Dollar little changed on MLK Day, sterling slides in risk-off trading

LONDON, Jan 15 – The dollar was little changed on Monday in cautious during a US public holiday, while risk-sensitive sterling slid ahead of a busy week for UK economic data.

The dollar index, measuring the US currency against six peers, was up 0.13% at 102.64, on the Martin Luther King (MLK) Day holiday.

Bets on Federal Reserve cuts this year, beginning as early as March, have intensified after data on Friday showed US producer prices unexpectedly fell in December.

Market pricing now points to a 77% chance that the US central bank will begin easing rates in March, up from 68% a week ago, according to the CME FedWatch tool.

“Despite the upside surprise to the CPI on Thursday, investors grew increasingly confident that the Fed is likely to cut rates soon,” said Jim Reid, strategist at Deutsche Bank.

In the broader market, traders also watch out for UK inflation, jobs data, and retail sales due later in the week, as markets continue to focus on how soon major central banks globally could begin easing rates this year.

Sterling slipped 0.27% to USD 1.2717, though it remained close to a two-week peak hit last week.

“It’s a big UK data week,” said Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets, adding that the general risk-off mood across markets and speculation on the upcoming data is keeping the pound under pressure.

CIBC expects earnings, inflation, and retail spending data to come all below consensus forecasts.

The euro hovered near the $1.10 mark and was last 0.08% lower on the day at $1.0941.

In Asia, the yen remained under pressure, down 0.63% at 145.83 per dollar, moving closer to its lowest level since mid-December, on expectations that the Bank of Japan will keep its ultra-loose policy settings unchanged at its policy meeting next week.

CHINA, TAIWAN

The yuan fell on Monday to a one-month low after China’s central bank surprised markets by keeping its medium-term policy rate unchanged, defying market expectations it would cut rates to shore up China’s bumpy post-pandemic economic recovery.

That sent the onshore yuan sliding to a one-month low of 7.1813 per dollar before it recouped some of those losses to trade down 0.08% at 7.1744.

“Some economists have argued that the PBoC may have chosen to hold rates steady to avoid further downside in the yuan, and excess volatility in the FX market,” said Kathleen Brooks, research director at XTB.

Rate cuts could still be on the table, said Tommy Wo, senior economist at Commerzbank.

“There will be more room for PBoC rate cuts when the timing of Fed’s rate reduction becomes clearer.”

Elsewhere, the Taiwan dollar fell to a more than three-week low of 31.284 per US dollar, after the Democratic Progressive Party’s (DPP) Lai Ching-te won the presidency over the weekend, though his party lost its majority in parliament

Analysts now fear policy paralysis.

“DPP lost the majority in the parliament. Hence Lai is ruling with a weaker mandate than Tsai Ing-wen,” said Allan von Mehren, director at Danske Bank.

He expects continued tensions in the Taiwan Strait but not a further escalation.

“China will continue to deter Taiwanese independence with military drills around the island and Taiwan and the US are likely to continue to have closer relations but without crossing China’s red line”.

(Reporting by Joice Alves in London; Additional reporting by Rae Wee and Vidya Ranganathan, Faith Hung in Taipei; Editing by Jamie Freed, Angus MacSwan, Sharon Singleton, and Tomasz Janowski)

European stocks fall as yields rise, China skips rate cut

LONDON/SYDNEY, Jan 15 – European stocks fell on Monday as bond yields climbed, and Chinese equities dipped after the country’s central bank unnerved investors by skipping an expected rate cut.

US markets were closed for Martin Luther King, Jr. Day.

Europe’s STOXX 600 index was last down 0.5%, taking its fall for the year to around 1%, after a 13% increase in 2023.

Britain’s FTSE 100 was 0.4% lower and Germany’s DAX was off by 0.5%.

The Chinese CSI 300 index fell to its lowest since 2019 but finished 0.1% lower as investors digested the central bank’s decision to leave its medium-term policy rate unchanged on Monday, defying expectations for a cut.

