US yields gain, Fed meeting minutes next week’s focus

US Treasury yields rose on Friday as investors awaited clues on how many times the Federal Reserve is likely to cut interest rates this year, with minutes due next week from the Fed’s most recent policy meeting being the next event that may offer new insight.

Softening consumer prices in April boosted expectations that the US central bank will be able to cut rates two times this year, beginning in September. But traders are also wary that this will depend on price pressures continuing to ease over the coming months.

“The Fed obviously hopes that the inflation data comes down quickly, as does the market, and reality is just a little slower,” said John Luke Tyner, fixed income analyst and portfolio manager at Aptus Capital Advisors in Fairhope, Alabama.

Data on Wednesday showed that the consumer price index (CPI) rose 0.3% last month for an annual gain of 3.4%, after advancing 0.4% in March and February. That remains above the Fed’s 2% annual target.

Fed policymakers also have not openly shifted views yet about the timing of rate cuts despite Wednesday’s improving inflation report.

Fed minutes due next Wednesday may offer more detail on what Fed officials are looking at in order to begin cutting rates. The meeting from April 30 to May 1, however, was before Wednesday’s CPI data.

“The timing is a little troubling for them because I imagine that the minutes will display some more hawkish commentary based on the first three months of the year,” Tyner said. “If we are seeing the data indeed slow down, maybe that could send kind of a mixed signal.”

The Fed indicated it is still leaning toward eventual reductions in borrowing costs at the meeting, but acknowledged that disappointing inflation readings in the first quarter could make those rate cuts a while in coming.

US Fed Governor Michelle Bowman on Friday repeated her view that inflation will fall further with the policy rate held steady, but said she has seen no improvement in inflation this year and remains willing to hike rates should progress stall or reverse.

Benchmark 10-year yields were last up 4 basis points at 4.42%.

Two-year yields rose 3 basis points to 4.825%.

The inversion in the yield curve between two-year and 10-year notes US2US10=TWEB narrowed 1 basis point on the day to minus 41 basis points.

The Treasury Department will sell USD 16 billion in 20-year bonds next Wednesday and USD 16 billion in 10-year Treasury Inflation-Protected Securities (TIPS) next Thursday.

(Reporting by Karen Brettell; Editing by Chizu Nomiyama and Will Dunham)

China stimulus, US rate cut bets lift gold, silver soars above $30 mark

Gold prices, aided by China’s stimulus measures, looked poised to clock their second consecutive weekly gain on Friday on renewed hopes for US interest rate cuts, with silver breaking the USD 30 barrier to hit an 11-year high.

Spot gold rose 1.5% to USD 2,412.83 per ounce by 1745 GMT, closing in towards an all-time high of USD 2,431.29 hit on April 12.

US gold futures settled 1.3% higher at USD 2417.40 per ounce.

“Gold is moving higher despite (an uptick in) the dollar and yields. I think in this instance, China stimulus has helped as we’re also seeing other (base) metals do very well,” said Bart Melek, head of commodity strategies at TD Securities.

The market was lifted after China, a major consumer of industrial metals as well as gold, announced “historic” steps to stabilize the crisis-hit property sector.

Spot gold prices are up over 2% so far this week.

Meanwhile, London’s gold price benchmark ended the week at a record high of USD 2402.60 per troy ounce, the London Bullion Market Association (LBMA) said.

“Ultimately gold is responding to the idea that US inflation is probably under control … any talk of a prolonged period of high interest rates is going to be mitigated,” Melek said.

Traders expect roughly two quarter-point cuts from the Fed this year, with November being the most likely starting point.

Lower interest rates tend to boost non-yielding bullion’s appeal.

Spot silver jumped 4.8% to USD 31.02 per ounce after breaking above a major resistance level of USD 30. The last time silver hit the USD 30 price level was in early 2021, but sustaining it for an extended period has eluded silver for more than a decade.

“Anytime we’re talking about China stimulating, that is accretive for platinum markets,” Melek said.

Platinum added 2.3% to USD 1,081.37, after hitting a one-year high on Thursday. The metal is up 9% so far this week due to continued structural deficits.

Palladium rose 1.2% to USD 1,007.

