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Business

Asian stocks slide with U.S. yields on Pelosi jitters; Aussie drops

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A man wearing a protective face mask, amid the coronavirus disease (COVID-19) pandemic, walks past a screen showing Shanghai Composite index, Nikkei index and Dow Jones Industrial Average outside a brokerage in Tokyo, Japan, February 14, 2022. REUTERS/Kim Kyung-Hoon

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TOKYO, Aug 2 (Reuters) – Asia stocks tumbled on Tuesday as jitters about an escalation in Sino-U.S. tension with U.S. House of Representatives Speaker Nancy Pelosi set to begin a trip to Taiwan, adding to fears about the risk of global recession.

U.S. long-term Treasury yields dropped to a four-month low, pulling the U.S. dollar down, amid a bid for safer assets after China threatened repercussions in the event of the visit by Pelosi to the self-ruled island, which China claims as its territory. Crude oil also sank.

Meanwhile, Australian stocks pared declines and the Aussie dollar weakened after the central bank raised the key rate by an as-expected 50 basis points, with markets interpreting changes to the accompanying policy statement as dovish. read more

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Japan’s Nikkei (.N225) slid 1.54%, while Taiwan’s stock index (.TWII) dropped 1.87%.

Chinese blue chips (.CSI300) tumbled 2.47% and Hong Kong’s Hang Seng (.HSI) lost 2.71%.

However, Australia’s equity benchmark (.AXJO) was just 0.23% lower, after an earlier decline of 0.7%

MSCI’s broadest index of Asia-Pacific shares (.MIAP00000PUS) retreated 1.33%.

U.S. e-mini stock futures pointed to a 0.44% lower restart for the S&P 500 (.SPX), which stumbled 0.28% overnight.

“We knew from the onset that (Pelosi’s trip) would be a driver of risk-off sentiment in the region,” said Carlos Casanova, the senior Asia economist at Union Bancaire Privee in Hong Kong.

“There’s going to be a lot of speculation and uncertainty about what the extent of China’s response will be in the short term.”

The week began with China, Europe and the United States reporting weakening factory activity, with that in the U.S. decelerating to its lowest level since August 2020. read more

That sank crude, with Brent futures edging down to $99.27 a barrel on Tuesday after losing almost $4 overnight. U.S. West Texas Intermediate futures also eased to $93.26, extending Monday’s almost $5 slide.

The benchmark 10-year U.S. Treasury yield fell as low as 2.53% in Tokyo trade, the lowest since April 5, amid wagers the slowdown could spur the U.S. Federal Reserve to ease off the policy-tightening pedal. The bonds also benefited from safety-seeking demand before Pelosi’s Taiwan visit.

That helped the U.S. dollar slide as low as 130.40 yen for the first time since June 6. The euro jumped as high as $1.0294, a level not seen since July 5.

The Taiwan dollar slipped to its lowest level in more than two years on the weaker side of 30 per U.S. dollar.

Meanwhile, the Aussie was 0.51% lower at $0.69910, extending a 0.14% retreat following the Reserve Bank of Australia’s policy decision.

It had hit the highest since June 17, at $0.7048, in the previous session but that was after bouncing off a 26-month trough at $0.66825 in the middle of last month.

“The Aussie has been underperforming other major currencies lately given global growth concerns so it really needed a hawkish surprise to reignite its recovery from 2-year lows,” said Sean Callow, a currency strategist at Westpac in Sydney.

“Instead, it got the RBA leaving the door wide open to slowing the pace of tightening at future meetings, sending AUD back below $0.70.”

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Reporting by Kevin Buckland; Additional reporting by Tom Westbrook; Editing by Robert Birsel

Our Standards: The Thomson Reuters Trust Principles.

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World

London’s High Court rules against Venezuela’s Maduro in $1 bln gold battle

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Venezuela’s President Nicolas Maduro looks on during a meeting with Alejandro Dominguez, president of the South American Football Confederation CONMEBOL, at the Miraflores Palace, in Caracas, Venezuela July 11, 2022. REUTERS/Leonardo Fernandez Viloria

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LONDON, July 29 (Reuters) – London’s High Court has rejected President Nicolas Maduro’s latest efforts to gain control of more than $1 billion of Venezuela’s gold reserves stored in the Bank of England’s underground vaults in London.

The court ruled on Friday that previous decisions by the Maduro-backed Venezuelan Supreme Court, aimed at reducing opposition leader Juan Guaido’s say over the gold, should be disregarded.

It marked the latest victory for Guaido, who has won a series of legal clashes over the bullion after the British government recognised him rather than Maduro as the South American country’s president.

