Crude Oil: Uptrend May Extend on Cautious Trade Deal Optimism, Supply Risks

Commodity

Summary:

Oil prices surged near $70 amid cautious optimism over a U.S.-China trade deal, stalled Iran nuclear talks, falling U.S. inventories, and limited OPEC+ output—raising prospects for further short-term gains.

Oil prices jumped by as much as 5% yesterday, bringing WTI crude close to $70 per barrel. The main reason for the rise is positive news about a possible trade deal between China and the US, though no final agreement has been reached yet.

At the same time, talks with Iran over its nuclear program have not made much progress. If the negotiations fail completely, there is a risk of military conflict, which often pushes oil prices higher.

Adding to the upward pressure, US oil inventories fell more than expected for the third month in a row.

Oil Prices Move Under Geopolitical Pressure

Looking at the different parts of the ongoing tariff war, the situation with China seems to have the biggest impact on financial markets, including oil. The latest statement says that the deal is almost complete, but both Donald Trump and Xi Jinping still need to sign it. Given how quickly things can change, nothing is certain yet.

Still, the market is already hoping for a return to normal trade, especially for semiconductors and rare earth metals, which appear to be the key negotiating points for both countries. A revival in trade and a stable long-term deal would help GDP growth, which would also increase demand for oil.

Yesterday’s decision to withdraw some staff from the US embassy in Baghdad is a bad sign for the US-Iran talks on stopping Iran’s nuclear program in exchange for easing Western sanctions. People involved in the talks say that Iran is demanding more, and although negotiations are still ongoing, the chances of a deal look slim.

In the worst case, the US could launch strikes on Iran’s nuclear sites. If that happens, Iran may retaliate, and the conflict could spread across the region, pushing oil prices much higher.

Last month, OPEC+ announced a production increase of 310,000 barrels per day but managed to raise output by only 180,000 barrels. Key producers, led by Saudi Arabia, were unable to boost production as planned.

Combined with falling US oil inventories, this points to a possible, at least short-term, shortage of crude on the global market, especially if trade activity and GDP growth in the US pick up.

WTI Crude Oil Prices Approach Key Supply Zone

WTI crude oil has broken through the resistance level around $65 per barrel, opening the way for further gains. The next target for buyers is the supply zone near $72 per barrel, which is where a strong downward move started in early April.

Crude Oil: Uptrend May Extend on Cautious Trade Deal Optimism, Supply Risks_1

Any possible pullbacks are likely to face support near the intersection of the rising trend line and the previously broken resistance, which now acts as support. In a very bullish scenario, if prices break above $72 per barrel, they could even move toward this year’s highs just below $80 per barrel.

source : investing

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Glendon

Economic

Forex

The Producer Price Index (PPI), a critical measure of the change in the price of goods sold by manufacturers, reported a slight uptick in the latest economic data. The PPI is considered a leading indicator of consumer price inflation, which accounts for the majority of overall inflation.

The actual figure came in at 0.1%, marking a modest increase from the previous figure. This shift towards positive territory indicates a rise in the prices of goods sold by manufacturers, signaling the potential for increased inflation down the line.

However, the actual figure of 0.1% fell short of the forecasted 0.2%. Economists had anticipated a slightly higher increase, suggesting a more robust inflationary trend. The lower-than-expected PPI reading could be interpreted as a bearish signal for the USD, as it indicates slower-than-anticipated inflation.

Comparatively, the previous reading for the PPI was at -0.2%. The move from negative to positive is a significant shift, as it indicates a reversal of the previous deflationary trend. This change could signal a potential shift in the broader economic landscape, with manufacturers increasing prices in response to various market pressures.

The PPI’s importance as a leading indicator of inflation cannot be overstated, as it provides a snapshot of manufacturers’ pricing power and potential inflationary pressures. An increase in the PPI often precedes higher consumer prices, affecting the purchasing power of consumers and potentially influencing the Federal Reserve’s decisions on interest rates.

In conclusion, while the PPI’s modest increase indicates a move away from deflation, its failure to meet forecasts may raise some concerns about the pace of inflation. This could potentially influence decisions on monetary policy and affect the value of the USD in the currency markets. As always, market participants will be keeping a close eye on these indicators to inform their decisions.