(Reporting by Harshit Verma and Rahul Paswan in Bengaluru; Additional reporting by Polina Devitt in London; Editing by Alan Barona)

China clouds darken market mood

Broadly speaking, the global backdrop for Asian markets is still bright, with investors confident that the Fed will soon cut US interest rates keeping the dollar, bond yields and volatility in check, and boosting risk assets.

But there’s a cloud that shows no sign of lifting: China. If anything, it’s getting darker.

The economic “data dump” from Beijing on Friday showed that China’s recovery is sputtering – investment growth slowed, retail sales expanded at the slowest pace since late 2022, and new home prices fell at the fastest rate in nine years.

Most alarming, the property sector bust is deepening. Granted, Chinese and Hong Kong shares jumped on Friday after Beijing unveiled a series of historic steps to stabilize the sector, but will the bounce last?

Even though the central bank said it is facilitating 1 trillion yuan in extra funding and easing mortgage rules, and local governments will buy some apartments, deep-rooted fundamentals of huge over-supply and weak demand remain.

Renewed concern over China’s growth raises the question of how Beijing will finance its fiscal support measures in the long term. China is sitting on more than USD 3 trillion of FX reserves. Is now the time for China to dip into that rainy day fund to prevent the property sector bust from bringing down the wider economy?

It’s unlikely, and Beijing may well default to ramping up exports as the preferred path to recovery. But that would not be welcomed by the United States, which last week imposed extra tariffs on USD 18 billion of imports from China.

These tariffs and the hardening battle lines between the West and China on trade are bound to feature prominently in next week’s meeting of G7 finance officials in Italy. US Treasury Secretary Janet Yellen will attend, but it is unclear if Fed Chair Jerome Powell will travel, after he tested positive for COVID-19.

That said, financial markets are enjoying a period of remarkable calm right now. Global FX volatility is the lowest in five weeks, US Treasury market volatility is at a six-week low, and the VIX index on Friday fell below 12 for the first time this year.

This low volatility environment is helping to lift US, European, and other stock markets to all-time highs.

The Asian economic calendar on Monday offers a decent serving of indicators for investors to get their teeth into, including: GDP from Thailand, current account and trade data from Indonesia, Malaysia, and Taiwan, and unemployment from Hong Kong.

China’s central bank is widely expected to keep its one- and five-year loan prime rates on hold again at 3.45% and 3.95%, respectively, after leaving its medium-term lending facility loans unchanged on Wednesday.

Pressure is mounting for a cut soon, though.

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

– Thailand GDP (Q1)

– Taiwan exports (April)

– Japan tertiary index (March)

(Reporting by Jamie McGeever; Editing by Lisa Shumaker)

Yields rebound from six-week lows as unemployment claims fall

US Treasury yields rebounded from almost six-week lows on Thursday after data showed jobless claims fell in the latest week and as Federal Reserve officials said they need to see further progress on inflation before cutting interest rates.

Benchmark 10-year yields also bounced after they briefly fell to the 200-day moving average, which is seen as a technical area of support.

The number of Americans filing new claims for jobless benefits fell last week to a seasonally adjusted 222,000, unwinding nearly half of the jump at the start of the month.

The jobs data underscores that the economy is strong enough to allow the Fed to keep rates steady as they wait for more confirmation that inflation will continue to recede.

“Things are still moving along and the Fed is on hold for now, and they claim they are going to be on hold for a while,” said Ellis Phifer, managing director of fixed income research at Raymond James in Memphis, Tennessee.

Bonds rallied earlier on Thursday and yields hit their lowest levels since April 5 as traders boosted bets that the Federal Reserve will cut rates two times this year, with the first cut likely in September.

That followed data on Wednesday showing the consumer price index rose 0.3% last month after advancing 0.4% in March and February. The core CPI rose 0.3% in April after advancing 0.4% for three straight months.

“Yesterday’s news was good in the sense that it wasn’t hotter than expected,” said Phifer.

Traders are closely watching inflation for signs that price pressures are moving back closer to the Fed’s 2% annual target. Stronger-than-expected price gains in the first quarter raised doubts that the US central bank will be able to cut rates in the coming months.