Investors are set for a busy week with data on Chinese fourth-quarter growth, British inflation, and US retail sales all due on Wednesday.

They will also be listening closely to central bank officials, especially the Federal Reserve’s Christopher Waller, whose dovish turn in late November helped to send markets soaring and who speaks on Tuesday.

Duncan Toms, multi-asset strategist at HSBC, said markets were vulnerable to a reconsideration of expectations for heavy rate cuts this year.

“With so much in the price… there is little support to be expected for valuations,” he said. “We expect a rather broad-based correction across all asset classes.”

Traders expect around 165 basis points of rate cuts from the Fed this year, and see an 80% chance of them starting in March, according to money market pricing.

“The first half of January has shown a dislocation between rate expectations and data in the US,” said Francesco Pesole, currency strategist at ING.

“The two most important data points for the Federal Reserve, labor and CPI inflation figures, both came in hotter than expected.”

ECB OFFICIALS PUSH BACK ON RATE CUTS

US Treasury trading was shut on Monday, but Germany’s 10-year bond yield was up 5 basis points at 2.195%, around its highest level since mid-December.

Prices, which move inversely to yields, fell as European Central Bank officials pushed back against market expectations for rapid interest rate cuts this year.

Japanese stocks continued to shine, with the Nikkei 225 index hitting a 34-year high above 36,000. The market has been buoyed by falls in the yen and US bond yields in recent days.

The focus of world leaders and executives gathering for the 54th World Economic Forum meeting this week in Davos, Switzerland, will be global politics.

However, markets showed a limited reaction to the victory of the ruling Democratic Progressive Party in Taiwan over the weekend, a result which displeased Beijing.

The US Republican Iowa caucus will be run in frigid weather later on Monday. At the same time, concern is running high about a broadening of the Middle East conflict.

The euro was treading water at USD 1.095, while the dollar index rose 0.14% to around 102.65.

Oil prices have drawn support from disruptions to shipping in the Red Sea, though doubts about demand this year have limited the rally.

Brent crude oil was last down 0.8% at USD 77.66 a barrel, down from a two-week high of USD 80.75 on Friday.

(Reporting by Harry Robertson in London and Wayne Cole in Sydney; Editing by Sonali Paul, Christopher Cushing, Angus MacSwan, Barbara Lewis, and Alex Richardson)

Gold rises as safe-haven demand, rate cut bets keep prices elevated

Jan 15 – Gold prices advanced on Monday, as the metal’s appeal was boosted by safe-haven demand owing to tensions in the Middle East, while markets raised bets that the Federal Reserve will cut rates as soon as March.

Spot gold was up 0.2% at USD 2,052.10 per ounce, as of 10:34 a.m. ET (1534 GMT). US gold futures rose 0.2% to USD 2,056.40, with trading expected to be low due to the Martin Luther King Day holiday.

The war between Israel and Hamas has passed the 100-day mark as Israel continues its fierce offensive, while the Houthi militia’s threat to respond to US air strikes on Yemen kept risks elevated.

Gold tends to perform well during economic turmoil, with reliability that can help offset the risk of more volatile assets in conditions such as geopolitical uncertainty.

“Spot gold is also rising as markets cling on to hopes that the Fed will cut its benchmark rates as early as March,” said Han Tan, chief market analyst at Exinity Group.

“Gold’s window for posting fresh record highs should remain open as long as the Fed can move in line with market expectations,” Tan added.

Bullion hit an all-time high of USD 2,135.40 on Dec. 4.

Supporting gold, data on Friday showed US producer prices unexpectedly fell in December, sending 10-year Treasury yields lower.

Traders are now pricing in a 73% chance that the Fed could cut rates in March, according to CME’s Fed watch tool.

Higher interest rates raise the opportunity cost of investing in non-yielding bullion.

In other metals, spot silver was down 0.1% to USD 23.16 per ounce, platinum climbed 0.6% to USD 910.92 and palladium lost 0.8% to USD 968.25.

