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World stocks edge above Nov 2020 lows, sterling recovers some ground

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  • Dollar eases from 20-year highs reached Monday
  • German 10-year bond yields hit near 11-year highs
  • Oil rallies from Monday’s nine-month lows

LONDON/HONG KONG, Sept 27 (Reuters) – World stocks picked up from 21-month lows on Tuesday and sterling rallied after hitting record lows versus the dollar a day earlier on UK plans for tax cuts, as market slides ran out of steam.

U.S. S&P futures bounced 0.94% after Wall Street fell deeper into a bear market on Monday, benchmark 10-year Treasury yields dipped from the previous session’s 12-year high and the dollar eased from 20-year highs on a basket of currencies.

Markets remain nervous, however, after U.S. Federal Reserve officials on Monday said their priority remained controlling domestic inflation. read more

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“U.S. rate expectations have increased fairly significantly,” said Andrew Hardy, investment manager at Momentum Global Investment Management, though he added that “there’s a huge amount of bearishness already priced into markets”.

Markets are pricing in a 76% probability of a further 75 basis point move at the next Federal Reserve meeting in November.

Central bank speakers on Tuesday include Fed chair Jerome Powell and ECB president Christine Lagarde.

The MSCI world equity index (.MIWD00000PUS) rose 0.29% after hitting its lowest since Nov 2020 on Monday. European stocks gained more than 1% and Britain’s FTSE (.FTSE) rose 0.6%.

Sterling collapsed to a record low $1.0327 on Monday as the government tax cut plans announced on Friday came on top of huge energy subsidies.

The British currency recovered 4.6% from that low to $1.0801 on Tuesday.

After the pound’s plunge, the Bank of England said it would not hesitate to change interest rates and was monitoring markets “very closely”. read more

Bank of England Chief Economist Huw Pill will speak on a panel at 1100 GMT.

A lack of confidence in the government’s strategy and its funding also hammered gilts on Friday and again on Monday.

The yield on five-year gilts rose as much as 100 basis points in two trading days, though it slipped off the highs on Tuesday.

“(It) is definitely something that’s unfolding…probably we’re only at a certain initial stage of seeing how the market digests that kind of information,” said Yuting Shao, macro strategist at State Street Global Markets.

“Of course the tax cut plan itself was really aimed to stimulate growth, reduce household burdens, but it does raise the question of what the implications are in terms of the monetary policies.”

Spillover from Britain kept other assets on edge.

Bond selling in Japan pushed yields up to the Bank of Japan’s ceiling and prompted more unscheduled buying from the central bank in response.

The German 10-year bond yield briefly hit a new nearly 11-year high of 2.142%.

Ten-year U.S. bond yields dropped 3.2 bps after reaching a high on Monday of 3.933%.

MSCI’s broadest index of Asia shares outside Japan (.MIAPJ0000PUS) hit a fresh two-year low before bouncing 0.5%. Japan’s Nikkei (.N225) was up 0.5%.

The dollar index eased 0.13% to 113.72, after touching 114.58 on Monday, its strongest since May 2002.

The European single currency was up 0.24% on the day at $0.9629 after hitting a 20-year low a day ago.

Oil rose more than 1% after plunging to nine-month lows a day earlier, amid indications that producer alliance OPEC+ may enact output cuts to avoid a further collapse in prices.

U.S. crude gained 1.4% to $77.70 a barrel. Brent crude rose 1.27% to $85.20 per barrel.

Gold , which hit a 2-1/2 year low on Monday, rose 0.8% to $1,634 an ounce.

Bitcoin broke above $20,000 for the first time in about a week, as cryptocurrencies bounced, along with other risk-sensitive assets. read more

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Reporting by Xie Yu; Editing by Edmund Klamann, Muralikumar Anantharaman and Raissa Kasolowsky

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Business

Sterling collapses as investors fly into dollars

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  • Sterling hits record low; risk of BOE response
  • Euro down 1%; Aussie, kiwi, yuan hit multi year lows
  • S&P 500 futures drop 0.6%

SYDNEY, Sept 26 (Reuters) – Sterling slumped to a record low on Monday, prompting speculation of an emergency response from the Bank of England, as confidence evaporated in Britain’s plan to borrow its way out of trouble, with spooked investors piling in to U.S. dollars.

Broadening worry that high interest rates will hurt growth hit Asia’s currencies and equities too, with exporters from Japanese carmakers to Australian miners hit hard.

The pound plunged nearly 5% at one point to $1.0327, breaking below 1985 lows. Moves were exacerbated by thinner liquidity in the Asia session, but even after stumbling back to $1.05 the currency is still down some 7% in just two sessions.

