Gold firmed on Fed pause hopes after weak US jobs data

Nov 3 – Gold prices gained on Friday as the US dollar and Treasury yields slipped after weak US jobs data cemented expectations that the Federal Reserve is done raising interest rates.

Spot gold rose 0.4% to USD 1,994.28 per ounce by 3:14 p.m. ET (1914 GMT), after hitting a session high of USD 2,003.69. US gold futures settled 0.3% higher at USD 1,999.2.

US job growth slowed more than expected in October, while wage inflation cooled, pointing to an easing in labor market conditions. Data showed employers added 150,000 jobs in October, below the 180,000 expected by economists.

“If the labor market starts to deteriorate, the Fed will be unable to continue a hawkish path. The data cements the idea of a Fed pause, which is helping gold,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Higher rates increase the opportunity cost of holding zero-yield bullion.

Adding to gold’s shine, the dollar index fell 1% and benchmark 10-year US Treasury yields fell to an over one-month low after the data.

Traders are now pricing in a 95% chance that the US central bank will leave rates unchanged in December compared to 80% before the data, according to the CME FedWatch tool.

Craig Erlam, senior markets analyst at OANDA said in a note that “USD 2,000 is a big psychological barrier (for gold) and momentum indicators suggest it may be a struggle at this time.”

Investors also keep a tab on the Middle East conflict. Gold rose more than 7% in October on safe-haven demand.

“While peace isn’t likely to break out, the situation might not escalate into a regional conflict in the short term. Given gold has had a tremendous run in the past month, we could see some consolidation or even a modest retracement,” said Tai Wong, a New York-based independent metals trader

Spot silver was up 2% at USD 23.21 per ounce, platinum rose 1.5% to USD 932.78 and palladium added 1.8% to USD 1,119.21.

(Reporting by Ashitha Shivaprasad and additional reporting by Daksh Grover in Bengaluru; Editing by David Evans, Shweta Agarwal and Shailesh Kuber)

Global money market funds attract robust inflows on central bank policy caution

Nov 3 – Investors channelled substantial sums into global money market funds in the week leading to Nov. 1, seeking the safety of these assets ahead of pivotal policy decisions from the world’s leading central banks.

The move towards money markets underscored a broader sense of caution as markets braced for the US Treasury Department’s update on financing requirements against a backdrop of an expanding budget deficit.

Investors pumped in a net USD 65.6 billion into global money market funds in their biggest weekly net purchase since March 22, data from LSEG showed.

On Tuesday, the Bank of Japan loosened its yield curve control with another policy adjustment, hinting at a cautious retreat from its extensive monetary stimulus.

A day later, the Federal Reserve maintained interest rates steady, with Chair Jerome Powell signaling the potential for further tightening.

US, European, and Asian money market funds drew inflows worth USD 56.52 billion, USD 7.43 billion, and USD 3.59 billion, respectively.

Global equity funds drew a net USD 1.79 billion, the first weekly inflow in seven thanks to a surge in demand in Asia and cooling selling pressure in the US and Europe. Investors poured about USD 2.63 billion into Asian funds, the most in four weeks.

Sectoral equity funds still witnessed outflows of about USD 4.05 billion, the highest in four, as financials, healthcare and tech lost USD 1.67 billion, USD 574 million, and USD 532 million, respectively.

Global bond funds experienced USD 5.54 billion in outflows, over ten times higher than last week. Government bond funds saw redemptions of about USD 298 million, halting a 28-week buying streak. High-yield funds faced USD 1.83 billion in sales, while corporate bond funds drew USD 1.11 billion.

In commodities, precious metal funds received USD 1.13 billion worth of inflows compared to USD 1.04 billion worth of outflows in the previous week. Additionally, energy funds received USD 44 million, a second weekly inflow.

Data for emerging markets, encompassing 28,658 funds, showed investors withdrew a net USD 3.06 billion from EM equity funds, extending net selling into a 12th week. EM bond funds also suffered USD 1.62 billion worth of disposals, a 14th straight week of outflows.

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

Oil settles down, posts weekly loss as geopolitical risk premium ebbs

Nov 3 – Oil prices settled more than 2% lower on Friday as supply concerns driven by Middle East tensions eased, while jobs data raised expectations the US Federal Reserve could be done hiking interest rates in the biggest oil-consuming economy.

