Oil prices dip, but set for weekly gain of over 3%

HOUSTON, March 15 – Oil prices dipped on Friday, a day after topping USD 85 a barrel for the first time since November, but prices were expected to finish more than 3% higher for the week on rising demand from US refiners completing planned overhauls.

Brent crude oil futures slid 9 cents or 0.11% to USD 85.33 a barrel at 12:16 p.m. CDT (1716 GMT). US West Texas Intermediate (WTI) crude was down 17 cents or 0.21% to USD 81.09.

“Supplies are tightening” for motor fuels, said Phil Flynn, analyst at Price Futures Group. “Prices are at risk to go higher.”

But “there are worries the US Federal Reserve won’t be able to cut interest rates” because inflation remains above the central bank’s target of 2%, Flynn added.

Cuts in interest rates are seen as opportunities for demand growth in the United States.

Prices had been range-bound for much of the last month roughly between USD 80 to USD 84 a barrel. Then the International Energy Agency on Thursday raised its view on 2024 oil demand for a fourth time since November as Houthi attacks have disrupted Red Sea shipping.

World oil demand will rise by 1.3 million bpd in 2024, the IEA said in its latest report, up 110,000 bpd from last month. It forecasts a slight supply deficit this year should OPEC+ members sustain their output cuts having previously forecast a surplus.

US energy firms this week added the biggest number of oil and natural gas rigs in a week since September, with the oil rig count also rising to its highest in six months, energy services firm Baker Hughes said in its closely followed report on Friday.

The oil and gas rig count, an early indicator of future output, rose by seven to 629 in the week to March 15. Baker Hughes said oil rigs rose six to 510 this week, their highest since September, while gas rigs rose one to 116.

The gains this week have come despite the US dollar strengthening at its fastest pace in eight weeks. A stronger dollar makes crude more expensive for users of other currencies.

Also supporting prices were Ukrainian strikes on Russian oil refineries, which caused a fire at Rosneft’s biggest refinery in one of the most serious attacks against Russia’s energy sector in recent months.

“We’re continuing to tread water,” said John Kilduff, partner with Again Capital LLC said of Friday’s activity.

US crude oil stockpiles also fell unexpectedly last week as refineries ramped up processing while gasoline inventories slumped as demand rose, the Energy Information Administration said on Wednesday.

Lower interest rates cut consumer borrowing costs, which can boost economic growth and demand for oil.

In the US, some signs of slowing economic activity were seen as unlikely to spur the Federal Reserve to start cutting interest rates before June as other data on Thursday showed a larger-than-expected increase in producer prices last month.

(Reporting by Erwin Seba; Additional reporting by Noah Browning, Arathy Somasekhar, and Sudarshan Varadhan; Editing by Michael Perry, Jason Neely, David Gregorio, and Alexander Smith)

Oil dips on profit taking after price crosses USD 85

March 15 – Oil prices edged lower on Friday but were on track to gain nearly 4% for the week as sharp declines in US crude and fuel inventories, drone strikes on Russian refineries, and a rise in energy demand forecasts buoyed prices.

Brent crude oil futures for May fell 41 cents, or 0.5%, to USD 85.01 a barrel at 1234 GMT, after crossing USD 85 a barrel for the first time since November on Thursday. US West Texas Intermediate (WTI) crude for April fell 32 cents, or 0.4%, to USD 80.94.

The International Energy Agency on Thursday raised its view on 2024 oil demand growth for a fourth time since November as Houthi attacks disrupt Red Sea shipping.

World oil demand will rise by 1.3 million bpd in 2024, the IEA said in its latest report, up 110,000 bpd from last month. It forecasted a slight supply deficit this year after OPEC+ members extended cuts, from a surplus previously.

Also supporting oil prices, Ukraine struck Russian oil refineries in a second day of heavy drone attacks on Wednesday, causing a fire at Rosneft’s biggest refinery in one of the most serious attacks against Russia’s energy sector in recent months.

US crude oil stockpiles fell unexpectedly last week as refineries ramped up processing while gasoline inventories slumped as demand rose, the Energy Information Administration (EIA) said on Wednesday.