Analysts say that while Wednesday’s data could give the Fed some confidence inflation is improving, they will need to see further easing in price pressures before cutting rates.

New York Fed President John Williams said that the data is not enough to call for the US central bank to cut interest rates sometime soon.

Richmond Fed President Thomas Barkin also said that inflation is still not where the Fed needs it to be, while Cleveland Fed President Loretta Mester said that holding US central bank policy at current levels will help get still-high inflation back to the 2% target.

Other data on Thursday suggested the economy lost further momentum early in the second quarter with single-family homebuilding falling for the second straight month in April and permits for future construction hitting an eight-month low. Output at factories unexpectedly fell.

Benchmark 10-year yields were last up 2 basis points on the day at 4.377% after earlier falling to 4.313%, the lowest since April 5. They are now trading back above the 200-day moving average of 4.331%, after briefly trading below it.

Two-year yields rose 6 basis points to 4.793% after earlier reaching 4.705%, also the lowest since April 5.

The inversion in the yield curve between two-year and 10-year notes widened 4 basis points on the day to minus 42 basis points.

(Reporting By Karen Brettell; additional reporting by Terence Gabriel; editing by Jonathan Oatis and Lisa Shumaker)

Oil up after US economic data strengthens rate cut expectations

NEW YORK – Crude prices edged up on Thursday after data showed a stabilizing US job market, fueling expectations that the Federal Reserve could begin to cut interest rates in autumn, which should stimulate the economy and boost oil demand.

Brent crude futures settled 52 cents, or 0.6%, higher at USD 83.27 a barrel, while US West Texas Intermediate crude (WTI) ended at USD 79.23, up 60 cents, or 0.8%.

The number of Americans filing new claims for unemployment benefits fell last week, pointing to an underlying strength in the labor market.

“Even though the jobless claims were low, the report was weak enough that it’s going to allow the Fed to get in and cut,” said John Kilduff of Again Capital. “The strong employment trends do portend strong gasoline demand as we look out, even though it has been lackluster.”

Wednesday’s slower-than-expected US inflation data for April also fed market expectations for a September cut in interest rates, which could temper dollar strength and make greenback-denominated oil more affordable for holders of other currencies.

Equities, which tend to move in tandem with oil prices, rose on the rate cut hopes, with the Dow reaching an all-time high of 40,000 for the first time.

Brent had touched an intra-day low of USD 81.05 on Wednesday – the lowest the front-month futures contract has traded since Feb. 26. It then rebounded after the inflation data and a government report showing a drawdown in US crude, gasoline, and distillate inventories last week due to a rise in both refining activity and fuel demand.

US gasoline demand, however, continued to land under 9 million barrels per day for a sixth straight week, below what is typical heading into the summer driving season, which officially kicks off on the Memorial Day weekend at the end of the month.

“This increase in the runs that will likely persist into early next month will be going head-to-head with continued weak product demand that is showing no sign of improvement,” said Jim Ritterbusch of Ritterbusch and Associates.

In the Middle East, Israel’s tanks pushed into the heart of Jabalia in northern Gaza on Thursday while, in the south, its forces pounded Rafah without advancing, Palestinian residents and militants said.

Ceasefire talks mediated by Qatar and Egypt are at a stalemate, with Hamas demanding an end to attacks and Israel refusing until the group is annihilated.

(Additional reporting by Noah Browning, Katya Golubkova in Tokyo and Emily Chow in Singapore; Editing by Marguerita Choy and Susan Fenton)

US stocks lose steam after Dow hits milestone 40,000 mark

NEW YORK – US stocks closed lower on Thursday after the Dow reached an intra-day high of 40,000 for the first time, as investors continued to recalibrate their rate-cut expectations following data showing a slowdown in inflation, as well as strong corporate earnings results.

Early gains in equities dissipated throughout the day, however, with the three major indexes closing slightly lower.

The blue-chip index has recovered from its October 2022 lows, powered by resilient US economic growth despite steep rate hikes by the Fed.

Ten out of 11 S&P 500 sectors closed lower, with stocks in consumer staples the only top gainer.

