What Are The Main Sticking Points In The Cease-fire Talks Between Israel And Hamas?

Palestinian-Israeli conflict

Summary:

The latest proposal for a cease-fire in Gaza has the support of the United States and most of the international community, but Hamas has not fully embraced it, and neither, it seems, has Israel.

Hamas this week accepted the broad outline but requested “amendments.” Prime Minister Benjamin Netanyahu has publicly disputed aspects of the plan, raising questions about Israel’s commitment to what the U.S. says is an Israeli proposal.

U.S. Secretary of State Antony Blinken, who is on his eighth visit to the region since Hamas’ Oct. 7 attack triggered the war, told reporters in Qatar on Wednesday that the negotiations will continue.

But he said Hamas had requested “numerous” changes, adding that “ some of the changes are workable; some are not.”

Blinken declined to elaborate, but recent statements by Israeli and Hamas officials suggest they remain divided over many of the same issues that mediators have been trying to bridge for months.

Here’s a look at the main sticking points.

Ending the war

Hamas has insisted it will not release the remaining hostages unless there’s a permanent cease-fire and a full withdrawal of Israeli forces from Gaza. When President Joe Biden announced the latest proposal last month, he said it included both.

But Netanyahu says Israel is still committed to destroying Hamas’ military and governing capabilities, and ensuring it can never again carry out an Oct. 7-style assault. A full withdrawal of Israeli forces from Gaza, where Hamas’ top leadership and much of its forces are still intact, would almost certainly leave the group in control of the territory and able to rearm.

That’s in part because Israel has yet to put forward a plan for Gaza’s postwar governance, and has rejected a U.S. proposal that has wide regional support because it would require major progress toward creating a Palestinian state.

Hamas spokesman Jihad Taha told a Lebanese news outlet on Wednesday that the “amendments” requested by the group aim to guarantee a permanent cease-fire and a complete Israeli withdrawal.

Hamas is also seeking the release of hundreds of Palestinians imprisoned by Israel, including political leaders and senior militants convicted of orchestrating deadly attacks on Israeli civilians. But it’s unclear if the sides have agreed on a list of who will be freed, or on whether they will be released in Gaza, the occupied West Bank or sent into exile.

Getting to the second phase of the plan

The cease-fire plan calls for an initial six-week phase in which Hamas would release some hostages — including women, older adults and wounded people — in exchange for an Israeli withdrawal from populated areas. Palestinian civilians would be able to return to their homes and humanitarian aid would be ramped up.

But then things get tricky.

The two sides are supposed to use that six-week period to negotiate an agreement on the second phase, which Biden said would include the release of all remaining living hostages, including male soldiers, and Israel’s full withdrawal from Gaza. The temporary cease-fire would become permanent.

But only if the two sides agree on the details.

Hamas appears concerned that Israel will resume the war once its most vulnerable hostages are returned. And even if it doesn’t, Israel could make demands in that stage of negotiations that were not part of the initial deal and are unacceptable to Hamas — and then resume the war when Hamas refuses them.

Israel’s ambassador to the U.N., Gilad Erdan, said Israel would demand in those negotiations that Hamas be removed from power. “We cannot agree to Hamas continuing to be the rulers of Gaza because then Gaza will continue to pose a threat to Israel,” Erdan told CNN’s “The Source” on Monday.

Israel also appears wary of the plan’s provision that the initial cease-fire be extended as long as negotiations continue over the second phase. Erdan said that would allow Hamas to “continue with endless and meaningless negotiations.”

Resolving mistrust between longtime enemies

There are other issues that could unravel cease-fire efforts, beginning with the utter lack of trust between Israel and Hamas, which have fought five wars and are committed to each other’s destruction.

Then there are the intense and contrasting pressures on Netanyahu, which may explain his mixed signals about the proposal.

Thousands of Israelis, including families of the hostages, have protested in recent months to demand the government bring the captives home, even at the expense of a lopsided deal with Hamas.

But the far-right partners in Netanyahu’s increasingly narrow coalition have rejected the U.S.-backed plan and have threatened to bring down his government if he ends the war without destroying Hamas.

They want to reoccupy Gaza, encourage the “voluntary emigration” of Palestinians from the territory and rebuild Jewish settlements there. Netanyahu’s ultranationalist allies have more leverage over him than at any time since the start of the war after Benny Gantz, a centrist political opponent, resigned Sunday from Israel’s war Cabinet.

