Oil Could Hit $200 if War Breaks Out Between US and Iran

Military conflict between the United States and Iran would threaten to shut the world’s busiest seaway for oil exports and send crude prices to all-time highs, perhaps even to $200 a barrel, according to one analyst.

President Donald Trump on Sunday night warned Iranian President Hassan Rouhani on Twitter that his country would “SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE” if Rouhani ever threatened the United States again.


West Texas Intermediate graph

Trump appeared to be responding to comments over the weekend from Rouhani, who said, “Iran’s power is deterrent and we have no fight or war with anybody but the enemies must understand well that war with Iran is the mother of all wars,” according to an English translation on the Iranian president’s official website.

The rhetoric has been heating up as the first of two U.S.-imposed deadlines for international businesses to cut ties with Iran approaches next month. By November, the United States expects most oil buyers to reduce purchases of Iranian crude to zero, or else face U.S. sanctions.

In May, Trump pulled out of an international nuclear accord with Iran and restored sanctions against the nation, the world’s fifth biggest oil producer.

via CNBC

Canadian Soy Growers Could Win From Cancelled China Contracts

Canada might soon be reaping the benefits from the recent string of canceled soybean contracts, Simon Wilson, executive director of the North Dakota Trade Office, told CNBC.

“The big competitor for us is Canada,” Wilson told CNBC’s Contessa Brewer on Friday’s “Power Lunch.” “They have similar weather, similar production cycle. And for us, we’ve always been competing with them.


usdcad Canadian dollar graph, July 23, 2018

But now, after Chinese buyers canceled all of their firm orders for food-grade soybeans earlier this month, the competition might heat up. The scrapped contracts amount to a loss of $1.2 million to $1.5 million, but that’s a small portion of North Dakota’s $30 million to $35 million in annual contracts, which are usually finalized in the summer months.

Wilson said Chinese trade delegations, previously scheduled for September, have gone “radio silent on us.”

“There’s a lot of money in this,” he said. “It’s a big market. China’s a massive market for soybeans.”

via CNBC

G20 Warn That Downside Risks Are Increasing

Global finance leaders called on Sunday for stepped-up dialogue to prevent trade and geopolitical tensions from hurting growth, but ended a two-day G-20 meeting with little consensus on how to resolve multiple disputes over U.S. tariff actions.

The finance ministers and central bank governors from the world’s 20 largest economies warned that growth, while still strong, was becoming less synchronized and downside risks over the short- and medium-term had increased.



“These include rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies,” the G-20 finance officials said in a communique.

“We … recognize the need to step up dialogue and actions to mitigate risks and enhance confidence,” the communique said.

This marked a strengthening of language compared to their previous statement issued in March, in which they simply “recognize the need for further dialogue.”

“The latest language suggests a great deal of urgency about resolving these issues,” Australia Treasurer Scott Morrison told Reuters in an interview, adding that the ministers had made it clear in the discussion that they were concerned about “tit-for-tat measures” and that open trade was the goal.

via CNBC

Bank of Japan (BOJ) Hints At Tightening Sooner than Expected

Signs that the Bank of Japan (BoJ) might scale back its monetary stimulus faster than expected sent tremors through bond markets on Monday, while European stocks and U.S. futures slipped as threats of further U.S. tariffs on China drained risk appetite.



Europe’s bond yields climbed after a Reuters report that the BoJ was discussing modifying its huge easing programme sent Japan’s 10-year bond yield to a six-month high.

The report rekindled anxieties about monetary stimulus easing around the world and piled further pressure on investors already struggling to navigate rising protectionism.

via Reuters

US Home Sales Fall in June

U.S. home sales fell for a third straight month in June as a persistent shortage of properties on the market pushed up house prices to a record high, likely sidelining some potential buyers.

The National Association of Realtors said on Monday existing home sales fell 0.6 percent to a seasonally adjusted annual rate of 5.38 million units last month. May’s sales pace was revised down to 5.41 million units from the previously reported 5.43 million units.



Economists polled by Reuters had forecast existing home sales gaining 0.5 percent to a rate of 5.44 million units in June. Sales rose in the Northeast and Midwest, but fell in the West and populous South.

Existing home sales, which make up about 90 percent of U.S. home sales, fell 2.2 percent from a year ago in June. They have dropped on a year-over-year basis for four consecutive months and declined 2.2 percent in the first half of 2018. Sales are being stymied by an acute shortages of homes on the market.