“We’ve had a big rally and people are looking at multiples, saying ‘we’ve got great earnings growth this year and next year but it’s still priced in at 21 or 22 times forward earnings,'” said Thomas Hayes, chairman of Great Hill Capital in New York.

“We have a lot of good news and a lot of that is priced in and that’s what the market is grappling with right now,” Hayes added.

Investors are betting on two quarter-point interest rate cuts from the Federal Reserve this year, and estimate a 70% chance of the first reduction in September, according to the CME FedWatch Tool.

All three Wall Street indexes had reached record closes on Wednesday after data showed a smaller-than-expected rise in consumer prices in April, indicating that inflation had resumed its downward trend.

Data on Thursday also showed the number of Americans filing new claims for jobless benefits fell last week, though labor market conditions remain fairly tight even as job growth is cooling.

“The current environment seems to focus on what the Fed may or may not do, given that we had started the year with the expectation that the Fed will cut rates up to six times but that moved down more recently to one or two times,” said Silas Myers, chief executive and portfolio manager at Mar Vista Investment Partners in Los Angeles.

The Dow Jones Industrial Average fell 38.62 points, or 0.10%, to 39,869.38, the S&P 500 lost 11.05 points, or 0.21%, to 5,297.10 and the Nasdaq Composite lost 44.07 points, or 0.26%, to 16,698.32.

Walmart rose 7% after the retail giant raised its fiscal 2025 sales and profit forecast, betting on easing inflation to further boost demand for essentials.

Deere dropped 4.8% after the farm equipment maker trimmed its annual profit forecast for the second time.

US-listed shares of Swiss insurer Chubb gained 4.7% after Warren Buffett’s Berkshire Hathaway revealed a $6.7 billion stake in the company.

GameStop and AMC Entertainment slid 30% and 15%, respectively, with the so-called meme stocks extending Wednesday’s losses following a two-day rally sparked by the social media return of “Roaring Kitty” Keith Gill.

About 17.8 billion shares changed hands across US exchanges, compared with the average of about 11.5 billion shares over the last 20 sessions.

Declining issues outnumbered advancers by a 1.2-to-1 ratio on the NYSE. On the Nasdaq, 1,965 stocks rose and 2,301 fell as declining issues outnumbered advancers by a 1.17-to-1 ratio.

The S&P 500 posted 64 new 52-week highs and one new low while the Nasdaq recorded 188 new highs and 58 new lows.

(Reporting by Chibuike Oguh in New York; Additional reporting by Bansari Mayur and Shristi Achar A in Bengaluru; Editing by Aurora Ellis and Matthew Lewis)

Dollar rebounds on high US import prices

NEW YORK/LONDON – The dollar rose on Thursday after data showed US import prices increased 0.9% last month, a jump that raised concerns the Federal Reserve’s fight to tame inflation is not yet done and could delay plans for policymakers to cut interest rates.

Economic data this week offered the US central bank good news, but policymakers haven’t openly shifted their views on the timing of rate cuts many investors believe will start this year.

The jump in the price index for US imports in April was the largest one-month increase since it rose 2.9% in March 2022, the Bureau of Labor Statistics said. Prices for US imports last declined on a monthly basis in December, the BLS said.

The market also was grappling with a drop in the number of Americans filing new claims for unemployment benefits last week that pointed to underlying strength in the US labor market. A strong economy could keep rates higher for longer.

“The market is, of course, very sensitive to signs of inflation from wherever it may come, and the import price series that we got today was meaningfully stronger than expected,” said Brain Daingerfield, head of G10 FX strategy at NatWest Markets in Stamford, Connecticut.

“The Fed wants to see consistent progress in more than just one point. The number we got yesterday – the CPI – was not as bad as feared,” he said. “But I don’t think it was enough to materially change the market’s outlook for the Fed and that’s reflected in the way that the dollar has bounced back today.”

The dollar rebounded from a sharp decline against all major currencies on Wednesday when data showed US inflation slowing to 0.3% in April from a month earlier.

The dollar index, which tracks the US currency against six peers, rose 0.27% to 104.47 after a 0.75% slide on Wednesday.

