Gold extends gains as rate cut bets strengthen after US economic data

Gold prices extended gains on Thursday after traders added to bets that the Federal Reserve will deliver an interest-rate cut next month following the latest US economic data.

Spot gold was up 0.6% at USD 2,623.58 per ounce as of 1:59 p.m. ET (1759 GMT), on track to snap a six-session losing streak. US gold futures settled 0.5% higher to USD 2,639.30.

US consumer prices rose slightly more than expected in September, but the annual increase in inflation was the smallest in more than 3-1/2 years. Another report showed that weekly jobless claims rose to 258,000 for the week ending Oct. 5, versus estimates of 230,000.

The CPI report didn’t bring much of a surprise and the jobs numbers show a trend of weakening, which puts the notion that the Fed is on track to cut rates, helping gold, said Alex Ebkarian, chief operating officer at Allegiance Gold.

“Last few days, saw cooling in gold’s rally, so it is in a good position to go back up,” Ebkarian added.

Markets now see an 80% likelihood of a 25-basis-point cut from the Fed next month versus 76% before the data, according to the CME FedWatch tool.

Zero-yield bullion is a preferred investment amid lower interest rates.

Investors’ focus will shift to US Producer Price Index data on Friday for additional insights on rate cuts.

Heightened geopolitical events and strong demand led by central banks are the other positive catalysts for gold, Ebkarian added.

In the Middle East, Israel pressed its assault on Hezbollah and told Lebanese civilians not to return to homes in the south.

Spot silver rose 1.7% to USD 31.02 per ounce.

“Easing monetary policy and an undersupplied market will likely attract investor interest, with silver remaining an inexpensive alternative to gold,” ANZ said in a note.

Platinum added 2.4% to USD 967.17, and palladium was up 3% to USD 1,070.50.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Tasim Zahid and Vijay Kishore)

US inflation, China plans spell caution; BOK set to cut

Investors in Asia enter the final trading day of the week with sentiment dented a bit by surprisingly sticky US inflation the day before, and with a sense of caution ahead of keenly-awaited news on China’s stimulus plans from Beijing the following day.

Wall Street only posted mild losses on Thursday, the downside perhaps cushioned by soft weekly jobless claims figures that would suggest the Fed remains on track to cut interest rates a further 50 basis points this year.

Asia will struggle to get much of a steer from Treasuries or the dollar either – the greenback ended flat on Thursday, and yields were mixed across the curve in narrow ranges.

Traders have scaled back their expectations of Fed rate cuts since last week’s stellar US employment report, but are not quite at the point of pricing in a pause in the cycle. Yet that’s what Atlanta Fed president Raphael Bostic floated on Thursday. Could incoming data really lead to a skip soon?

The highlight in Asia’s calendar on Friday is the Bank of Korea’s interest rate decision. Economists expect the BOK to deliver its first interest rate cut since the pandemic, kicking off the easing cycle with a 25 basis point cut to 3.25%.

All but three of the 37 economists in a Reuters poll expect that from the BOK, and the rest said they expect no change. Analysts generally expect the BOK to move more slowly than its regional peers in the coming months.

Inflation eased rapidly to 1.6% in September from 2% in August, the lowest since early 2021 and below the BOK’s 2% target, but household debt and property prices are high.

Indian trade data, industrial output figures from Malaysia and New Zealand’s manufacturing purchasing managers index for September make up the rest of the region’s calendar on Friday.

New Zealand’s manufacturing activity has been shrinking every month since March last year, the PMIs show, although the pace of contraction has slowed sharply the last two months.

This release comes days after the country’s central bank cut interest rates by half a percentage point and signaled that further easing will follow.

Looking ahead to Saturday, all eyes will be on Beijing, where China’s finance ministry will detail plans on fiscal stimulus to boost the economy. It is unclear whether this means fresh fiscal steps to revive growth will be taken, or that the package of measures announced recently will be explained in greater detail.

Hope, if not expectation, is building that it’s the former. If it’s the latter, investors are likely to be disappointed and there’s a good chance that the stunning rally in Chinese stocks over the last two weeks reverses on Monday, perhaps significantly.