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“You’ve got to buy the dollar as a risk off-trade. There is nowhere else to go,” said Rabobank strategist Michael Every in Singapore.

“The BOE are going to have to step in today, surely, at which point everyone’s going to end up with massively higher mortgage rates to try and stabilise sterling.”

The collapse sent the dollar higher broadly and it hit multi-year peaks on the Aussie, kiwi and yuan and a new 20-year top of $0.9528 per euro .

In stocks, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 1% to a two-year low. It is heading for a monthly loss of 11%, the largest since March 2020. Japan’s Nikkei (.N225) fell 2.2%.

S&P 500 futures fell 0.5%.

Last week, stocks and bonds crumbled after the United States and half a dozen other countries raised rates and projected pain ahead. Japan intervened in currency trade to support the yen. Investors lost confidence in Britain’s economic management.

The Nasdaq (.IXIC) lost more than 5% for the second week running. The S&P 500 (.SPX) fell 4.8%.

Gilts suffered their heaviest selling in three decades on Friday and on Monday the pound made a 37-year low at $1.0765 as investors reckon planned tax cuts will stretch government finances to the limit.

Sterling is down 11% this quarter.

Five-year gilt yields rose 94 basis points last week, by far the biggest weekly jump recorded in Refinitiv data stretching back to the mid 1980s. Treasuries tanked as well last week, with two-year yields up 35 bps to 4.2140% and benchmark 10-year yields up 25 bps to 3.6970%.

The euro wobbled to a two-decade low at $0.9660 as risks rise of war escalating in Ukraine, before steadying at $0.9686.

In Italy, a right-wing alliance led by Giorgia Meloni’s Brothers of Italy party was on course for a clear majority in the next parliament, as expected. Some took heart from a middling performance by eurosceptics The League.

“I expect relatively little impact considering that the League, the party with the least pro-European stance, seems to have come out weak,” said Giuseppe Sersale, fund manager and strategist at Anthilia in Milan.

Oil and gold steadied after drops against the rising dollar last week. Gold hit a more-than two-year low on Friday and bought $1,643 an ounce on Monday. Brent crude futures sat at $86.29.

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Additional reporting by Danilo Masoni in Milan; Editing by Sam Holmes

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Business

Stocks tense, dollar bullish for central bank binge

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Passersby wearing protective face masks walk past a stock quotation board in Tokyo, Japan February 24, 2022. REUTERS/Issei Kato

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  • S&P 500 futures slip, Nikkei futures down
  • Fed leads pack of central bank meetings
  • Market leaning toward 75 bp from Fed, PBOC eases
  • Dollar firm near multi-year highs

SYDNEY, Sept 19 (Reuters) – Shares slipped in Asia on Monday and the dollar firmed as investors braced for a packed week of central bank meetings that are certain to see borrowing costs rise across the globe, with some risk of a super-sized hike in the United States.

Markets are already fully priced for a rise in interest rates of 75 basis points from the Federal Reserve, with futures showing a 20% chance of a full percentage point.

They also show a real chance rates could hit 4.5% as the Fed is forced to tip the economy into recession to subdue inflation. read more

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“How high will the funds rate ultimately need to go?” said Jan Hatzius, chief economist Goldman Sachs.

“Our answer is high enough to generate a tightening in financial conditions that imposes a drag on activity sufficient to maintain a solidly below-potential growth trajectory.”

He expects the Fed to hike by 75 basis points on Wednesday, followed by two half-point moves in November and December.

Also important will be Fed members’ “dot plot” forecasts for rates, which are likely to be hawkish, putting the funds rate at 4%-4.25% by the end of this year, and even higher next year.

That risk saw two-year Treasury yields surge 30 basis points last week alone to reach the highest since 2007 at 3.92%, so making stocks look more expensive in comparison and dragging the S&P 500 down almost 5% for the week.

On Monday, holidays in Japan and the UK made for a slow start and S&P 500 futures dipped 0.2%, while Nasdaq futures fell 0.5%.

EUROSTOXX 50 futures added 0.2%, while FTSE futures were closed.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 0.5%, after losing almost 3% last week.

Japan’s Nikkei (.N225) was shut, but futures implied an index of 27,360 compared to Friday’s close of 27,567.

China’s central bank went its own way and cut a repo rate by 10 basis points to support its ailing economy, leaving blue chips (.CSI300) up 0.1%.

A RUSH TO TIGHTEN

Bank of America’s latest fund manager survey suggests allocations to global stocks are at an all-time low.

“But with both U.S. yields and the unemployment rate headed to 4-5%, poor sentiment isn’t enough to keep the S&P from making new lows for the year,” warned BofA analysts in a note.