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“I have … concluded that the Guaido Board succeeds: that the STJ (Venezuelan supreme court) judgements are not capable of being recognised,” the judge in the case said.

The Maduro and Guaido camps have each appointed a different board to the Central Bank of Venezuela (BCV) and the two have issued conflicting instructions concerning the gold reserves.

Lawyers for the Maduro-backed BCV board said the central bank was considering an appeal after Friday’s ruling, while Guiado, who has seen some international support falter over the last 18 months, called it an important victory.

The Maduro-backed BCV board said in a statement it rejected the court’s ruling and reserved “all legal action at its disposal to appeal this unusual and disastrous” decision.

Shortly after, the vice president and finance minister Delcy Rodriguez said on state television that “the damage caused to our people is serious” and that the court “has to rectify.”

Maduro’s legal team has said he would like to sell some of the 31 tonnes of gold to finance Venezuela’s response to the pandemic and bolster a health system gutted by years of economic crisis.

Guaido’s opposition has alleged that Maduro’s cash-strapped administration wants to use the money to pay off his foreign allies, which his lawyers deny.

“This decision represents another step in the process of protecting Venezuela’s international gold reserves and preserving them for the Venezuelan people,” Guaido said in a statement.

“This type of honest and transparent judicial process does not exist in Venezuela.”

The British government in early 2019 joined dozens of nations in backing Guaido, after he declared an interim presidency and denounced Maduro for rigging 2018 elections.

Guaido at that time asked the Bank of England to prevent Maduro’s government from accessing the gold. Maduro’s central bank then sued the Bank of England to recover control, saying it was depriving the BCV of funds needed to finance Venezuela’s coronavirus response.

Legal experts have said the latest case has been unprecedented as it has seen one of a country’s highest courts interpreting the constitution of another.

“This is an unfortunate ruling,” said Sarosh Zaiwalla at Zaiwalla & Co, which represented the Maduro-backed central bank, adding it would continue to pursue the case despite Friday’s decision.

“The BCV remains concerned that the cumulative effect of the judgments of the English Court appears to accord a simple statement by the UK Government recognising as a head of state a person with no effective control or power over any part of that state,” Zaiwalla added.

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Reporting by Marc Jones; Editing by Michael Holden, Catherine Evans, Barbara Lewis and Daniel Wallis

Our Standards: The Thomson Reuters Trust Principles.

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Business

Google helps jittery stocks ahead of Fed

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A man wearing a protective face mask, amid the coronavirus disease (COVID-19) pandemic, walks past a screen showing Shanghai Composite index, Nikkei index and Dow Jones Industrial Average outside a brokerage in Tokyo, Japan, February 14, 2022. REUTERS/Kim Kyung-Hoon

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  • Nasdaq futures up 1.5%, S&P 500 futures up 0.9%
  • Euro struggles as gas crisis crimps growth outlook
  • Aussie inflation surprises with downside miss; RBA bets ease

SINGAPORE, July 27 (Reuters) – Better-than-expected results at Microsoft and Google helped steady a nervous mood in stock markets on Wednesday, while bonds and the dollar were on edge ahead of a U.S. Federal Reserve meeting that is expected to deliver another big rate hike.

Nasdaq 100 futures bounced 1.5% and S&P 500 futures were up 0.9% in Asia after Microsoft (MSFT.O) forecast strong revenue growth and Google parent Alphabet (GOOGL.O) posted solid search engine ad sales. read more

Alphabet shares rose 5% after hours and Microsoft shares rose 4% to cut through some of the gloom cast by a profit warning at retailer Walmart (WMT.N) and soft U.S economic data.

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European futures rose 0.2% and FTSE futures rose 0.3%. Japan’s Nikkei (.N225) rose 0.4%.

Things were not as bright elsewhere. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.7%.

The world’s second-biggest chipmaker, SK Hynix (000660.KS), warned demand was likely to slow as customers cut spending, and shares fell 1.9%. read more

The euro struggled to recoup an overnight drop as a further cut in Russian gas flows loomed. The International Monetary Fund has cut global growth forecasts and in a few hours traders expect the Fed to raise interest rates sharply.

“They have laid out their plan to raise rates to restrictive levels,” said Khoon Goh, head of Asia research at ANZ Bank in Singapore. “They want to avoid a hard landing, obviously, but they just can’t take the chance of inflation staying elevated.”

The U.S. central bank is expected to announce a 75 basis point (bps) rate hike at 1800 GMT. Futures imply about a 15% chance of a 100 bps hike. The Treasury market is already anticipating that so many sharp near-term hikes will hurt longer-run growth.

