British American Tobacco Backs Guidance, But Expects Weaker First Half on U.S. Softness — Commodities Roundup

MARKET MOVEMENTS:

–Brent crude oil is down 1.5% at $77.16 a barrel

–European benchmark gas is down 2.3% at EUR35.17 a megawatt-hour

–Gold futures are down 0.8% at $2,349.40 a troy ounce

–LME three-month copper futures are down 2% at $9,985.00 a metric ton

TOP STORY:

British American Tobacco Backs Guidance, But Expects Weaker First Half on U.S. Softness

British American Tobacco kept its 2024 outlook unchanged but forecast a softer first-half performance as it continues to cope with macroeconomic pressures in its key U.S. market.

The cigarette maker-which houses the Kent, Dunhill and Lucky Strike brands-reiterated that it expects its results to be weighed to the second half due to planned investment phasing and slow recovery in the U.S.

Smokers switching to cheaper, nonpremium brands and a rise in illegal disposable vapes have hindered the performance of its largest market and led to a large write-down of some of its brands in December. BAT expanded in the country-which made up 44% of its 2023 group revenue-through its takeover of Reynolds American in 2017.

OTHER STORIES:

Equinor Sells Stake in Two North Sea Production Licenses to PGNiG

Equinor is selling a 19.5% stake in two North Sea production licenses to Polish state-owned oil and gas company PGNiG, it said Tuesday.

The licenses in question are PL048E in the Eirin gas field, and PL1201 which is located just south of Eirin, with Equinor currently owning 78.2% in both licenses and PGNiG holding the remaining share.

—

Tesla China’s Sales Rose in May Amid EV Demand Recovery

Tesla’s sales in China rose in May, as the country’s demand for electric vehicles picked up, thanks to government trade-in programs and consumer interest generated by the Beijing Auto Show.

The U.S. EV maker sold 72,573 China-made cars in May, up 17% from a year earlier, preliminary data from the China Passenger Car Association showed Tuesday. However, Tesla’s sales dropped 6.5% from April.

—

Tesla Hits Back on Musk Pay Package After ISS Recommendation

Tesla fired back at the proxy advisory firm Institutional Shareholder Services, defending its multibillion-dollar pay package for Chief Executive Elon Musk after the firm recommended shareholders vote it down.

Tesla argued in a document filed with regulators Monday that ISS had reached the wrong conclusion about Musk’s pay package because of a “technical misunderstanding.”

MARKET TALKS:

Shares in European Oil Companies Fall After OPEC+ Surprise Move — Market Talk

1024 GMT – European oil companies are trading lower as oil prices continue to decline after hitting four-month lows. Brent crude oil’s fall below $80 a barrel–a first since February–is driven by OPEC+’s surprise decision to start removing some of its production cuts earlier than expected, AJ Bell investment director Russ Mould says in a market comment. U.K. heavyweights Shell and BP are down 2.4% at GBP27.16 and 3.8% at GBP4.63, respectively. French major TotalEnergies’ shares are down 2.7% at EUR64.14, while Italy’s Eni trades 2.9% lower at EUR14. Portugal’s Galp trades 1.8% lower at EUR18.88, while shares in Norway’s Equinor fall 3.1% at NOK294.35. (christian.moess@wsj.com)

—

U.S. Rate Cuts Likely to Win Back Western Gold Investors — Market Talk

1013 GMT – U.S. interest rate cuts are likely to win back Western gold investors, World Gold Council chief market strategist John Reade said at the Nomura Investment Forum Asia. Elevated interest rates have hurt European and U.S. investors’ interest in gold, although prices held up well, helped by central bank purchases, mostly from emerging markets, he said. Reade says a near-term risk is profit-taking in the precious metal, which might follow a period of strong U.S. economic data. (tracy.qu@wsj.com)

—

Palm Oil Closes Lower, Tracking Weak Soybean Oil, Palm Olein — Market Talk

1013 GMT – Palm oil closed lower, following overnight losses in soybean oil on the Chicago Board of Trade and weaker palm olein prices. Investors are waiting for May production data from the Malaysia Palm Oil Board, due Monday, which may show higher production figures, says Low York Hong, AmInvestment Bank’s head of futures broking. Palm oil analytics data showed Malaysia’s production rose 16% last month. The Bursa Malaysia Derivatives contract for August delivery fell MYR156 to MYR3,920 a ton. (jiahui.huang@wsj.com; @ivy_jiahuihuang)