“Our suite of 38 proprietary growth indicators depict a grim outlook for global growth, yet we are staring at one of the most aggressive tightening episodes in history, with 85% of the global central banks in tightening mode.”

Most of the banks meeting this week – from Switzerland to South Africa – are expected to hike, with markets split on whether the Bank of England will go by 50 or 75 basis points. read more

“The latest retail sales data in the UK supports our view that the economy is already in recession,” said Jonathan Petersen, a senior market economist at Capital Economics.

“So, despite sterling hitting a fresh multi-decade low against the dollar this week, the relative strength of the U.S. economy suggests to us the pound will remain under pressure.”

Sterling was stuck at $1.1396 having hit a 37-year trough of $1.1351 last week,

One exception is the Bank of Japan, which has so far shown no sign of abandoning its uber-easy yield curve policy despite the drastic slide in the yen. read more

The dollar edged up to 143.25 yen on Monday , having backed away from the recent 24-year peak of 144.99 in the face of increasingly strident intervention warnings from Japanese policymakers.

The euro was holding at $0.9991 , having edged just a little away from its recent low of $0.9865 thanks to increasingly hawkish comments from the European Central Bank.

Against a basket of currencies, the dollar was up 0.3% at 109.88, not far from a two-decade high of 110.79 touched earlier this month.

The ascent of the dollar and yields has been a drag for gold, which was hovering at $1,668 an ounce after hitting lows not seen since April 2020 last week.

Oil prices were trying to bounce on Monday, having shed around 20% so far this quarter amid concerns about demand as global growth slows.

Brent firmed 50 cents to $91.85 a barrel, while U.S. crude rose 33 cents to $85.44 per barrel.

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Reporting by Wayne Cole; Editing by Sam Holmes and Christian Schmollinger

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Business

European stocks extend losses as slowdown warnings weigh

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LONDON, Sept 16 (Reuters) – European stocks dipped on Friday and Europe’s benchmark German 10-year bond yield hit its highest since mid-June as investors braced for a U.S. rate hike while warnings from the World Bank and the International Monetary Fund fanned fears of a slowdown.

The World Bank’s chief economist said on Thursday he was worried about a period of low growth and high inflation in the global economy. The International Monetary Fund said downside risks continue to dominate the global economic outlook but it is too early to say if there will be a widespread global recession. read more

Wall Street sold off on Thursday after U.S. economic data gave the Federal Reserve little reason to ease its aggressive rate-hike stance. read more

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The downbeat tone continued during Asian trading, with data showing that China’s property sector had contracted further last month. read more

As of 0815 GMT, the MSCI world equity index, which tracks shares in 47 countries, was down 0.5% on the day and set for its fourth consecutive day of losses. (.MIWD00000PUS)

Europe’s STOXX 600 was down 1.2% (.STOXX) and London’s FTSE 100 (.FTSE) edged 0.1% lower. Germany’s DAX was down 1.8% (.GDAXI). read more

Markets priced in a 75% chance of a 75-basis-point rate hike and a 25% chance of 100 bps when the Fed meets next Wednesday.

In the UK, retail sales fell more than expected, in another sign that the economy is sliding into recession as the cost-of-living crisis squeezes households’ disposable spending. read more

“We’re now seeing data confirm that the economy is indeed slowing down,” said Axel Rudolph, market analyst at IG Group.

“I expect stocks to head back down to below their March lows. If you are in an environment where you have central banks that aggressively raise rates, historically this has always led to bear markets.”

The pound weakened to a 37-year low against the U.S. dollar . read more

The U.S. dollar index was up 0.3% at 110.13 , still hovering near a 20-year high, and steady against the yen at 143.365 .

The yen could hurtle towards three-decade lows before the year-end, according to market analysts and fund managers. read more

The dollar’s strength pushed China’s offshore yuan past the 7-per-dollar level for the first time in nearly two years. read more

The euro was a touch lower at $0.9961 . Germany’s two-year bond yields hit a fresh 11-year high after the European Central Bank vice president said an economic slowdown in the euro zone would not be enough to control inflation and the bank will have to keep raising interest rates. read more

Germany’s benchmark 10-year bond was up 3 basis points on the day at 1.765% – having touched its highest since mid-June in early trading .

Oil prices edged higher, but were on track for a weekly drop amid fears of a reduction in demand. read more

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Reporting by Elizabeth Howcroft; Editing by Sherry Jacob-Phillips

Our Standards: The Thomson Reuters Trust Principles.

Elizabeth Howcroft

Thomson Reuters

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and the money driving “Web3”.