“Despite the gradual shift towards surplus, we believe (palladium) prices may rally modestly this year,” HSBC said in a note.

(Reporting by Anjana Anil in Bengaluru; Editing by Sharon Singleton, Louise Heavens, and Andrea Ricci)

Funds most bearish on dollar since August: McGeever

ORLANDO, Florida, Jan 15 – The US dollar is off to a strong start this year but no thanks to hedge funds and foreign exchange speculators, who have extended their bets against the world’s reserve currency to levels last seen in August.

The latest Commodity Futures Trading Commission data show that funds increased their net short dollar position against a range of major and emerging currencies to USD 12.7 billion in the week ending Jan. 9 from USD 10.5 billion the week before.

That’s the largest net short position since the week ending Aug. 22, and marks a swing of more than USD 22 billion from the USD 10 billion net long in mid-November. That was the largest aggregate bullish dollar bet in over a year.

Funds have now cranked up their bearish bets against the dollar in six of the last seven weeks, which dovetails with interest rate and money markets that continue to price in more than 150 basis points of rate cuts from the Federal Reserve this year.

Short-term interest rate spreads have moved against the dollar quite significantly in recent weeks. The two-year US-German spread, for example, has shrunk around 25 basis points this year to its narrowest since August.

Yet so far this year the dollar has rallied against nearly every major currency, most notably a 3% jump against the Japanese yen. It is something of a puzzle.

As HSBC currency analysts note, the CFTC positioning data contradicts the message from strong US growth figures relative to other major economies, and a hawkish Fed relative to the market.

“The former still paints the impression of US exceptionalism and the latter’s messaging is not as dovish in tone compared with the market pricing,” they wrote on Sunday.

FIGHTING THE FED

It is indeed curious that currency speculators are leaning so heavily against the dollar and rates traders are betting on 150 bps of rate cuts this year – double what the Fed itself indicated in its December Summary of Economic Projections.

While economic activity is likely to slow, many economists are abandoning their 2024 recession calls in favor of some degree of ‘soft landing’, the labor market is still creating jobs, and corporate earnings growth is tracking over 10%.

Compare with the euro zone that is either in or flirting with recession, expected UK GDP growth this year of less than 1% – the weakest of all G7 nations, according to the IMF – and a potentially less hawkish outlook for the Bank of Japan.

The upshot is the 2024 path for the other G4 central banks could be more dovish than markets had envisaged only a few weeks ago. All else equal, this should weigh on their respective currencies.

As 2024 gets underway, the FX market at large appears to be leaning in this direction. Hedge funds are leaning the other way, and digging in.

(By Jamie McGeever; Editing by Christopher Cushing)

Oil slips; investors eye Mideast developments

SINGAPORE, Jan 15 – Oil prices slipped on Monday with traders watching out for supply disruption risk in the Middle East following strikes by US and British forces to stop Houthi militia in Yemen from attacking ships in the Red Sea.

Brent crude futures fell 31 cents, or 0.4%, to USD 77.98 a barrel by 0124 GMT after settling up 1.1% on Friday. US West Texas Intermediate crude was at USD 72.36 a barrel, down 32 cents, or 0.4%, following a near 1% gain in the previous session.

The benchmarks jumped more than 2% last week to touch their highest intraday levels this year after US and British forces launched dozens of air strikes against Houthi forces in retaliation for months of attacks on Red Sea shipping that the Iran-backed fighters cast as a response to the war in Gaza.

On Sunday, the Houthi militia threatened a “strong and effective response” after the United States carried out another strike overnight, ratcheting up tension. The US later said it shot down a missile fired at one of its ships from Houthi militant areas of Yemen.

President Joe Biden said the United States had sent a private message to Iran about the Houthi attacks.

Several tanker owners steered clear of the Red Sea and multiple tankers changed course on Friday following the strikes, although traders were still watching out for Iran’s response and impact on shipments in the Strait of Hormuz, the world’s most important oil chokepoint.

