China rolls out USD 112-billion funding schemes to bolster stock market

BEIJING/SHANGHAI – China’s central bank kicked off two funding schemes on Friday that will initially pump as much as 800 billion yuan (USD 112.38 billion) into the stock market through newly-created monetary policy tools.

The People’s Bank of China (PBOC) spelt out operational details of the swap and relending schemes first announced in late September, aiming to support “steady development” of capital markets.

China’s recent market bull run has been losing steam as euphoria turned into caution over the size and implementation of Beijing’s stimulus promises. Following the PBOC announcement, the benchmark Shanghai Composite Index reversed early losses to end the session sharply up 4%.

“The shoes finally dropped,” said veteran investor Wen Hao, who had been anxiously waiting for implementation of the schemes.

Wen said he expects many companies will tap the new facilities to buy shares, adding fuel to a bull market “which has just started.”

The announcement came after China’s financial regulators held a meeting with key financial institutions, urging them to swiftly implement expansive policies to support the economy and capital markets.

Under the swap scheme, initially worth 500 billion yuan, brokerages, asset managers and insurers can obtain liquidity from the central bank through asset collateralisation to buy stocks.

Currently, 20 companies have been approved to participate in the scheme and initial applications have exceeded 200 billion yuan, the PBOC said. Participants include China International Capital Corp (CICC), Citic Securities, China Asset Management Co and E Fund Management Co, China’s securities regulator said.

“The swap scheme will become a market stabilizer” as demand for the tool rises when stocks are over-sold, but the appetite naturally fizzles when the market recovers, Xinhua Financial said in an article on Friday.

In addition, institutions can use the tool to access liquidity in a stock market rout without having to sell shares in a downward spiral.

Under the facility, assets including bonds, stock ETFs, and holdings in constituents of the CSI300 Index can be exchanged for highly liquid assets such as treasury bonds and central bank bills, giving participants easier access to funding.

“If implemented effectively, these new policy efforts could bring incremental funds into the market and enhance shareholder returns, thereby driving valuation rerating,” BNP Paribas said in a note to clients.

RELENDING SCHEME

The central bank also launched a relending program, initially worth 300 billion yuan, that would allow financial institutions to borrow from the PBOC to fund share purchases by listed companies or their major shareholders.

The one-year interest rate for relending is set at 1.75%, and 21 eligible financial institutions, including policy and commercial banks, can apply for the loans at the start of each quarter, the PBOC said.

Listed companies and their major shareholders can then borrow from the banks at interest rates of up to 2.25% for share buybacks and purchases. It is an exception to rules that prohibit bank lending from flowing into the stock market.

Last week, Beijing Balance Medical Technology Co 688198.SS said its controlling shareholder plans to tap the facility to buy the company’s shares.

“I expect to see a growing number of companies to announce share buybacks or purchases using the cheap loans,” investor Wen said.

(Reporting by Ella Cao and Ryan Woo; Editing by Jamie Freed, Jacqueline Wong, and Shri Navaratnam)

Global uncertainties drive gold above unprecedented USD 2,700/oz milestone

Gold surged above the historic threshold of USD 2,700-per-ounce on Friday, powered by escalating tensions in the Middle East, uncertainties around the US elections and relaxed monetary policy expectations that pushed the metal into uncharted territory.

Spot gold was up 1% at USD 2,720.05 per ounce by 02:58 p.m. ET (1858 GMT) and has risen 2.4% so far this week.

US gold futures settled 0.8% higher to USD 2,730.

“With the conflict intensifying – particularly following Hezbollah’s announcement to escalate the war with Israel – investors are flocking to gold, a traditional safe-haven asset,” said Alexander Zumpfe, a precious metals trader at Heraeus Metals Germany.

Pledges from Israel and its enemies Hamas and Hezbollah to keep fighting in Gaza and Lebanon dashed hopes that the death of a Palestinian militant leader might hasten an end to the escalating war in the Middle East.

Rising geopolitical tensions prompt investors to seek safe-haven assets like gold, driven by risk aversion and concerns over global market instability.