On the demand side, China’s central bank is expected to leave a key policy rate unchanged when it rolls over maturing medium-term loans on Friday, a Reuters survey showed.

Lower interest rates cut consumer borrowing costs, which can boost economic growth and demand for oil.

In the United States, some signs of slowing economic activity were unlikely to spur the Federal Reserve to start cutting interest rates before June as other data on Thursday showed a larger-than-expected increase in producer prices last month.

(Reporting by Arathy Somasekhar in Houston; Editing by Stephen Coates)

Markets under pressure, China house prices eyed

March 15 – Asian markets are likely to come under downward pressure at the open on Friday, following the sharp rise in US bond yields and the dollar the previous day on the back of yet another hotter-than-expected US inflation report.

Wall Street’s late slide on Thursday – the S&P 500 and Nasdaq both shed 0.3% – could tempt investors to play safe ahead of the weekend and steer Asian equities away from what would be their seventh weekly rise in eight.

The MSCI Asia ex-Japan index would need to avoid falling 0.5% or more to notch a weekly gain. Japan’s Nikkei 225, on the other hand, goes into Friday’s session down more than 2% on the week and on track for its worst week this year.

The pullback in Japanese stocks should come as little surprise – the Nikkei hit a record high above 40,000 points last week and the Bank of Japan next week could deliver its first interest rate hike in 17 years.

The Asia and Pacific economic calendar on Friday includes South Korean trade figures and import and export prices, New Zealand’s manufacturing PMI for February, and Japan’s ‘tertiary index’ gauge of conditions in the services sector.

Japan watchers are also awaiting the findings of a preliminary survey of national wage round talks from labor union umbrella group Rengo. Sources have told Reuters that signs of strong wage growth could be the switch that flips the Bank of Japan into raising rates next week.

Japanese news agency Jiji reported on Thursday that the BOJ has started to make arrangements to end its negative interest rate policy next week.

The main indicator though will probably be Chinese house prices for the month of February. They fell at an annual rate of 0.7% in January, the biggest decline in almost a year, and have been declining almost every month since April 2022.

A turnaround in the embattled property sector is needed for the broader economy to get going again, and to convince investors that the market and economic nadir has passed.

Curiously, China’s economic surprises index this week rose to its highest level since October, begging the question: strong data, or lousy expectations to begin with? Maybe a bit of both.

A reasonably bullish case, however, could be made for Asian risk assets on Friday. Even though the US 10-year yield and dollar had their biggest rises in a month and Fed rate cut expectations were pared back, Wall Street only fell 0.3%.

Chipmakers and tech stocks across the region could also get a boost from Apple supplier Foxconn saying on Thursday that it expects a significant rise in revenue driven by booming demand for artificial intelligence servers.

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

– China house prices (February)

– Japan tertiary index (January)

– New Zealand manufacturing PMI (February)

(By Jamie McGeever)

Wall St ends down after PPI data and as chipmakers fall

NEW YORK, March 14 – US stocks dropped on Thursday, with chipmaker stocks extending losses for a second day, and as a jump in producer prices left investors wondering if the Federal Reserve might wait longer than expected to cut interest rates.

Data showed US producer prices increased more than expected in February as the cost of goods like gasoline and food surged.

Rate-sensitive utilities and real estate were the day’s weakest sectors, with real estate down 1.6% and utilities off 0.8%.

The Fed is expected to leave rates unchanged at its policy meeting next week. The market has trimmed the odds of a cut of at least 25 basis points at its June meeting to 62.9%, CME’s FedWatch Tool showed, down from 81.7% a week ago.

“If we take inflation as a whole, we’ve had relatively hot inflation readings the last two months now, yet the market has kind of powered higher,” said Tony Welch, chief investment officer of SignatureFD.

“Fed policy may not be as loose as the market wanted it to be this year, but the prospect of further tightening still remains a low probability.”

Nvidia shares fell 3.2%, while an index of semiconductors was down 1.8%. The index is down 3.5% for the week so far, with investors taking profits after recent sharp gains.

