March 25th Financial News

Panels on the energy transition and all things related, from oil to minerals, kick off the Financial Times Commodities Global Summit this week in Switzerland. German manufacturers weigh in on gas storage plans in Europe. And, coffee is not expected to get cheaper any time soon.

Critical Minerals

Critical minerals are vital for clean energy and the fight for them is intensifying, with US President Donald Trump even evoking wartime powers to produce them. China is the undisputed leader in extracting the minerals, but it is curbing exports in response to US trade tariffs. Other nations joining the race to build up supplies, however, will find extracting and then refining minerals into a usable form is a complex undertaking.

Coffee

“Roasters are struggling,” says Thiago Cazarini, a broker in Brazil’s largest coffee-growing region. The processors who typically take positions in the futures market to protect themselves from price fluctuations changed course when the commodity began rising last year, betting they could secure a better deal later. But supply shortages persisted and prices kept climbing. Coffee drinkers can expect to see the impact of that at the register. Coffee futures rose Monday in New York.

Copper

Copper is flirting with records in New York after hitting $10,000 on the London Metal Exchange, the highest since October. Used in wiring, plumbing and industrial machinery, copper has been flowing into the US at breakneck levels as the Trump administration hints at tariffs on the colorful metal. Traders smell a windfall in arbitrage opportunities, while bulls remain steadfast. Copper rose Monday.

Oil

The US oil industry, the world’s biggest, has undergone a dramatic overhaul over the past 2 1/2 decades as a result of the shale boom. In the mid-2000s, America was a net importer of as much as 14 million barrels a day of crude oil and refined fuels, while today it’s a major supplier to overseas markets. The most-recent government data shows the US just hit a fresh record for shipping the most oil overseas relative to how much it buys. Futures rose Monday.

Gas Storage

Gas inventories are a problem for Europe after a cold winter left reserves low. To ensure it has enough gas to get through the heating season, the European Union is requiring storage facilities to be at least 90% by Nov. 1. Some countries, including Germany, the world’s third largest economy, are pushing to lower the target. A German industry lobby joined the chorus, citing the nation’s high energy prices.

Source: Yahoo Finance

Traders battered by one of the fastest U.S. stock slides on record may be poised for a reprieve.

Equity strategists at firms including JPMorgan Chase & Co., Morgan Stanley and Evercore ISI are advising clients that the worst of the recent downturn is likely behind them, citing metrics from investor sentiment and positioning to favorable seasonality.

Major American stock indexes bounced back Monday after reports that President Donald Trump plans to take a more targeted approach with the tariffs he will roll out on April 2, easing some concerns that his escalating trade war will fan inflation and stall the economy.

Those worries had knocked stocks down sharply since mid-February, sending the S&P 500 Index into its seventh-fastest 10% drop from a record high in nearly a century and erasing over US$5.6 trillion from the index’s market capitalization. JPMorgan said the bulk of that came from a cohort of momentum stocks, the 50 names with strongest price performance in the S&P 500, which erased two years of gains in three weeks. That also eased the crowding in that segment that had built up during the previous rally.

“As a result, the risk of another violent unwind should be low in the short term,” JPMorgan strategists led by Dubravko Lakos-Bujas said in a March 21 note to clients.

On Monday, pockets of the market that were hardest hit recently saw the biggest recoveries, with a guage of so-called Magnificent Seven stocks rising more than 2% during the session.

Morgan Stanley’s Michael Wilson joined Lakos-Bujas in striking a more optimistic tone, indicating that seasonal factors, a falling U.S. dollar, Treasury yields, and ultra-pessimistic sentiment and positioning are paving the way for a “tradeable rally in the near term.” And at Evercore ISI, chief equity and quantitative strategist Julian Emanuel said rhetoric on the economy by the Trump administration “has reset the bar such that sentiment is so negative right now.”

“We think the two steps backward portion we lived through is in the process of resolving itself, and you’re likely to get three steps forward toward higher prices,” he said.

The selloff has left Wall Street conflicted about whether the time has come to buy the dip, however. While strategists see a period of calm ahead, they’ve largely avoided giving clients a resounding all clear to pile into U.S. equities for now.

That’s in significant part because Trump’s planned announcement of universal, reciprocal trade tariffs next month may again alter investors’ expectations about the economic fallout.

