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The leader of Italy’s new anti-EU or Eurosceptic bloc (League), Matteo Salvini, said over the weekend that he wants to form a cross-EU bloc of Eurosceptic nationalist parties. The anti-establishment, right wing League formed a government coalition with Italy’s Five Star Movement earlier this year partly on an anti-centralised European Union platform.
As of 1 July (Canada Day) Canada has begun imposing tariffs on U.S. goods. $12.6 billion in U.S. exports to the country are being targeted in retaliation of U.S. tariffs on steel and aluminium. Canada is targeting a broad range of American products from frozen pizzas to dishwasher detergent to steel. Canada is America’s second largest trading partner. Canada will be adding tariffs on such a wide variety of American goods in part to impact a large portion of American manufacturing to get is message across and in part to support a broad range of Canadian producers.
Japanese automaker Nissan has cancelled the planned sale of its electric car battery unit to China’s GSR Capital, an investment firm. Nissan said GSR Capital lacked the funds to purchase its Automotive Energy Supply Corp (AES). Nissan holds a 51% stake in AES and was asking $1bn for their stake. The collapse of GSR Capital’s bid opens up the sale to other potential suitors. AES is a key supplier of batteries to Tesla. Earlier this year GSR Capital invested $500m into a NEVS a Swedish EV maker and signed a joint venture with Turkey’s Zorlu Holding to set up a battery assembly plant there.
China unveiled easings to its foreign investment controls last week. China’s National Development and Reform Commission has cut the list of industries where foreign investment is limited or banned from 48 to 63. Notably investment restrictions in the heavy industry, banking and automotive sectors have been eased. Over the next few years ownership restrictions on businesses in the shipping, aircraft power and some agricultural sectors will ease. This comes as both the European Union and United States have been pressuring China to open up its markets.
Lopez Obrador has won an election landslide in Mexico. A member of Mexico’s nascent left leaning National Regeneration Movement party Obrador has won around 53% of the country’s vote leading to capitulation by his rivals. His nearest opponent, Ricardo Anaya, won 23% of the vote. He will assume the presidency in December.
South African retail conglomerate Steinhoff will take a $12 billion writedown of shareholders equity according its latest unaudited accounts. The company is embroiled in an accounting scandal and has allegedly been overstating income and cash for several years. There may be more troubles to come for the company as 47% of its long-term assets are listed as goodwill or intangible.
European peach prices on average are higher currently than they were this time last year, but are sitting in the middle of their five year range. Current prices are €106/hundred kg vs €86/hundred kg this time last year. Greek and Spanish preach prices are trading at the lower end of their five-year range, French prices are at the top of their five-year range and Italian prices are in the middle.
According to Strategie Grains heavy rainfall in the French grain belt during the winter and early spring will reduce this year’s French wheat yield. The consultancy has reduced its forecast for this year’s harvest by 4 million tonnes. Euronext Matif milling wheat futures shot up on this news with the front month contract trading at €180/tonne today vs €174-€175/tonne late last week. UK Feed Wheat futures also ticked upwards with the November contract now trading above £150/tonne.
Ghana and Ivory Coast have agreed to start coordinating their cocoa bean sales to the open market. The two countries account for 60% of global raw cocoa output. They are planning to set export volume targets and work to ensure a cocoa price floor to support farmers. London Cocoa resumed its upward trend after a late May correction with the July delivery contract trading at £1895/tonne.
Climbing U.S. natural gas production is counteracting demand increases from high temperatures in key U.S. demand areas. The latest EIA natural gas production reading was 2.39 Tcf or 11% higher than April 2017 and the highest April production recorded. April consumption matched that figure, however, at 2.34 Tcf due to cold spells. August delivery Henry Hub futures have been trading sideways for much of June around the $2.90/MMBTU level.
Asian demand for crude oil imports is slowing as the region’s economic growth stammers. According to Thomson Reuters oil tanker cargo orders in July by Asian suppliers are down 11% vs June. The company is also reporting that the average bpd ordered by Asian suppliers for May, June and July was 19.3m bpd vs 20.3m bpd for those three months last year.
The province of Ontario is withdrawing from the California-Quebec-Ontario linked Western Climate Initiative, cap-and-trade carbon market that linked the three regions’ economies. Ontario joined the carbon market in 2017 that allowed major emitters in California, Ontario and Quebec to trade their allowances with each other. Ontario elected a new premier in early June who campaigned to end Ontario’s involvement in the scheme.
PT Inalum, an Indonesian state-owned mining and holding company, has nearly finalized a deal to acquire the Grasberg copper mine in West Papua. The mine is the world’s second largest and is owned and operated by U.S. Freeport. Rio Tinto owns 40% of the mine. PT Inalum is looking to take a 51% stake in the mine, which will need investment to continue producing copper in the long term.
Australia’s Department of Industry expects iron ore prices to fall by 1/5th by 2020 to trade at $51/tonne. The department expects Brazilian and Australian output will continue rising but this will be met by a moderation of Chinese demand. Overall this will improve the supply of iron ore. The department also expects copper prices to trade just below $8000/tonne by 2020 as mine supply falls short. LME 3-month copper closed last week at $6,626/tonne.
Gold prices continue to retreat and have dropped below $1,250/Troy ounce for the first time since December. Platinum prices are similarly falling and trading at $837/Troy ounce, the lowest they’ve been since January 2016. Gold and platinum are partly used for industrial purposes but are mainly held as hedges against market volatility.