Dollar pauses rally as markets brace for US nonfarm payrolls test

SINGAPORE, Oct 6 – The dollar dipped on Friday but traders were largely keeping to the sidelines in both the currency and US Treasury markets as they looked to US nonfarm payrolls data later in the day for potential catalysts.

Friday’s closely-watched jobs report comes on the heels of a run of resilient US economic data which has reinforced the Federal Reserve’s hawkish messaging of higher-for-longer rates and sent the greenback and US Treasury yields surging.

The dollar index , which earlier in the week hit a roughly 11-month high of 107.34, last settled at 106.37, but remained on track for 12 straight weeks of gains.

“There’s an element here of just taking stock ahead of what should be a very important data release,” said Rodrigo Catril, senior FX strategist at National Australia Bank.

“We’ve got to be mindful that at the moment, US Treasury yields and the dollar, in particular, have been very reactive to positive data releases coming from the US, and therefore there’s potential for fireworks tonight.”

A broad selloff in world government bonds also stabilised on Friday, with the 30-year US Treasury yield last at 4.900%, after spiking above 5% for the first time since 2007 earlier in the week.

Bond yields move inversely to prices.

The benchmark 10-year Treasury yield last stood at 4.7269%, while the two-year yield settled at 5.0267%.

The pause in the dollar’s rally has also provided a much-needed reprieve for the yen, which last bought 148.48 per dollar.

Its sudden-but-brief spike of about 2% to 147.30 per dollar on Tuesday stoked speculation that Japanese authorities could have intervened in the currency market to shore up the battered yen, though data from the Bank of Japan (BOJ) seemed to suggest otherwise.

“Whether the BOJ and/or (Ministry of Finance) will intervene at distinct levels … will continue to be a tease, contingent on broader currency markets and momentum,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.

“Currency traders may tease out thresholds, but should be warned to do so only cautiously.”

Elsewhere, the euro slipped 0.03% to $1.0546 and was on track for a 0.25% decline for the week, extending its run of losses into a 12th week.

Sterling edged 0.03% lower to $1.2188 and was likewise headed for five straight weeks of losses, struggling against a dominant dollar.

“The backdrop remains one in which the Fed is sticking its hawkish neck out much further than the European Central Bank, Bank of England, Reserve Bank of Australia (and the) BOJ,” said Thierry Wizman, Macquarie’s global FX and interest rates strategist.

The Australian dollar fell 0.05% to USD 0.6367, while the New Zealand dollar gained 0.11% to USD 0.59695, after both Antipodean currencies tumbled earlier in the week on the back of their respective central bank decisions.

The RBA on Tuesday held interest rates steady for a fourth month, with the Reserve Bank of New Zealand following suit a day after, both in line with expectations, though their messaging came in less hawkish than expected.

The Aussie was eyeing a weekly drop of more than 1%, while the kiwi was headed for a more than 0.5% fall.

(Reporting by Rae Wee. Editing by Shri Navaratnam)

Wall St ends down slightly; investors await Friday’s payrolls

NEW YORK, Oct 6 – US stocks ended just slightly lower after bouncing off session lows on Thursday as investors awaited Friday’s monthly jobs report and further possible clues on the outlook for interest rates.

US data on initial claims for state unemployment benefits pointed to still-resilient labor market conditions, a day after a report showing US private payrolls increased less than expected in September.

Friday’s monthly payrolls report could be the week’s most important economic news, however, investors remained concerned about whether the Federal Reserve will keep rates higher for longer.

Benchmark US Treasury yields eased. Earlier this week, they hit their highest since 2007.

Stocks ended well off their weakest levels of the session, and strategists noted the S&P 500 was holding above its 200-day moving average, currently at around 4,206.

“It looks like we’re trying to hold here, and the reason is probably because yields have come down somewhat and these comments by Mary Daly may have also helped a little bit,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

San Francisco Fed Bank President Mary Daly said at the Economic Club of New York that with U.S. monetary policy “well into” restrictive territory and the recent rise in U.S. Treasury yields, the Fed may not need to raise rates any more.

The Dow Jones Industrial Average fell 9.98 points, or 0.03%, to 33,119.57, the S&P 500 lost 5.56 points, or 0.13%, to 4,258.19 and the Nasdaq Composite dropped 16.18 points, or 0.12%, to 13,219.83.

Among the day’s decliners, Clorox Co dropped 5.2% as the cleaning products maker said it expects to post a first-quarter loss.

Also, shares of Dell Technologies were down 1.5% after the company’s revenue forecast signaled that an AI boost may take longer to materialize.

