NEW YORK (ICIS)–With solid progress on disinflation and the labor market easing, financial markets are sharpening their focus on the coming interest rate cut cycle, with the first move expected in September. Ten-year Treasury yields are collapsing and economically sensitive stocks surging, as consensus moves to as much as three cuts of 25 basis points by the Federal Reserve in 2024 and further easing next year. All this comes as the consumer – the key driver of the US economy – is showing signs of fatigue. With COVID-era savings largely tapped out and the labor market easing, consumer spending is poised to slow going forward, bringing down overall economic growth as well as inflation. The latest US retail sales report confirmed the trend of a continuing slowdown in consumer spending, with June flat versus May. Year-on-year, retail sales were up just 2.3% – lower than the current inflationary trend.  This also implies a drop in volumes. There was notable year-on-year strength in ecommerce (+8.9%), bars and restaurants (+4.4%) and apparel (+4.3%). Weakness was led by furniture and home furnishings (-4.0%); sporting goods, hobby, musical instruments and books (-3.4%) and motor vehicles and parts (-2.2%). We are not talking about a collapse in consumer spending, but an easing is clearly in effect, naturally in line with a softening labor market. The unemployment rate has continued to slowly tick higher and is now at 4.1% versus a low of 3.4% in January. And the ratio of job openings versus unemployed now stands at 1.2 – close to pre-pandemic levels. The number of high-profile US retail earnings disappointments and stock price collapses continues to pile up. These include Helen of Troy, a producer of branded consumer home, outdoor, beauty and wellness products, sportswear giant Nike, coffee and beverage retailer Starbucks and restaurant group McDonald’s – all in the consumer discretionary camp. INFLATION RATE CONTINUES TO FALLThis slowdown in consumer spending is showing up in inflation numbers as well, with the June core Consumer Price Index (CPI) – excluding food and energy – actually falling 0.1% from May. From a year ago, it was up 3.3% in June, showing further progress from May’s 3.4% print. Services inflation has been sticky, but relief may be on its way. The ISM® US Services Purchasing Managers’ Index (PMI®) for June showed a huge 5.0-point decline from May to 48.8 – in contraction territory (under 50) for the second month in three. On the US manufacturing front, the recovery is sputtering as the ISM US Manufacturing PMI fell further in June to 48.5 – in contraction for the third consecutive month after eking out an expansion in March for the first time in 17 months. This puts the widely expected H2 recovery in chemicals volumes in jeopardy. US housing starts rose 3.0% in June versus May to an annualized pace of 1.35 million, but the gains were in the multifamily sector as single-family starts fell for the fourth consecutive month – by 2.2% in June. Total June starts were down 3.1% year on year. ICIS projects US housing starts of 1.43 million for 2024, rising to 1.49 million in 2025. US light vehicle sales ended Q2 on a sour note, with June sales falling 4.0% from May to a 15.3-million-unit pace, which was also off 4.8% from a year ago. For 2024, ICIS projects light vehicle sales improving to 15.8 million units versus 15.5 units in 2023 and rising further to 16.3 million units in 2025. ICIS forecasts US GDP growth slowing to 2.3% in 2024 from 2.5% in 2023, with the quarterly rate by Q4 at just 1.6%. For all of 2025, ICIS sees GDP growth slowing to 1.8%. While consumer spending is easing and high interest rates continue to weigh on manufacturing and key chemical end markets of housing and automotive, coming rate cuts by the Fed should boost sentiment and ultimately demand, particularly in cyclical sectors. Chemical stock prices are already catching a bid in anticipation. Even as the interest rate picture clears up, uncertainty abounds on the geopolitical and political fronts, with the upcoming US election in November in focus. For the chemical and manufacturing sectors, the spotlight on tariffs and their implications will only intensify.