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

– South Korea interest rate decision

– India trade (September)

– New Zealand manufacturing PMI (September)

(Reporting by Jamie McGeever, Editing by Deepa Babington)

US yields boosted by Fed minutes, 10-year note auction

NEW YORK – US Treasury yields rose on Wednesday in volatile trading, as investors continued to price in a less aggressive monetary easing cycle from the Federal Reserve, with gains further boosted by a weaker-than-expected auction of 10-year notes.

The US benchmark 10-year yield hit a fresh seven-week high of 4.078%, while two-year yields, which are more sensitive to interest rate expectations, rose in five of the last six sessions.

Dallas Fed President Lorie Logan, who is not a voter at this year’s Federal Open Market Committee (FOMC), expressed the US central bank’s gradual approach in remarks on Wednesday, fueling a rise in Treasury yields. She said she supported last month’s big interest-rate cut but wants smaller reductions ahead, given “still real” upside risks to inflation and “meaningful uncertainties” over the economic outlook.

Chip Hughey, managing director of fixed income at Truist Advisory Services in Richmond, Virginia, said he understood why the Fed is leaning toward smaller rate cuts.

“The reality is that the Fed is still in restrictive territory,” he noted. “There is plenty of room for the Fed to reduce the fed funds rate over a year and a half to get it down to the neutral level.”

US yields rose after Logan’s comments. US two-year yields, were last up 4 basis points (bps) at 4.019%, gaining in five of the last six trading days.

The Fed minutes were also released on Wednesday and offered very little surprises for the market. US yields did drift higher after they came out.

The minutes showed that a “substantial majority” of Fed officials at the September meeting supported launching the easing cycle with an outsized half-point rate cut. There was also broad agreement that the initial move would not commit the Fed to a particular pace of cuts in the future.

The US rate futures market has factored in an 83% chance of a 25-bp rate cut at the November meeting, and 17% chance of a pause, higher than the 12% seen on Tuesday, according to LSEG calculations.

The futures market also showed about 47 bps of easing this year, down from more than 50 bps early this week. It also priced in about 94 bps of Fed cuts in 2025. Next year’s rate cut probability was a sharp decline from the roughly 200-250 bps reductions being estimated prior to last Friday’s blowout US nonfarm payrolls report that recalibrated Fed easing expectations.

In afternoon trading, the yield on the benchmark US 10-year note climbed 3.6 bps to 4.071%.

The 10-year note auction was lackluster overall, with a yield of 4.066%, higher than the rate forecast at the bid deadline. Much like the three-year note sale on Tuesday, investors demanded a higher yield to buy the benchmark note.

The bid-to-cover ratio, another measure of demand, was 2.48, the lowest since August.

In other maturities, US 30-year bond yields, were up 2.1 bps at 4.346%.

The yield curve flattened a little bit on Wednesday, with the spread between US two-year and 10-year yields at 4.8 bps, from 5 bps late on Tuesday. The flattening suggested that the rates market expects a slower pace of Fed easing, or smaller rate cuts, in the coming months.

For Thursday, the US consumer price index will be in focus after the labor market showed little signs of slowing.

Vishal Khanduja, co-head of Broad Markets Fixed Income at Morgan Stanley Investment Management in Boston, believes the disinflation trend will continue.

“There could be some disruptions in the fourth quarter because of the (Middle East) war and now the hurricanes. But the overall trend will continue to be lower.”

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Emelia Sithole-Matarise and Daniel Wallis)

Gold eases for sixth session as dollar marches upward

Gold retreated for the sixth straight day on Wednesday on an advancing dollar and diminished expectations for a larger rate cut from the Federal Reserve in November.

Spot gold fell 0.5% to USD 2,607.93 per ounce by 02:39 p.m. ET (1839 GMT). US gold futures for December delivery settled 0.4% lower at USD 2,626.