“Adding to the momentum, concerns around the US presidential election and anticipation of looser monetary policies have further fueled the rally,” Zumpfe added.

Gold shattered records multiple times this year as expectations of more rate cuts by central banks and geopolitical uncertainties boosted prices by more than 30% so far this year, its best annual growth since 1979, as per LSEG data.

Lower rates enhance the appeal of bullion, which yields no interest on its own.

Sources told Reuters the ECB was likely to cut again in December unless economic data suggests otherwise. Traders are also pricing in a 92% chance of a Federal Reserve rate cut in November, according to the CME Fedwatch tool.

Max Layton, global head of commodities research at Citi, sees gold prices reaching USD 3,000/oz over the next 6-12 months, as a store of wealth in a time of high US and European economic uncertainty, driving up ETF and investment demand.

Silver is expected to perform strongly to USD 35/oz over the next three months, Layton added.

Spot silver rose 6% to USD 33.58. Platinum added 2.4% to USD 1,016.25 and palladium gained about 4% to USD 1,083.25.

(Reporting by Anushree Mukherjee, Swati Verma, and Anjana Anil in Bengaluru; Editing by Shailesh Kuber and Shreya Biswas)

US yields drop as market consolidates after rally

NEW YORK – US Treasury yields fell on Friday as the market consolidated following large yield increases over the past month as investors price in a less dovish Federal Reserve due to the US economy remaining stronger than previously expected.

Traders priced out the odds of an additional 50 basis point interest rate cut by the US central bank after data showed much stronger job gains than expected in September. Fed Chair Jerome Powell has also pushed back against the likelihood of further large cuts.

The Fed is expected to make steady 25 basis point reductions at its coming meetings. But traders are also focused on the outcome from the Nov. 5 US presidential election, geopolitical tensions in the Middle East and the strength of riskier asset markets.

“The market is decidedly in the mode of consolidation; there’s not any obvious potential triggers on the horizon,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.

However, it is “poised to respond to external influences. Those could come in the form of moves in the equity market, moves in credit, geopolitical concerns or even the progress towards the presidential election,” Lyngen said.

Benchmark 10-year yields were last down 2.1 basis points at 4.075%. They reached 4.12% on Oct. 10, which was the highest since July 31 and are up from 3.599% on Sept. 17, the lowest since June 2023.

The 10-year yields are holding just below the 200-day moving average at 4.17%.

Interest rate-sensitive two-year yields fell 3.2 basis points to 3.955%.

The yield curve between two-year and 10-year notes steepened 1 basis point to 11.8 basis points.

Atlanta Fed President Raphael Bostic
said Friday he will be patient on cutting rates to make sure inflation does not stall out above the US central bank’s 2% target.

Traders are now pricing in 44 basis points of cuts by year-end, implying they see a less-than-certain chance that the Fed will make a 25 basis point reduction at each of its next two meetings.

Data on Friday showed that US single-family homebuilding surged in September, though excess supply of new homes and prospective buyers holding out for lower mortgage rates pose a near-term challenge.

(Reporting by Karen Brettell; Editing by Jonathan Oatis)

Wall Street zeroes in on semiconductors after turbulent week

NEW YORK – US semiconductor companies will get a closer look from investors in the coming weeks, after diverging reports from two industry leaders abroad set off a volatile few days of trading.

Because semiconductors are key components in a broad array of products, chipmakers, and related equipment companies are closely followed for insight into the economy. Wall Street also watches the stocks as indicators of overall market trends.

This year, the industry has been at the center of the artificial intelligence enthusiasm powering the stock market to record highs, highlighted by massive gains for Nvidia, the AI poster child.

“It’s vitally important that these chip stocks hold up,” said Matt Maley, chief market strategist at Miller Tabak. “If they go down, it weighs on the rest of the market.”

The Philadelphia SE Semiconductor index has pulled back after climbing more than 40% in the first half of the year. It is now up about 25% in 2024 against a 22.5% gain for the benchmark S&P 500.

Semiconductor and related equipment stocks account for 11.5% of the weight of the S&P 500. Nvidia, which is approaching Apple as the largest company by market value, holds a 6.8% weight in the index.