Source: Investing

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Warren Takunda

Economic

Stocks

London stocks had dipped into the red by midday on Thursday amid ongoing trade concerns and after the release of disappointing UK GDP data.

The FTSE 100 was down 0.1% at 8,852.87.

Joshua Mahony, chief market analyst at Rostro, pointed to growing worries that we could soon see the trade war break out once again.

"Despite Bessent’s prediction that many of the reciprocal tariff delays will be extended on 9 July, President Trump subsequently announced plans to send letters setting out unilateral tariff rates to key trading partners," he said.

"The decision on whether nations will be granted an extended reprieve comes down to the perception over whether they appear to be approaching trade talks in good faith. For EU nations this is a concern given the tumultuous relationship they have had with Trump since he took office for the second time."

On home shores, figures from the Office for National Statistics showed the economy contracted more than expected in April as higher taxes and Trump’s tariffs took their toll.

The economy shrank 0.3% following 0.2% growth in March. Economists were expecting a contraction of 0.1%.

Monthly services output fell 0.4% in April following 0.4% growth the month before, and was the largest contributor to the fall in monthly GDP.

Production output shrank 0.6% in April following a 0.7% contraction in March, while construction output grew 0.9% following growth of 0.5% in March.

ONS director of economic statistics Liz McKeown said: "The economy contracted in April, with services and manufacturing both falling. However, over the last three months as a whole GDP still grew, with signs that some activity may have been brought forward from April to earlier in the year.

"Both legal and real estate firms fared badly in April, following a sharp increase in house sales in March when buyers rushed to complete purchases ahead of changes to stamp duty. Car manufacturing also performed poorly after growing in the first quarter of the year."

Separate data from the ONS showed that the value of goods exports fell by £2.7bn, or 8.8% in April 2025, with falls in exports to both the EU and non-EU countries.

Exports of goods to the US fell by £2bn, which the ONS said was "likely linked" to the implementation of tariffs on goods imported there. This was the largest monthly decrease since records began in January 1997 and followed four months of consecutive increases.

Investors were also mulling the latest residential market survey from the Royal Institution of Chartered Surveyors, which showed that house prices weakened in May as consumer sentiment faltered.

In equity markets, Halma surged as the safety equipment firm reported record revenues and profits for the 12 months to 31 March, with both rising by double-digit percentages, and lifted its dividend by 7%.

Tesco rose as it posted a 4.6% jump in first-quarter like-for-like sales and an increase in its markets, and held its full-year guidance.

Housebuilder Crest Nicholson nudged higher as it held annual guidance after a rise in adjusted half-year earnings amid an easing in mortgage costs as interest rates fall.

Source: Sharecast

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Michelle

Economic

Forex

The latest data on Initial Jobless Claims, a key indicator of the health of the U.S. labor market, showed no change from the previous week, with the number of individuals filing for unemployment insurance for the first time holding steady at 248K. This figure surpassed the forecasted number of 242K, potentially signaling a slower than expected recovery in the job market.

The actual number of 248K matched the previous week’s figure, indicating a stagnation in the decline of jobless claims that many economists and market watchers have been anticipating. The steady number suggests that the pace of layoffs in the U.S. economy remains unchanged, a potentially disquieting sign for those hoping for a rapid return to pre-pandemic employment levels.

The forecasted figure of 242K, which the actual number exceeded by 6K, was based on various economic indicators and projections. The fact that the actual number surpassed the forecasted one could be interpreted as a negative or bearish sign for the U.S. dollar. However, it’s worth noting that the market impact of Initial Jobless Claims varies from week to week, and this single data point should be considered in the context of broader economic trends.

Initial Jobless Claims is among the earliest economic data released in the U.S., and it provides a snapshot of the number of individuals who have filed for unemployment insurance for the first time in the past week. While the data can fluctuate from week to week, it’s a closely watched barometer of the labor market’s health and can influence decisions made by policymakers, investors, and businesses.

In summary, the unchanged number of Initial Jobless Claims at 248K, which exceeded the forecasted figure, may be cause for concern among those hoping for a quicker recovery in the job market. However, it’s important to consider this data in the context of other economic indicators and trends.