Benchmark 10-year Treasury yields were steady at 2.8032% on Wednesday, below two-year yields at 3.0508%.

Australian bonds staged a relief rally on Wednesday, after consumer price data surprised on the downside for a change – even if only by a tiny margin – prompting investors to back out of bets on a 75 bps rate hike in Australia next week. read more

The Australian dollar fell marginally to $0.6935. Three-year bond futures rose 11 ticks.

EUROPE, CHINA WOBBLY

On top of worries about interest rates damaging economies, Europe faces an energy crisis and China is beset by restrictive COVID-19 policies and fresh setbacks for its ailing property market.

The euro had its worst session in a fortnight on Tuesday, sliding 1%, as Russia’s Gazprom said it would further cut westbound gas flow and energy prices zoomed higher – with German year-ahead prices rising to a record.

The common currency steadied at $1.0150 in Asia. The Japanese yen held at 136.96 per dollar.

China’s yuan was under pressure and property stocks fell as investors have been spooked that a widening boycott of mortgage repayments on unfinished apartments and crippling debts at many developers could ricochet into the banking industry.

The onshore CSI real estate index (.CSI000952) fell 2% and a Hong Kong index of mainland developers (.HSMPI) fell more than 5%, dragged down by large developer Country Garden (2007.HK) announcing a discounted share sale. read more

“China’s housing sector is in the midst of a depression and the recent mortgage boycott is a sign of the severity of the downturn,” said analysts at Societe Generale.

“The extent of this boycott, as it is now, is not unmanageable, but there is a risk of escalation.”

Oil prices held steady, with Brent crude futures at $104.58 a barrel and U.S. crude futures up 0.3% to $95.32 a barrel.

Gold was steady at $1,717 an ounce.

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Reporting by Tom Westbrook; Editing by Christopher Cushing and Kim Coghill

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Business

Asia shares bounce on China property fund as Fed hike looms

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A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying various countries’ stock indexes including Russian Trading System (RTS) Index which is empty, outside a brokerage in Tokyo, Japan, March 10, 2022. REUTERS/Kim Kyung-Hoon

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  • Chinese stocks rise on reported property aid
  • Investors expect a 75bp Fed hike
  • Markets now focus on corporate earnings

HONG KONG, July 26 (Reuters) – Asian shares pared losses on Tuesday as investor sentiment improved on China’s reported plans to tackle a debt crisis in real estate development.

MSCI’s broadest gauge of Asia stocks outside Japan (.MIAPJ0000PUS) bounced back to a gain of 0.36% in afternoon sessions. Chinese stocks jumped after reports the country would set up a fund of up to $44 billion to help property developers. read more

Hong Kong’s Hang Seng Index (.HSI) was 1.48% higher and China’s benchmark CSI300 Index (.CSI300) also widened gains to a rise of 0.91% at the morning close. Japan’s Nikkei (.N225) fell 0.08%, erasing some morning losses.

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FTSE futures edged up 0.15%. U.S. markets are likely to open lower, with E-mini futures for the S&P 500 index down 0.32%.

U.S. retailer Walmart Inc (WMT.N) cut its profit forecast on Monday and said customers were paring back discretionary purchases as inflation bit into household budgets. Shares fell 10% after hours. read more

Investors are also awaiting a likely 75 basis point Federal Reserve interest rate increase later this week – with markets pricing about a 10% risk of a larger hike, as well as waiting to see whether economic warning signs prompt a shift in rhetoric.

“We are leaning to the view that 75 bps is most likely but won’t be the end unless they see some demand destruction and some tempering of inflation,” said John Milroy, an investment adviser at Ord Minnett.

“We are fearful they have to materially slow the U.S. economy further.”

Big technology companies such as Apple (AAPL.O), Microsoft (MSFT.O) and Amazon.com are due to report earnings this week.

“The market has stabilized” from rate hike expectations, said Redmond Wong, Greater China market strategist at Saxo Markets in Hong Kong. “The focus is now on earnings.”

In China, “maintaining stability is the key theme,” said Wong on likely outcomes from politburo meetings expected to begin this week.

In currencies, the dollar was marginally softer but not drifting too far below recent milestone highs as uncertainty continued to swirl around the interest rate and economic outlook.

The euro rose 0.21% to $1.0240 but was hemmed in by uncertainty over Europe’s energy security, which is not helped by a looming cut in the westbound flow of Russian gas. read more

The yen steadied at 136.54 per dollar. The U.S. dollar index , which touched a 20-year high this month, was down slightly at 106.380.