Evercore’s Emanuel said it’s the next catalyst for the market. Morgan Stanley’s Wilson says he’s also watching employment and manufacturing data along with earnings revisions as “signposts for a more durable rally.”

At 22V Research, chief market strategist and president Dennis DeBusschere on Monday said that market internals have improved in a way that suggests the U.S. economy is not moving into a recession. The unusually low investor sentiment — given the still solid economic data — suggests “stronger than normal returns” in the one-, three-, and six-month periods if the impact of tariffs wind up being minor. But like others, he’s waiting for more clarity around the levies to firm up his views.

“Assuming tariffs are not a major headwind to growth, fundamental factors should rebound throughout 2025,” he said. But “our conviction that tariffs will not lead to deeply negative outcomes is low, which is why we will wait until the April 2 announcement to press this longer-term view.”

Source: BNN BIoomberg

Trump's Tariff Strategy on Key Sectors Unveiled

U.S. President Donald Trump, during a cabinet meeting, stated that companies are returning to the United States and investment levels are exceeding expectations. His announcement focused on imposing tariffs to bolster the economy.

The tariffs on cars, aluminum, and pharmaceuticals are planned to maintain low tax rates, influencing domestic and international trade dynamics.

Trump's Tariff Strategy on Key Sectors Unveiled

During the cabinet meeting, President Trump highlighted a returning trend of companies moving operations back to the U.S. He attributed this to favorable domestic policies that surpass expectations in investment.

With this background, the administration aims to secure further economic benefits. The planned tariffs will focus on key sectors like automobiles, aluminum, and pharmaceuticals. The initiative supports keeping tax rates low and crafting competitive market conditions for American businesses.

Economic and Global Trade Implications Monitored

Immediate implications involve strengthening domestic industries while potentially affecting international trade relations. The tariffs could reshuffle global supply chains, especially in sectors reliant on imports. This policy direction aligns with Trump's long-standing focus on American economic interests.

Market reactions to the tariff announcement vary with speculation about potential trade disruptions. Key stakeholders, including business leaders and foreign governments, express concerns and conjectures regarding future trade policies. Some entities voice support for economic nationalism, while others caution against retaliatory measures by impacted nations.

Historical Context, Price Data, and Expert Analysis

Did you know? The planned tariffs on cars, aluminum, and pharmaceuticals represent a strategic move similar to measures taken in the 1980s to curb foreign competition and boost U.S. manufacturing.

Historically, the U.S. has utilized tariffs as a means to balance trade deficits and stimulate domestic sectors. Previous instances saw variable outcomes, often leading to countermeasures from trade partners. Economic data indicates a rise in foreign investment returning to U.S. soil, partly driven by current administration policies.

Experts provide insights into the long-term financial ramifications of these tariffs, warning of possible price hikes and supply chain adjustments. Analysts point to the necessity of evaluating bilateral trade agreements to mitigate adverse effects on the global economy. While these tariffs serve immediate economic goals, their ongoing effectiveness and implications remain subjects of financial discourse among economists and policy experts.

Source: CryptoSlate

The Federal Reserve appears to be on the threshold of ending a historic streak of losses, which in turn could get it back on track to returning cash to the Treasury somewhere down the line, analysts at Morgan Stanley said in a note on Monday.

At issue is the relationship between how the Fed makes money to fund its operations and the cash it pays as part of the system to maintain control over short-term interest rates. Aggressive rate rises starting three years ago tipped Fed books deeply into the red and now, with short-term rates down, the investment bank believes the Fed is hovering near the point where it can earn money again.

The bank argued there’s a “breakeven rate” where Fed income meets its expenses that is derived from the average interest payment it gets from bonds it holds divided by its interest liabilities. “As of March 12, the weighted average coupon for the Fed was 2.66%, and reserves and (reverse repo) were roughly 55% of the balance sheet, so the breakeven rate is about 4.8%,” Morgan Stanley economists wrote.

“Not surprisingly, then, the Fed is now on the verge of no longer running a loss on a flow basis,” they said, adding “the smaller balance sheet combined with the lower policy rate has brought the Fed out of the red.”

Continuing to shrink the size of Fed bond holdings as well as the prospect of more rate cuts “means the Fed will start earning a profit again.” If the Fed meets expectations and cuts rates again in the future, that and changes in the interest flows from securities it owns should help accelerate the return to profitability, the researchers wrote.