The sector had its share of drama in the past week. Chip shares tumbled on Tuesday after equipment maker ASML, Europe’s biggest tech firm, projected lower-than-expected 2025 sales and bookings. But the group rebounded on Thursday after Taiwan Semiconductor Manufacturing Co., which produces advanced chips used in AI applications, reported a forecast-beating 54% jump in quarterly profit.

Following the dueling announcements, the SOX semiconductor index is down 2.5% so far this week, with the S&P 500 up 0.5%.

The semiconductor group could take its next cues from imminent corporate reports, including from Texas Instruments and equipment company Lam Research next week.

Texas Instruments’ products are used in a broad range of applications, including automotive and industrial, and could be a barometer for whether such areas that have been sluggish for the chip industry are starting to rebound, said Daniel Morgan, portfolio manager at Synovus Trust.

Overall, Morgan said, the semiconductor group is trading at 5.6 times price-to-book valuation, which he said was fair, noting that group topped 8 times price-to-book levels in 2021.

Advanced Micro Devices’ earnings report the following week will give some initial insight into AI-related demand ahead of Nvidia’s highly anticipated report due late next month.

If AMD’s 2025 forecast for its AI chips is strong, “that’s going to be bullish for the sector,” Maley said.

The semiconductor reports are due in a busy week for US corporate earnings overall, with well over 100 S&P 500 companies set to report, including Tesla, Coca-Cola, and IBM.

“The (semiconductor) group is very important, if nothing else because of the market cap that it carries,” said Chuck Carlson, chief executive officer at Horizon Investment Services.

(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Richard Chang)

Dollar rides ‘Trump trade’ toward third weekly rise

SINGAPORE – The dollar headed for a third weekly gain in a row on Friday, helped by a dovish European Central Bank and strong US data that is pushing out expectations for how fast US rates can fall, particularly if Donald Trump wins the presidency.

The euro is down almost 1% for the week so far, has fallen through its 200-day moving average, and at USD 1.0828 in early Asia trade is parked near a 2-1/2 month low.

On a rolling basis, the dollar’s 3.1% three-week gain on the euro is the sharpest rally since the middle of 2022, and it has forged to the strong side of 150 yen for the first time since early August. It last bought 150.24 yen.

On Thursday, data showed US retail sales growth was higher than expected and the ECB cut interest rates by 25 basis points.

Four sources close to the matter told Reuters the ECB was likely to cut again in December unless economic data suggests otherwise.

Meanwhile, markets have been disappointed at the lack of detail offered by Chinese authorities on plans to revive the slowing economy, and the yuan is headed for its largest weekly fall in more than 13 months.

“All of that has played in to a stronger dollar,” said Jason Wong, senior strategist at BNZ in Wellington.

“There’s also been a Trump trade going on in the background,” he said, with the dollar tracking Trump’s newfound lead in election prediction markets, since his tariff and tax policies are seen as likely to keep US interest rates high.

Trump’s prospects have also set bitcoin rallying since his administration is seen as taking a softer line on cryptocurrency regulation. It was last at USD 67,335, up 13% since Oct. 10. The US goes to the polls on Nov. 5.

Later on Friday, Chinese growth and activity data is due and is likely to show a slowdown that puts this year’s economic growth target of around 5% at risk.

The Australian dollar, sensitive to China’s outlook owing to commodity exports, steadied at USD 0.6697 on Friday for a fall of around 0.8% on the week.

It had received a boost on Thursday when stronger-than-expected jobs data reduced bets on interest rates cuts. The New Zealand dollar is also down 0.8% on the week and was a fraction lower at USD 0.6055 early in the Asia session.

Israel said it had killed Hamas leader Yahya Sinwar in Gaza, a mastermind of the Oct. 7, 2023, attack that triggered war.

Israel’s shekel rose and touched a two-week high after the news, though Israeli Prime Minister Benjamin Netanyahu said fighting would go on and broader markets had little immediate reaction.

Sterling regained the USD 1.30 level overnight but is also headed for a weekly loss after a bigger-than-expected drop in British inflation raised bets the Bank of England might cut interest rates twice before the end of the year.