After recent market weakness, investors are keen for third-quarter earnings reports to kick off mid-month. S&P 500 company earnings overall are expected to have risen 1.6% year-over-year for the quarter, according to LSEG IBES data.

Volume on US exchanges was 9.76 billion shares, compared with the 10.63 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 1.11-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favored decliners.

The S&P 500 posted three new 52-week highs and 39 new lows; the Nasdaq Composite recorded 24 new highs and 330 new lows.

(Reporting by Caroline Valetkevitch; additional reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Shounak Dasgupta and David Gregorio)

Nasdaq leads Wall Street rebound after weaker-than-expected data

NEW YORK, Oct 4 – US stocks ended higher and the Nasdaq gained more than 1% on Wednesday, a day after a sell-off, as the latest economic data showed US private payrolls increased less than expected in September.

Consumer discretionary rose 2%, leading S&P 500 sectors higher, followed by communication services and technology, as US Treasury yields eased off of 16-year highs.

The ADP National Employment Report was cheered by investors worried about rising interest rates and the likelihood that the Federal Reserve may need to keep rates higher for longer.

“On a technical basis, we’re probably a little bit oversold,” said Oliver Pursche, senior vice president and advisor for Wealthspire Advisors in Westport, Connecticut.

Recent weakness had brought the S&P 500 near its 200-day moving average, currently at around 4,203.

“This September we saw a shift in both strategist and investor belief,” he said. “It seems like it finally sunk in that interest rates are going to remain higher for longer, and that the idea that the Fed is going to cut rates any time soon is fictional.”

Other data on Wednesday showed new orders for US-made goods increased more than expected in August, although Friday’s jobs report for September is the week’s key economic news.

The Dow Jones Industrial Average rose 127.17 points, or 0.39%, to 33,129.55, the S&P 500 gained 34.3 points, or 0.81%, at 4,263.75 and the Nasdaq Composite added 176.54 points, or 1.35%, at 13,236.01.

Several mega-cap shares including Amazon.com (AMZN) were higher on the day.

Ford Motor (F) was near flat even as the automaker posted a nearly 8% rise in US auto sales for the third quarter.

Investors looking for non-economic data to focus on are keen for third-quarter earnings reports to kick off mid-month. S&P 500 company earnings are expected to have risen 1.6% year-over-year for the quarter, according to LSEG data.

Volume on US exchanges totaled 10.50 billion shares, compared with the 10.63 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered decliners on the NYSE by a 1.45-to-1 ratio; on Nasdaq, a 1.30-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and 40 new lows; the Nasdaq Composite recorded 18 new highs and 398 new lows.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Shounak Dasgupta and Richard Chang)

US recap: Treasury yields’ moment of doubt dents dollar

Oct 4 – The dollar index fell 0.27% on Wednesday amid a retreat in Treasury yields and oil prices as the markets stepped back to ponder the potential negative economic impact and sustainability of those trends.

Wednesday’s moment of doubt included USD/JPY’s uptrend after its 150.165-147.30 dive from Tuesday’s 2023 peak and today’s crude oil collapse, with little clarity provided by the day’s US economic data.

ADP’s 89k employment increase missed the 153k forecast. Friday’s non-farm payrolls are forecast slipping to 170k from 187k and are given far more weight by markets.

ISM services were as forecast at 53.6, off slightly from August’s 54.5, weighed down by new orders dropping from 57.5 to 51.8, a nine-month lows.

August factory orders beat forecast, but did so largely due to a 9.4% surge in orders from petroleum refineries that boosted gasoline supplies enough to send those prices down 26% from August highs and toward 2023’s lows.

The euro zone is seen likely to contract in Q3, while US Q3 GDP forecasts are as high at 4.9% annualized. And the ECB is seen even less likely than the Fed to hike rates again.

EUR/USD rose 0.37% amid the broader dollar pullback and 7bp rebound in 2-year bund-Treasury yields spreads. The bounce from Tuesday’s 1.0448 low on EBS might need Friday’s payrolls report to echo Wednesday weak ADP to gain traction.

USD/JPY was flat in a very tight trading range by 149 that it’s been in since rebounding from Tuesday’s suspicious 150.165-147.30 plunge just after bullish JOLTS data.

The potential threat of Japanese intervention to support the yen has left the USD/JPY uptrend in limbo, but still above key kijun support at Tuesday’s 147.30 spike low.

Sterling rose 0.5%, aided by an upward revision to UK September PMIs, though still in contraction below 50. The rebound came after 10- and 30-year Treasury yields fell after probing key resistance earlier on Wednesday.