Oil prices rose further on expectations Russia’s reduction in natural gas supply to Europe could encourage a switch to crude, with Brent futures last up 1.27% at $106.45 a barrel and U.S. crude up 1.26% at $97.92 a barrel. read more

Benchmark 10-year Treasury yields fell to 2.875% as growth worries gave support to bonds.

Gold hovered at $1,721.8 an ounce and bitcoin nursed overnight losses at $21,111.31.

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Reporting by Kane Wu in Hong Kong; Editing by Sam Holmes

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Business

Russia gas flow lifts euro ahead of ECB rate meeting

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  • Resumption in Russia gas flows lifts euro
  • ECB set to hike rates by at least 25 basis points
  • ECB rate decision due at 1215 GMT
  • U.S. crude oil prices trade below $100 a barrel

LONDON, July 21 (Reuters) – Stock markets eased on Thursday as a resumption of Russian gas supplies to Europe lifted the euro ahead of the European Central Bank’s anticipated first interest rate hike in over a decade to quell inflation.

The flow of Russian gas resumed to Germany after a 10-day outage to ease Europe’s supply concerns for now, helping to ease worries about fallout on the economy. read more

The euro edged up, distancing itself further from last week’s parity against the greenback, the recovery bolstered by expectations the ECB might deliver a big 50 basis-point rate hike.

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Russian President Vladimir Putin has warned that supplies could be reduced further or even stop, prompting the EU to tells its members to cut usage.

“European markets are going to be pulled and pushed by Putin’s mood,” said Michael Hewson, chief markets strategist at CMC Markets.

Markets are looking to see how much the ECB will raise interest rates later at 1215 GMT on Thursday, with a 25-bps hike already price in, Hewson said. read more

Traders also await details of an ECB tool to contain stress in bond markets, made all the more urgent by a crumbling government in Italy, one of the euro zone’s most indebted countries.

Italian spreads and debt/GDP

Rate hikes from the U.S. Federal Reserve next week and from the Bank of England in August are also well anticipated by now, Hewson said.

The STOXX index (.STOXX) of 600 European companies was off 0.4%. The MSCI All-Country stock index (.MIWD00000PUS) eased 0.14%.

Italian bonds sold off sharply following the collapse of Mario Draghi’s government in the euro area’s third biggest economy. read more

Nadege Dufosse, head of cross-asset strategy at Candriam, said political turmoil in Italy is putting more pressure on the ECB to have its so-called anti-fragmentation tool in place to cap bond yields and reassure markets.

“I think they will have to deliver on that point, I think it’s the main risk today. It must convince investors that it will be efficient,” Dufosse said.

After the latest series of rate hikes, investors will be trying to gauge whether the economy is headed for a soft or hard landing as higher borrowing costs are absorbed, she said.

“It’s the expectations for the fourth quarter or next year that can really determine the trend in the market. For now we do not have the answer and we just have to be very pragmatic,” Dufosse said.

Bucking the trend, the Bank of Japan left monetary policy unchanged on Thursday, as expected, and raised its inflation forecasts a little bit. The yen held steady at 138.37 per dollar. read more

Nasdaq 100 futures fell 0.25% and S&P 500 futures fell 0.2%. Earnings from Blackstone, Dow Chemical, Philip Morris International, Twitter and American Airlines were due on Thursday.

CHINA CLOUDS

Wall Street indexes rallied overnight but even better-than-expected results from Tesla after hours couldn’t carry the positive mood into the Asia session. read more

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.1% and Japan’s Nikkei (.N225) gained 0.4%.

A cloud over Chinese growth due to its strict COVID-19 controls and fresh concern over the ailing property market is also casting gloom over the prospects for global demand.

Growth-sensitive commodities such as copper and iron ore have been sliding and this week Chinese banks and property stocks have been hurt by borrowers boycotting mortgage payments on unfinished homes. read more

“Past due mortgages doubled over the week, and … potential home buyers are waiting for a general drop in home prices for the housing market, including completed projects,” ING analysts said in a note to clients on Thursday.

“This is negative even for cash-rich developers.”

China’s yuan was slightly firmer at 6.7664 to the dollar. Against other currencies the greenback steadied after dipping earlier in the week. The Australian dollar bought $0.68650.

The benchmark 10-year Treasury yield held at 3.0415%, below the 2-year yield of 3.2359%, a market signal that often presages a recession.

Oil prices fell for a second straight session, as demand concerns outweighed tight global supply after U.S. government data showed tepid gasoline consumption during the peak summer driving season.

Brent crude was down 2.25% at $104.50 a barrel, while U.S. West Texas Intermediate dropped 2.6% to $97.32 a barrel.