British retail sales and US housing starts data are due later on Friday, as are plans from Japan’s largest union group, Rengo, for the year’s wage negotiations. Data showed Japan’s core consumer prices were up 2.4% year-on-year in September, a bit higher than expected.

The US dollar index hit a 2-1/2 month high on Thursday at 103.76 and is up 0.8% this week.

China’s yuan hovered at 7.1370 in offshore trade, ahead of the onshore open.

(Reporting by Tom Westbrook; Editing by Jamie Freed)

Gold hits record highs on US election uncertainty, more policy easing

Gold prices hit record highs on Thursday as uncertainty surrounding the US presidential elections and the war in the Middle East prompted investors to seek out the safe-haven asset, while easing monetary policy environment kept prices elevated.

Spot gold rose 0.7% to USD 2,690.60 per ounce by 1:42 p.m. ET (1742 GMT). US gold futures settled 0.6% higher at USD 2,707.5.

Gold has seen a surge of over 30% this year, surpassing record levels, driven by prospects of further Federal Reserve rate cuts after a half percentage point rate cut last month and ongoing geopolitical uncertainties.

“On top of the concerns in the Middle East, you are also nearing the US election, which is looking like a very closely contested election. And that generates a whole host of uncertainty, and gold often is the place to go in times of uncertainty,” Nitesh Shah, commodity strategist at WisdomTree, said.

Gold prices are expected to rise to USD 2,941 a troy ounce over the next 12 months, delegates to the London Bullion Market Association’s annual gathering predicted earlier this week.

“The LBMA poll that came out from Miami earlier in the week, where the base look for gold prices was to rally near USD 3,000 in the next year and silver doing even better, I think that potential is also just attracting a bit of attention,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Earlier in the US session, prices had backed off from record highs after data showed US retail sales increased slightly more than expected in September while a Labor Department report said unemployment unexpectedly fell last week.

“Those two reports fall into the camp of the monetary policy hawks,” Jim Wyckoff, senior market analyst at Kitco Metals, said.

Gold, which yields no interest on its own, tends to gain when interest rates are cut.

The European Central Bank also cut interest rates for the third time this year by a quarter-point.

Elsewhere, spot silver fell 0.3% to USD 31.56 per ounce. Platinum rose 0.1% to USD 994.00 and palladium gained 1.7% to USD 1,041.

(Reporting by Anushree Mukherjee, Swati Verma, and Rahul Paswan in Bengaluru; Editing by Shailesh Kuber)

US Treasury yields rise as Fed expectations ease on retail sales data

NEW YORK – US 10-year Treasury yields climbed on Thursday after economic data pointed to an economy on solid footing, easing market expectations for Federal Reserve aggressiveness in cutting interest rates.

The Commerce Department said retail sales rose 0.4% last month, above the 0.3% estimate of economists polled by Reuters, and after an unrevised 0.1% gain in August, in a sign consumer health remains resilient.

In other data, the Labor Department said weekly initial jobless claims dropped by 19,000 last week to 241,000 and below the 260,000 estimate, but could remain at elevated levels in the coming weeks due to the effects of Hurricanes Helene and Milton.

“It’s just one thing after another that is hitting the economy, but so far US growth is defying gravity,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin. “Monetary policy is still restrictive, the cuts are taking the foot off the brake, not pushing on the accelerator. We’re still a long way from neutral so the Fed can cut, but it doesn’t have to be in a hurry.”

In addition, the Federal Reserve Bank of Philadelphia’s monthly manufacturing index rose to 10.3 in October from 1.7 in the prior month and above the 3.0 estimate as manufacturing activity in the US Mid-Atlantic region expanded more than expected.

The yield on the benchmark US 10-year Treasury note US10YT=TWEB rose 7.9 basis points to 4.095%. The 10-year is on track for its biggest one-day jump since Oct. 4.

Yields have experienced a sharp run higher since a strong jobs report in early October, but have eased in the last three sessions, with the 10-year yield holding below the 2-1/2 month high of 4.12% hit last week.