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Business

U.S. stocks slip while yields rise, Fed in focus

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  • Fed looms over broader markets, dollar rises
  • Oil tumbles on demand concerns, U.S. rail strike averted
  • Treasury yields climb while oil gold tumbles

NEW YORK, Sept 15 (Reuters) – Wall Street indexes were firmly in the red after a choppy start to Thursday’s session while bond yields rose as investors digested economic data that provided the Federal Reserve little reason to ease its aggressive interest rate hiking cycle.

Oil futures tumbled more than 3% on demand concerns and after a tentative agreement that would avert a U.S. rail strike, as well as continued U.S. dollar strength with expectations for a large U.S. rate increase. read more

Economic data showed U.S. retail sales unexpectedly rebounded in August as Americans ramped up purchases of motor vehicles and dined out more while taking advantage of lower gasoline prices. But data for July was revised downward to show retail sales declining instead of flat as previously reported.

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Separately the Labor Department said initial claims for state unemployment benefits fell for the week ended Sept. 10 to the lowest level since the end of May. read more

Investors are widely expecting an aggressive rate hike after the Federal Open Market Committee (FOMC) meeting next week, but nervously awaiting hints from Fed Chair Jerome Powell about future policy moves, said Quincy Krosby, chief global strategist at LPL Financial.

“The market remains choppy knowing that there’s a Fed meeting next week. Even though participants agree that it’ll be a 75 basis points rate hike, it’s what the statement adds to previous commentary and what Chairman Powell says in his press conference” that have them worried, Krosby said.

The Dow Jones Industrial Average (.DJI) fell 173.07 points, or 0.56%, to 30,962.02; the S&P 500 (.SPX) lost 44.69 points, or 1.13%, to 3,901.32 and the Nasdaq Composite (.IXIC) dropped 167.32 points, or 1.43%, to 11,552.36.

MSCI’s gauge of stocks across the globe (.MIWD00000PUS) shed 0.96% while emerging market stocks (.MSCIEF) lost 0.57%.

Stocks, bonds and currencies on Thursday were showing a market “increasingly understanding the Fed is going to hike more aggressively next week,” said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.

Referring particularly to the still strong labor market, Ladner said “economic numbers released today are tying a bow on the situation.”

Treasury yields rose with the two-year hitting fresh 15-year highs, after data on retail sales and jobless claims showed a resilient economy that gives the Fed ample room to aggressively hike interest rates.

Also already signaling a recession warning the inverted yield curve – the gap between 2-year and 10-year treasury yields – widened further to -41.4 basis points, compared with -13.0 bps a week ago.

Benchmark 10-year notes were up 4.5 basis points to 3.457%, from 3.412% late on Wednesday. The 30-year bond last fell 5/32 in price to yield 3.4779%, from 3.469%. The 2-year note last fell 5/32 in price to yield 3.8646%, from 3.782%.

“In this vicious cycle where the data continues to remain resilient, that would imply a Fed that would likely stay the course and continue to tighten policy,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.

Also clouding investors’ moods on Thursday was the World Bank’s assessment that the world may be edging toward a global recession as central banks across the world simultaneously hike interest rates to combat persistent inflation. read more

In currencies the dollar was slightly higher against the yen while the Swiss franc hit its strongest level against the euro since 2015. read more

The dollar index , which measures the greenback against a basket of major currencies, rose 0.091%, with the euro up 0.18% to $0.9995.

The Japanese yen weakened 0.19% versus the greenback at 143.44 per dollar, while Sterling was last trading at $1.1469, down 0.57% on the day.

Before the tentative labor agreement, fears of a U.S. railroad worker strike had supported oil prices due to supply concerns on Wednesday. In addition, the International Energy Agency (IEA) said this week that oil demand growth would grind to a halt in the fourth quarter.

U.S. crude settled down 3.82% at $85.10 per barrel while Brent finished at $90.84, down 3.46% on the day.

Gold dropped to its lowest level since April 2021, hurt by elevated U.S. Treasury yields and a firm dollar, as bets of another hefty Fed rate hike eroded bullion’s appeal.

Spot gold dropped 1.9% to $1,664.46 an ounce. U.S. gold futures fell 2.02% to $1,662.30 an ounce.