—

Metal Prices Slide, with Copper Falling on Pressure from Funds — Market Talk

1007 GMT – Metal prices slide, with copper falling 1.8% to $10,012 a ton on downward pressure from hedge funds. Base metals traders are cautious after last week’s weakness, and copper remains key in driving trends in the wider base metal market, though it looks to have consolidated around the $10,000 a ton support level, Sucden Financial analysts say in a note. “Despite maintaining a moderately bullish outlook for the longer term, we believe a slight correction below this support level could realign the [copper] price closer to its fair value,” Sucden analysts say. The metal had rallied overnight on a strong reading from China factory activity data, showing two-year highs before slipping back, SP Angel analysts say in a note. Elsewhere, aluminum falls 0.6% to $2,646 a ton, while nickel drops 1.4% to $19,300 a ton. (joseph.hoppe@wsj.com)

—

Gold Futures Slip But Remain Largely Rangebound Ahead of Key Catalysts — Market Talk

0748 GMT – Gold futures slip 0.2% to $2,363.2 a troy ounce, trading within a tight range over the past week. Non-interest yielding bullion found some support from stronger expectations of the Federal Reserve cutting interest rates later this year, as Monday’s U.S. data revealed a slowdown in manufacturing and economic activity, says Rania Gule, market analyst at broker XS.com. Continued geopolitical risks also support short-term expectations, so any declines are likely to remain limited with price drops seen as buying opportunities, Gule says in a note. Traders will likely wait for key U.S. data releases this week, including Friday’s non-farm payrolls report, along with the Bank of Canada’s Wednesday decision and the European Central Bank’s Thursday meeting to provide momentum and determine gold’s short-term direction, Gule says. (joseph.hoppe@wsj.com)

—

Oil Slides to Four-Month Lows as OPEC+ Move Is Seen as Bearish

0730 GMT – Oil prices slump to four-month lows, signaling OPEC+’s policy move disappointed markets. Brent crude is down 1.35% to $77.36 a barrel, while WTI falls 1.5% to $73.08 a barrel. According to analysts, the gradual return of 2.2 million barrels a day of oil supply from October 2024 to September 2025 risks leaving the market in surplus next year. “OPEC+ made it clear that the return of these barrels to the market can be paused if market conditions do not allow for this additional supply,” ING’s Warren Patterson and Ewa Manthey say in a note. “However, one must question how long some members will be willing to hold a substantial amount of supply from the market and give market share away to non-OPEC+ producers.” (giulia.petroni@wsj.com)

—

BHP Failed to Take Over Anglo. Will It Take Its Coal Mines Instead? — Market Talk

0229 GMT – BHP may have had to walk away from its takeover bid for Anglo American, but the world’s No. 1 miner could still seek to acquire its rival’s metallurgical coal “crown jewels,” the Moranbah North and Grosvenor mines, according to Jefferies analyst Christopher LaFemina. He reckons it might make strategic sense for BHP to buy those assets, which Anglo is expected to sell as part of a planned restructuring. However, the mines may also be of interest to Glencore, he adds, while Peabody makes sense as a potential buyer as well. “Anglo’s Dawson, Capcoal assets and interest in Jellinbah could be attractive to pure-play Australian operators, financial buyers and Japanese/Indian steel consortiums,” LaFemina says. He says those assets could be a fit for a number of companies, including Whitehaven, Yancoal, Stanmore and Coronado. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

—

Iron-Ore Prices Fall Amid Weak Demand From China — Market Talk

0223 GMT – Iron-ore prices are lower in early trade amid concerns about weak demand from China after property sales dragged in May. Recent stimulus has so far failed to boost demand for housing, ANZ Research analysts write in a note. The value of new-home sales from the top 100 largest property developers fell 34% on year in May, highlighting the continued challenges facing the property sector, they add. That dims the outlook for construction-related materials like iron ore. The most-traded iron-ore contract on the Dalian Commodity Exchange is 0.6% lower at CNY847.00 a ton. (jiahui.huang@wsj.com; @ivy_jiahuihuang)

Write to Barcelona Editors at barcelonaeditors@dowjones.com

(END) Dow Jones Newswires

06-04-24 0741ET