The Dow Jones Industrial Average fell 137.66 points, or 0.35%, to 38,905.66. The S&P 500 lost 14.83 points, or 0.29%, at 5,150.48 and the Nasdaq Composite dropped 49.24 points, or 0.3%, to 16,128.53.

The S&P 500 remains up about 8% for the year to date.

The small-cap Russell 2000 fell 2% on the day, underperforming the broader market.

“There’s nervousness about the market being very extended with a relatively narrow breadth. You can see the anxiety from the hotter PPI expressed in the Russell index of small and midcap names,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

Other data showed US retail sales rebounded in February, rising 0.6%, but less than the 0.8% advance expected.

Shares of Robinhood Markets rose 5.2% after the trading app operator said its assets under custody rose 16% in February.

Volume on US exchanges was 13.1 billion shares, compared with the 12.1 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancers on the NYSE by a 3.77-to-1 ratio; on Nasdaq, a 3.08-to-1 ratio favored decliners.

The S&P 500 posted 39 new 52-week highs and no new lows; the Nasdaq Composite recorded 57 new highs and 186 new lows.

(Reporting by Caroline Valetkevitch; Additional reporting by Sinead Carew in New York, Bansari Mayur Kamdar, and Shashwat Chauhan in Bengaluru; Editing by Pooja Desai and Richard Chang)

US Treasury yields climb on strong February inflation data

WASHINGTON, March 14 – US Treasury yields climbed on Thursday following hotter-than-expected February inflation data, raising uncertainty about whether the Federal Reserve would cut interest rates later than June, as widely expected.

The benchmark 10-year note yield was last up 10.2 basis points (bps) at 4.294%, on track for its best daily gain since mid-February.

US two-year yields were up 6.5 bps on the day at 4.687%. Both the two-year and 10-year yields rose for the fourth consecutive day and touched two-week lows.

Data showed the producer price index rose 0.6% in February, exceeding forecasts of 0.3% and the previous month’s increase. This follows Tuesday’s surprisingly solid increase in the consumer price index for February.

Still, the data only slightly dented speculation in the futures markets that the Fed would ease in June for the first time since it began hiking the Fed funds rate from near-zero in March 2022.

The Fed holds a two-day policy meeting next week, in which it is expected to hold rates in the 5.25%-to-5.5% range until June. At least two more rate cuts are likely by year-end. The Fed is looking for data that gives them more confidence inflation is on a path to their 2% goal.

Traders in Fed funds futures reduced bets that the Fed will cut rates by June to 60.6%, from 66.7% on Wednesday, according to the CME Group’s FedWatch tool.

“This data really pushes back on the market pricing,” said Subadra Rajappa, head of US rates strategy at Societe Generale in New York.

“If you look at the market pricing of cuts, June really feels like a coin toss as opposed to a shoo-in now like it was over the last couple of weeks.”

In addition to February’s PPI data, initial jobless claims for the week ending March 9 also came in stronger than expected. There were 209,000 claims on the week, lower than the 218,000 expected.

Retail sales disappointed in February, meanwhile, ticking up 0.6% month over month versus an expected 0.8% increase.

“The one observation that we’ll add is the pace of retail sales during Q1 hints of the specter of stagflation – although it’s only a couple prints and insufficient to draw any broad-based conclusion,” Ian Lyngen, managing director and head of US rates strategy for BMO Capital Markets, said in a note.

“The knee-jerk response to the data was bond-bearish but the price action has faded and the theme of unchanged and quiet trading has re-emerged.”

In other maturities, the 30-year bond yield was last up 9.4 bps to 4.412%. Like the two- and 10-year, it also briefly touched its highest in two weeks.

The US yield curve, meanwhile, which measures the yield spread between two-year and 10-year notes steepened or narrowed its inversion on Thursday to minus 39.5 bps from minus 44.7 bps on Wednesday.

An inverted yield curve typically predicts an upcoming recession.

(Reporting by Matt Tracy; Editing by Richard Chang and Jonathan Oatis)

US dollar gains as strong economic data could reduce rate cuts this year

NEW YORK, March 14 – The US dollar advanced on Thursday, boosted by data showing hotter-than-expected producer prices last month and fewer people seeking unemployment claims, which suggested that the Federal Reserve could reduce the number of rate cuts this year.