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Additional reportig by Tom Westbrook, Editing by Sam Holmes, Kim Coghill and Nick Macfie

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Business

Tesla profit tops target; Musk sees no demand problem

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A Tesla logo is seen in Los Angeles, California U.S. January 12, 2018. REUTERS/Lucy Nicholson

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July 20 (Reuters) – Tesla Inc (TSLA.O) on Wednesday reported a smaller-than-expected drop in quarterly profit as a string of price increases on its electric vehicles (EVs) helped offset production challenges caused by COVID-19 lockdowns in China.

Chief Financial Officer Zachary Kirkhorn said Tesla was still pushing to reach 50% growth in deliveries this year, adding that while the target had become more difficult, “it remains possible with strong execution.”

Chief Executive Elon Musk said he expects inflation to start easing by end-2022 and most commodity prices to stabilize.

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Tesla does not have a demand problem, but a production problem, Musk told a conference call. He dismissed the idea that global economic problems were hurting interest in Tesla, despite vehicle prices’ rising to what he called “embarrassing levels.”

The U.S. price of Tesla’s Model Y long-range version, now $65,990, is up more than 30% since the start of 2021.

Shares of Tesla were up about 1% in after-hours trade. The shares are down about 40% from their peak in November.

Tesla’s China factory ended the second quarter with a record monthly production level. Musk said new factories in Berlin and Texas aimed to produce 5,000 cars a week by the end of the year, adding that Berlin produced 1,000 cars a week in June.

Musk previously had said the new factories were “gigantic money furnaces” and that he had “a super bad feeling about the economy.” read more

Morgan Stanley analysts said in a report after Tesla’s earnings announcement that they see “near-term margin headwinds due to (new) challenges with ramping new production, particularly in Berlin”.

Tesla executives acknowledged some continuing tightness in supplies of older-generation microchips, but said there were no major problems in supplies of chips and batteries barring unforeseen COVID-related shutdowns.

The EV maker posted an adjusted profit of $2.27 per share for the quarter versus analysts’ consensus estimates of $1.81. This was down from $3.22 in the preceding quarter.

Its automotive gross margin fell to 27.9%, down from a year earlier and the preceding quarter, amid inflationary pressure.

Tesla’s total revenue fell to $16.93 billion in the second quarter from $18.76 billion a quarter earlier, ending its streak of posting record revenue in recent quarters.

Analysts were expecting revenue of $17.10 billion, according to IBES data from Refinitiv. read more

BITCOIN TO CASH

Tesla said it had converted approximately 75% of its bitcoin purchases into fiat currency, which added $936 million of cash to its balance sheet.

Musk said the sale was made to increase liquidity when Tesla was uncertain about how long the COVID lockdown in China would continue. Tesla has not sold any of its holdings of the Dogecoin cryptocurrency.

“This should be not taken as some verdict on bitcoin,” he said, adding that Tesla was open to increasing its cryptocurrency holdings in the future.

Musk had said in May last year that Tesla would not sell its bitcoin.

“The bitcoin losses point out an important part of the Tesla investment case – its eccentric owner. While Musk’s impressive innovation has served the company well, his personal flair is starting to raise governance questions,” said Laura Hoy, analyst at Hargreaves Lansdown.

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Reporting by Hyunjoo Jin in San Francisco and Nivedita Balu in Bengaluru ; Editing by Anil D’Silva, Peter Henderson, Matthew Lewis, Leslie Adler and Himani Sarkar

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Business

Stocks climb, euro inches higher in big week for markets

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LONDON, July 18 (Reuters) – World equity markets got off to a solid start on Monday and the euro pulled away from parity as market participants scaled back bets on the Federal Reserve interest rate hike next week and on optimism spurred by central bank pledges to support China’s economy.

U.S. stock futures were up more than 1% while European stock indices were a sea of green in a big week for the region.

The European Central Bank is set to raise rates for the first time in more than a decade on Thursday, the same day the bloc will be hoping Russia resumes gas supplies. Italy, meanwhile, is again in the grip of a political crisis. read more

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The pan-European STOXX 600 index (.STOXX) was up 1.3% by 1030 GMT after posting a 0.8% drop last week. Gains on Monday were broad-based and led by miners (.SXPP), energy stocks (.SXEP) and banks (.SX7P).

“It is a wild week this week, there is so much going on,” said James Rossiter, senior global strategist at TD Securities.

“The ECB is a huge focus, there is not a lot of scope for the ECB to surprise, 25 bps is locked in I think… and then there is Italy and Nord Stream too.”

