • The British government has committed to a rolling series of Contracts for Difference auctions for renewable energy. The first such round will be in May 2019 and then happen annually. £557m has been budgeted for offshore and remote island wind projects. Each round is expected to delivery between 1 and 2 GWs of capacity. 

Metals

  • China launched a probe into stainless steel imports this week targeting some $1.3bn of products from Japan, Korea, Indonesia, and the EU. Chinese imports of stainless billet and hot-rolled stainless sheets/plates nearly tripled in 2017 to 703,000 tonnes. Interestingly, the probe is examining stainless steel produced by Chinese owned firms in these countries, especially Indonesia. Commentators are suggesting this probe is part of a dispute between Chinese state-owned steel mills operating with relatively higher Chinese labour costs and Chinese privately-owned steel mills setting up shop overseas to benefit from relatively cheaper labour costs.
  • UC Rusal – the world’s largest primary aluminium producer – may be removed from the US sanctions list according to US treasury secretary Steven Mnuchin. The company has been working to comply with US demands to be removed from said list. When the sanctions were initially set Germany, Ireland and France, and major corporations lobbied the US government to water them down (the initial suggestion was to block UC Rusal from the international aluminium market entirely). This reflects just how important UC Rusal’s aluminium output is to the global economy.
  • Earlier this month an autonomous train completed its first delivery of iron ore for mining giant Rio Tinto. The ‘robot’ delivered 28,000 MT of ore to a port 280km away from the mine head. The trip was monitored remotely from Perth. Rio Tinto also wants 30% of its Australian mine haul trucks to be autonomous by 2019.