“The markets aren’t moving because the extraordinary payrolls report may require a recalibration by the FOMC. It’s why gold hasn’t budged and looks to be down for the sixth straight session though the pullback has been modest,” said Tai Wong, a New York-based independent metals trader.

“The dollar has surged over the past few sessions that’s adding downward pressure to gold,” he added.

The dollar index hit a near two-month high, making bullion more expensive for holders of other currencies.

The minutes of the Sept. 17-18 session, at which the Fed lowered the benchmark policy rate by half a percentage point, noted the future pace of cuts will not be determined by large initial reduction.

Markets now see a 76% likelihood of a 25-basis-point cut from the Fed next month, according to the CME FedWatch tool. Zero-yield bullion is a preferred investment amid lower interest rates.

Dallas Fed Bank President Lorie Logan said she wants
smaller reductions ahead, given the “still real” upside risks to inflation and “meaningful uncertainties” over the economic outlook.

Investors now await US Consumer Price Index (CPI) and Producer Price Index (PPI) data due on Thursday and Friday, respectively, for further insights on the interest rate outlook.

“Despite the modest pull-back, expectations of lower interest rates and ongoing geopolitical tensions suggest the backdrop for gold is likely to remain supportive over the long term,” said Kinesis Money market analyst Carlo Alberto De Casa in a note.

Spot silver slipped 0.8% to USD 30.46 per ounce. Platinum was steady at USD 949.91, while palladium rose 1.6% to USD 1,038.25.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Tasim Zahid, Alan Barona, and Shreya Biswas)

Oil falls as swelling US supply counters Middle East and hurricane risks

NEW YORK – Oil prices fell on Wednesday after US data showed rising crude inventories, but losses were limited by the risk of Iranian supply disruptions caused by the Middle East conflict and Hurricane Milton in the US

Brent crude futures settled at USD 76.58 a barrel, falling 60 cents, or 0.8%. US West Texas Intermediate (WTI) futures settled down 33 cents or 0.5%, at USD 73.24 a barrel.

Crude inventories jumped by 5.8 million barrels to 422.7 million barrels last week, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 2 million-barrel rise.

The build was smaller than estimated on Tuesday by trade group American Petroleum Institute, which also limited declines in oil prices, said Bob Yawger, director of oil futures at Mizuho in New York.

Larger-than-expected drawdowns in gasoline and distillates also helped soften the impact to prices, Yawger said.

“There’s a bullish element in the gasoline number, which might have been a rebound from the hurricane,” said Yawger, referring to Hurricane Helene, which struck the US late last month.

The country is bracing for a second major storm, Hurricane Milton, which spawned tornadoes and lashing rain hours ahead of its expected landfall in Florida on Wednesday. The storm has already driven up demand for gasoline in the state, with about a quarter of fuel stations selling out of supplies, which has helped support crude prices.

MIDDLE EAST IN FOCUS

Markets remained on edge about a potential Israeli attack on Iranian oil infrastructure, even after oil prices tumbled by more than 4% on Tuesday on a possible Hezbollah-Israel ceasefire deal being reached.

US President Joe Biden spoke with Israeli Prime Minister Benjamin Netanyahu about Israel’s plans concerning oil-producer Iran in a call on Wednesday. Neither the White House nor Netanyahu’s office provided details of the discussion.

“We’re still on tenterhooks with the Middle East situation,” said John Kilduff, partner at Again Capital in New York. “Speculation of a strike on Iran is worth about USD 5 a barrel.”

Even with threats to the oil-producing Middle Eastern region top of mind, economic problems in top crude importer China made it difficult for prices to advance.

“Despite the current heightened tensions in the Middle East, it is easy to forget that the oil market is very much vulnerable to corrections due to the ongoing bearish macro narrative centered on China,” said Harry Tchilinguirian, head of research at Onyx Capital Group.

China said on Tuesday it was “fully confident” of achieving its full-year growth target but refrained from introducing stronger fiscal steps, disappointing investors who had banked on more support for the economy.

Investors have worried about slow growth dampening fuel demand in China, the world’s largest crude importer.