Brent crude futures were down USD 1.92, or 2.3%, to USD 84.89 a barrel. US West Texas Intermediate crude futures fell USD 1.95, or 2.4%, to USD 80.51 a barrel.

Both benchmarks settled down more than 6% on the week.

Hezbollah leader Sayyed Hassan Nasrallah, speaking for the first time since the Israel-Hamas war erupted, warned on Friday that a wider conflict in the Middle East was possible but did not commit to opening another front on Israel’s border with Lebanon.

“The market is taking this conflict in its stride, as it looks to be neither a significant demand or supply disruption event,” said John Kilduff, partner at Again Capital LLC in New York.

US job growth slowed more than expected in October, official data showed, while wage inflation cooled, pointing to an easing in labor market conditions.

The data bolstered the view that the Federal Reserve need not raise interest rates further.

The Fed held interest rates steady this week, while the Bank of England kept rates at a 15-year peak, supporting oil prices as some risk appetite returned to markets.

But a private sector survey on Friday showed that while China’s services activity expanded at a slightly faster pace in October, sales grew at the softest rate in 10 months and employment stagnated as business confidence waned.

The data followed a reading from the National Bureau of Statistics on Wednesday that showed China’s manufacturing activity unexpectedly contracted in October.

On the supply side, Saudi Arabia is expected to reconfirm an extension of its voluntary oil output cut of 1 million barrels per day through December, based on analyst expectations.

The US House of Representatives easily passed a bill to bolster sanctions on Iranian oil in a strong bipartisan vote, but it was unclear how effective the legislation would be if signed into law.

While Congress can pass sanctions legislation, such measures often come with national security waivers that allow presidents discretion in applying the law.

China could also continue to import the oil despite new sanctions.

US energy firms this week cut the number of oil and natural gas rigs operating to their lowest since February 2022, energy services firm Baker Hughes said on Friday.

(Additional reporting by Ahmad Ghaddar in London; Jeslyn Lerh in Singapore; editing by Jason Neely, Kirsten Donovan, David Gregorio, and Louise Heavens)

Oil prices steady, on track for second straight week of losses

Nov 3 – Oil prices were little changed on Friday, heading for their second straight week of losses as the US central bank left the door open for possible future rate hikes and worries that the Middle East conflict would disrupt supply eased.

Brent crude futures rose 6 cents to USD 86.91 a barrel by 0010 GMT, while US West Texas Intermediate crude futures gained 12 cents, or 0.2%, to USD 82.58 a barrel.

Both benchmarks had gained more than USD 2 a barrel on Thursday. Brent was on track to fall about 4% in the week, while WTI looked set to close down 3.5%.

Geopolitical concerns remained in focus, as Israeli forces on Thursday encircled Gaza City – the Gaza Strip’s main city – in their assault on Hamas, the military said, but the Palestinian militant group resisted their drive with hit-and-run attacks from underground tunnels.

The White House said it was exploring a series of pauses in the Israel-Hamas conflict to help people safely exit Gaza and allow humanitarian aid to get in, but reiterated its opposition to a full ceasefire.

On the supply side, top oil exporter Saudi Arabia is expected to reconfirm an extension of its voluntary oil-output cut of 1 million barrels per day through December, analysts expect.

US oil rig count data is expected later in the day and will serve as an indicator of future production.

Meanwhile, the US Federal delivered a ‘dovish’ pause to its rate hikes on Wednesday, while the BoE delivered a ‘hawkish’ pause on Thursday.

(Reporting by Arathy Somasekhar in Houston; Editing by Lincoln Feast)

Peering past the policy peak

Nov 3 – A powerful rally in US and global stocks on Thursday, sparked by another slump in bond yields as investors cheer what they increasingly believe is the end of the global rate-hiking cycle, paves the way for a strong end to the week in Asia on Friday.

There is a strong current of optimism surging through global markets that rate hikes from the Federal Reserve, Bank of England, European Central Bank, and others are over.

If the Fed delivered a ‘dovish’ pause on Wednesday, the BoE delivered a ‘hawkish’ pause on Thursday. But the over-arching reaction across markets was the same – huge rallies in bonds, stocks, and risk assets.

Investors are now looking to when the easing cycles start and how far they go. Around 70 to 75 basis points of Fed easing next year is priced into the US curve, and almost 50 bps of expected rate cuts are reflected in the UK curve.