Italy’s borrowing costs surged on Monday and the premium investors demand for holding Italian debt over safer German paper was at its widest in a month as political turmoil in Europe’s fourth largest economy rumbled on.

Prime Minister Mario Draghi attempted to resign from his post on Thursday after the 5-Star Movement, a coalition partner, failed to back him in a confidence vote. Draghi’s resignation was rejected by the Italian president. read more

Draghi is expected to address parliament on Wednesday but Italy’s 10-year bond yield rose 10 basis points (bps) on Monday to as high as 3.48% , pushing the closely watched spread over German Bund yields to its widest level in over a month at around 235 bps .

“We expect volatility to remain high until then in response to various rumours concerning whether he will remain firm on his resignation or whether he is willing to remain in place,” UniCredit analysts said in a note.

“Any indication that could increase the likelihood of early elections will ultimately be negative for BTPs and drive the spread wider.”

Overnight, a gauge of Asian shares (.MIAPJ0000PUS) rose more than 1%, its biggest daily rise in nearly two months, boosted by a jump in Chinese shares as regulators encouraged lenders to extend loans to qualified real estate projects.

It came too as the high-flying dollar, which has had its strongest start to a year in recent memory, eased on Monday. /FRX

The uncertainty will haunt the ECB at a policy meeting where it is likely to kick off a tightening cycle with a rise of 25 bps, with markets hanging on details of an anti-fragmentation tool intended to ease pressure on borrowing costs for the Union’s most indebted members. read more

Friday’s rally on Wall Street reverberated through global markets with MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) up 1.4%, having shed 3.5% last week.

A wider index of global stocks (.MIWO00000PUS) was up 0.4%.

Chinese blue chips (.CSI300) added 1.0% as the head of the country’s central bank pledged to help the economy, though Shanghai had also announced more districtwide coronavirus testing. read more

Traders are back to expecting a 75 basis point interest rate hike from the Federal Reserve next week, after flirting with the prospect of a 100 basis point move to rein in inflation.

“We do not believe that central banks will be able to raise rates to the extent that they or the market forecasts given the headwinds to already moderating economic growth,” said Steve Ellis, global CIO of fixed income at Fidelity International.

Corporate earnings will be in sharp focus this week with Goldman Sachs Group Inc (GS.N), Bank of America Corp (BAC.N), International Business Corp (IBM.N), Netflix Inc (NFLX.O), Tesla Inc .O and Twitter Inc (TWTR.N) due to report.

Of the 35 companies in the S&P 500 that have reported, 80% have beaten analyst expectations, according to Refinitiv. Analysts now expect aggregate year-on-year second-quarter profit growth of 5.6%, down from 6.8% at the beginning of the quarter.

Rising interest rates and a firm dollar have been a major drag for non-yielding gold which was stuck at $1,713 an ounce after shedding 2% last week.

Oil prices rose in the risk-on wave. President Joe Biden continued his trip to the Middle East hoping to get agreement on an increase in output, having seemingly come away from Saudi Arabia empty handed.

After an early dip, Brent crude added $2.54, or 2.5%, to $103.70 a barrel, after a 2.1% gain on Friday.

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Additional reporting by Marc Jones in London; editing by Kirsten Donovan and Bernadette Baum

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Business

Euro battles parity pressure ahead of U.S. inflation data

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LONDON, July 13 (Reuters) – Stocks slipped on Wednesday and the euro lurked just above parity against the dollar, as traders waited to see if U.S. inflation data later bolsters the case for another supersized Federal Reserve interest rate hike this month.

Recession worries meant Europe’s bourses were stumbling again after a relatively steady session in Asia Pacific where South Korea and New Zealand had jacked up their rates again.

London’s FTSE (.FTSE), Germany’s DAX (.GDAXI) and France’s CAC40 (.FCHI) were all down 0.6-0.8% , while the euro managed to claw up to $1.0050 even as gas prices jumped another 4.2% /FRX

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Copper, which is attuned to global growth, had hit a 20-month low too having now slumped 30% since April, although Wall Street futures were pointing higher.

UK economic growth data also delivered an unexpected rise but investors were far more focused on whether the U.S. inflation numbers due shortly show it pushing toward 9%, which would be the highest since 1981. read more

“Markets have been held up a bit in terms of parity in euro-dollar but we still have an incredible number of moving parts,” Societe Generale’s Kit Juckes said, explaining that the higher the U.S. inflation numbers, the clearer it will be that the Fed will crack on with rate hikes.

It increased them by a supersized 75 basis points at its last meeting, its first move of that scale since 1994.