The slowing of consumer prices, after a stall in the first three months of the year, prompted markets to price in the likelihood that the Fed would cut rates twice this year, with the first coming as early as September.

But Fed officials sounded a note of caution on Thursday, with Richmond Fed President Thomas Barkin saying inflation is still not where it needs to be. Holding US central bank policy at current levels will help get still-high inflation back to the 2% target, said Cleveland Fed President Loretta Mester, adding that reaching that goal will take longer than she previously thought.

“The goods price deflation is no longer dominating and then you have the import price number, which went up even though the non-petroleum price didn’t go up a lot,” said Steven Ricchiuto, US chief economist at Mizuho Securities USA in New York.

“The reality is inflation is moderating to 3%. That’s still above target. Maybe you’re jumping the gun on the inflation story,” he said.

Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 222,000 for the week ended May 11, the Labor Department said. Economists polled by Reuters had forecast 220,000 claims in the latest week.

The dollar dropped 1% against the yen on Wednesday but was up 0.28% on Thursday at 155.30, having fallen as low as 153.6 before weak Japanese growth figures dented the yen.

The Japanese currency has fallen around 9.5% this year as the Bank of Japan has kept monetary policy loose while higher Fed interest rates have drawn money towards US bonds and the dollar. The yen has been particularly sensitive to any widening or closing of the interest rate differential.

The euro hit a two-month high at USD 1.0895 on Thursday before dipping to trade 0.14% lower at USD 1.0867. Britain’s pound reached a one-month top of USD 1.2675 before falling back 0.13% to USD 1.1268.

(Reporting by Herbert Lash, additional reporting by Harry Robertson in London and Tom Westbrook in Singapore; Editing by Marguerita Choy, Alexandra Hudson, and Jonathan Oatis)

Markets upbeat ahead of China data dump

Asian markets go into Friday’s session looking to end a strong week on a positive note, and there appears to be no obvious reason why the recent upswing should reverse unless investors opt for a bout of profit-taking ahead of the weekend.

China’s monthly ‘data dump’, when Beijing simultaneously lands several top-tier economic indicators, could go a long way to setting the market tone across Asia on Friday.

The MSCI Asia ex-Japan stock index is eyeing a sixth consecutive rise, which would mark its best run since January last year. Barring a slide of almost 3%, the index will close the week in positive territory for a fourth week.

Wall Street ended a touch lower on Thursday, but not before the Dow Jones Industrials hit 40,000 points for the first time, while the dollar and bond yields ticked higher.

On the week, the dollar and yields are lower, and stocks are higher. Broadly speaking, economic and inflation data this week from the world’s largest economy were soft, refueling investors’ belief that US interest rates will be cut soon.

A batch of top-tier indicators from China on Friday will shed light on how well – or otherwise – the world’s second-largest economy is performing, and whether it is on track to meet authorities’ 5% GDP growth target for this year.

China’s economic surprises index is at a three-month low, evidence that activity has been weaker than expected or forecasts were too high to begin with. If there is a consensus, it is gravitating around the former rather than the latter.

The latest house prices, retail sales, urban investment, industrial production, and unemployment figures are broadly expected to show economic activity accelerated last month.

The dark cloud of deflation hangs heavily over the economy – the prolonged decline in producer prices could yet drag consumer prices lower – so a set of numbers in line with, or exceeding expectations on Friday would be welcome news for China bulls and policymakers alike.

Chinese bond yields have slumped to all-time lows and the US-China yield spread has ballooned to historic wides. These extreme scenarios have cooled in recent weeks – encouraging economic numbers on Friday will likely extend that ‘normalization’ further.

Figures from Japan on Thursday, meanwhile, showed that the world’s third-largest economy fared much worse in the first quarter than economists had expected, as first-quarter GDP shrank at an annualized rate of 2.0%.

That’s the kind of number that could make the Bank of Japan think twice about its policy ‘normalization’. The yen and Japanese bond yields retreated on Thursday but are still slightly higher on the week.