Rising building materials costs as well as shortages of land and labor have left builders unable to bridge the inventory gap, pushing up house prices. Supply constraints have largely accounted for the sluggish housing market but there are growing concerns that the higher house prices together with rising mortgage rates will slow down demand.

via CNBC

UBS Says Trump Tweets are Losing Impact

The impact of a Donald Trump tweet on the value of assets might be losing its punch, according to a leading economist.

The president has mastered the use of the microblogging site to set the news agenda and pump out headline-style messages to his 53 million followers.

Trump’s Twitter account has rattled markets with nuclear threats to North Korea, a promise to enforce tariffs on a huge amount of global trade, as well as warnings over the U.S.’ relationships with countries generally considered allies.



The occasional call for the U.S. and other countries to build infrastructure and raise defense spending has also sent asset managers scurrying to revaluate portfolios.

On Sunday, Trump logged on to Twitter to tell Iranian President Hassan Rouhani that he must “never ever threaten the United States again.”

via CNBC

Oil Higher After Trump Iran Threats

Oil prices rose on Monday on worries over supply after tensions worsened between Iran and the United States, while some offshore workers began a 24-hour strike on three oil and gas platforms in the British North Sea.


West Texas Intermediate graph

Iranian Supreme Leader Ayatollah Ali Khamenei on Saturday backed a suggestion by President Hassan Rouhani that Iran could block Gulf oil shipments if its exports were stopped.

The Iranian leadership was responding to the threat of U.S. sanctions after President Donald Trump in May pulled out of a multinational agreement to trade with Tehran in return for its commitment not to develop nuclear weapons.

Trump has said Iran risks dire consequences “the like of which few throughout history have suffered before” if the Islamic Republic made more threats against the United States.

via Reuters

BoJ easing talk sends bond yields up

Signs that the Bank of Japan (BoJ) might scale back its monetary stimulus faster than expected sent tremors through bond markets on Monday, while European stocks slipped as threats of further U.S. tariffs on China drained risk appetite.

Europe’s bond yields climbed after a Reuters report that the BoJ was discussing modifying its huge easing programme sent Japan’s 10-year bond yield to a six-month high.

The report rekindled anxieties about monetary stimulus easing around the world and piled further pressure on investors already struggling to navigate rising protectionism.

The yield on Europe’s benchmark bond, the German 10-year Bund, hit a one-month high of 0.39 percent and U.S. 10-year Treasury yields also hit their highest in a month at 2.90 percent.

The yen climbed to two-week highs against the dollar and was last up 0.2 percent at 111.14 per dollar.

“It’s all that concern investors have about the move from global quantitative easing to global quantitative tightening. That fear gets stoked when you have reports such as this,” Psigma Investment Management’s head of investment strategy, Rory McPherson.

“The ECB meeting this week will be more in focus now that we’ve had this concern about Japan.”

The dollar index meanwhile bounced back, up 0.1 percent from two-week lows hit after U.S. President Trump criticised the Federal Reserve’s tightening policy and accused the European Union and China of manipulating their currencies.

“We see the latest news on trade policy as pointing to continued high risk of escalation between the U.S. and China, and a renewed focus of the Trump Administration on currency matters,” Goldman Sachs analysts said.

Beijing said it has no intention of devaluing the yuan to help exports.

Trump’s comments about rates also helped the Treasury yield curve reach its steepest in three weeks. The yield curve’s flattening has been seen by some as a sign of an impending recession.

The U.S. president’s new threats to slap duties on all $500 billion of U.S. imports from China triggered sell-offs across stock markets, though good earnings kept a lid on losses.

The MSCI all-country world index declined just 0.1 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2 percent.

Reuters

Canada: Wholesale trade, May 2018

Wholesale sales rose 1.2% to a record $63.7 billion in May. Sales were up in four of seven subsectors, representing approximately 50% of total wholesale sales.

The miscellaneous, building material and supplies, and farm product subsectors contributed the most to the gains in May, while the motor vehicle and parts subsector posted the largest decline.

In volume terms, wholesale sales increased 1.3%.

Sales increase in four of seven subsectors, led by the miscellaneous and the building material and supplies subsectors

In dollar terms, the miscellaneous subsector reported the largest increase in May, as sales rose 7.8% to $8.3 billion. Sales were up in four of five industries, led by the agricultural supplies industry (+25.6%) following a 5.4% decline in April. In volume terms, the agricultural supplies industry increased 27.4%.