Fed Chair Jerome Powell and other policymakers around the world may insist that policy needs to remain restrictive and that rate cuts are simply not on the agenda, but markets have the bit between their teeth – the pivot is in place.

Bond yields slumped again on Thursday – the US 10-year yield is down around 40 basis points from its peak above 5% only a few days ago – the dollar fell. That’s music to emerging market ears.

Asian stocks jumped 1.7% for their best day since July. Given the strength of the rally on Wall Street and around the world later in the day, few would bet against another strong rise on Friday.

The S&P 500 chalked up its best day in six months, also boosted by strong corporate earnings and guidance – Apple reported forecast-beating quarterly sales and profit, although shares fell slightly in after-hours trade.

The three main Wall Street indexes are well on course to register their best week of the year, all eyeing weekly gains of around 5%.

Japan’s Nikkei followed Wednesday’s 2.4% leap with a 1.1% spike on Thursday. Although the yen rebounded a bit Thursday, it is still below 150 per dollar near last year’s 33-year low, and is languishing at its lowest level in over half a century on a real effective exchange rate basis.

Chinese markets, however, remain the outliers. Official and unofficial figures this week showed manufacturing sector activity unexpectedly shrank in October, dampening the optimism that had built up after the strong third-quarter GDP data.

If the Caixin non-manufacturing purchasing managers report on Friday signals a contraction in services – September’s 50.2 showed slender growth – Chinese stocks could buck the global trend and close lower on the day and the week.

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

– China, India services PMI (October)

– Australia manufacturing, services PMIs (October)

– Fed’s Barr, Barkin, Kashkari speak

(By Jamie McGeever; Editing by Josie Kao)

Dollar weakens as risk appetite rises on view Fed rate hikes are done

NEW YORK, Nov 2 – The dollar fell across the board on Thursday, as investors’ appetite for riskier currencies grew as they bet the Federal Reserve is done raising interest rates after holding them steady in the previous session.

The Fed left interest rates unchanged on Wednesday as policymakers struggled to determine whether financial conditions may be tight enough already to control inflation, or whether an economy that continues to outperform expectations may need still more restraint.

Investors, however, are increasingly convinced a peak in US interest rates has been reached, with Fed funds futures sticking with a sub-20% chance that rates will rise in December.

That view helped boost investors’ risk appetite on Thursday, helping lift equities and high-yielding assets such as commodity and emerging market currencies.

Brad Bechtel, global head of FX at Jefferies in New York, said the Fed is probably finished hiking rates, but he could see the rationale for tightening one more time given the still-resilient US economy.

“But at the same time, everyone is looking at a slowdown and inflation is going in the right direction,” Bechtel said. “We can kind of debate whether they would hike another 25 (basis points) or not. It doesn’t matter. The broader theme is that the Fed is pretty much near the peak.”

The dollar index, which measures the currency’s strength against a basket of six rivals, was 0.3% lower at 106.14.

“Markets were not pricing in any further tightening before yesterday so nothing changes there. But at the margin, a bit more conviction around the next move being a cut may be emerging,” Shaun Osborne, chief currency strategist at Scotia Bank, said in a note.

Sterling, meanwhile, rose after the Bank of England kept rates at a 15-year high and stressed that it did not expect to start cutting them any time soon.

The pound rose as much as 0.6% against the dollar to USD 1.2225, its highest level in 1-1/2 weeks after the BoE voted 6-3 to hold rates steady at 5.25%, while ruling out rate cuts anytime soon. Sterling was last up 0.4% at USD 1.2201.

The Australian dollar, often used as a proxy for risk appetite, jumped 0.54% on Thursday, while the New Zealand dollar rose 0.8%.

Norway’s central bank also left its benchmark rate unchanged, as widely expected, but said it would likely raise borrowing costs next month unless inflation showed a continued decline.

The dollar was 0.2% lower against the Norwegian crown to 11.16.

Against the yen, the dollar fell 0.3% to 150.44, off a one-year high touched earlier this week.

The yen has been struggling for traction, even as the Bank of Japan on Tuesday made another relaxation of its yield curve control policy.

A fall to a one-year low of 151.74 per dollar and 15-year low of 160.83 per euro after the BoJ’s announcement had traders on watch for possible intervention to prop up the currency.