The yield on the 30-year bond jumped 9.4 basis points to 4.393% and was on pace for its biggest daily climb since Aug. 6.

While the data still gives the Fed enough cushion to continue cutting rates, investors now see less of a chance for rate cuts at the two remaining meetings this year.

Markets are now pricing in a 90.3% chance for a cut of 25 bps at the Fed’s November meeting, down from 93.7% in the prior session, with only an 9.7% chance the central bank will hold rates steady, according to CME’s FedWatch Tool.

Expectations for a cut of 25 bps at the December meeting were scaled back to 73.6% from 85.6% on Wednesday.

Earlier on Thursday, the European Central Bank (ECB) cut interest rates for the third time this year, saying inflation in the eurozone was increasingly under control while the outlook for the wider economy was worsening.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 11.3 basis points.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, rose 4.5 basis points to 3.98%.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.246% after closing at 2.219% on Oct. 16.

The 10-year TIPS breakeven rate was last at 2.3%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Christina Fincher and Will Dunham)

Oil prices edge higher on US crude stockpiles draw

NEW YORK – Oil prices inched up on Thursday, bouncing back from two-week lows, after data showed falling crude and fuel inventories in the United States.

Brent crude futures settled at USD 74.45 a barrel, up 23 cents, or 0.31%. US West Texas Intermediate crude futures settled down 28 cents, or 0.4%, at USD 70.67 a barrel.

Both benchmarks had settled down on Wednesday, closing at their lowest levels since Oct. 2 for a second day in a row, after OPEC and the International Energy Agency cut demand forecasts for 2024 and 2025.

US crude inventories fell by 2.2 million barrels to 420.6 million barrels in the week ended Oct. 11, the Energy Information Administration said on Thursday, compared with analysts’ expectations in a Reuters poll for a 1.8 million-barrel rise. Gasoline and distillate inventories also fell last week.

“This tells me operational efficiencies are still improving,” said Tim Snyder, chief economist at Matador Economics. “Markets are normalizing.”

Oil output in North Dakota, the third-largest producing state in the US, fell by around 500,000 barrels through October, after wildfires crossed into key producing counties this month, a state regulator said.

The European Central Bank cut interest rates for the third time this year on Thursday, indicating that inflation in the euro zone is now increasingly under control and the economic outlook has worsened.

That decision is expected to boost oil prices as it makes borrowing cheaper, potentially boosting demand.

But fears that a retaliatory attack by Israel on Iran for the latter’s Oct. 1 missile strike could disrupt oil supplies kept prices steady, though uncertainty remains over how the conflict in the Middle East will develop.

“The country’s forthcoming retaliatory measures against Iran are still not clear,” said John Evans of oil broker PVM.

Evans added that the Middle East “will certainly provide enough reason to move oil prices again soon enough and investors today will also be preoccupied with an abundance of financial data.”

The dollar jumped to an 11-week high on Thursday, also offsetting some gains. A firmer US currency can hurt demand for dollar-denominated oil from buyers using other currencies.

Investors are also waiting for further details from China on broad plans announced on Oct. 12 to revive its ailing economy, including efforts to shore up the ailing property market.

(Reporting by Nicole Jao in New York, Paul Carsten and Ahmad Ghaddar in London and Florence Tan and Emily Chow; Editing by Mark Potter, Daren Butler, Jane Merriman. Will Dunham, and Susan Fenton)

Waiting for the big one… China GDP

Anyone hoping for a quiet end to the trading week in Asia will be disappointed, as investors brace for a batch of top-tier economic data on Friday that includes Japanese inflation, Malaysian GDP, and the main event – Chinese GDP.

Other Chinese indicators – September’s retail sales, house prices, industrial production, unemployment, and investment – will also be released. But all eyes will be on third quarter growth and how close it is to the 5.0% mark.

That’s Beijing’s 2024 target, but most analysts say it will be missed. The wave of fiscal stimulus measures announced recently has come too late to boost growth this year but has prompted some economists to raise their 2025 forecasts.

