China Export Ban, Tesla's Record Deliveries, and Oil Squeeze Announcement

Financial markets experienced a mixed session on the eve of Independence Day, with indices trading higher but volume remaining muted. Several key factors influenced the market, including China's export ban on rare-earth metals, Tesla's impressive record deliveries, and Saudi Arabia and Russia's oil squeeze announcement.

Key Factors for Today

• China's export ban on gallium- and germanium-related products raises concerns and potential price hikes.
• Tesla reported record vehicle deliveries in Q2, surpassing expectations and boosting the Nasdaq.
• Saudi Arabia and Russia announced further production cuts, causing a spike in WTI prices.
• European markets maintain optimism despite a revised manufacturing PMI.
• The Reserve Bank of Australia (RBA) decided to keep rates steady, citing uncertain economic outlook.

Market Movers

• China's export ban on rare-earth metals stirred risk appetite, leading to a weaker yuan and a stronger dollar.
• Tesla's remarkable Q2 deliveries propelled the Nasdaq slightly higher, despite remaining below its peak.
• WTI experienced a temporary spike following Saudi Arabia and Russia's oil squeeze announcement, closing above the $70/bbl threshold.
• Energy and material shares supported European indices despite a lower-than-expected Eurozone Manufacturing PMI.

Economic Calendar

• 4th of July Holiday
• German Trade Balance
• Canadian Manufacturing
• GDT Price Index

China Export Ban

Recent reports suggest that China will prohibit the export of gallium- and germanium-related products in August. These components are crucial for chips and solar panels, and their scarcity in the US market may lead to price increases. The export ban emerged following the US investigation into Chinese gallium exporter Innoscience over intellectual property violations. Although not fully processed, this latest development in the trade tensions between China and Europe has created pressure on risk appetite. Consequently, the yuan weakened, while the dollar strengthened. The USD/JPY pair closed at 144.62 after bouncing at 144.00, with 145.00 potentially paving the way for new territories.

Tesla Record Deliveries

Tesla's strategic price-cutting efforts paid off, as the company reported a record number of vehicle deliveries in Q2. With 466.1K units delivered, surpassing expectations, Tesla showcased its continued growth. Production also increased to 479.7K, exceeding the anticipated figures. This impressive performance by Tesla had a positive spillover effect on other electric car manufacturers, providing support to the Nasdaq, which rose by 0.2%. However, the index remained below its peak level of 15,300, with the 15k handle acting as a major support.

WTI Spikes 2% After Saudi Arabia and Russia Announce Oil Squeeze

Saudi Arabia's decision to extend its voluntary production cut of 1 million barrels per day through August, combined with Russia's announcement of an additional 500K bbl/day reduction in August, propelled WTI prices to a spike of 2%, reaching $71.70/bbl. However, despite this initial surge, WTI closed in the red, although it managed to remain above the critical $70/bbl threshold. These developments highlight the ongoing efforts of major oil-producing nations to balance global oil supply and maintain stable prices.