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Additional reporting by Herbert Lash in New York, Marc Jones in London, Stefano Rebaudo in Milan, Tom Westbrook in Singapore and Wayne Cole in Sydney; Editing by Kirsten Donovan and Jonathan Oatis

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Business

Asian shares extend global rout, yen perks up on intervention hints

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An electronic stock quotation board is displayed inside a conference hall in Tokyo, Japan November 1, 2021. REUTERS/Issei Kato

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  • Nikkei tumbles 2.3%, S&P 500 futures stabilise
  • Dollar falls 0.6% on yen on news of rate check from BoJ
  • 2-yr U.S. yields scale new 15-yr high of 3.8040%
  • U.S. yield curve remains deeply inverted

SYDNEY, Sept 14 (Reuters) – Asian stocks tumbled on Wednesday as U.S. data dashed hopes for an immediate peak in inflation, although the dollar paused its relentless run against the yen as Japan gave its strongest signal yet it was unhappy with the currency’s sharp declines.

Data on Tuesday showed the headline U.S. consumer price index gained 0.1% on a monthly basis versus expectations for a 0.1% decline. In particular, core inflation, stripping out volatile food and energy prices, doubled to 0.6%. read more

Wall Street saw its steepest fall in two years, the safe-haven dollar posted its biggest jump since early 2020, and two-year Treasury yields, which rise with traders’ expectations of higher Fed fund rates, jumped to the highest level in 15 years.

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The stock rout is set to hit European markets, with the pan-region Euro Stoxx 50 futures , German DAX futures and FTSE futures off more than 0.7%.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 2.2% on Wednesday, dragged lower by a 2.4% plunge in resources-heavy Australia (.AXJO), a 2.5% drop in Hong Kong’s Hang Seng index (.HSI) and a 1.5% fall in Chinese bluechips (.CSI300).

Japan’s Nikkei (.N225) tumbled 2.6%.

After a heavy equity selloff overnight, both the S&P 500 futures and Nasdaq futures rose 0.2%.

“Markets have reacted violently to what I would consider to be a modest miss in U.S. CPI,” said Scott Rundell, chief investment officer at Mutual Limited.

“Futures have stabilised, so we might see a dead-cat bounce tonight.”

Financial markets now have fully priced in an interest rate hike of at least 75 basis points at the conclusion of the Fed’s policy meeting next week, with a 38% probability of a super-sized, full-percentage-point increase to the Fed funds target rate, according to CME’s FedWatch tool.

A day earlier, the probability of a 100 bps hike was zero.

“USD rates are now pricing in a Fed funds rate of 4.25% by end-2022 (75bps, 75bps, 25bps for the remaining three meetings). Decent odds of a 4.5% peak early 2023 is also reflected,” said Eugene Leow, senior rates strategist at Deutsche Bank.

“While resilient growth and slowing inflation can make for a better risk taking environment, the U.S. economy now looks too hot still. With no clear signs of the labour market slowing and inflation still problematic, a downshift from the Fed looks set to be delayed again.”

The strength of the U.S. dollar had pressured the rate sensitive Japanese yen close to its 24-year low at 149.96 yen before giving up some of the gains on news that the Bank of Japan has conducted a rate check in apparent preparation for currency intervention. read more

Yen-buying intervention is rare. The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis triggered a yen sell-off and rapid capital outflows.

Earlier in the day, Japanese Finance Minister Shunichi Suzuki said that currency intervention was among options the government would consider. read more

The dollar now hovered at 143.7 yen , down 0.6% for the day.

Many traders remained doubtful that intervention was imminent, but the jump in the yen pointed to rising nerves. The timing of the BOJ’s move also suggests that 145 per dollar will be an important level for markets and the authorities.

The two-year U.S. Treasury yield scaled a new 15-year high of 3.8040% on Friday before retreating to 3.7629%, and its curve gap with the benchmark 10-year yields widened to around 34 basis points, compared with just 16 basis points a week ago.

The yield curve inversion is usually treated as a warning of recession.

The 10-year Treasury note yield held steady at 3.4178%.

Oil prices edged lower on Friday. U.S. crude settled down 0.6% at $86.82 per barrel and Brent eased by a similar margin at $92.65.

Gold was slightly higher. Spot gold was traded at $1703.02 per ounce.

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Reporting by Stella Qiu; Editing by Stephen Coates, Ana Nicolaci da Costa and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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Business

European shares, euro jump on Ukrainian advances in northeast

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LONDON, Sept 12 (Reuters) – European shares jumped on Monday after Ukrainian forces made a rapid advance in Kharkiv province in Russia’s worst setback since its Kyiv push was abandoned in March, while the euro extended on last week’s European Central Bank inspired gains.

On Saturday, Moscow abandoned its main bastion in northeastern Ukraine, in a sudden collapse of one of the war’s principal front lines after Ukrainian forces made a rapid advance. read more

The broad pan-European STOXX 600 (.STOXX) index was up 0.7% in early trade, hitting its highest since the end of August.