Source: Investing

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Adam

Stocks

Bond

Traders who hung on during this year’s tariff-fueled rollercoaster ride in stocks are facing a conundrum: Bonds may offer more attractive returns in coming years, according to one widely tracked measure.

The equity risk premium, which investors use to determine the difference between expected returns on equities and US Treasuries, is hovering around its lowest point since 2002, data from Bloomberg Intelligence showed. That suggests stocks are more expensive relative to bonds than they have been for most of the last two decades, according to Bloomberg Intelligence strategists Gina Martin Adams and Michael Casper.

Calculated by subtracting the S&P 500 Index's (^SPX) earnings yield from the 10-year Treasuries rate, the gauge helps investors decide where to allocate their cash. The case for owning equities becomes less compelling if bonds can earn nearly as much as stocks but with reduced risk.

After the big recovery in stocks since April, the readout is fairly gloomy for equities: The S&P 500 (^GSPC) has averaged a 12-month return of only 2.5% over the past three decades when the risk premium has stood around current levels, according to data compiled by investment research firm CFRA. That compares to an average annual return of 8.5% for the period.

Sizzling Rally in US Stocks Leaves Them Pricey Compared to Bonds_1

“Whenever you see equity risk premium slump this much, it historically tells us that stocks are becoming less attractive,” said Timothy Chubb, chief investment officer at Girard, a wealth advisory firm backed by Univest. “After a massive rally over the past two months, this could take some air out of the recent rebound.”

With the S&P 500 within 2% of a record following a breathtaking surge from the edge of a bear market, investors are seeking fresh catalysts to justify buying stocks at current levels. While a brighter outlook on global trade, robust corporate earnings and resilient economic data have driven that rebound, those factors appear to be largely priced in.

That may be a reason for the comparatively listless trading in equities of late. The S&P 500 hasn’t seen a move exceeding 0.6% in either direction for 10 of the last 11 sessions through Wednesday — the longest such stretch since early December, according to data compiled by Bloomberg.

“We know what the rules of the game are now for the trade war, and tariff optimism is no longer a floor for shares with things looking pricey again,” said Scott Ladner, chief investment officer at Horizon Investment.

Higher Yields

Meanwhile, Treasury yields stand near their highest levels in decades. Worries over US fiscal spending are expected to keep borrowing costs high for the foreseeable future, though several months of weaker-than-expected inflation have bolstered the case for the Federal Reserve to cut interest rates.

Not all periods with a negative or low equity risk premium have coincided with poor stock returns. The measure was negative for two long stretches in the post-World War II era, from October 1968 to October 1973, and from September 1980 to June 2002, BI data show. During the first stretch, stocks gained 1.1% annually, but they surged an annualized 10% in the latter.

At the same time, worries over the US fiscal position have dented the appeal of Treasuries, especially longer-dated maturities. DoubleLine Capital’s Jeffrey Gundlach was the latest to sound a warning, saying on Wednesday that America’s debt burden and interest expense have become “untenable” and could drive investors out of dollar-based assets.

Rich Valuations

Pricey stock valuations — including those of the so-called Magnificent Seven tech megacaps — are one key reason for the low equity risk premium.

Excluding the so-called Magnificent Seven stocks including Nvidia Corp. (NVDA), Microsoft Corp. (MSFT) and Meta Platforms Inc. (META) brings the forward earnings yield up to 5.1%, from its current level of 3.62%, BI data shows. Still, that’s just 0.7 percentage point above the 10-year yield.

“The outlook for stocks will ultimately be driven by trade and Fed policy in the coming months,” said Casper, of Bloomberg Intelligence. “The Fed will be a pivotal catalyst for any further upside ahead since monetary easing is historically good for equity gains. But investors need clarity.”

Source: Bloomberg

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Adam

Forex

The dollar neared a 2025 low on Thursday, while stocks eased from record highs, as a cocktail of rising Middle East tensions and concern over the fragility of a trade truce between Washington and Beijing drew investors into safe-haven assets.

Separately, a report on U.S. consumer inflation on Wednesday showed overall price pressures remained contained in May, largely due to declines in the cost of gasoline, cars and housing. But most economists expect inflation to pick up as the impact of U.S. tariffs begins to bite.

The dollar, which has lost around 10% in value against a basket of currencies this year, skimmed its lowest levels since late April, which in turn, marked its lowest level in three years.