“As the Middle East conflict is currently not affecting oil production, the geopolitical risk premium priced in oil prices now appears modest based on the implied volatility of options,” Goldman Sachs analysts said in a note.

“While unlikely to materialize in our view, we estimate that oil prices would rise 20% in the first month of a Strait of Hormuz interruption, and may temporarily double in a less likely extended disruption.”

In Libya, people protesting against perceived corruption threatened to shut down two more oil and gas facilities after shutting the 300,000 barrel-per-day Sharara field on Jan. 7.

In the US, power and natural gas companies were preparing on Friday for extreme cold over the Martin Luther King Day holiday weekend that is expected to cause record gas demand while also cutting supplies by freezing wells.

(Reporting by Florence Tan; Editing by Christopher Cushing)

Dollar wobbles; yuan on guard ahead of China data dump

SINGAPORE, Jan 15 – The dollar ebbed on Monday on renewed expectations of a rate cut by the Federal Reserve in March, while the Chinese yuan struggled near a one-month low ahead of a slew of economic data this week.

China’s fourth-quarter gross domestic product (GDP), December industrial production, retail sales, and unemployment rate are among the economic indicators out on Wednesday, which are likely to provide further clarity on the pace of recovery in the world’s second-largest economy.

Traders also have their eye on a reading on UK inflation due later in the week, as the market focus remains on how soon major central banks globally could begin easing rates this year.

The euro hovered near the USD 1.10 mark in early Asia trade, with the single currency last at USD 1.0946.

Sterling stood near its two-week peak hit last week and last bought USD 1.2732, while the dollar index was flat at 102.50, having drifted largely sideways over the past couple of sessions.

Bets for a Fed cut in March have gathered some steam after data on Friday showed US producer prices unexpectedly fell in December, sending US Treasury yields sliding in response.

“We move past the US CPI and PPI releases and the market has become even more convinced that the Fed’s easing cycle starts in March, with a 25bp cut priced for every meeting from this starting point,” said Chris Weston, head of research at Pepperstone.

Market pricing now points to a 78% chance that the US central bank will begin easing rates in March, as compared to a 68% chance a week ago, according to the CME FedWatch tool.

In Asia, the yen remained under pressure at 145.04 per dollar on expectations that the Bank of Japan is likely to keep its ultra-loose policy settings unchanged at its upcoming policy meeting next week.

The offshore yuan languished near a one-month low of 7.1925 per dollar hit on Friday, and was last at 7.1861 per dollar.

China’s central bank is expected to ramp up liquidity injections and cut a key interest rate when it rolls over maturing medium-term policy loans on Monday, as authorities try to get the shaky economy back on more solid footing.

“I think more PBOC (People’s Bank of China) easing is coming this year,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

“I don’t think (Monday’s move) will materially weigh on the (yuan) because a rate cut is more or less priced in.

“I’ll also watch out for the data dump from China… I expect the activity data and GDP figure to show weak momentum into the end of 2023.”

The Australian dollar, often used as a liquid proxy for the yuan, edged 0.07% higher to USD 0.6690. The New Zealand dollar slipped 0.13% to USD 0.6233.

“I think the risks are skewed to an even weaker signal from the Chinese economy and that could be a headwind for… risk currencies like the Aussie and kiwi,” said Kong.

Elsewhere, the Taiwan dollar was little changed and last at 31.13 per dollar, after the Democratic Progressive Party’s (DPP) Lai Ching-te won the presidency over the weekend, though his party lost its majority in parliament.

Analysts expect Taiwan’s stock market to take a hit this week as the specter of policy paralysis fuels selling in a market that is up 25% in little more than a year.

“On net, we do not expect large post-election market moves, given the outcomes were broadly in line with polls, no major changes in economic policy, and likely limited impact on cross-strait trade,” said analysts at Goldman Sachs, who are neutral on the Taiwan dollar.

(Reporting by Rae Wee; Editing by Jamie Freed)

Taiwan election a relief for world markets, concern for local investors

SINGAPORE, Jan 14 – Taiwan’s election could allay global concerns about the island’s relations with China, while prompting a light selloff domestically on Monday as investors worry the result could hinder economic policy.