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Germany’s DAX (.GDAXI) rose 1.4%, France’s CAC 40 (.FCHI) and Britain’s FTSE 100 (.FTSE) both jumped 1%.

Asian shares also rallied in slow trading with China and South Korea out for a holiday.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.7%, having bounced modestly from a two-year low hit last week. Japan’s Nikkei (.N225) added another 1.2%, after rallying 2% last week.

“The Russia-Ukraine situation is creating some glimmers of hope for the market that there might be a resolution and provide some relief on the intensity of the energy shock,” said Hani Redha, a multi-asset portfolio manager at PineBridge Investments.

“For now, the balance of information we have is being interpreted as bullish by the market,” added Redha.

The news of Ukrainian advances also helped lift the euro, which extended last week’s post European Central Bank (ECB) gains to rise to its highest against the dollar in almost four weeks.

The single currency was also helped in part by a Reuters report that European Central Bank policymakers see a growing risk that they will have to raise their key interest rate to 2% or more to curb record-high inflation despite a likely recession. read more

The euro was last up 1.5% to $1.0194, touching its highest against a softening dollar since Aug. 17.

Meanwhile, peripheral euro zone government bonds underperformed their peers, hurt by reports that the ECB may next month kick off a debate about reducing the size of their balance sheet.

Italy’s 10-year government bond yield rose as much as 6.5 basis points to 4.098%, its highest since mid-June.

Germany’s 10-year yield was up 4 basis points, pushing the closely watched spread between Italian and German 10-year yields to as wide as 237 basis points. ,

“There is an urgency to front load rate hikes and take rates to neutral as soon as possible,” said Mohit Kumar, interest rate strategist at Jefferies, in a note.

“Once we reach levels close to neutral, we do expect the doves to take back control at the ECB and hence see the recent shift as a front loading exercise rather than a fundamental shift in ECB policy,” Kumar added.

The dollar index , which measures the greenback against a basket of six currencies, was down 0.7% to 107.98, its lowest since Aug. 26.

Still, the index is up over 12% this year, having gained over 10% against the euro, 13% against the pound and 24% against the Japanese yen.

U.S. inflation data released on Tuesday will be key for determining the direction of travel in the near term.

Falling petrol prices are seen pulling down the headline consumer price index by 0.1%, according to a Reuters poll.

The core is forecast to rise 0.3%, though some analysts see a chance of a softer report.

“Commodities, in general, have been coming off and that’s likely to be the main driver of softer numbers,” PineBridge’s Redha said.

A soft number might revive speculation the Federal Reserve will only hike by 50 basis points this month, though it would likely have to be very weak to have a real impact given how stridently hawkish policymakers have been recently. read more

Oil prices have been trending lower amid concerns about a global economic slowdown, though cuts to supply did prompt a 4% bounce on Friday.

On Monday, Brent was steady at $92.82 a barrel, while U.S. crude slipped 0.2% to $86.60.

The weaker dollar helped lift gold to $1,724 an ounce, away from last week’s low of $1,690.

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Reporting by Samuel Indyk in London, additional reporting by Wayne Cole in Sydney

Our Standards: The Thomson Reuters Trust Principles.

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Business

Oil prices drop; stocks gain as Treasury yields ease

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  • U.S. stocks higher in early trading
  • Oil prices sink
  • Benchmark Treasury yields ease

NEW YORK, Sept 7 (Reuters) – Oil prices fell sharply on Wednesday amid demand worries, while Wall Street stocks edged higher after recent losses.

Brent crude futures touched their lowest since early February. Earlier, data showed China’s export growth slowed in August. read more

Benchmark U.S. Treasury yields slipped after earlier hitting three-month highs, with the 10-year note yield last at 3.29%, while all three major U.S. stock indexes rose in early trading.

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Concerns that inflation will remain persistently high and keep driving interest rates higher had lifted yields in recent weeks.

The European Central Bank is widely expected to raise interest rates sharply when it meets this week, while the U.S. central bank is expected to raise rates by another 75 basis points at its Sept. 20 to 21 meeting. read more

Fed Chair Jerome Powell is expected to speak on Thursday.

“We’ve seen a global repricing and it’s generally been supported by an acceleration of expected tightening due to inflation concerns,” said Jonathan Cohn, head of rates trading strategy at Credit Suisse in New York.

U.S. crude recently fell 3.51% to $83.83 per barrel and Brent was at $89.89, down 3.17% on the day.

The Dow Jones Industrial Average (.DJI) rose 179.79 points, or 0.58%, to 31,325.09, the S&P 500 (.SPX) gained 23.12 points, or 0.59%, to 3,931.31 and the Nasdaq Composite (.IXIC) added 63.63 points, or 0.55%, to 11,608.54.

