In today’s briefing:
- US vs EU: Crying ‘Wolf’?
- Steno Signals #198 – A 20–25% Weaker USD May Solve All Trump’s Problems
- KOSPI 200 and KOSDAQ 150 Constituent Changes Announced: A Few Surprises
- Asian Equities: To Sidestep ASEAN’s China Problem, Focus on Select Pockets
- Global base oils margins outlook: Week of 26 May
- Global Coal Fundamentals: May 2025
- Middle East FX, May 27th 2025 ,
- Global base oils arb outlook: Week of 26 May
- Americas/EMEA base oils supply outlook: Week of 26 May
- Americas/EMEA base oils demand outlook: Week of 26 May
US vs EU: Crying ‘Wolf’?
- Ursula von der Leyen had a call with Donald Trump on 25 May.
- The call can be interpreted as a ‘win’ for Trump as he had threatened to impose 50% tariffs on the EU from 1 June.
- Another perspective could be that Trump’s reversion is a new manifestation of the TACO principle.
Steno Signals #198 – A 20–25% Weaker USD May Solve All Trump’s Problems
- Morning from Europe.
- Trump’s classical stop-and-go approach to negotiations is starting to get baked into markets, but we’re still surprised by the extent of market moves when these impulsive threats are announced on Truth Social — and markets remain poor at assessing the “realistic outcomes” of this approach.
- On Friday, markets at one point priced in a 40–60% probability that 50% tariffs on the EU would actually take effect on June 1.
KOSPI 200 and KOSDAQ 150 Constituent Changes Announced: A Few Surprises
- Korea Exchange announced its KOSPI200 rebalance changes on 27 May. It added 8 companies and deleted 8 companies. KRX also added 9 companies and deleted 9 companies in KOSDAQ 150.
- These 8 new inclusions in KOSPI200 are up on average 49.8% in the past one year. The 8 deletions to KOSPI200 are down on average 45.2% in the past one year.
- There were numerous surprises to the KOSDAQ150 rebalances. In particular, three companies are relative surprises to the KOSDAQ150 additions including Solid Inc, Zeus Co, and Wemade Max.
Asian Equities: To Sidestep ASEAN’s China Problem, Focus on Select Pockets
- ASEAN’s underperformance could continue. The low growth region is facing the additional risk of increasing Chinese exports, which could dent domestic companies’ revenues and margins and engender a deflationary spiral.
- China exports more to ASEAN than to the US or EU. Margin pressure in consumer and industrials is palpable. Thailand is in deflation and inflation is nosediving in the region.
- We recommend playing the region through markets with low China import intensity (Indonesia, Philippines) and through consumer services and select banks. We have Digiplus, DBS, BCA in our model portfolio.
Global base oils margins outlook: Week of 26 May
- Global base oils prices mostly hold firm vs feedstock/gasoil prices.
- Firm margins in Asia and Europe point to still-tight supply-demand fundamentals, incentivizing refiners to maintain high output levels.
- Weaker margins in US point to diverging fundamentals compared with other regions.
Global Coal Fundamentals: May 2025
- In April 2025, global coal markets showed a diverging trend between thermal and metallurgical segments.
- Thermal coal remained under pressure amid softening prices, high stockpiles in China and India, and collapsing power demand in Europe, where electricity generation fell sharply due to warm weather, a major blackout in Spain, and ongoing economic stagnation in Germany.
- As a result, API2 and API4 prices slipped further, with month-ahead API2 contracts trading at $93/ton, API4 at $88/ton, and Newcastle coal easing to $95/ton, despite a brief rebound to $99 mid-month.
Middle East FX, May 27th 2025 ,
- Gun stores ! Trump is very explicit when he describes people that Mexico is supposed to be sending to the US. Terrorists, rapists, criminals, cartel gangs etc.
- But for all the violence coming allegedly from Mexico, there is only two legal gun stores in all of Mexico ! Two !
- In the US, there are over 17 000 gun and ammunition stores and 70 000 licensed gun dealers ! In Mexico , a dozen documents are required before being approved and it can take a few months.
Global base oils arb outlook: Week of 26 May
- US Group II heavy-grade base oils prices stay unusually weak relative to CFR India prices for the time of year.
- Persistent US price-discount to CFR India prices coincides with steady flow of heavy-grade base oils shipments from US to India and especially to Pakistan.
- Arbitrage shipments highlight persistent surplus of heavy-grade base oils in US market.
Americas/EMEA base oils supply outlook: Week of 26 May
- US base oils prices continue to edge lower versus feedstock/competing fuel prices.
- Margins fall because of steady outright prices and higher feedstock costs.
- Margins previously rose in first few weeks of Q2 2025 because of lower feedstock costs while outright prices mostly held steady.
Americas/EMEA base oils demand outlook: Week of 26 May
- US base oils demand likely to remain more muted as concern about strength of end-user consumption and expectations of improving supply incentivize buyers to maintain low stocks.
- Demand could get support from procurement of additional stocks as buffer against any weather-related supply disruptions during Atlantic hurricane season.
- Any such stock-building would be despite expectations of more readily-available supply over coming months.
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