The Bank of Japan has started to make arrangements to end its negative interest rate policy at the March 18-19 meeting, Jiji news agency reported. The yen firmed against both the dollar and euro after the report but it has since weakened versus the greenback.

Preliminary results of Japan’s spring wage negotiations are due on Friday, with several of the country’s biggest companies having already agreed to meet union demands for pay increases.

The dollar was last up 0.4% versus the yen at 148.29 yen, while the euro stayed lower against the Japanese unit, down 0.2% at 161.49.

The dollar index, which gauges the currency against six major peers, rose in three of the last four sessions. It was last up 0.6% at 103.36. For the week, the index was up 0.6%, on pace for its largest weekly gain since mid-January.

Data on Thursday showed the US producer price index for final demand rose 0.6% in February after advancing by an unrevised 0.3% in January. Economists had forecast the PPI climbing 0.3%.

In the 12 months through February, the PPI surged 1.6% after advancing 1.0% in January. The report followed data on Tuesday that consumer prices increased strongly for a second straight month in February.

A separate report from the Labor Department was also better-than-expected, showing that US initial claims for state unemployment benefits fell 1,000 to a seasonally-adjusted 209,000 for the week ended March 9. Economists had forecast 218,000 claims in the latest week.

“There is the possibility that the Fed next week raises the median dot for 2024 and 2025, which means fewer rate cuts,” said Thierry Albert Wizman, global FX and rates strategist, at Macquarie in New York.

“The US economy has stayed strong looks like through the first quarter and there has been some evidence that the disinflation trend is slowing.”

The Fed’s current dot plot, or the central bank’s interest rate forecast, showed three rate cuts for 2024, but that was released at the December meeting and inflation numbers since then have been sticky.

The US central bank’s policy meeting is set to run from March 19-20 and while the market is not expecting any change in interest rates, investors will be closely watching for revisions to the dot plot.

US rate futures have pared back the chances of a rate cut at the June meeting to 60%, from about 67% late on Wednesday, according to LSEG’s rate probability app. For 2024, the market is now pricing in less than three rate cuts, down from between three to four roughly two weeks ago.

Another piece of data on Thursday showed some deceleration in spending. US retail sales rose 0.6% last month and the numbers for January were revised lower to show sales tumbling 1.1% instead of 0.8% as previously reported.

Economists polled by Reuters had forecast retail sales in February, which are mostly goods and are not adjusted for inflation, rising 0.8% in February.

The retail sales report, however, has not dented the market’s growing conviction that the Fed’s rate-cutting cycle will be gradual.

In other currencies, the euro dropped 0.6% to USD 1.0885. There was no major European economic data on Thursday.

Sterling fell as well versus the dollar, sliding 0.5% to USD 1.2736.

In cryptocurrencies, bitcoin continued its upward march, hitting a record USD 73,803. It was last down 3.5% at USD 70,612. Exchange-traded bitcoin funds and optimism that the Fed will cut interest rates this year have boosted the biggest cryptocurrency.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Harry Robertson in London and Brigid Riley in Tokyo; Editing by Christopher Cushing, Elaine Hardcastle, and Sharon Singleton)

Gold retreats as dollar, yields firm on higher US inflation data

March 14 – Gold slid on Thursday after a larger-than-expected rise in February’s US producer price index (PPI) cooled expectations of early rate cuts by the Federal Reserve, boosting Treasury yields and the dollar.

Spot gold was down 0.6% at USD 2,161.39 per ounce as of 2:32 p.m. EDT (1832 GMT), moving away from a record peak of USD 2,194.99 hit on March 8.

US gold futures settled 0.6% lower at USD 2,167.5.

The dollar gained 0.6% against its rivals, making gold less attractive for other currency holders, while benchmark US 10-year note yields rose to a more than one-week high.

“I expect to see continued pressure (on gold), with all of the data showing the US economy is strong, the labor market still strong,” said Chris Gaffney, president of world markets at EverBank.

“It really makes investors question just how quickly the Fed’s going to decide to start cutting (rates).”