It’s hard to imagine either Israel or Hamas entirely giving up on the talks. For Israel, that would likely mean abandoning scores of hostages still held in Gaza. For Hamas, it would prolong the suffering of Palestinians in Gaza and give Israel more time to annihilate the militants.

But Blinken hinted that the negotiations would not continue indefinitely.

“At some point in a negotiation, and this has gone back and forth for a long time, you get to a point where if one side continues to change its demands, including making demands and insisting on changes for things that it already accepted, you have to question whether they’re proceeding in good faith or not.”

Source:AP

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Warren Takunda

Economic

Asian currencies pared some of their gains Thursday as Federal Reserve officials signaled just one rate cut this year despite cooler inflation data.

The Japanese currency strengthened to 155.71 to the dollar from 157 at one point, after the U.S. consumer price index for May showed inflation had slowed, according to Refinitiv. The yen later weakened to around 156 as U.S. policymakers suggested they saw just one rate cut this year, compared with the three predicted in March.

The Japanese currency traded at 156.80 at one point Thursday morning.

"The two events in the U.S. were very mixed, and, naturally, so was the dollar-yen rate reaction," said Osamu Takashima, FX strategist at Citigroup Global Markets Japan. "The top side to the dollar-yen should be limited today," Takashima said, due to expectations the Bank of Japan may consider scaling back its monthly purchases of Japanese government bonds.

Investors' use of the yen to buy higher-yielding countries is a major factor in the currency's weakness. The yen carry trade is driven by the large gap in policy rates between the U.S. and Japan of more than 5%. "This situation will not change even if the Fed cuts once or twice," Takashima said. He expects the yen to trade between 155 and 160 to the dollar over the next six months.

Japanese investor attention has turned to the BOJ's two-day monetary policy meeting ending Friday.

A stronger yen going into the meeting is "good news" for the central bank, said Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Banking. He said the BOJ is unlikely to be forced to raise interest rates even if the yen ends up falling after a reduction in JGB purchases.

Elsewhere in Asia, currencies are mirroring the yen's movement.

As the trading day opens in Asia, "We're going to see a fair bit of strength coming through for most currencies that do not trade 24/7, as they play catchup," said Rob Carnell, chief economist for the Asia-Pacific at ING in Singapore. He expects the South Korean won and Thai baht to be some of the biggest movers.

The Indonesian rupiah rose as high as 16,250 per dollar on Thursday, up from 16,301, its lowest level in more than four years, reached the previous day. The Philippine peso traded at 58.50 to the dollar at one point on Thursday, up from 58.82, its lowest point in more than a year and a half, which it hit on Monday.

Emerging-market currencies in Asia are responding more to the latest U.S. inflation data than to the Fed's rate cut forecast, said Leonard Kwan, portfolio manager of dynamic emerging-markets bond strategy at T. Rowe Price in Hong Kong. "As the market digests the outcome of the Fed meeting, we might see some changes to the initial optimism."

Fewer interest rate cuts in the U.S. means the dollar will stay resilient, creating headwinds for Asian financial markets, said Frederic Neumann, chief Asia economist at HSBC in Hong Kong.

"And that, of course, complicates the monetary policy strategy for most Asian central banks," he said. "They can't really ease before there's a firm signal from the Fed that it will start to cut interest rates as well."

Source: NikkeiAsia

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Owen Li

Commodity

The massive overhang of copper in China is starting to work its way through the global market dynamics for the industrial metal, with prices easing and trade flows likely to adjust.

Stockpiles have surged this year in China, which imports about 60% of global traded copper, carrying inventories registered with the Shanghai Futures Exchange (ShFE) to a 51-month high of 339,964 metric tons in the week to June 7.

Stockpiles in China usually follow a distinct seasonal patter, with strong builds at the start of the year, followed by equally rapid drawdowns from about March onwards.

However, this year is different, with ShFE warehouses continuing to see huge inflows at a time when they are normally shipping metal out.

There are several dynamics at work in this unusual build of copper stockpiles in China, including the struggles of key sectors that consume the metal, such as housing construction and manufacturing.