The Morgan Stanley report follows the Fed’s release on Friday of its financial situation for 2024, which showed a smaller loss after the record red ink reported for 2023. The U.S. central bank said that the total distribution of its comprehensive net loss for 2024 stood at $77.5 billion versus $114.6 billion in 2023. The Fed last turned a profit in 2022.

Fed officials have said repeatedly that losses do not affect the institution’s ability to conduct monetary policy or its operations. For the vast majority of its history the Fed has been a big profit maker, as the income it earned primarily from interest on bonds it owns outstripped what it had to pay to banks and money market funds, as part of technical work to set the level of short-term rates.

That began to change in 2022 when the Fed pushed up its interest rate target dramatically as part of efforts to tame inflation. That caused its interest expenses to surge above what it was earning from its bonds, preventing it from returning cash to the Treasury.

Source: Yahoo Finance

U.S. President Donald Trump has announced that any country that buys oil or gas from Venezuela will pay a 25% secondary tariff on trades with the United States, Reuters reported on Monday, with Trump claiming that Venezuela has sent "tens of thousands" of people to the U.S. who have a "very violent nature.

Earlier this month, Chevron Corp. (NYSE:CVX) received a 30-day notice from the Trump administration to wrap up its operations in Venezuela. The deadline, set for April 3, provides the company only 30 days instead of the normal six-month wind-down period. Since 2022, Chevron has been allowed to operate in Venezuela as an exception to U.S. sanctions, exporting crude to the United States. According to Secretary of State Marco Rubio and other foreign-policy hawks, Chevron has been providing a financial lifeline for Maduro’s regime to enrich itself and suppress civil rights. Venezuela produced about 20% of Venezuela’s oil in 2024, close to Maduro’s goal of 1 million barrels per day. Chevron is the only major oil producer with a waiver to operate in Venezuela despite Washington’s sanctions against President Nicolás Maduro’s regime.

Last year, the United States Office of Foreign Assets Control (OFAC) eased some sanctions on Venezuela but retained sanctions on PdVSA. OFAC has issued a new license allowing certain transactions related to the export or re-export of liquefied petroleum gas (LPG) to Venezuela until July 8, 2025.  However, transactions with Petróleos de Venezuela, S.A., the Venezuelan state-owned oil and natural gas company in which PdVSA has a 50 percent or greater interest, remain prohibited under the sanctions imposed by various executive orders.

Venezuela's crude oil production has declined sharply from 3.2 million b/d in 2000 to 735,000 b/d in September 2023 mainly due to sanctions and poor maintenance; in contrast, Argentina’s crude output has been increasing with Argentine President Javier Milei vowing to shake up the system.

Source: OILPRICE

The USD/CAD currency pair continues to move within the framework of the development of the fall and the formation of the “Triangle” pattern. At the time of publication of the forecast, the US Dollar to Canadian Dollar exchange rate is 1.4330. Moving averages indicate the presence of a short-term bearish trend for the pair. Prices have broken through the area between the signal lines downwards, which indicates pressure from sellers and a potential continuation of the fall of the price pair in the near future. At the moment, it is worth considering an attempt to develop a bullish correction in the Canadian Dollar price and a test of the resistance level near the 1.4365 area. Next, a rebound downwards and a continuation of the fall of the currency pair on Forex. The potential target of such movement of the instrument is the area below the 1.4275 level.

Canadian Dollar Forecast USDCAD for March 25, 2025

An additional signal in favor of a decrease in Canadian Dollar quotes will be a test of the resistance line on the relative strength indicator. The second signal in favor of a fall will be a rebound from the upper border of the “Triangle” pattern. The cancellation of the fall option of the USD/CAD currency pair on Forex will be a strong growth and a breakout of the 1.4445 area. This will indicate a breakout of the resistance area and continued growth of quotes to the area above 1.4655. Expect confirmation of the pair’s fall with a breakout of the support area and closing of the USD/CAD quotes below 1.4305.

Canadian Dollar Forecast USDCAD for March 25, 2025 suggests an attempt to test the resistance area near 1.4365. Further, continued fall to the area below 1.4275. An additional signal in favor of the decline of the Canadian Dollar on Forex will be a test of the trend line on the relative strength indicator. Cancellation of the option of a fall in USD/CAD quotes will be a strong growth and a breakout of the 1.4445 level. This will indicate continued growth in the value of the asset with a potential target above 1.4655.

Source: forex24.pro