Overall, however, analysts remain pretty glum. Their consensus forecast in a Reuters poll is that gross domestic product expanded 4.5% in the third quarter from a year earlier, slowing from 4.7% in the previous quarter.

For 2024 as a whole they forecast growth of 4.8%, undershooting the government’s target, and expect a further deceleration next year to 4.5%.

Citi’s Chinese economic surprises index has been inching higher in recent weeks but remains firmly in negative territory, where it has been since June. Investors are realizing that Beijing’s fiscal, monetary and liquidity support, however successful they prove to be, will take time to bear fruit.

This is perhaps reflected in Chinese stocks’ third decline in a row on Thursday – Shanghai’s blue chip index is down 15% from its October 8 peak, although still up around 18% since the first stimulus measures were unveiled last month.

Elsewhere in Asia on Friday Japan releases September inflation figures, with economists expecting a marked slowdown in the annual core rate to 2.3% from 2.8% in August. That would be the biggest month-to-month decline since February last year.

It would also support the thinking of Bank of Japan officials who favor a more cautious approach to tightening monetary policy.

The BOJ will forgo raising interest rates again this year, according to a very slim majority of economists in a Reuters poll published this week, although nearly 90% still expect rates to rise by end-March.

Japanese interest rate swaps traders are pricing in a 15 basis points rate hike from the BOJ in January, and only 35 bps of tightening in total next year.

The global market picture looks fairly positive though. On Thursday chip-making giant TSMC delivered an upbeat outlook and US economic data was strong, lifting the Dow to a new high.

Treasury yields and the dollar also rose on Thursday, which is not so positive for emerging markets, however. The dollar is its strongest in two and a half months and has appreciated in all but two of the last 14 trading days.

Here are key developments that could provide more direction to markets on Friday:

– China GDP (Q3)

– Japan inflation (September)

– Malaysia GDP (Q3)

(Reporting by Jamie McGeever)

Inflows into Asian bonds slow on caution over US rate cuts, elections

Asian bond markets attracted overseas investments for the fifth consecutive month in September, though the pace of inflows slowed due to diminished expectations for further rate cuts by the US Federal Reserve and caution ahead of US elections.

Cross-border investors bought local bonds in Indonesia, India, Malaysia, South Korea, and Thailand, totaling a net USD 4.99 billion, which was less than USD 14.09 billion worth of net purchases the prior month, data from regulatory authorities and bond market associations showed.

Analysts anticipate a further decline in flows into Asian bonds due to the recent strengthening of the US dollar and the increase in US bond yields this month.

The US dollar index hit a two-month high of 103.397, this week, while the yield on US 10-year notes reached a two-and-a-half-month high of 4.12% after strong jobs data and higher-than-expected September inflation reduced expectations for large Fed rate cuts.

Saktiandi Supaat, an analyst at Maybank, noted that near-term risks for emerging market currencies persist, with a potential win by Republican presidential candidate Donald Trump possibly triggering de-risking due to his tariff proposals, while a victory by Democrat Kamala Harris might support a global soft landing and gradual Fed rate easing.

In September, foreigners purchased a net USD 2.76 billion worth of South Korean bonds, less than half the amount received in the previous month, while Indonesian bonds attracted about USD 1.4 billion in overseas capital.

Additionally, foreigners pumped about USD 427 million, USD 253 million, and USD 156 million respectively into Thai, Malaysian, and Indian bonds last month.

However, analysts are optimistic about the inclusion of Asian bonds in global bond indexes, which should bolster inflows.

Indian government securities were added to JPMorgan’s Government Bond Index-Emerging Markets in June 2024 and will join Bloomberg Index Services’ Emerging Market Local Currency Index in January 2025.

Additionally, FTSE Russell will include South Korean government bonds in the World Government Bond Index and Indian bonds in the Emerging Markets Government Bond Index starting in November 2025 and September 2025, respectively.

“Hopefully, the KTB yields’ upward march could be somewhat offset by the capital inflow amid its inclusion into the WGBI Index. The changing rate cut expectations will particularly weigh on higher yielders like IDR rates,” said Samuel Tse, an analyst at DBS Bank.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Chizu Nomiyama)

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