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

– China house prices, retail sales, urban investment, industrial production, unemployment (April)

– Malaysia GDP (Q1)

– Hong Kong GDP (Q1)

(Reporting by Jamie McGeever; Editing by Josie Kao)

Gold climbs as cooling US inflation bolsters Fed rate cut bets

Gold climbed to a near one-month high on Wednesday, aided by a weaker dollar and lower Treasury yields after data showed US consumer prices rose less than expected in April, boosting chances of the Federal Reserve cutting interest rates.

Spot gold climbed over 1% at USD 2,386.63 per ounce by 1816 GMT. US gold futures for June delivery settled 1.5% higher at 2394.90 per ounce.

The consumer price index data “could be an early indication that over time inflation will cool and the Fed will make its first interest rate cut,” said Phillip Streible, chief market strategist at Blue Line Futures.

US CPI rose 0.3% last month after advancing 0.4% in March and February, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations for a September interest rate cut.

Economists polled by Reuters had forecast the CPI rising 0.4% on the month and advancing 3.4% year-on-year.

The dollar fell 0.6% against a basket of other major currencies to hit its lowest in over a month, making gold more attractive for other currency holders. Benchmark 10-year Treasury yields hit a more than one-month low.

Technically, the gold futures bulls have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at USD 2,400.00, wrote Jim Wyckoff, senior analyst at Kitco Metals in a note.

Traders are now pricing in about a 74% chance of a US rate cut in September, according to the CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-yielding gold.

Spot silver jumped 3.6% to USD 29.61 per ounce, palladium gained 3% to USD 1,007.19 and platinum climbed over 3% to USD 1,062.20, hitting a near one-year high.

(Reporting by Rahul Paswan and Daksh Grover in Bengaluru; Editing by Bernadette Baum, Kirsten Donovan, and Alan Barona)

Yields fall as consumer prices cool

US Treasury yields fell to more than five-week lows on Wednesday after data showed US consumer price inflation cooled in April, boosting expectations that the Federal Reserve will cut interest rates two times this year.

Headline consumer prices gained less than anticipated while closely watched core prices were in line with economists’ projections.

It comes after higher-than-expected consumer price inflation in the first quarter raised concerns that the US central bank will not be able to cut interest rates as many times as previously expected this year.

“The market is breathing a sigh of relief that we’re not seeing perpetual upside surprises in inflation,” said Gennadiy Goldberg, head of US rates strategy at TD Securities in New York.

Fed funds futures traders are now pricing in 52 basis points of cuts this year, up from 45 basis points on Tuesday, with the first 25 basis point cut likely in September.

“This print keeps the door open to a cut I think as soon as September,” Goldberg said. However, “in the absence of further catalysts, the market could struggle to continue this bullish momentum in rates.”

The market is closely watching economic releases as Fed policy remains largely data-dependent.

The US central bank will likely need to see several months of data showing inflation easing before it begins cutting rates.

“The Fed needs to see further softening and consistent softening in these inflation data if it’s going to cut rates this year,” said Stephen Gallagher, chief economist at Societe Generale in New York.

Minneapolis Fed President Neel Kashkari on Wednesday reiterated his view that he is unsure how restrictive monetary policy is right now, and that borrowing costs should stay where they are as US central bankers take stock of inflation.

The consumer price index rose 0.3% last month after advancing 0.4% in March and February, for an annual gain of 3.4%. Economists polled by Reuters had forecast the CPI gaining 0.4% on the month and advancing 3.4% year-on-year.

The closely watched core CPI rose 0.3% in April, as expected, after advancing 0.4% in March. In the 12 months through April, the core CPI increased 3.6%. That was the smallest year-on-year gain since April 2021 and followed a 3.8% increase in March.

Other data on Wednesday also showed that US retail sales were unexpectedly flat in April as higher gasoline prices pulled spending away from other goods.

Benchmark 10-year yields were last down 9 basis points at 4.356% and got as low as 4.340%, the lowest since April 5.

Two-year yields fell 8 basis points to 4.736% and reached 4.711%, also the lowest since April 5.

The inversion in the yield curve between two-year and 10-year notes was little changed on the day at minus 38 basis points.

(Reporting By Karen Brettell; Additional reporting by Sinead Carew; Editing by Andrew Heavens, Chizu Nomiyama, and Diane Craft)

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