Thursday features US jobless claims and trade balance, but all eyes are on Friday’s jobs report.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Bumpy September for auto ETFs as UAW strike, higher rates weigh

Oct 4 – Exchange-traded funds tracking automakers saw net outflows last month on worries over the United Auto Workers’ (UAW) strike against the “Detroit Three” and higher interest rates.

Production at General Motors (GM), Ford (F) and Chrysler parent Stellantis (STLAM) have taken a beating as the UAW strike headed into the 20th day.

The USD 41.2 million First Trust Nasdaq Transportation ETF – that counts GM among its top holdings – saw net outflows of USD 11.6 million last month, compared with outflows of USD 3 million in August, according to Lipper data.

“Investors are being cautious about holding automaker stocks right now given the uncertain outcome and length of the strike,” said Bryan Armour, director of passive strategies research for North America at Morningstar.

“The redemption of ~20% of the (First Trust) ETF’s net assets in mid-September could have been related to the UAW strike, although it’s tough to say with certainty.”

JPMorgan has estimated a hit to operating profit of USD 191 million for GM and USD 145 million for Ford in the third quarter from the strike.

The bigger USD 719.63 million Global X Autonomous & Electric Vehicles (DRIV), where the three affected carmakers make up just 5% of the portfolio, saw net outflows of USD 12.3 million in September, improving from outflows of USD 59.3 in the prior month.

The First Trust fund fell 4.4% last month, while the Global X fund was down 5.7%.

EV-focused funds remain quite depressed, although that’s been the case for some time, said Todd Sohn, ETF and technical strategist at Strategas Securities.

“Rate pressure is definitely an agitation, and the recent strike just adds to heap.”

Funds tracking Tesla (TSLA) also failed to draw inflows last month despite hopes that the strikes would help the EV maker expand its market share.

The USD 1.02 billion Direxion Daily TSLA Bull 1.5X Shares ETF saw its first month of outflows in four.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Anil D’Silva)

Oil settles down more than USD 5 as US data shows weak demand for gasoline

Oct 4 – Oil prices settled down more than USD 5 on Wednesday as fuel demand destruction and a bleaker macroeconomic picture took center stage in the day’s trade.

Brent crude oil futures settled down 5.11, or 5.6%, to USD 85.81 a barrel while US West Texas Intermediate crude (WTI) fell USD 5.01, or 5.6%, to USD 84.22.

At their session lows, both benchmarks were down by more than USD 5, and heating oil and gasoline futures also fell by more than 5%. Crude oil prices have fallen by about USD 10 since last week’s settlement.

Finished motor gasoline supplied, a proxy for demand, fell last week to about 8 million bpd, its lowest since the start of this year, the US Energy Information Administration (EIA) reported Wednesday.

Some of that demand destruction could be due to torrential rains which brought flooding to New York last Friday and post-tropical storm Ophelia, which doused the Northeast with torrential downpours in late September, said Bob Yawger, director of energy futures at Mizuho.

Seasonally, US gasoline consumption is at the lowest level in 22 years, according to commodity analysts at JP Morgan.

A 30% spike in fuel prices in the third quarter of this year depressed demand, resulting in a counter-seasonal plunge of 223,000 barrels per day, the analysts wrote in a Wednesday note.

Gasoline stocks rose by 6.5 million barrels, far exceeding expectations of a 200,000-barrel rise.

US nationwide crude stocks fell by 2.2 million barrels to 414.1 million barrels in the week to Sept. 29, but stocks at Cushing, Oklahoma, the WTI delivery hub, rose for the first time in eight weeks.

Saudi Arabia’s energy ministry confirmed it will continue its voluntary 1 million barrel per day (bpd) crude supply cut until year-end, while Russia said it will continue its 300,000 bpd crude export cuts, and in November will review its voluntary 500,000 bpd output cut set in April.

But crack spreads, a proxy for refining margins, fell below USD 20 a barrel on Wednesday to the lowest level in about 1.5 years.

This margin “freefall” indicates high prices and interest rates are curtailing crude inventory purchases and increasing the odds of a recession, said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

“This could force further demand weakness that the Saudis and Russia may be unable to counter via additional production cuts,” Ritterbusch said.

Economic news also pressured oil prices. Growth in the US services sector slowed in September, data showed.

The daily Kommersant reported that Russia could be ready to ease its diesel ban in the coming days, citing unidentified sources.

The OPEC+ Joint Ministerial Monitoring Committee (JMMC) online meeting kept the group’s output policy unchanged.

Oil markets are heading in the “right direction” by balancing supply and demand, Kuwait’s oil minister Saad Al Barrak said, according to state media agency KUNA.