Vice President Lai Ching-te won the presidency on Saturday, the third consecutive term for his ruling Democratic Progressive Party (DPP), but the party lost its parliamentary majority, complicating Lai’s spending plans and any intent to take an aggressive stance on China.

China, which claims Taiwan as its territory, had called Lai a separatist and “troublemaker through and through”, but took a gentler tone after the election, not mentioning him by name and saying the results revealed the DPP “cannot represent the mainstream public opinion” on Taiwan.

Analysts expect Taiwan’s stock market to take a hit this week as the specter of policy paralysis fuels selling in a market that is up 25% in little more than a year.

Yet the outcome is also a relief for investors who had feared the hawkish Lai would push for Taiwan’s formal independence, something he has denied. Investors have worried about a hostile reaction from China and a chain reaction of sanctions that could cripple the global semiconductor industry.

“I would imagine the reaction is negative. The market could read weak government in Taiwan, lots of external risks from the mainland and lots of internal risks, because there is no control of the legislature,” said Alicia Garcia Herrero, chief economist Asia-Pacific at French investment bank Natixis in Hong Kong.

But Herrero’s says Lai’s “balanced” victory speech and the stalemate in parliament are reasons China may not react.

“If China does nothing, maybe the market will read it is not a big deal and might remain positive,” she said.

While investors expect some knee-jerk selling of Taiwan stocks and even the currency this week, it is likely market participants will sit tight until the new government takes office.

Parliament will open on Feb. 1 and Lai’s Cabinet will take office on May 20.

Aninda Mitra, head of Asia macro and investment strategy at BNY Mellon Investment Management, expects heated political rhetoric and other short-term ructions as Taiwan politicians and their Chinese and US counterparts trade jabs in the coming days.

“On the macro, geopolitical side I don’t think there will be huge ripples from a global perspective,” said Vishnu Varathan, chief economist, Asia ex-Japan at Mizuho Bank in Singapore.

But the DPP’s loss of a parliamentary majority was a bigger issue, he said. “The Taiwan dollar might take a little bit of a knock on the greater potential for stalemate.”

In the weeks ahead, investors will get a better sense of how much support Lai will get from parliament, where his DPP won 51 seats to the opposition Kuomintang’s 52 and the Taiwan People’s Party’s eight.

WHAT CHINA DOES

China’s reaction remains the wild card for global markets.

Beijing on Saturday pointed out most electors voted against Lai. Lai, meanwhile, kept it vague, saying there was a need for cooperation but that he was “determined to safeguard Taiwan from threats and intimidation from China”.

The stakes are high for global markets, given expectations the United States would support Taiwan if China were to invade.

Taiwan produces 60% of the world’s semiconductors, used in everything from smartphones and fighter jets, and 90% of the most advanced chips. Economic sanctions on Taiwan could cripple the global technology and artificial intelligence sectors.

Its biggest company, Taiwan Semiconductor Manufacturing Co., has often found itself in the cross-hairs of geopolitical tensions and trade sanctions. Shares of TSMC, Asia’s most valuable listed company, surged 32% in 2023.

“From here on what will need a lot more assessment are the strategic policies of the incoming Taiwanese government and their internal cohesion,” said Mitra.

“Will they try to balance their relationship with China and the US or pull away from one or the other? It remains too soon to definitively answer these questions right now.”

(Reporting by Tom Westbrook and Ankur Banerjee; Additional reporting by Roger Tung in Taipei; Writing by Vidya Ranganathan; Editing by William Mallard)

Red Sea tensions put focus on struggling US energy stocks

NEW YORK, Jan 12 – A recent rally that has boosted nearly every corner of the US stock market has left energy shares behind, and bullish investors are betting upcoming earnings reports and rising geopolitical tensions could spark a rebound for the struggling group.

