Fed's Powell Says Interest-Rate Pause Is Expected to Be Temporary -- Commodities Roundup

MARKET MOVEMENTS:

-- Brent crude oil is down 1.8% to $75.76 a barrel.

-- European benchmark gas is up 0.5% at EUR36.91 a megawatt hour.

-- Gold futures are 0.4% lower at $1,937.70 a troy ounce.

-- LME three-month copper futures are up 0.9% at $8,665.50 a metric ton.

-- Wheat futures are down 0.8% to $7.28 a bushel.

TOP STORY:

Fed's Powell Says Interest-Rate Pause Is Expected to Be Temporary

Federal Reserve Chairman Jerome Powell said the central bank was likely to raise interest rates in the coming months but more slowly than previously.

Fed officials left rates unchanged last week after lifting them at 10 straight policy meetings to combat inflation. But investors, consumers and borrowers shouldn't think they were done, Powell told the House Financial Services Committee on Wednesday.

"Given how far we've come, it may make sense to move rates higher but to do so at a more moderate pace," Powell said.

Inflation and economic activity haven't slowed as much as many officials anticipated this year, casting more uncertainty over how high they might lift rates this year.

OTHER STORIES:

Biden's Trade Challenge: Kicking the China Dependency Habit

China has many sources of geopolitical leverage, from its military to its vast market. Potentially, the most potent and least appreciated is the choke-point position it has built in global supply chains.

President Biden has devoted a lot of his foreign policy to addressing that vulnerability, from cultivating closer ties to India, which aspires to become an alternative manufacturing base to China, to negotiating critical minerals deals with Europe.

Oddly, he hasn't used a more obvious tool: trade deals. Biden has turned aside pleas to join pacts such as the Trans-Pacific Partnership, an accord between 12 Pacific Rim economies, or use access to the U.S. market as a tool of diplomacy.

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Widening Wealth Gap Drives Talks for Green Finance Pact at Paris Summit

The leaders of wealthy nations want private investors to send a flood of capital to poorer countries to lift them out of poverty and bankroll the response to climate change. Instead, those investor funds are drying up.

Rising interest rates and financial stress have choked off finance to the world's poorest countries, leaving them with debt burdens that are larger than they have been in nearly three decades. The market turmoil and the aftereffects of the global pandemic have pushed these countries deeper into poverty, reversing years of income gains and undermining their transition to cleaner energy, one of the rich world's top development priorities.

The gap between advanced economies and poor ones on wind and solar deployment is now so large that the Netherlands, one of the rainiest countries in Europe, generates more solar electricity than all of sub-Saharan Africa, according to the International Energy Agency.

MARKET TALKS:

Crude Palm Oil Prices Weaken, Tracking Soybean Oil

1003 GMT - Crude palm oil prices fell, tracking weaker soybean oil prices on the Chicago Board of Trade, says a Kuala Lumpur-based trader. Signs of weakening demand could also weigh on prices, he notes. Data from cargo surveyor AmSpec Research showed that Malaysian palm oil exports fell 13% on month over June 1-20, showing weaker demand for the commodity. The Bursa Malaysia Derivatives contract for September delivery closed MYR45 lower at MYR3,569 a ton. ([e-mail])

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China Looks Set to Lose Ground to Other Lithium Producers

0833 GMT - China looks set to lose ground to other lithium producers in the coming years, BMI says in a note. Lithium demand for EVs alone will grow 20% on average annually over 2023-e32, versus lagging supply growth of just 6%, it says. China's comparatively weak lithium-project pipeline will likely boost reliance on imports, with manufacturers and miners increasingly looking to invest abroad. China's tougher environmental scrutiny of mining projects will also cap tailwinds from a looming global supply deficit and high prices, BMI says. It flags further concerns, such as overdependence on supply chains running through China and resource nationalism from the Argentina-Bolivia-Chile "lithium triangle". These factors suggest limited upside to BMI's forecasts for China lithium production, regardless of global price or supply pressures. ([e-mail])

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Oil Drifts Lower Amid Larger-Than-Expected Supply

0755 GMT - Oil prices are drifting lower, as global macroeconomic weakness and hidden supply rises help to offset recent cuts to output from OPEC and better demand in China. Brent crude is down 0.3% to $76.90 a barrel while WTI is also down 0.3% to $72.35 a barrel. ANZ Research says the likely reason so far has been higher supply from producer nations. "Sanctions on Russian oil exports haven't greatly constrained supply to the international market, and exports from Iran and Venezuela have been surprisingly strong... even the OPEC+ quota reductions have not lowered production as much as agreed," ANZ says in a note. Higher interest rates have also raised the costs of holding stock, causing inventories to run down, it adds. ([e-mail])

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Gold Slips as Attention Turns to China Demand

0735 GMT - Gold prices are falling as attention shifts to Chinese buying, which seems to be slowing down after strong sales earlier this year. New York futures are down 0.3% to $1,938.30 a troy ounce. "Gold prices have been underpinned by strong physical demand in China," ANZ Research writes. ANZ notes that the People's Bank of China has added gold to its reserves for seven straight months while consumers bought jewelry, bars and coins following the lifting of lockdowns. "However, there are signs that growth is starting to slow down," it says, pointing to slowing retail sales growth of gold and silver jewelry to 24% year-on-year in May from 44% and 37% in March and April, respectively. "High unemployment amid an uncertain economic outlook could weigh further on demand." ([e-mail])

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Industrial Metals Mixed on Macro Uncertainty

0724 GMT - Metal prices remain range bound as macroeconomic uncertainty continues to weigh on demand. Three-month copper is up 0.2% to $8,606 a metric ton while aluminum is down 0.3% to $2,229 a ton. "Powell's Congressional comments didn't shift the macro narrative this week," says Dave Whitcomb, head of research at Peak Trading Research, in a note. "The Fed will remain data dependent and could hike rates again later this year. Bond markets are still pricing a 70% probability of a July hike," Whitcomb says, adding that after the Bank of England rate decision today, there are few major macro catalysts until early July. ([e-mail])

Write to Barcelona Editors at [e-mail]

(END) Dow Jones Newswires

06-22-23 0708ET