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Developed economies

  • The UK Government under Theresa May has announced their vision for the post-Brexit relationship between the UK and the EU on Friday. This includes a free trade agreement, regulatory alignment and customs alignment. As of yet the EU has not rejected this plan as they had done with previous suggestions on how to resolve the Irish Border issue. But David Davis, Brexit Secretary, and Boris Johnson, the Foreign Secretary, have both quit over Theresa May's proposals for trade with the EU, adding to pressure on the UK Prime Minister over Brexit.
  • Canadian unemployment rose slightly in June from 5.8% to 6.0% versus May. However, analysts see this as a positive sign as it reflects an increase in job-seekers than a decrease in jobs. This hike in job seekers may lead to an interest rate hike by the Bank of Canada this month. 
  • South Korean automaker Hyundai cautioned the US over imposing a 25% import tariff on South Korean manufactured cars. The automaker suggested this would hurt the two country’s alliance and make dealing with North Korea more difficult. 

Emerging markets

  • Nigeria’s Manufacturing PMI came in at 57 for June vs 56.5 for May whilst the country’s services PMI came in at 57.5 for June vs 57.3 for May. The Nigerian economy has been slowly recovering from the downturn in commodity linked emerging market economies between 2012 and 2015. 
  • There have been protests in Vietnam against plans for new economic zones. The Vietnamese Government is looking to give foreign investors 99-year leases on land parcels in these zones. The protests believe that these zones will be dominated by Chinese investors. 
  • 72% of Brazilian’s believe their economy is worse off now than it was six months ago according to a June Datafolha poll. The Brazilian economy contracted for the first three months of 2018 and has posted modest growth since April. The country is still struggling to break out of the 2012 and 2015 emerging market recession. 

Agricultural

  • Cargill is investing ~$10m to upgrade its grain terminal in Rostov, Russia. The upgrades will boost capacity of the exiting terminal by 50% to 1 million tonnes per year. 
  • Archer Daniels Midland (ADM) is in discussions to purchase Neovia, a French supplier of animal feed. Neovia is present in 25 countries but with limited presence in the United States. Neovia is valued at $1.8bn and is majority owned by French agricultural group InVivo
  • Sweltering temperatures across Europe are leading grain forecasters to slash output estimates for this year’s crop. UK Feed wheat futures are pushing up towards £170/tonne after ending may around £150/tonne. If the heat degrades this year’s output, we’ll likely see significant price volatility towards the autumn. 

Energy 

  • European power futures prices hit new contract highs this week as carbon, coal and Brent prices pushed higher. Calendar year 2019 German and French baseload prices hit €44.5/MWh and €49.6/MWh respectively. Brent crude is being elevated by a tight oil market and coal is increasing on Chinese demand. Meanwhile scorching temperatures across Europe are driving up demand. And there has been limited wind power production as high-pressure systems dominate the European meteorological space. 
  • Brent crude pushed up to $77.71/bbl on Monday as global demand is strong whilst the U.S. is trying to shut out Iranian oil from the market. The U.S. is looking to reduce oil exports from Iran to zero by November as it renews sanctions efforts. U.S. shale production, however, saw a modest boost last week with an increased rig count. 

Metals

  • US trade tariffs have made U.S. steel prices among the highest in the world. The U.S. Department of Labor steel mill products index read 213 in May, the highest level since 2015. The US has placed tariffs on multiple countries as part of Donald Trump’s trade wars. 
  • A $1bn long position in copper was Liquidated this week in the Shanghai Futures exchange. A brokerage in Beijing reduced its long position from 36,050 lots to 10,000 lots today. The liquidation pushed the SHFE copper price down from CNY 51,000/tonne to CNY 48,000/tonne. The LME copper market saw a similar sell-off. 
  • The Indian government has tasked three state-owned mining enterprises (NALCO, Hindustan Copper and MECL) to seek out ownership of lithium and cobalt reserves overseas to ensure India’s strategic supply of these minerals in the future.
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