Global stocks took a breather from the almost-unbroken rally that has run since early April, leaving the MSCI All-Country World index (.MIWD00000PUS) , down 0.1%, just below Wednesday's all-time high.

In Europe, the STOXX 600 (.STOXX) , fell 0.8%, led mostly by airlines and autos, given the strength in the oil price, while futures on the S&P 500 and Nasdaq fell 0.5%.

The U.S. administration on Wednesday said U.S. personnel were being moved out of the Middle East due to heightened security risks in the region, which briefly drove oil prices up by 4% before they receded.

"(A flare-up in tensions) is a significant tail risk, but I don't think it is anybody's baseline forecasts. So it's something to watch if there is a real escalation there, then markets will take fright and that would have ramifications for the oil price," Daiwa Capital economist Chris Scicluna said.

Iran, for its part, said it will not abandon its right to uranium enrichment, a senior Iranian official told Reuters on Thursday, adding that a "friendly" regional country had alerted Tehran over a potential military strike by Israel.

Classic safe-haven assets got a lift. The Swiss franc and the Japanese yen strengthened, pushing the dollar down by around 0.6% against both currencies, while gold held firm at $3,350 an ounce.

The sense of relief stemming from a positive conclusion to U.S.-China trade talks earlier this week, which President Donald Trump said was a "great deal with China", evaporated by Thursday.

RED, WHITE AND BLUE LETTERS

Adding yet another dose of uncertainty in the markets, Trump said the U.S. would send out letters in one to two weeks outlining the terms of trade deals to dozens of other countries, which they could embrace or reject.

"Markets may have no choice but to respond to Trump's tariff threat — even if it's just posturing to bring others to the table. The gap between 'risk-on' positioning and real-world risks has stretched too far," said Charu Chanana, chief investment strategist at Saxobank.

Trump's erratic tariff policies have roiled global markets this year, prompting hordes of investors to exit U.S. assets, especially the dollar, as they worried about rising prices and slowing economic growth.

The euro , one of the beneficiaries of the dollar's decline, touched a seven-week high and was last at $1.1535.

U.S. Treasuries also rallied in price, pushing yields down 1.5 basis points to below 4.4%, while two-year yields , which are more sensitive to inflation and interest-rate expectations, eased 1.6 bps to 3.93%.

Later in the day, the focus will be on a producer inflation report as some of the components feed into the Fed's preferred inflation gauge - the Personal Consumption Expenditure Index.

Wednesday's consumer index kept alive the prospect of the Federal Reserve cutting rates by a quarter point, but only in September, as policymakers assess how tariffs work their way through the real economy.

"I suspect it's probably going to be a combination of the two. Therefore it makes sense for the Fed to wait and see what happens rather than rushing into a rate cut," AMP Capital's head of investment strategy and chief economist Shane Oliver said.

Oil, which has fallen by 20% in the last year, eased by 1% to $69.07 a barrel, but remained near two-month highs, adding another moving part to the outlook for interest rates.

source : reuters

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Glendon

Economic

Forex

The Swiss National Bank (SNB) is likely to cut its policy rate by 50 basis points next week, bringing it back into negative territory for the first time since 2022, according to a new forecast from Capital Economics.

The SNB reduced its policy rate by 25 basis points to 0.25% at its last meeting, but inflation has since fallen into negative territory in May, significantly below the central bank’s March forecast of 0.3% for the second quarter. Core inflation dropped to just 0.5% in May, suggesting underlying price pressures are weaker than previously anticipated.

The Swiss franc has appreciated approximately 4% on a trade-weighted basis since the SNB’s March meeting, following what Capital Economics refers to as Trump’s "Liberation Day." According to an SNB working paper, this currency strength could reduce inflation by 0.5% annually over the next three years.

Capital Economics notes the risks are skewed toward the SNB undershooting its price stability target of 0-2% inflation. While there may be a short-term boost to demand as businesses front-run potential tariffs, particularly in the pharmaceutical sector, U.S. trade policy will likely have a negative impact on Swiss demand over the medium term.

If Switzerland secures a trade deal with the United States, it may include reduced barriers to agricultural trade, which could further weigh on inflation given the high level of Swiss food prices, according to the research firm.