Despite Beijing's stimulus efforts, the property sector has yet to stage a meaningful turnaround, and manufacturing is also uncertain, with the key Purchasing Managers' Index unexpectedly dropping in May to 49.5, below the level of 50 that separates expansion from contraction.

Despite the cloudy outlook for domestic demand in China, imports of unwrought copper have remained robust, with 514,000 tons arriving in May, up 17.4% from April and 15.8% from the same month in 2023.

For the first five months of the year, China's refined copper imports were 2.327 million tons, a gain of 8.8% from the corresponding period a year earlier.

Some of the import strength is probably due to increased imports from Russia, most probably at a discount, as Russian copper can no longer go to its previous major buyers in Europe, because of Western sanctions imposed after its invasion of Ukraine.

At the same time that China was importing more copper, it was also buying more ore and concentrate and boosting domestic production of refined metal.

Refined copper output was 1.14 million tons in April, up 9.2% from the corresponding month in 2023, official data showed.

The increase came despite a pact by top smelters to cut production in order to curb losses, amid fears of a shortage of raw material following the closure of the Cobre mine in Panama.

Imports of copper ores and concentrates did slip in May, dropping 3.6% to 2.264 million tons from April's 2.348 million, but are still up 2.7% in the first five months, suggesting the squeeze on raw materials may not be as bad as feared.

Adjusting Flows

At the same time that China was amassing its stockpile, the rest of the world was engulfed in what now appears to have been a bit of irrational exuberance, as the London benchmark contract hit a record high of $11, 104.50 a ton on May 20.

Part of the price surge related to a short squeeze in the United States, with traders scrambling to find enough copper to cover positions.

But now the physical market is likely to catch up to what has happened in the paper market.

While Chinese and Russian copper will not go to the United States, it is likely that copper from other producers will, and China will pare back imports of refined metal.

Chinese exports are also likely to increase after a modest start to the year, which saw exports of copper cathodes coming in at 283,978 tons in April, down 14.8% from the corresponding month in 2023.

That followed a reduction of 14.9% in March exports, although cathode shipments in the first two months were up 20.6% on the year.

Overall, it is likely that China's imports of refined copper may ease in coming months, although what may be more marked is a shift in where the metal is coming from, with arrivals from Russia expected to remain elevated.

It is also likely that China's surplus metal will find its way to global markets over time, which in turn should result in the London copper price continuing to stabilise at levels closer to around $10,000 a ton, with the contract having ended at $9,944.50 on Wednesday.

Source: Reuters

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Warren Takunda

Economic

Stocks

London stocks edged lower in early trade on Thursday as investors mulled the latest policy announcement from the US Federal Reserve, which signalled there would be just one rate cut this year.

At 0825 BST, the FTSE 100 was down 0.2% at 8,199.64.

The Fed held interest rates on Wednesday at between 5.25% and 5.5% and marked down its forecast for the number of rate cuts this year to just one from three in March.

Oxford Economics said: "The FOMC's updated projections won't change our forecast for two rate cuts this year, however, with the first to come in September.

"We expect a string of more favourable inflation releases - on the heels of Wednesday's softer-than-expected May CPI report - will clear the way for the Fed to lower rates in September."

On home shores, a survey released earlier by the Royal Institution of Chartered Surveyors (RICS) showed the recovery in the housing market "slipped into reverse" after Prime Minister Rishi Sunak called a general election.

The monthly net balance of house prices fell to -17 in May from a downwardly revised -7 in April, marking the lowest reading since January.

Meanwhile, the RICS new buyer enquiries gauge fell to -8 from -1, marking the lowest reading since November.

RICS senior economist Tarrant Parsons said: "The recent recovery across the UK housing market appears to have slipped into reverse of late, with buyer demand losing momentum slightly on the back of the upward moves seen in mortgage rates over the past couple of months.

"Nevertheless, expectations point to this delaying, rather than derailing, a modest improvement going forward."

In equity markets, Intermediate Capital, Land Securities, JD Sports, Compass and LondonMetric all fell as they traded without entitlement to the dividend.

St James’s Place was in the red as it appointed the chief financial officer of Credit Suisse’s UK operations - Caroline Waddington - as its new CFO, replacing Craig Gentle who will be retiring from the business after six years leading the finance function.

On the upside, BT Group rallied after Mexican billionaire Carlos Slim took a 3.2% stake in the telecoms firm. According to a regulatory filing late on Wednesday, the stake - worth around £400m - was taken by Slim’s family business Inbursa.