US producer prices increased more than expected in February amid a surge in the cost of goods like gasoline and food, which could fan fears that inflation is picking up again.

Higher inflation adds pressure on the Fed to keep interest rates elevated, weighing on non-yielding assets such as gold.

However, traders continue to bet on interest rate cuts in June, pricing in about a 60% chance, compared with 72% before the CPI data earlier this week, according to the CME Group’s FedWatch Tool.

The Fed is expected to hold rates steady at its policy meeting next week, but the focus will be on the “dot plot” projections.

“Gold is an uncertainty hedge, an inflation hedge with higher inflation and more uncertainty. I think that provides a good floor for precious metals pricing,” Gaffney added.

Spot platinum fell 0.8% to USD 930.95 per ounce, while palladium rose 0.8% to USD 1,067.79.

Silver slipped 0.8% to USD 24.83, after hitting a more than three-month high earlier in the session.

(Reporting by Anjana Anil in Bengaluru; Editing by Jan Harvey, Shailesh Kuber, and Shweta Agarwal)

Currency market subdued ahead of fresh US economic data

TOKYO, March 14 – The currency market was sedate on Thursday, with the US dollar consolidating against major peers as market players awaited more data from the world’s largest economy for clues on the direction of Federal Reserve policy.

Tuesday’s hotter-than-expected US consumer price index (CPI) has re-ignited concern that inflation could remain sticky, leaving traders to reassess if the Fed will start cutting interest rates at its June meeting as previously expected.

Market participants still see a 65% chance of a rate cut in June, though that has edged down from 71% earlier in the week, according to LSEG’s rate probability app. The likelihood of a July rate cut sits around 83%.

With the Fed widely expected to hold rates steady at its meeting next week, attention will be on the bank’s updated economic projections.

“The data is driving marginal changes in rate expectations, but ultimately, the markets have been pretty settled recently on three cuts this year,” said Kyle Rodda, senior financial market analyst at Capital.com.

“A more hawkish Fed next week could lower that to two (rate cuts) and defer expectations for the first to September,” which would essentially be a bull case for the US dollar, he said.

The dollar index, which measures the greenback against a basket of six currencies, was mostly flat at 102.77.

Markets will be scrutinizing US retail sales data, the producer prices index (PPI) report, and jobless claims due later on Thursday for more evidence of the economy slowing down.

Fed Chair Jerome Powell said last week the US central bank was “not far” from gaining the confidence needed to begin easing.

Against the yen, the dollar held at 147.69 yen, as an exit from negative rates at the Bank of Japan’s monetary policy meeting on March 18-19 continues to be a close call.

Sources told Reuters that Japan’s central bank will debate ending negative rates next week if big firms’ wage talks yield strong results.

The preliminary results of the spring wage negotiations are due on Friday, and news has already begun to trickle out that several of the country’s biggest companies have agreed to fully meet union demands for pay increases.

Elsewhere, the euro was holding steady against the dollar at USD 1.0949, ahead of remarks by several European Central Bank officials on Thursday.

The sterling was flat at USD 1.2796. Data on Wednesday showed Britain’s economy returned to growth in January after entering a shallow recession in the second half of 2023.

In cryptocurrencies, bitcoin was last down 0.28% to USD 72,950.00, after hitting a record high of USD 73,678 the previous session.

Ether fell 0.03% to USD 3,991.00.

(Reporting by Brigid Riley; Editing by Christopher Cushing)

Count down to Japan’s date with destiny

March 14 – A day of consolidation and narrow range-trading across world stocks on Wednesday gives Asian markets no clear direction on Thursday, allowing investors to gear up for next week’s potentially seismic Bank of Japan policy meeting.

The main event in Asia’s economic calendar on Thursday is the release of Indian wholesale price inflation. This comes a day after figures showed annual consumer inflation was marginally hotter than expected in February, although industrial production fell short of expectations.

Inflationary pressures, as measured by wholesale prices, remain muted. The last time annual wholesale price inflation was above 1% was almost a year ago, and prices were declining outright between April and October last year.

Economists polled by Reuters expect annual WPI inflation to inch lower to 0.25%.