The pan-European STOXX 600 index (.STOXX) lost 0.60% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 0.07%.

The U.S. dollar index was weaker. The dollar currency earlier touched a fresh 24-year peak against the Japanese yen.

The dollar index fell 0.118%. The Japanese yen weakened 1.17% versus the greenback at 144.50 per dollar.

The euro was up 0.42% to $0.9944.

The European Union proposed a price cap on Russian gas on Wednesday hours after President Vladimir Putin threatened to halt all supplies if they took such a step, raising the risk of rationing in some of the world’s richest countries this winter. read more

Liz Truss, who took over as Britain’s prime minister on Tuesday, vowed immediate action to help the economy, which faces double-digit inflation and an expected lengthy recession. read more

Sterling was last trading at $1.1466, down 0.43% on the day.

(This story was refiled to change headline tag to GLOBAL MARKETS from GLOBAL STOCKS)

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Additional reporting by Karen Brettell in New York and Elizabeth Howcroft in London, Editing by Angus MacSwan, William Maclean and Josie Kao

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Business

Stocks struggle as China rate cut sends oil tumbling

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FILE PHOTO – 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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  • https://tmsnrt.rs/2zpUAr4
  • Nikkei edges up, S&P 500 futures dip
  • PBOC cuts key rates, China data badly miss forecasts
  • Eyes on Fed minutes, earnings

LONDON, Aug 15 (Reuters) – Global shares struggled to advance on Monday while investors digested news of an unexpected cut in Chinese interest rates as data pointed to faltering growth in the world’s second largest economy, sending oil prices nearly 2% lower.

Weaker U.S. stock index futures also weighed on sentiment, while a steadier dollar knocked gold.

The MSCI all country index (.MIWD00000PUS) was barely firmer, a month-long advance having whittled away the benchmark’s decline for the year to about 13%.

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China’s central bank cut key lending rates to revive demand as data showed the economy unexpectedly slowing in July, with factory and retail activity squeezed by Beijing’s zero-COVID policy and a property crisis. read more

Until now, investors have been grappling with how much further central banks in the United States and Europe would hike rates when they meet next month.

Hopes of smaller rate hikes on signs that U.S. inflation may be peaking helped Wall Street clock up its fourth straight week of gains by Friday.

The gains on Wall Street and steady growth figures for Japan helped the Nikkei (.N225) share average in Tokyo jump to its highest in more than seven months.

“China, I think, is a different situation than the rest of the world. They’ve got a self imposed recession that they’ve created from the zero COVID policy,” said Patrick Armstrong, chief investment officer at investment house Plurimi Group.

“I do think it’s going to be Fed driven if there is another leg down in markets. Quantitative tightening, I think, will begin in earnest in September and that’s going to withdraw liquidity from the market,” Armstrong said.

Markets are still implying around a 50% chance the Fed will hike by 75 basis points in September and that rates will rise to around 3.50-3.75% by the end of the year.

The Fed will publish minutes on Wednesday from its last rate-setting meeting, but investor hopes of them showing the central bank beginning to pivot on rate hikes could be dashed.

“I don’t think (Fed Chair) Powell is going to say that, I don’t think the minutes are going to indicate that,” Armstrong said.

In Europe, the STOXX share index of 600 leading companies was up 0.13% at 441.43 points, still down around 10% for the year.

Fed Rate Futures and Stocks

U.S. FUTURES EASE

S&P 500 futures and Nasdaq futures were both down around 0.5% after last week’s gains.

Earnings from major retailers, including Walmart (WMT.N) and Target (TGT.N), will be scrutinised for signs of flagging consumer demand.

The cut in Chinese interest rates failed to stop Chinese blue chips (.CSI300) easing 0.13%, while the yuan and bond yields also slipped. read more

Geopolitical risks remain high with a delegation of U.S. lawmakers in Taiwan for a two-day trip. read more

The bond market still seems to doubt the Fed can manufacture a soft landing, with the yield curve remaining deeply inverted. Two-year yields at 3.27% are well above those for 10-year notes which were trading at 2.86%.

Those yields have underpinned the U.S. dollar, though it did slip 0.8% against a basket of currencies last week as risk sentiment improved.

But on Monday the dollar regained some poise, with the euro down 0.2% against the greenback at $1.02345 after bouncing 0.8% last week. Against the yen, the dollar steadied at 133.51 after losing 1% last week.

“Our sense remains that the dollar rally will resume before too long,” argued Jonas Goltermann, a senior economist at Capital Economics.

Gold was down 0.8% at $1,786, losing nearly all of its 1% gains last week.