The energy sector has slumped nearly 3% since late October, a period during which the S&P 500 has surged 16%. The benchmark index rose 24% for all of 2023, while energy fell 4.8%, the second-largest drop last year among S&P 500 sectors.

The sector’s struggles have continued even as other economically sensitive groups such as banks and small-cap stocks have benefited from investors’ growing belief that the economy will be able to navigate a “soft landing” where growth remains stable while inflation subsides.

One key reason for the sector’s underperformance has been a sharp downturn in oil prices. US crude is down over 20% since late September, to around USD 73 a barrel, pressured by strong supplies, particularly in the US, and concerns about tepid demand in China and Europe, investors said.

“Right now, oil prices have been … leading the stocks,” said Matthew Maley, chief market strategist at Miller Tabak. “So if oil prices can break out a little bit from here, which would catch people a little off guard, this energy group is going to start playing catch up real quick.”

Strategists at the Wells Fargo Investment Institute (WFII) this week upgraded their rating on the energy sector to “favorable” from “neutral,” saying “oil prices will bottom with the global economy and then finish the year higher.”

A potential rise in Middle East tensions and any OPEC actions on production are factors that could influence near-term oil prices.

Prices for US crude jumped as much as 4.5% on Friday before settling up 0.9%, after several oil tankers diverted course from the Red Sea following overnight air and sea strikes by the United States and Britain on Houthi targets in Yemen. The energy sector ended up 1.3% on the day.

“While a resolution of the problems in the Red Sea would be bearish for oil, it appears as though the situation is escalating and the risk should drive oil prices higher,” wrote Mike O’Rourke, chief market strategist at JonesTrading.

Another key factor for the group will be upcoming quarterly earnings reports. Oil services firm SLB, formerly called Schlumberger, reports next week, with Baker Hughes and Marathon Petroleum among those expected later in the month.

Energy is expected to post the worst full-year 2023 earnings performance of any sector, falling nearly 26% overall, LSEG data showed. But its earnings are expected to increase 1.6% in 2024.

Ahead of results, WFII strategists this week also pointed to “historically cheap” valuations for energy shares, noting that the sector trades at around 10 times trailing earnings versus a trailing P/E ratio of 22 times for the overall S&P 500.

Improving earnings trends and enticing valuations are among the factors supporting energy shares along with the potential for the group to be a hedge should geopolitical tensions rise, said Walter Todd, chief investment officer at Greenwood Capital. The firm is overweight energy in its portfolios, including shares of Conocophillips and Chevron.

While energy earnings are improving, the sector’s estimated performance this year is still expected to trail the 11.1% increase for the overall S&P 500 in 2024.

Robert Pavlik, senior portfolio manager at Dakota Wealth Management, said he thinks oil is fairly priced, pointing to the expected slowing of the US economy and doubts the Middle East conflict would give the commodity a lasting boost. Pavlik said he has “slightly less than market exposure” to energy shares, preferring other sectors such as industrials and technology.

“I think there are other areas of the market that will benefit most likely more than energy,” Pavlik said.

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

US yields sink after producer prices data boost early rate cut bets

NEW YORK, Jan 12 – US Treasury yields slid on Friday after producer prices data for December fell unexpectedly, raising bets of an early interest rate cut by the Federal Reserve this year.

US two-year yields dropped to their lowest since May at 4.119% in the wake of the data. They were last down 11.8 basis points (bps) at 4.142%. For the week, two-year yields, which reflect rate move expectations, were down 13.1 bps, their worst weekly showing in a month.

The benchmark 10-year yield, on the other hand, slid to a one-week trough of 3.916%, and was last at 3.955%, down 1.7 bps.

Data showing that the US producer price index for final demand slipped 0.1% last month pressured Treasury yields. The numbers for November were revised to show the PPI falling 0.1% instead of being unchanged as previously reported. Economists polled by Reuters had forecast the PPI rebounding 0.1%.

“The path continues to clear for the Fed to begin cutting interest rates in 2024 and to slow the pace at which they shrink their balance sheet,” Bill Adams, chief economist for Comerica Bank in Dallas, write in emailed comments.