Kazuo Ueda, the central bank’s governor, will continue to dismantle its ultra-loose monetary policy and look to exit the decade-long accommodative regime sometime next year, sources told Reuters.

Bitcoin, slipped 1.7% to USD 34,836, after hitting an 18-month high of USD 35,968 earlier in the session.

(Reporting by Gertrude Chavez-Dreyfuss and Saqib Iqbal Ahmed in New York and Samuel Indyk in London; Additional reporting by Danilo Masoni in Milan, Rae Wee in Singapore, and Stella Qiu in Sydney; Editing by Alexander Smith and Susan Fenton)

Gold gains as US dollar, yields slip; focus on jobs data

Nov 2 – Gold firmed on Thursday as the US dollar and Treasury yields retreated on raised bets that the Federal Reserve may be done raising interest rates, while investors awaited US non-farm payrolls data for further cues.

Spot gold was up 0.2% at USD 1,985.69 per ounce by 3 p.m. EDT (1900 GMT). US gold futures settled 0.3% higher at USD 1,993.50.

Helping bullion’s appeal, the dollar index slipped 0.7%, and benchmark US 10-year note yields fell to a near three-week low.

Gold is supported as there are signs of cracks in the US labor market, which probably signals the Fed is backing off completely from rate hikes, said Bob Haberkorn, senior market strategist at RJO Futures.

Data showed US weekly jobless claims rose moderately as the labor market continued to show few signs of a significant slowdown.

The Fed held rates steady on Wednesday as policymakers considered whether financial conditions may be sufficiently tight to control inflation.

The market now sees an 80% chance of another Fed pause in December, according to the CME FedWatch Tool.

Investors will also monitor the US non-farm payrolls report due on Friday for further cues on the US central bank’s policy path.

Higher interest rates raise the opportunity cost of holding bullion.

Gold rose over 7% in October and surpassed the key USD 2,000-per-ounce level last week on safe-haven demand amid growing unrest in the Middle East.

“Gold already prices in the geo-political risks. If the war expands, then prices would benefit more,” Haberkorn added.

Spot silver fell 0.9% to USD 22.77 per ounce, while platinum added 0.2% to USD 922.11.

Palladium gained 0.8% to USD 1,110.75 but was down nearly 40% for the year so far.

Shares of Johannesburg-based precious metals producer Sibanye Stillwater fell more than 3% after the company said it was considering further changes at its US palladium mines to adjust the operations to metal prices that have dropped faster than anticipated.

(Reporting by Anushree Mukherjee and Ashitha Shivaprasad in Bengaluru; Editing by Tasim Zahid and Shailesh Kuber)

China regulators probe liquidity stress that sent rates to record 50% – sources

SHANGHAI, Nov 2 – China’s financial regulators are investigating a month-end liquidity crunch that saw short-term money rates surge to as much as 50%, asking some institutions to explain why they borrowed at extremely high rates, three sources said.

The overnight rate for pledged repo – a short-term financing business – hit a record high of 50% on Oct 31, as a month-end scramble for cash and a flood of government bond sales caused stress in money markets.

The China Foreign Exchange Trade System (CFETS), a central bank affiliate that operates China’s interbank market, has asked institutions that settled trades on Tuesday at the 50% rate to submit explanations, according to two sources with direct knowledge.

“Anyone who borrowed money at very high rates needs to explain to regulators the decision-making and bidding process,” said another direct source.

(Reporting by Shanghai newsroom; Editing by Simon Cameron-Moore)

Bank of Japan likely to lift inflation forecasts, debate yield control’s future

TOKYO, Oct 31 – The Bank of Japan will likely revise up its inflation forecasts and discuss further tweaks to its bond yield control at its policy meeting on Tuesday, amid growing expectations the days of the controversial monetary tool are numbered.

The Japanese yen climbed to a two-week peak against the dollar after the Nikkei newspaper reported on Monday that the BOJ would consider making adjustments to its yield curve control (YCC) at the two-day meeting ending on Tuesday.

One of the ideas the BOJ will consider at its meeting is to allow the 10-year Japanese government bond (JGB) yield to rise above a 1% cap by revising its current guidance to conduct unlimited bond buying operations to defend that level, the Nikkei said.

“The BOJ will probably explain any such move as a technical adjustment instead of a big policy shift,” said Toru Suehiro, an economist at Daiwa Securities.