Oil prices eased as China’s disappointing data added to worries about global demand for fuel.

The head of the world’s top exporter, Saudi Aramco, said it was ready to ramp up output while production at several offshore U.S. Gulf of Mexico platforms is resuming after a brief outage last week.

Brent slipped 1.8% to $96.35, while U.S. crude fell 1.9% to $90.34 per barrel.

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Reporting by Wayne Cole; Editing by Sam Holmes, Raju Gopalakrishnan and Ed Osmond

Our Standards: The Thomson Reuters Trust Principles.

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Business

Wall Street muted on mixed inflation messages

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  • U.S. stocks flat following Friday sell-off
  • Treasury yields tick down
  • Oil up nearly 2%, off multi-month lows

Aug 8 (Reuters) – Wall Street stocks were mostly flat on Monday, the dollar weakened and U.S. government bond yields fell as investors weighed mixed messages on inflation and how aggressive the Federal Reserve might be in combating it.

The Dow Jones Industrial Average (.DJI) rose just 0.09% on the day, while the S&P 500 (.SPX) lost 0.12% and the Nasdaq Composite (.IXIC) dropped 0.1% read more

Of note was Nvidia Corp (NVDA.O), whose stock declined around 6% after the chip designer warned on Monday that its second-quarter revenue would drop by 19% from the prior quarter on weakness in its gaming business. read more

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The broad Euro STOXX 600 (.STOXX) finished up around 0.75% on Monday, led by cyclical and growth stocks, helping it recover losses from Friday. But the MSCI world equity index (.MIWD00000PUS), which tracks shares in 47 countries, added just 0.15%. read more

“With labor market strength, the threat of a recession seems remote, but concerns over how aggressive the Federal Reserve could be hovers over the market,” Quincy Krosby, chief global strategist for LPL Financial, said in an email.

Indeed, higher interest rates remained in focus for investors.

Unexpectedly strong U.S. jobs data last week raised the stakes for the July U.S. consumer prices report due on Wednesday, which could see a further acceleration in inflation — and more aggressive Federal Reserve interest rate hikes.

Business investment appeared to be an early victim of rising prices and rates, according to new U.S. government data. read more

At the same time, U.S. consumers’ expectations for where inflation will be in a year and three years dropped sharply in July, a New York Federal Reserve survey showed on Monday, a win for policy makers. read more

On Monday, benchmark 10-year note yields fell to 2.751%, after getting as high as 2.869% on Friday, the highest since July 22. Two-year yields were last at 3.211%, after reaching 3.331% on Friday, the highest since June 16.

‘OTHER SIDE OF THAT MOUNTAIN’

“The rise in inflation and the Fed’s reaction to it has been a real headwind for valuations this year,” Morgan Stanley strategists wrote in a note on Monday. “However, it’s also been a tailwind for earnings. Now, we are on the other side of that mountain, and operating leverage is rolling over likely more than the consensus expects.”

Fed funds futures traders are now pricing for a 67.5% chance of another 75 basis point rate increase in September, and for the Fed funds rate to rise to 3.65% by March, from 2.33% now.

“We see inflation staying above the Fed’s 2% target through next year,” BlackRock Investment Institute strategists wrote in a note on Monday. “We think the Fed will keep responding to calls to tame inflation until it acknowledges how that would stall growth.”

In foreign exchange markets, the U.S. dollar dipped around 0.2% versus a basket of six major currencies to 106.4 , giving up some gains after strengthening on the jobs boom and the jump in yields. read more

Economic surprises

Analysts remained bullish on the U.S. currency’s prospects.

“Data like this will further any thoughts about ‘U.S. exceptionalism’ and is very positive for the USD against all currencies,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, referring to the U.S. jobs statistics.

The euro declined slightly to $1.019 .

Bitcoin and other cryptocurrencies, which tend to act as a barometer for risk appetite, gained. Bitcoin was last up 3.25% at $23,942.

Italy spread

Gold broke higher on Monday as the dollar and Treasury yields retreated. Spot gold rose 0.8% to $1,788 per ounce, after dropping 1% in the previous session. U.S. gold futures were 0.76% higher at $1,786.

Oil prices rebounded some on Monday but were still near their lowest levels in months in volatile trading as positive economic data from China and the United States spurred hopes for demand growth despite recession fears. read more

U.S. crude recently rose 1.79% to $90.59 per barrel and Brent was at $96.40, up 1.59% on the day.

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Reporting by Lawrence Delevingne in Boston, Tom Wilson in London and Wayne Cole in Sydney; Editing by Jane Merriman, Peter Graff and Lisa Shumaker

Our Standards: The Thomson Reuters Trust Principles.

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