Comerica, Adams added, forecasts that the first rate cut will be at the June policy meeting and the Fed will begin slowing balance sheet run-off or quantitative tightening in the second half of the year.

The PPI report follows Thursday’s consumer price index (CPI)data that came in slightly hotter than expected. The headline CPI rose 3.4% in December on a yearly basis versus the consensus forecast of a 3.2% increase.

The CPI numbers briefly pushed US Treasury yields higher.

Thierry Albert Wizman, global rates and FX strategist at Macquarie in New York, pointed out, however, that the real concern lies in potential supply shocks due to interruptions in global shipping in the midst of the situation in the Red Sea.

“That’s the main concern. It’s not that we’re getting an increase in aggregate demand, but we’re getting a reduction in supply instead that causes inflation,” Wizman said.

For instance, container shipping rates for key global routes have already soared this week, with US and UK air strikes on Yemen stirring concerns of a prolonged disruption to global trade in Red Sea, one of the world’s busiest routes.

The closely watched spread between 10-year and two-year US Treasury yields on Friday steepened further, or narrowed its inversion to minus 18 bps. That was the least inverted since November, with the curve last at minus 18.6 bps.

Analysts referred to Friday’s yield curve move as a bull steepener, in which short-term interest rates post sharper falls than longer-dated ones. This reflects market expectations the Fed will soon start cutting rates.

The US rate futures market has priced a nearly 80% chance of a rate cut at the Fed’s March policy meeting after the PPI data, up from 71% late on Thursday, according to LSEG’s rate probability app. For 2024, futures traders are betting on at least six rate cuts of 25 bps each, taking down the fed funds rate to 3.6% by the end of the year.

Macquarie’s Wizman said he is not convinced the Fed will cut rates in March. Wizman noted that it will take time for the Fed to go from a tightening to an easing bias.

“Presumably the Fed would have prepared the markets sufficiently for a cut, and that’s going to take a few meeting cycles. It’s more likely in June,” Wizman said.

In other maturities, US 30-year bond yields slipped 2.1 bps to 4.158%.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Toby Chopra, Andrea Ricci, and Will Dunham)

Global money market funds see third weekly inflow ahead of US inflation data

Jan 12 – Global investors accumulated money market funds for a third straight week in the seven days to Jan. 10, while pulling back from equity funds, as they favored safer bets ahead of key US inflation data.

Global money market funds secured a net USD 57.04 billion worth of inflows during the week, according to LSEG data.

The US consumer price index (CPI) data for December, released on Thursday, exceeded economists’ expectations, casting doubt on early interest rate cuts by the Federal Reserve. The CPI rose 0.3% in December, after a 0.1% increase in November.

By region, European and Asian money market funds were particularly in demand, as they drew inflows worth USD 26.25 billion and USD 24.23 billion, respectively. Meanwhile, US funds received just USD 4.6 billion.

In the equities segment, global investors sold about USD 7.72 billion worth of funds, posting a second consecutive week of outflows.

By equity sectors, consumer discretionary funds faced outflows of USD 614 million, the biggest weekly net selling since Sept. 27, 2022. Healthcare, and metals & mining sectors drew USD 582 million and USD 556 million worth of inflows, respectively.

Simultaneously, global bond funds garnered USD 10.77 billion in net buying, a third weekly inflows in a row.

Global corporate bond funds received USD 5.73 billion in a third straight week of net buying. Investors also poured USD 1.25 billion and USD 1.02 billion, respectively into government and high-yield funds.

Among commodities, precious metal funds suffered about USD 813 million in net selling, the biggest weekly outflow since Oct. 25, 2023. Energy funds also witnessed around USD 321 million worth of net disposals.

Data covering 27,981 funds in the emerging markets showed that investors poured about USD 174 million in bond funds, staying net buyers for a third successive week. They also purchased about USD 37 million worth of EM equity funds.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Varun H K)

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