“If that (high inflation reading) happens today, that could get the bond market a bit nervous again, invert the U.S. yield curve more and send the euro decisively through parity,” Juckes said.

Underscoring the global inflation concerns, South Korea’s central bank on Wednesday raised its rates by 50 basis points, the biggest increase since the bank adopted its current policy system in 1999, and New Zealand’s central bank also delivered its third straight 50 bps hike in a row. read more

It left fixed income markets all waiting on 1230 GMT U.S. inflation data. German government bond yields edged up to 1.15%, after falling sharply for two days , while 10-year U.S. Treasuries hovered at 2.97% as they also digested the IMF’s latest U.S. growth forecast cut. read more

Bond market recessionary warning signs are now flashing “with growing alarm” Deutsche Bank’s Jim Reid said. One in particular is the 2 year/10 year U.S. Treasury curve, which has inverted before every one of the last 10 U.S. recessions, and remains near its most inverted of this cycle so far at -8.5 bps.

PARITY WATCH

Wall Street futures were pointing to marginally higher starts for the main S&P 500, Nasdaq and Dow Jones indexes after a late slump on Tuesday.

Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gained 0.5%, snapping two straight days of losses and having slumped to its lowest in two years the day before.

Taiwanese stocks led the gains after Taiwan’s finance ministry said on Tuesday evening it would activate its stock stabilisation fund. The market (.TWII) had fallen to a 19-month low that day.

Japan’s Nikkei (.N225) finished up 0.5% after it had lost nearly 2% the previous day.

“Sharp weakness in oil prices in July suggests that June’s (inflation) may mark a peak, however. If so, the most dynamic phase of Fed tightening could conclude with a 75bps rate rise on 27 July,” analysts at ANZ said.

“However, our expectation is that underlying strength in core inflation and still deeply negative real policy rates means 50bps rate rises will still be appropriate after the summer.”

Worries that higher rates could bring the global economy to a standstill, or even worse into recession, has been the key driver behind both the 20% slump in world stocks this year and the surge in the safe-haven U.S. dollar.

The euro , which is down over 11% since January was last at $1.0050, as investors waited to see whether it would fall below one U.S. dollar for the first time since 2002.

It dropped to just a whisker away on Tuesday, falling as low as $1.00005.

The dollar was also firm on other peers, and its index measure against major rivals was holding at just under 108.

Oil prices paused their overnight declines. Brent crude was little changed at $100 a barrel with U.S. West Texas Intermediate crude at $96.31. Industrial metal copper though buckled another 0.75% on the London Metal Exchange (LME) to $7,310 a tonne having slipped as low as $7,202.50.

Leading cryptocurrency bitcoin meanwhile was up over 2% and looked on track to snap a three-day losing streak, though at $19,772 was still trading below the key psychological $20,000 mark.

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Additional reporting by Alun John in Hong Kong and Sam Byford in Tokyo;
Editing by Alison Williams, Kirsten Donovan

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Asian stocks fall to two-year low, euro nears par with dollar on growth fears

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HONG KONG, July 12 (Reuters) – Global equities faltered, oil fell and the euro inched closer to parity with the safe haven dollar on Tuesday as the prospect of further tightening by central banks, renewed COVID outbreaks in China and Europe’s energy shortages spooked investors.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 1.3% to its lowest level in two years, while Japan’s Nikkei (.N225) lost 2%.

Futures also pointed to a week open in the U.S. and Europe, as U.S. S&P 500 e-minis , lost 0.6%, Nasdaq futures fell 0.7%, pan-region Euro Stoxx 50 futures shed 0.8% and FTSE futures slipped 0.44%.

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The euro fell as low as $1.0005 against the U.S. dollar, moving ever closer to parity for the first time since December 2002, as investors worry an energy crisis will tip the region into a recession.

“Risk-off sentiment is dominating global markets,” said Yuting Shao, macro strategist at State Street Global Markets.

“The dollar is the go-to international reserve currency. So when there is a recessionary risk or there’s pickup of volatility, the greenback is the currency that people rush to because that is the safest,” Shao added.

The dollar index , which tracks the currency against a basked of six peers rose to 108.44, the highest since October 2002.

The focus for this week will be macro data including U.S. consumer inflation on Wednesday, and comments from Federal Reserve Officials as investors look for clues on the outcome of the Fed’s upcoming policy meeting before officials enter the pre-meet blackout period.

A high inflation reading would add pressure for the Fed to step up its already aggressive pace of interest rate increases.