Halma gained after it reported another year of record profit and revenue as it hailed a solid performance in the safety and the environment & analysis sectors. In the year to the end of March 2024, adjusted pre-tax profit rose 10% to £396.4m on revenue of £2.03bn, up 10% on the previous year.

Virgin Money was little changed after it posted an 18% jump in interim profit as it continued to benefit from higher interest rates and a lower bad debt charge, but said it expected headwinds in the second half of the year with the Bank of England expected to cut its benchmark base rate.

Pre-tax profit for the six months to March 31 came in at £279m from £236m a year earlier. Net interest income rose 2% to £868m, while net interest margin - the difference between the bank’s lending and savings rates - was up three basis points to 1.94%.

Source: ShareCast

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ING

Commodity

Energy

Energy – Bearish EIA and IEA reports

Oil prices edged higher yesterday despite a fair amount of bearish oil data. Instead, the market appears to have focused on external developments, specifically US CPI data for May, which came in weaker than expected. However, attention has returned back to oil fundamentals this morning with prices under renewed pressure.

EIA weekly data was bearish. The report showed that US commercial crude oil inventories increased by 3.73m barrels over the last week. This large inventory build was due to stronger crude oil imports and weaker exports. Imports jumped by 1.25m b/d week-on-week to 8.3m b/d, the largest weekly import volume since 2018, while crude exports fell 1.31m b/d WoW. Developments in refined products were also relatively bearish. Gasoline and distillate fuel oil stocks increased by 2.57m barrels and 881k barrels respectively. Furthermore, while implied gasoline demand increased by 94k b/d WoW, the four-week average gasoline demand figure is still around 124k b/d lower year-on-year.

The IEA's monthly oil market report was also fairly bearish, with the agency revising down its demand growth forecasts further this month. The IEA now expects global oil demand to grow by 960k b/d this year, down 100k b/d from their previous estimates. Concerns over weaker demand are not a surprise, given the weakness seen in refinery margins over much of the second quarter. This revision lower in demand growth only sees the divergence between IEA and OPEC forecasts grow, with OPEC still holding onto the view that oil demand will grow by 2.25m b/d this year. For 2025, the IEA expects oil demand to grow by 1m b/d. This modest demand growth coupled with strong supply growth means that OPEC+ could have to extend their additional voluntary cuts beyond the third quarter of this year rather than gradually unwinding them.

The IEA also published its Oil 2024 publication, in which it shares its view on the oil market through to 2030. Its latest long-term estimates suggest that global oil demand will only grow by 3.2m b/d between 2023 and 2030, and will level off at the end of this decade. This plateauing in demand will coincide with a rise in global production capacity. The IEA estimates that global production capacity will grow by 6m b/d to 113.8m b/d by 2030, which would leave production capacity at more than 8m b/d above projected demand.

European natural gas prices strengthened further yesterday. TTF settled more than 2.9% higher on the day on the back of supply concerns. These concerns remain related to Russian pipeline flows into Europe and the risk that Russia halts flows. This is because Uniper has been awarded EUR13bn in damages for gas which was not supplied by Gazprom. The risk is that if Gazprom does not pay Uniper these damages, buyers who are still receiving Russian gas could be forced to redirect payments due to Gazprom to Uniper instead. If this were to happen, the risk is that Gazprom would halt the remaining flows.

The EIA will release its weekly US natural gas storage report later today and the market expects that US storage grew by around 72Bcf over the last week.

Agriculture – Wheat balance tightens

The USDA's latest WASDE report saw the agency revise lower its global corn ending stock estimates for 2024/25 from 312.3mt to 310.8mt. This was also slightly below market expectations. In contrast, the USDA left the US corn balance sheet unchanged for 2024/25. Estimates for ending stocks were left unchanged at 2,102m bushels for 2024/25. For soybeans, US beginning stock projections were increased from 340m bushels to 350m bushels due to a lower soybean crush in 2023/24. With little change to the 2024/25 production/consumption numbers, ending stock estimates also increased by 10m bushels to 455m bushels.