Weak demand continues to underpin the fundamental outlook. The US Energy Information Administration (EIA) on Tuesday downgraded its demand forecast for 2025 on weakening economic activity in China and North America.

(Additional reporting by Arunima Kumar in London, Trixie Yap in Singapore, and Colleen Howe in Beijing; Editing by David Goodman, Emelia Sithole-Matarise, Richard Chang, and David Gregorio)

Foreign money is leaving Asian equities ex-China this month, LSEG data shows

Foreign money is leaving Asian equities, excluding China, this month as concerns about hefty stock valuations and conflict in the Middle East spur investors to book profits.

Some investors also appear to be moving money into Chinese and Hong Kong shares after Beijing’s announcement of stimulus measures drove a rally in local shares, analysts said.

According to LSEG data, foreigners have so far divested a net USD 7.61 billion worth of shares in India, Indonesia, Thailand, Vietnam, South Korea, Taiwan, and the Philippines this month, following net purchases of USD 759 million a month ago driven by optimism over a large rate cut by the US Federal Reserve.

“We have seen further profit-taking pressure on Korea and Taiwan due to the shift in momentum on global AI/semiconductor investment theme,” said Jason Lui, head of APAC equity and derivative strategy at BNP Paribas.

“Some of the capital from East Asia (Japan, Korea, Taiwan) may have been reallocated back to HK/China as well.”

Taiwanese and South Korean stocks saw foreign net outflows of about USD 1.71 billion and USD 426 million, respectively, following USD 2.94 billion and USD 5.73 billion worth of net selling in September.

Overseas investors have, meanwhile, snapped up a net USD 5.81 billion worth of China-focused funds since the beginning of this month, LSEG Lipper data showed.

Indian equities have recorded about USD 5.35 billion worth of foreign net outflows in October, driven by disappointing corporate updates and caution over high valuations, contrasting with USD 6.89 billion in net inflows last month.

Indian equities trade at a price to 12-month forward earnings ratio (P/E) of 23.24 compared with a P/E of 12.63 for Asia. The P/E for Chinese shares is just 10.34.

According to Yeap Jun Rong, market strategist at IG: “The India story remains compelling for foreign investors despite softer growth momentum, as economic fundamentals are still strong.”

Thai and Indonesian stocks also saw USD 375 million and USD 176 million worth of net outflows, respectively, following USD 860 million and USD 1.42 billion worth of net inflows in September.

“We may expect a more cautious stream of inflows for the region as we head into the US election, which adds a layer of uncertainty for global markets,” IG’s Rong said.

(Reporting by Gaurav Dogra in Bengaluru; Editing by Mark Potter)

Reality check for China stocks, dollar rips higher

Attention in Asia on Thursday is likely to center on Chinese stocks, and whether the previous day’s steep selloff extends further, and the US dollar, which is on its longest winning streak in more than two years.

The economic calendar is light, with only wholesale inflation and bank lending figures from Japan, and Philippines trade data, on deck.

Currency and rates markets could get more impetus from Bank of Japan deputy governor Ryozo Himino and Reserve Bank of Australia assistant governor Sarah Hunter, who are scheduled to speak at separate events in Japan and Australia, respectively.

The foreign exchange market, and the US dollar in particular, is increasingly playing on the minds of investors across the continent.

The New Zealand dollar fell 1.3% on Wednesday after the country’s central bank delivered a 50-basis point cut in interest rates and indicated it will ease policy further in the coming months. The kiwi has weakened 5% this month, making it the worst-performing major currency in the world this month.

The greenback rose against a basket of major currencies on Wednesday for an eighth day, its best run since March-April, 2022, as the ongoing resilience of the US economy draws flows into US assets and forces investors to rethink their dovish outlook for US interest rates.

Demand for US assets from Asia is also strong.

Thursday may be a good test for Chinese markets, following Wednesday’s reality check. After surging as much as 40% in just six trading days, benchmark equity indices in China slumped 7% on Wednesday for their biggest one-day losses since February 2020.

Will the pullback provide a more attractive entry point for investors who missed that initial whoosh? If so, the rally may have more to run, but a second day of losses may suggest investors need more from Beijing.