Developments in Tokyo, meanwhile, suggest momentum is building toward the BOJ raising interest rates next Wednesday. This would end the negative interest rate policy that has been in place for eight years, and would be the first rate hike in 14 years.

Sources have told Reuters that the BOJ will debate raising rates if a preliminary survey on Friday on big firms’ wage talks, to be released by union umbrella Rengo, is positive.

Sustainable wage growth is seen as a key plank of ensuring Japan’s decades-long battle with deflation is over.

On Wednesday, car giant Toyota Motor agreed to give factory workers their biggest pay increase in 25 years, heightening expectations that bumper pay raises will be matched elsewhere, giving the BOJ the green light to move.

A head of steam appears to be building. Representatives of government, labor, and management held a tripartite meeting on Wednesday to push wage hikes across the country, and according to union sources, progress was made.

Japanese stocks fell a mild 0.26% on Wednesday as the profit-taking from last week’s record high continued. It was the fourth decline out of the last five sessions, suggesting traders may also be bracing for a BOJ move.

The two-year JGB yield edged back above 0.20%, although the yen hardly moved.

Meanwhile, fraught US-Sino relations over trade, tech, and spying took another twist on Wednesday after the US House of Representatives passed a bill that would give TikTok’s Chinese owner ByteDance about six months to divest the US assets of the short-video app, or face a ban.

US President Joe Biden said he wants the Senate to give swift approval.

The measure is the latest in a series of moves in Washington to respond to US national security concerns about China, from connected vehicles to advanced artificial intelligence chips to cranes at US ports.

Elsewhere in Asia on Thursday, investors also await retail sales data from Indonesia, and industrial production and producer prices from Hong Kong.

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

– India wholesale price inflation (February)

– Indonesia retail sales (February)

– Hong Kong producer price inflation (February)

(By Jamie McGeever; Editing by Josie Kao)

Wall Street ends mostly lower as chipmakers ease; inflation data ahead

NEW YORK, March 13 – The S&P 500 and Nasdaq edged lower on Wednesday as investors took profits in chipmaker stocks, while they braced for producer price data and further clues on the inflation trend ahead of next week’s Federal Reserve meeting.

An index of semiconductors eased 2.5% after recent strong gains, but was up 17% for the year to date. Shares of Nvidia, which have led the recent rally fueled by optimism about artificial intelligence, fell 1.1%.

Investors are looking ahead to Nvidia’s global GTC developer conference on AI from March 18-21 and any AI-related announcements.

Intel shares fell 4.4%. Bloomberg reported that the Pentagon had pulled out of a plan to spend as much as USD 2.5 billion on a chip grant to the company.

February US producer price data due on Thursday could offer further insight into the inflation picture.

“The last reading actually helped to underscore the hotter inflation trend. So this is going to be important,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

While the US central bank is widely expected to leave interest rates unchanged when it meets next week, traders see a 65% chance of the first rate cut coming in June, the CME FedWatch Tool showed.

The Dow Jones Industrial Average rose 37.83 points, or 0.1%, to 39,043.32. The S&P 500 lost 9.96 points, or 0.19%, at 5,165.31 and the Nasdaq Composite dropped 87.87 points, or 0.54%, to 16,177.77.

Tuesday’s slightly hotter-than-expected consumer price data failed to dampen hopes of rate cuts in the coming months.

Monthly US retail sales data also is due on Thursday.

Among other declining shares, Dollar Tree slumped 14.2% after the discount store chain said it would close nearly 1,000 stores and posted a net loss in the previous quarter, hurt by an over-USD 1 billion goodwill impairment charge.

McDonald’s shares fell 3.9% after its chief financial officer said international sales could fall sequentially in the current quarter.

Volume on US exchanges was 11.12 billion shares, compared with the 12 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered decliners on the NYSE by a 1.53-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored decliners.

The S&P 500 posted 59 new 52-week highs and no new lows; the Nasdaq Composite recorded 89 new highs and 110 new lows.

(Reporting by Caroline Valetkevitch; additional reporting by Bansari Mayur Kamdar and Johann M Cherian in Bengaluru; Editing by Pooja Desai and Richard Chang)

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