Also high on investors’ list of worries is the fact that a growing number of Chinese cities, including the commercial hub Shanghai, are adopting fresh COVID-19 curbs starting from this week to rein in new infections after finding a highly-transmissible Omicron subvariant. read more

By early afternoon, Hong Kong’s benchmark Hang Seng Index (.HSI) fell 1.21% to its lowest since June 17, while the mainland China blue chip CSI300 (.CSI300) lost 1.3%.

Additionally, the surging cost of energy in Europe is a major fear as the biggest single pipeline carrying Russian natural gas to Germany entered annual maintenance, with flows expected to stop for 10 days.

Investors are worried the shutdown might be extended because of the war in Ukraine, restricting European gas supply further and tipping the struggling eurozone economy into recession. read more

The yield on benchmark 10-year Treasury notes was at 2.9595%, having dropped back below 3% overnight as investors bought safe haven Treasuries amid a sell-off on Wall Street.

Growth fears were also weighing on oil, despite concerns about the tight supply.

Brent crude futures fell $1.35, or 1.3%, to $105.75 a barrel, while U.S. West Texas Intermediate crude was at $102.64 a barrel, down $1.45, or 1.4%.

Gold was slightly lower. Spot gold was traded at $1728.98 per ounce.

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Business

Shares slide ahead of U.S. inflation data, earnings hurdles

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People pass by an electronic screen showing Japan’s Nikkei share price index inside a conference hall in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato

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  • European shares down 1.3%, S&P 500 futures off 0.8%
  • Dollar tops 137 yen before U.S. CPI, inflation expectations
  • Banks kick off earnings season from Thursday

SYDNEY/LONDON, July 11 (Reuters) – Shares slid on Monday as investors braced for a U.S. inflation report that could force another super-sized hike in interest rates, and the start of an earnings season in which profits will be under pressure.

The STOXX index of European shares fell 1.3% (.STOXX), with S&P 500 futures down 0.8% and Nasdaq futures off 0.9% as an upbeat U.S. June payrolls report raised expectations of a 75 basis point hike from the Federal Reserve.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) slipped 1.8%, while Chinese blue chips (.CSI300) lost 1.9% after Shanghai discovered a COVID-19 case involving a new subvariant, Omicron BA.5.2.1. read more

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Bond yields and the rampant U.S. dollar also rose, the latter hitting a 24-year peak against the yen.

Underlining the global nature of the inflation challenge, central banks in Canada and New Zealand are expected to tighten policy further this week.

While Wall Street did eke out some gains last week, the market mood will be tested by earnings from JPMorgan and Morgan Stanley on Thursday, with Citigroup and Wells Fargo the day after.

Another hurdle will be Wednesday’s U.S. consumer price report, in which markets see headline inflation accelerating further to 8.8% but a slight slowdown in the core measure to 5.8%.

An early reading on consumer inflation expectations this week will also have the close attention of the Fed.

“Unexpected weakness in these releases will be required to dislodge expectations for a 75 bps July 27 Fed rate rise, which lifted from about 71 bps to 74 bps post the payrolls report,” said Ray Attrill, head of FX strategy at NAB.

PARITY PARTY

Treasury yields climbed around 10 basis points on the jobs report and the 10-year stood at 3.09% on Monday, up from a recent low of 2.746%.

A hawkish Fed combined with fears of recession, particularly in Europe, has kept the dollar up at 20-year highs against a basket of competitors . The dollar broke above 137.00 to reach its highest since 1998 at 137.28 yen as the Bank of Japan remained dovish. read more

Japan’s conservative coalition government was projected to have increased its majority in upper house elections on Sunday, two days after the assassination of former prime minister Shinzo Abe. read more

The euro continued to struggle at $1.0122 , having shed 2.4% last week to hit a two-decade low and major retracement target at $1.0072.

“With little economic relief on the horizon for Europe, and U.S. inflation data likely to mark a new high for the year and keep the Fed hiking aggressively, we think the risks remain skewed in favour of the greenback,” said Jonas Goltermann, a senior markets economist at Capital Economics.

“Indeed, we think the EUR/USD rate will break through parity before long, and may well trade some way through that level.”

Rising interest rates and a strong dollar have been a headache for non-yielding gold, which was ailing at $1,739 an ounce , having fallen for four weeks in a row.

Oil prices also lost around 4% last week as worries about demand offset supply constraints.

Data from China due on Friday are likely to confirm the world’s second-largest economy contracted sharply in the second quarter amid coronavirus lockdowns.

Brent was trading down $1.27 lower at $105.76, while U.S. crude slipped $1.43 to $103.36 per barrel.

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Reporting by Wayne Cole and Lawrence White; Editing by Kenneth Maxwell, Bradley Perrett and Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.

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