Before getting stuck in, it’s worth flagging where signals may come from about the next steps in the trade showdown, apart of course from the twittersphere. This week the World Trade Organization General Council meets on the U.S.-China standoff; Nafta negotiators try try to make headway in Washington; and leaders from the BRICS nations get together in Johannesburg.
Gulfs Apart
Commodity investors will have their attention fixed on Iran this week and into August after Donald Trump’s all-caps threat to the leadership of the major oil producer, and his counterpart’s earlier warning that any conflict would be the “mother of all wars.” Brent crude slipped after rising as much as 2 percent Monday.
There are likely to be plenty more verbal barbs in the coming days. Secretary of State Pompeo has an opportunity for comment on Iran later Monday after a consultation with his Australian counterparts; on Tuesday he’ll host a Ministerial to Advance Religious Freedom event in Washington; and then midweek he’s speaking to the Senate Foreign Relations Committee. Early August sees the initial 90-day deadline for tightened sanctions against Tehran.
It’s a Gusher
After driving costs down to survive a plunge in the crude price that started in 2014, the oil industry is now riding a rebound toward some of the fattest profit margins they’ve ever seen. The only question is: what are they going to do with the extra money? Some of the answers will start to come in on Thursday and Friday, when in addition to the quarterly figures from Shell, Exxon and Chevron, Total SA and ConocoPhillips are set to report their numbers.
Investors are pushing for share buybacks after enduring belt-tightening measures used to survive the downturn that diluted their holdings. But even after buying back shares and paying dividends, a group of nine integrated oil companies will probably have an extra $8 billion in cash, according to Royal Bank of Canada. That may mean majors are now scouring the globe for more barrels, marking the end of austerity and a return to bigger spending.
Lightning Rods
After six straight weeks of declines, copper and other metals will be in focus again, as assets that have become a lightning rod for concerns about the growing fallout from a global trade war. China’s policy response will be key here, as investors wait to see whether it will offer some support to the yuan, which has slumped in lockstep with copper over the past few weeks.
Anglo American is among the first to report earnings and investors, who have been raking in big returns from the mining industry will be keenly watching out for news on Thursday about the company’s interim dividend plans, as well as the status of approval for a new $6 billion copper mine in Peru. Freeport, the largest publicly traded copper producer, will also release its second-quarter results. Analysts are on the lookout for any update on the Phoenix-based miner’s Grasberg copper-and-gold project and when it expects to finally reach a deal with Indonesia allowing it to continue operating its flagship mine.
Navigating the Downturn
Top gold producers Barrick and Newmont are among the companies turning in their report cards for the second quarter at a time when the price of the precious metal is languishing at a one-year low. Investors will be looking for clues on how miners are managing costs and their progress in paring debt.
In the case of Barrick, analysts are hoping for an update on talks with Tanzania to lift a ban on the export of concentrates produced by Acacia Mining Plc. Barrick owns 64 percent of Acacia. Investors may also be eager to hear directly from Barrick about its intention toward Detour Gold Corp. Barrick was said to be the undisclosed miner that was asked to sign a confidentiality agreement alongside Paulson & Co. to discuss potentially buying Detour.
Source: Bloomberg