“JGB yields are already moving quite freely. Having them move even more freely won’t lead to a big change in markets.”

The BOJ sets a target of around 0% for the 10-year yield under YCC. Under criticism that its heavy defence of the cap is causing market distortions and an unwelcome yen fall, it raised its de-facto ceiling for the yield to 1.0% from 0.5% in July.

Since then, rising global bond yields and persistent inflation have put the BOJ in a tight spot with the 10-year JGB yield threatening to breach the 1% cap.

Sources told Reuters last week the BOJ could debate further tweaks to YCC at the Oct. 30-31 meeting to relax its grip on the 10-year yield.

Any such move would underpin the yen ahead of the U.S. Federal Reserve’s expected decision to keep interest rates steady at its rate review on Wednesday.

The BOJ is widely expected to maintain the 0% target for the 10-year yield and that for short-term rates at -0.1%.

In fresh quarterly forecasts due after the meeting, the BOJ is likely to revise up its projections to forecast inflation hitting or exceeding its 2% target this year and next.

But the bank is seen projecting slower inflation in 2025, reflecting weaker growth and uncertainty over next year’s wage negotiations in Japan.

Japan remains a dovish outlier among global central banks that have mostly hiked rates aggressively in recent years to combat rampant inflation.

By allowing yields to rise more, the BOJ reduces the need to ramp up bond buying and load up its already big balance sheet.

But loosening its control on Japanese yields now could heighten already increasing expectations of a near-term exit, triggering market volatility.

Despite repeated assurances by BOJ Governor Kazuo Ueda that ultra-low interest rates will stay, markets are already predicting a policy shift early next year.

Nearly two-thirds of economists polled by Reuters expect the BOJ to end negative rates next year.

Inflation has stayed above the BOJ’s 2% target for the 18th straight month in September. Surveys have shown heightening inflation expectations, which lower the real cost of borrowing.

Markets are focusing on Ueda’s post-meeting briefing for clues on how soon the BOJ could embark on a full-fledged exit.

(Reporting by Leika Kihara. Editing by Sam Holmes)

Yield curve control morphs

Japan’s yield cap has evolved into a reference rate, with the Bank of Japan redefining its 1% limit on 10-year government bond yields as an “upper bound” rather than a rigid target.

It will keep buying bonds, but time will tell whether and how tenaciously it will impede yields rising beyond 1%. The move was foreshadowed in the Nikkei newspaper and having bought the rumour, markets sold the fact.

The yen slipped back to 150 per dollar. After touching an almost 10-year low in morning trade, Japanese government bond futures 2JGBv1 rallied following the announcement. The Nikkei bounced 0.5%.

For now, investors seem to think that U.S. interest rates and the dollar will stay in the driver’s seat – leaving the yen to languish at an effective rate that is its lowest on record.

In the longer run, higher Japanese rates might encourage investors in the world’s biggest creditor nation to keep their money at home, instead of buying so many offshore assets. That could finally trigger some gains for the battered yen.

For the meantime the sense that some sort of anchor remains also spread some cheer to Treasury trade, sparking a brief rally.

Bond market focus now shifts to the US, where the Federal Reserve meets and the Treasury lays out its bond-selling plans.

On Monday the US Treasury Department said it expects to borrow USD 776 billion in the fourth quarter, USD 76 billion less than it had anticipated in July. Its detailed refunding plans are due on Wednesday, as is the Fed’s policy decision.

In Europe, GDP and inflation data is due later on Tuesday.

Around the grounds in Asia, an unexpected contraction in Chinese manufacturing activity dented hope that China’s economy had bottomed and that a recovery, however fragile, was underway.

Falls in Hong Kong and Shanghai led MSCI’s broadest index of Asia-Pacific shares outside Japan 0.9% lower.

Samsung Electronics announced its best quarterly profit of the year and an executive said the chip industry had reached bottom. Shares were steady.

In Australia, Origin Energy’s largest shareholder spurned a takeover bid from a Brookfield consortium, and Treasury Wine Estates TWE.AX agreed a USD 900 million buyout of US rival DAOU Vineyards, adding exposure to a market it has long struggled to dominate.

Meanwhile, outside of markets, Hamas said its militants fired anti-tank missiles at Israel’s invading forces in Gaza early on Tuesday as the conflict intensified.

(Tom Westbrook)

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