China’s finance ministry will flesh out its plans to boost the economy at a news conference on Saturday, a sign that Beijing may be ready to roll out more forceful policies to revive growth.

The People’s Bank of China, meanwhile, has steered the yuan away from the 7.00 per dollar level, at least for now. Tuesday’s fixing of 7.0709/USD was 0.9% higher than the previous fix, marking the biggest one-day rise since May 2022.

Wednesday’s fix was a bit lower but still comfortably above pre-Golden Week holiday levels.

In Japan, inflationary pressures are expected to have eased in September, with annual wholesale price inflation falling to 2.3% from 2.5% in August. That would be the lowest since April.

The monthly rate of deflation is expected to accelerate to -0.3% from -0.2%, which would be the fastest rate of month-on-month decline since May last year.

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

– Japan wholesale inflation (September)

– BOJ deputy governor Ryozo Himino speaks

– RBA assistant governor Sarah Hunter speaks

(Reporting by Jamie McGeever, Editing by Deepa Babington)

Japan’s Nikkei snaps 3-day winning run on Wall Street slump, stronger yen

TOKYO – Japan’s Nikkei share average snapped a three-day winning streak to close lower on Tuesday as a stronger yen and Wall Street’s weaker finish overnight weighed on sentiment.

The Nikkei fell 1% to close at 38,937.54, after rising 1.8% on Monday. The index has jumped 4% over the last three sessions.

“Japanese stocks retreated as overnight declines of Wall Street prompted investors to book profits from their three-day rally,” said Naoki Fujiwara, senior general manager at Shinkin Asset Management.

“Also, a stronger yen weighed on sentiment,” he said.

Wall Street’s three major indexes closed around 1% lower as traders tamped down bets for Federal Reserve’s easing on interest rates and concerns over the Middle East conflict’s impact on oil prices.

The yen was a tad stronger at 148.07 per dollar, having slumped to a seven-week low of 149.10 in the previous session.

A stronger yen tends to dampen exporters’ shares, as the unit decreases the value of overseas profits in yen terms when firms repatriate them to Japan.

The broader Topix dropped 1.47% to 2,699.15, with Toyota Motor falling 2.93% to drag the index the most. Shares of Sony Group fell 2.43%.

Technology startup investor SoftBank Group slumped nearly 2% to drag the Nikkei index the most. Uniqlo brand owner Fast Retailing slipped 0.61%.

All but three of the Tokyo Stock Exchange’s 33 industry sub-indexes fell, with the brokerage sector declining 3% to become the worst performer. The banking sector lost 2.6%.

Of more than 1,600 stocks listed on the TSE’s prime market, 84% fell, while 14% rose and 1% flat.

(Reporting by Junko Fujita; Editing by Subhranshu Sahu, Varun H K, and Sherry Jacob-Phillips)

Hong Kong bourse can go harder on tycoons

HONG KONG – Hong Kong’s tycoons are acting like the masses are about to seize the means of production. The city’s stock exchange is proposing reforms that would make listed companies more accountable to independent shareholders. The Chamber of Hong Kong Listed Companies, a lobby group dominated by mogul-owned businesses, decried the proposals as “inappropriate” and tantamount to “micromanaging”. In truth, the bourse is treating them with kid gloves.

The new rules, if adopted, are pretty basic, as far as they go. Their goal is to bolster the role of independent non-executive directors (INEDs), who must make up at least a third of every listed company’s board and are charged with mediating between controlling and minority shareholders. Among the better ideas are making companies appoint a lead independent director to hear concerns from investors; limiting INED tenure to nine years; and preventing them from sitting on more than six boards at once.

Direct access to a lead independent director would be an especially welcome change. It would provide a reliable channel to push back on potentially sketchy deals when owner-executives refuse to engage — a common problem.

Yet the exchange has left loopholes that tycoons can step through with gusto. Independent directors who hit the nine-year limit can return to the board after two years. And companies that don’t appoint a lead INED can simply explain why without facing any serious consequences.