LONDON (ICIS)–IT issues that impacted energy trading systems on Friday morning were gradually being resolved, with market participants regaining access to critical applications. A flawed update of cybersecurity software CrowdStrike hit Windows operating systems, with IT outages affecting companies across many sectors. This included energy trading platform Trayport and several brokers, with trading operations impacted. Trayport said shortly after midday London time it had made “significant progress in implementing workarounds for the ongoing CrowdStrike-related outage”. It said its services were being restored, including risk-based trading, and that the group was working to bring the remaining services back online as quickly as possible. A German power trader told ICIS shortly after midday London time that “all was back to normal” and was able to access broker screens. “It has been very bad this morning. Now everything is working smoothly, but all connections were down for a while,” a gas trader added. A broker had told ICIS earlier in the morning that “hardly anything is working here, we are just waiting for systems to come back.” LIQUIDITY Most traders contacted by ICIS reported issues affecting their usual trading activities as well as data used for analyzing market fundamentals. Some European gas and power traders said broker screens were not available and the issue was likely to affect liquidity throughout Friday’s trading session. Another added that they expected the number of transactions to go through at the end of the day to be down by about half. “I can chat and agree on deals, but I cannot put it in my system, meaning the P&L is not updated,” said one EU gas trader in the morning. “There’s a lot of counterparties offline, and those that are online are reluctant to show prices this morning,” said an LNG trader. Others reported fewer issues and said they could operate as usual. Intraday price movements highlighted that the global IT disruptions impacting energy trading activities on Friday did not have any significant impact on European gas and power prices, as highlighted by regional market commentaries published by ICIS. ENERGY EXCHANGES Commenting on the status of ICE’s derivatives markets, an ICE spokesperson told ICIS: “We are aware of the issue and markets are fully operational. We are in close dialogue with our customers on whether and how they’re impacted”. Earlier in the session, the European Energy Exchange (EEX) reported in a message to trading participants that customers using Trayport services were potentially facing technical problems. “Customers may observe problems to login or to trade via Trayport due to infrastructure issues with a third-party service provider,” EEX said. EEX also offered its assistance to customers for removing orders or trading on behalf. European power exchange EPEX SPOT, which is part of EEX, told ICIS that issues with the Spanish OMIE short-term trading platform, which caused a partial decoupling of markets on Friday morning, were not related to the global IT issues. It confirmed that all other European day-ahead power auctions were running to plan and order book closures were happening on time. Trading across the Nord Pool exchange was not impacted, a spokesman confirmed, and added that it was monitoring the situation closely. Spanish gas exchange MIBGAS also told ICIS it has not been affected by the outage. The electronic capacity trading platform RBP, owned by the Hungarian gas transmission system operator FGSZ Natural Gas Transmission, said it had not been impacted. IMPACT ON ENERGY COMPANIES Several energy companies contacted by ICIS did not report issues related to the global IT incident and were monitoring the situation. Spanish gas system operator Enagas told ICIS it “is not vulnerable because it does not have the impacted software installed, but an analysis is being carried out to foresee any eventual impact”. “As far as we’re aware, everything has been fine here relating to the outages and we are not aware of any issues in the LNG shipping market making an impact,” a UK-based shipbroker told ICIS. Other LNG shipping sources have also so far said they have noted no impact on terminals or shipping operations. Belgian gas system operator and LNG terminals operator Fluxys told ICIS “there have been some very minor issues without any real effect on flows”. The issues related to the “impact on the systems of our [external] partners.”, Fluxys’ subsidiaries include Dunkerque LNG and Zeebrugge LNG. ICIS contacted other major European LNG operators and global energy companies but received no replies by the time of publishing.