Meanwhile, the global soybean balance sheet saw marginal changes with ending stock estimates falling by 0.6mt to 127.9mt for 2024/25, largely in line with market expectations. For wheat, the agency projects US supplies increasing by 17m bushels to 1,875m bushels for 2024/25.Despite expectations for higher output, ending stock estimates were revised down by 8m bushels to 758m bushels primarily due to higher export projections. Looking at the global market, the USDA lowered wheat ending stock estimates from 253.6mt to 252.3mt. The agency expects 2024/25 wheat production to fall to 790.8mt, down 7.4mt from the previous estimates, largely due to revisions in Russian, Ukrainian and EU output.

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FXOpen

Economic

Forex

The second consecutive decline in the US core consumer price index caused a sharp drop in the American currency across the board. For instance, the GBP/USD pair rose by 120 points within a couple of hours, attempting to strengthen above 1.2800. The EUR/USD pair closed Monday's "price gap" and tested 1.0850, while the USD/JPY pair briefly traded below 156.00. However, a change in medium-term trends remains highly uncertain. The Fed meeting and the publication of an updated economic forecast by the US regulator allowed the dollar to quickly recover some losses.

From yesterday's Fed statement:

The target range for the federal funds rate remains at 5.25–5.50%;
The median forecast by FOMC members suggests one and a half rate cuts for the federal funds rate (compared to three in the March forecast).

From the published data, it can be inferred that the Fed maintains a fairly hawkish stance, which could support buyers of the US currency. Dollar Falls After Inflation Data: Is a Change in Medium-Term Trends on the Horizon?_1

Dollar Falls After Inflation Data: Is a Change in Medium-Term Trends on the Horizon?_1

GBP/USD

The GBP/USD pair fell just short of updating the current year's high at 1.2895 by several dozen points. Technical analysis of the GBP/USD pair indicates that the price has returned to the multi-day flat corridor of 1.2820-1.2700. If GBP buyers fail to hold 1.2800 as support, the price may drop to 1.2750-1.2700. Updating the yearly highs could lead to a test of 1.3000. Factors that may influence the pair's price include:

Today at 15:30 (GMT +3:00) – Initial US jobless claims;
Today at 19:00 (GMT +3:00) – Speech by US Treasury Secretary Janet Yellen;
Today at 15:30 (GMT +3:00) – US Producer Price Index (PPI).

USD/JPY

The pair almost tested the announced levels yesterday and is trading near 157.00 again. Technical analysis of the USD/JPY pair on the H4 timeframe shows the formation of a "bullish engulfing" pattern, which may lead to a test of the 157.70-157.40 range. This pattern would be invalidated if the price drops below yesterday's low of 155.70.

Prepare for increased volatility in the pair tomorrow morning: at 06:00 (GMT +3:00), the Bank of Japan will announce its rate decision. Dollar Falls After Inflation Data: Is a Change in Medium-Term Trends on the Horizon?_2

Dollar Falls After Inflation Data: Is a Change in Medium-Term Trends on the Horizon?_2

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Alex

Economic

Stocks

European stocks relinquished some of the gains they’ve achieved after Wednesday’s softer US inflation print as the Federal Reserve’s more hawkish tone on interest rates weighed on sentiment.

The Stoxx 600 dipped 0.3% on Thursday after notching up its biggest advance in a month during the previous session. Futures contracts for the S&P 500 and Nasdaq 100 pointed higher, while the dollar and Treasuries were little changed.

The European Union’s bonds fell as bets the bloc’s debt would soon be added to key sovereign benchmarks received an early blow.

Risk-on assets had rallied after a report showed the US core consumer price index fell to the lowest in more than three years. Later, the Federal Reserve penciled in just one quarter point interest-rate cut this year, down from three seen in March.

European Stocks Give Up Gains on Fed Rate Caution: Markets Wrap_1

“The Fed dot plot was marginally on the hawkish side, causing some pullback in the markets,” said Mohit Kumar, chief economist for Europe at Jefferies International. Any selloff in stocks would be a buying opportunity, he said.

Adding to the caution, European Central Bank Governing Council member Joachim Nagel warned that consumer price growth in the euro zone is proving stubborn.

“We are on a bumpy road, but we all know that the last mile is the most complicated one,” the Bundesbank president said. Governing Council Madis Muller is due to speak later on Thursday.

In commodities, oil dipped after a three-day advance as investors weighed an unexpected build in US crude stockpiles and the higher-for-longer Fed rate outlook. Gold declined.