Such deference to captains of industry might have made sense back when these China-savvy magnates’ corporate empires were as politically powerful as they were profitable. But in recent years their sway over Hong Kong’s affairs has been substantially supplanted by Beijing. On top of that, an exodus of home buyers has helped torpedo the property market that made them so wealthy and powerful.

The nuclear option has always been for the tycoons to take their business elsewhere. But their hometown remains a nexus of free-flowing capital and cross-border financial know-how that’s difficult to replicate. And longtime ties to the mainland combined with worsening US-China tensions make a move to Wall Street daunting at best.

That gives Hong Kong Exchanges and Clearing a chance to press its advantage. The company run by Bonnie Chan could impose stricter limits on independent directorship tenure and the number of boards individuals sit on, as well as impose actual punishments for those that fail to appoint a lead independent director. It could also shift responsibility over who appoints INEDs from controlling stakeholders to minority shareholders, ensuring that some members of every board were, on paper at least, as independent as possible.

The tycoons might carp and moan about having to adopt better governance practices. But they’re not going anywhere.

CONTEXT NEWS

Investors and listed companies are awaiting the final version of changes to Hong Kong Exchanges and Clearing’s corporate governance regime after the close of a consultation period on August 16. HKEX is expected to publish final revised rules in the coming months.

Rules proposed by the exchange would impose a nine-year cap on the board tenure of independent non-executive directors (INEDs), limit INEDs from sitting on more than six boards at once, and mandate that companies appoint a lead INED to address shareholder concerns when corporate channels prove inadequate—or explain their failure to do so.

(Editing by Antony Currie and Aditya Srivastav)

Investors read Fed tea leaves, shrug off China stimulus

NEW YORK – Wall Street got back on track Tuesday, encouraged that the Fed seems confident enough in the US growth picture to ease up on the easing, but investors have been reticent ahead of the release of minutes from the September FOMC where officials took the most dovish possible policy turn to ensure the US jobs machine keeps humming.

By the time New York opened, markets weren’t looking too impressed with China’s economic jawboning after its return from Golden Week holiday. The yuan took a spill although it had brushed itself off a bit by the time Tuesday trading wrapped up.

Beijing said it was “fully confident” of achieving its full-year growth target but refrained from introducing stronger fiscal steps, disappointing investors who had banked on more support from policymakers to get the economy back on track.

While China shares initially rallied to two-year highs after the holiday they lost steam after the state planner did not provide details to sustain market optimism. Hong Kong shares slumped as investors also walked back some of the stimulus excitement.

London-based hedge fund giant Winton has lost more than 8% on its China strategy, since Sept. 20, wiping out all gains for this year, according to two investors and a performance record.

On Wednesday, the record from September’s Fed meeting will reveal the discussion about what looked at the time like a deteriorating labor market, until the eye-popping September payrolls report on Friday put those concerns to rest and unchained animal spirits for two of three subsequent US trading sessions.

Traders were 88% confident that November’s FOMC would bring a 25-basis point cut, hedged by a 12% probability that the Fed would hold rates steady. Fed funds futures still lean toward 50 bps of easing through year-end.

US markets were also still focused on the growing risk of a Middle East conflagration as Israel continued to step up its military incursion into Lebanon to combat Hezbollah, while continuing its war with Hamas in Gaza.

That did not stop the S&P 500 from rebounding 1%, while the Nasdaq advanced almost 1.5% as the risk-off impulse dissipated.

Forex trading in US time zones was subdued, with traders keeping powder dry for the release of September CPI on Thursday, the most important indicator of the week, even as Fed confidence that inflation is nearing their 2% target seems to have turned its policy discussion more squarely on employment.

The dollar eked out a 0.05% gain vs. the yen and showed a 0.67% rise against the yuan late Tuesday. The 10-year Treasury yield held above 4% for a second day.

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

– Taiwan CPI (Sept)

– Reserve Bank of India meeting

– Reserve Bank of New Zealand meeting

– Minutes of Federal Open Market Committee meeting (Sept)

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