LONDON (ICIS)–IT issues that impacted energy trading systems on Friday morning were gradually being resolved, with market participants regaining access to critical applications. A flawed update of cybersecurity software CrowdStrike hit Windows operating systems, with IT outages affecting companies across many sectors. This included energy trading platform Trayport and several brokers, with trading operations impacted. Trayport said shortly after midday London time it had made “significant progress in implementing workarounds for the ongoing CrowdStrike-related outage”. It said its services were being restored, including risk-based trading, and that the group was working to bring the remaining services back online as quickly as possible. A German power trader told ICIS shortly after midday London time that “all was back to normal” and was able to access broker screens. “It has been very bad this morning. Now everything is working smoothly, but all connections were down for a while,” a gas trader added. A broker had told ICIS earlier in the morning that “hardly anything is working here, we are just waiting for systems to come back.” LIQUIDITY Most traders contacted by ICIS reported issues affecting their usual trading activities as well as data used for analyzing market fundamentals. Some European gas and power traders said broker screens were not available and the issue was likely to affect liquidity throughout Friday’s trading session. Another added that they expected the number of transactions to go through at the end of the day to be down by about half. “I can chat and agree on deals, but I cannot put it in my system, meaning the P&L is not updated,” said one EU gas trader in the morning. “There’s a lot of counterparties offline, and those that are online are reluctant to show prices this morning,” said an LNG trader. Others reported fewer issues and said they could operate as usual. ENERGY EXCHANGES Commenting on the status of ICE’s derivatives markets, an ICE spokesperson told ICIS: “We are aware of the issue and markets are fully operational. We are in close dialogue with our customers on whether and how they’re impacted”. Earlier in the session, the European Energy Exchange (EEX) reported in a message to trading participants that customers using Trayport services were potentially facing technical problems. “Customers may observe problems to login or to trade via Trayport due to infrastructure issues with a third-party service provider,” EEX said. EEX also offered its assistance to customers for removing orders or trading on behalf. European power exchange EPEX SPOT, which is part of EEX, told ICIS that issues with the Spanish OMIE short-term trading platform, which caused a partial decoupling of markets on Friday morning, were not related to the global IT issues. It confirmed that all other European day-ahead power auctions were running to plan and order book closures were happening on time. Trading across the Nord Pool exchange was not impacted, a spokesman confirmed, and added that it was monitoring the situation closely. Spanish gas exchange MIBGAS also told ICIS it has not been affected by the outage. The electronic capacity trading platform RBP, owned by the Hungarian gas transmission system operator FGSZ Natural Gas Transmission, said it had not been impacted. IMPACT ON ENERGY COMPANIES Several energy companies contacted by ICIS did not report issues related to the global IT incident and were monitoring the situation. Spanish gas system operator Enagas told ICIS it “is not vulnerable because it does not have the impacted software installed, but an analysis is being carried out to foresee any eventual impact”. “As far as we’re aware, everything has been fine here relating to the outages and we are not aware of any issues in the LNG shipping market making an impact,” a UK-based shipbroker told ICIS. Other LNG shipping sources have also so far said they have noted no impact on terminals or shipping operations. Belgian gas system operator and LNG terminals operator Fluxys told ICIS “there have been some very minor issues without any real effect on flows”. The issues related to the “impact on the systems of our [external] partners.”, Fluxys’ subsidiaries include Dunkerque LNG and Zeebrugge LNG. ICIS contacted other major European LNG operators and global energy companies but received no replies by the time of publishing.

LONDON (ICIS)–Gas In Focus editor Katya Zapletnyuk and deputy editor Marta Del Buono discuss the surge of populist movements in recent EU and member state elections and its impact on energy markets. Europe has been hurt by the energy crisis and high energy costs are driving businesses to other parts of the world. Consumers are demanding a focus shift from climate targets to competitiveness and security. Click here to watch

LONDON (ICIS)–Companies including financial services were hit by a global IT outage on Friday, with disruptions partly affecting energy trading. The chemicals sector currently appears unaffected though Poland’s largest container terminal, the Baltic Hub in Gdansk, was reportedly having some issues. Trayport, a key data platfrom for European wholesale energy markets, issued a statement warning the outage was affecting some of its key services. “We are currently facing infrastructure issues due to a global outage with a third-party service provider” Trayport said in a statement. Trayport added it was currently implementing workarounds, and customers may begin to see some of Trayport services become available. “We continue to work closely with the vendor to resolve the situation as soon as possible,” it added. ICIS continued to receive trade information on European gas and power markets spread across multiple trading venues. However, traders contacted by ICIS reported issues: “Servers are not accessible for the moment. We can trade but not book deals,” one trader said. A power trading source has said systems were unaffected in some countries. A gas trader in northern Europe said that some brokers were impacted, but that major exchange platforms were functioning as usual. Some trading companies are also faced internal IT issues. European power exchange EPEX SPOT reported a partial decoupling on the OMIE area, which includes Spanish and Portuguese power markets, for the IDA3 auctions, although it did not indicate whether it was related to the global IT outage. But the group reported a normal market status for most other markets and order book closures were also reported as being on time. Additional reporting by Clare Pennington

LONDON (ICIS)–Senior editor for recycling Matt Tudball discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Bullish outlook for eastern Europe bales and flake Upwards pressure appearing when market usually quietens down for summer Wider market expects bale supply to improve during August Outlook from September onwards still uncertain