Sales in the building material and supplies subsector rose 5.0% to $9.7 billion as all industries posted gains in May. Much of May’s increase was attributable to higher sales in the lumber, millwork, hardware and other building supplies industry, up 7.3% to $4.9 billion. This was the third consecutive increase for the industry and the highest sales level since July 2017. In volume terms, the industry increased 6.8%, indicating that the gain in the current dollar series was partly price driven. In May, international merchandise trade reported gains in both imports and exports of building and packaging materials.

Following a 17.5% decline in April, the farm product subsector rebounded in May, up 25.5% to $859 million. This was the third increase in four months and the highest level since November 2017. A 28.5% increase in volume terms signifies that price changes had no impact on the growth seen in the current dollar series. Exports of farm and fishing products increased in May.

The motor vehicle and supplies subsector recorded the largest decline in dollar terms in May, down 2.5% to $11.1 billion. This was the second consecutive monthly decline and the fifth drop in six months, bringing the subsector to its lowest level since December 2016. The sole contributor to the decrease was the motor vehicle industry, down 3.7% to $8.9 billion. Imports and exports of passenger cars and light trucks as well as manufacturing sales of motor vehicles declined in May.

Sales increase in eight provinces

Sales were up in eight provinces in May, accounting for 49% of total wholesale sales in Canada. Higher sales in the western provinces led the gains. In dollar terms, Alberta contributed the most to the increase, more than offsetting the decline reported in Ontario.

Alberta reported its fifth increase in six months, with sales rising 6.7% to $7.3 billion, their highest level on record. Sales were up in six subsectors, led by the miscellaneous subsector (+26.7%). The agricultural supplies industry within the miscellaneous subsector contributed the most to the gains.

Sales in Saskatchewan increased for the third consecutive month, up 9.8% to $2.3 billion—the highest level since December 2016. The miscellaneous subsector (+17.2%) led the gains, with the agricultural supplies industry contributing the most to the increase.

In British Columbia, sales grew 1.9% to $6.7 billion, its third consecutive gain. The gains were led by the machinery, equipment and supplies subsector (+11.4%), more than offsetting the 10.2% decline in April.

Sales in Nova Scotia rose 9.0% to $962.3 million, driven by gains in the food, beverage and tobacco subsector (+38.8%).

Ontario posted its second consecutive monthly decline in May, down 0.9% to $32.1 billion. The motor vehicle and parts (-4.6%) and the food, beverage and tobacco (-6.5%) subsectors led the decrease. The motor vehicle and parts subsector was down for the second consecutive month, while the food, beverage and tobacco subsector declined for the second time in four months.

Wholesale inventories increase for the second consecutive month

Wholesale inventories rose for the second consecutive month, up 1.4% to a record $84.0 billion in May. Five of seven subsectors posted increases, representing 90% of total wholesale inventories.

In dollar terms, the machinery, equipment and supplies subsector (+1.6%) posted the largest gain, following a 0.3% decline in April. Three of four industries increased, with the other machinery, equipment and supplies industry contributing the most to the upturn.

Inventories grew 2.7% in the miscellaneous subsector, a third consecutive monthly gain. Increases were reported by all five industries and were led by increased stock in the other miscellaneous industry (+4.0%).

The building material and supplies subsector (+2.0%) rose for the third consecutive month, on the strength of higher inventories in the metal service centres (+3.8%) and the lumber, millwork, hardware and other building supplies (+1.6%) industries.

Higher inventories in the motor vehicle and parts subsector (+2.0%) were led by increased stock in the motor vehicle industry (+2.9%).

The inventory-to-sales ratio increased from 1.31 in April to 1.32 in May. This ratio is a measure of the time in months required to exhaust inventories if sales were to remain at their current level.

StatsCanada

Japanese PM Reaffirms Autos are No Threat to US Security

Japan’s Prime Minister Shinzo Abe said on Friday imports of Japanese automobiles pose no threat to U.S. national security, vowing to convince President Donald Trump not to impose tariffs that could damage the global economy.



“Imports of our nation’s automobiles and auto parts have never damaged U.S. national security and will not do so in the future,” Abe said at a news conference to mark the end of the parliamentary session.

Washington launched an investigation in May into whether imported vehicles were a threat to national security threat. Trump has repeatedly threatened to impose tariffs as a key part of his economic message, repeatedly lamenting the U.S. auto sector trade deficit, particularly with Germany and Japan.

via Reuters