Additional reporting by Clare Pennington LONDON (ICIS)–Companies including financial services were hit by a global IT outage on Friday morning, with disruptions partly affecting energy trading. Trayport, a key data platform for European wholesale energy markets, issued a statement warning the outage was affecting some of its key services. “We are currently facing infrastructure issues due to a global outage with a third-party service provider” Trayport said in a statement. Trayport added it was currently implementing workarounds, and customers may begin to see some of Trayport services become available. “We continue to work closely with the vendor to resolve the situation as soon as possible,” it added. ICIS continued to receive trade information on European gas and power markets spread across multiple trading venues. However, traders contacted by ICIS reported issues: “Servers are not accessible for the moment. We can trade but not book deals,” one trader said. A power trading source has said systems were unaffected in some countries. A gas trader in northern Europe said that some brokers were impacted, but that major exchange platforms were functioning as usual. Some trading companies are also faced internal IT issues. European power exchange EPEX SPOT reported a partial decoupling on the OMIE area, which includes Spanish and Portuguese power markets, for the IDA3 auctions, although it did not indicate whether it was related to the global IT outage. But the group reported a normal market status for most other markets and order book closures were also reported as being on time. ICIS is monitoring the ongoing disruptions and the impact on markets and will provide regular updates in the coming hours.

SINGAPORE (ICIS)–Malaysia’s economy grew by 5.8% year on year in the second quarter, driven by stronger exports and an expansion in the services sector, official advance estimates showed on Friday. The second-quarter GDP print follows the stronger-than-expected annual growth of 4.2% in the first quarter of 2024, the Department of Statistics said in a statement. Manufacturing for the period posted a stronger annualized growth of 4.7% compared with the 1.9% pace set in the first quarter. On a quarter-on-quarter basis, Malaysia’s economy grew by 0.7% in April-June, reversing the 3.1% contraction registered in Q1. Q2 exports grew faster by 5.8% year on year to ringgit (M$) 368.8 billion ($84 billion), compared with the 2.0% growth in the previous quarter. Malaysia’s services sector expanded by 5.6% year on year in the second quarter, accelerating from the 4.7% expansion in the first three months of 2024. In H1, the country’s GDP growth averaged 5.0%, stronger than the 4.1% growth posted in the same period last year. Malaysia is southeast Asia’s fifth-largest economy and a net exporter of polyolefins. The country is also one of the largest producers and exporters of oleochemical products worldwide, contributing about 20% to global capacity, according to the Malaysian Petrochemicals Association (MPA). ($1 = M$4.67) Thumbnail image: Petronas Towers in Kuala Lumpur, Malaysia (Source:C F Tham/AP/Shutterstock)

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The slide in today’s post is an updated version of the slide I first published late last year. Note that there is a new scenario added to the original two, A Bi-polar World. I could be wrong, of course. I might have given the wrong weightings to each of the scenarios, or more simply have chosen the wrong scenarios entirely. But today’s events point to very different outcomes than we saw during the 1992-2021 Petrochemicals Supercycle. Supermajors – 25% probabilityA small number of oil-and-gas-to-petrochemicals players dominate the business as they have increasingly turned oil and natural-gas liquids into petrochemicals at competitive costs. This is in response to the decline in crude-oil demand into transportation fuels because of the electrification of vehicles. Non-integrated petrochemical producers in Europe, South Korea, Singapore, Taiwan and Southeast Asia consolidate. Large swathes of capacity closes-down in these countries and regions to balance markets. A Bi-Polar World – 50% probabilityThe split between China and the US, and possibly the EU as well, widens. The rest of the developed world, including major petrochemical players in countries such as South Korea, Singapore and Japan, will need to decide where they stand: With the US and its partners or with China and its partners. They are at risk of losing access to the China market. Petrochemicals trade is largely confined to between China and its partners and between the US and its partners. No one scenario will be completely right. We could end up at any of many points between each of these three extreme outcomes. This is the case with Supermajors and A Bi-polar World. It could be that the closer relationship between Saudi Arabia and China allows Saudi Arabia to supply more of China’s petrochemicals deficits, allowing the Kingdom to perhaps realise some of its crude-oil-to-chemicals ambitions. A De-globalised World – 25% probabilityMarkets are in general much more regional. Instead of just a bi-polar world, we end up with beggar-thy-neighbour trade barriers similar in scale to the ones which led to the Great Depression. Petrochemical companies become much more “local for local”. Governments put up barriers to protect jobs and to ensure refineries don’t shut down along with uncompetitive petrochemical plants, thereby by protecting local supplies of transportation fuels. While extreme outcomes help push people out their comfort zones, supporting local petrochemical companies might instead fit at some mid-way point between all the scenarios. And “local for local” shouldn’t be viewed as automatically a bad thing. One can argue that because of today’s highly uncertain geopolitical world, local supplies of at least some petrochemicals are essential. Calling all senior management teams out there: You need to prepare your teams for the world after the Petrochemicals Supercycle. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.