Russian Deputy Prime Minister Alexander Novak said the Saudi and Russian cuts have helped to balance oil markets, and said the domestic market benefited from the Kremlin’s diesel and gasoline export ban.

(Reporting by Robert Harvey, Laura Sanicola, and Muyu Xu; Editing by Mark Potter, Louise Heavens, Nick Macfie, and David Gregorio)

Breaking point?

Oct 4 – Another crushing selloff in US Treasuries, one of the biggest falls in world stocks this year, suspected currency market intervention from Japan, and political turmoil in Washington as House of Representatives speaker Kevin McCarthy was booted from his job.

It’s safe to say Tuesday was a volatile day across world markets. It’s probably also safe to say Asian markets will open on the defensive and investors will be running for cover on Wednesday.

The trouble is, with the apparently safest asset on the planet at the epicenter of the storm, there doesn’t appear to be anywhere obvious to take shelter.

The heavy selling across the US government bond curve accelerated on Tuesday after strong US jobs data, pushing the 10-year yield up to a new 16-year high of 4.80%. It is up almost 25 basis points in barely 48 hours.

The 2s/10s yield curve inversion is now only 35 basis points, the smallest this year, and the inflation-adjusted 10-year ‘real’ yield is up at 2.45%, the highest since 2008.

‘Bond King’ Bill Gross, formerly of PIMCO fame, tweeted that a 30-year mortgage rate of 7.7% “shuts down” the US housing market. Fears are growing that something somewhere in the investment universe will soon break, such is the blistering rise in bond yields.

But where can investors turn?

Gold? It fell only 0.2% on Tuesday but the fact it failed to rise at all in such a febrile ‘risk-off’ environment is telling. Gold is at a seven-month low and has fallen seven days in a row, its longest losing streak since 2018.

The Swiss franc? It weakened against the mighty dollar.

The Japanese yen? Yes, it rallied on Tuesday but only thanks to suspected intervention from Japanese authorities after briefly slipping below 150.00 per dollar.

The greenback snapped back almost three yen then settled around 149.00 yen at the close of US trading. A senior Japanese ministry of finance official declined to comment and the New York Fed did not respond to requests for comment.

Japanese stocks had already slumped to a four-month low before the yen’s sudden burst of strength. The Nikkei – and stocks across Asia – will likely fall further on Wednesday.

In this climate, the regional data and policy calendar is of much less significance. Purchasing managers index reports from Japan, Australia and South Korea will be released, and the Reserve Bank of New Zealand will announce its latest interest rate decision on Wednesday.

The RBNZ is widely seen holding its key interest rate at 5.50% – the highest in nearly 15 years – and keeping it there at least until March before lowering it shortly after.

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

– New Zealand interest rate decision

– US Fed’s Schmid, Bowman, Goolsbee all speak

– South Korea industrial output, retail sales (August)

(By Jamie McGeever; Editing by Josie Kao)

S&P 500 ends at lowest since June 1 as data fuels rate worries

NEW YORK, Oct 3 – The S&P 500 index closed at its lowest level since June 1 on Tuesday as economic data underscored the view the Federal Reserve may need to keep interest rates high.

The Dow turned negative for the year for the first time since June and ended at its lowest level since May 31. The Nasdaq also closed at its lowest since May 31.

Data showed US job openings unexpectedly increased in August, fueling worries about a tight labor market ahead of Friday’s key US monthly jobs report.

Investors continue to closely watch benchmark Treasury yields, which hit 16-year highs on Tuesday.

“The scenario that most investors were assuming is the Fed would need to ultimately cut short-term rates, and we would return to a favorable interest rate environment,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

“But investors are seeing a different scenario now – higher rates for longer.”

Higher borrowing costs are a negative for businesses and consumers.

All but one S&P 500 sector – utilities – were lower on the day, led by declines in consumer discretionary and technology. Growth companies tend to be among the hardest hit by rising yields.

The Dow Jones Industrial Average fell 430.97 points, or 1.29%, to 33,002.38, the S&P 500 lost 58.94 points, or 1.37%, at 4,229.45 and the Nasdaq Composite dropped 248.31 points, or 1.87%, to 13,059.47.

The CBOE volatility index, Wall Street’s “fear gauge,” hit its highest close since May 24.

Atlanta Fed President Raphael Bostic said there is no urgency for the central bank to raise its policy rate again, but it will likely be “a long time” before rate cuts are appropriate. Cleveland Fed President Loretta Mester said she is open to raising rates again, potentially at the bank’s next meeting.

Shares of Amazon.com (AMZN) and Microsoft (MSFT) dropped after Reuters reported British media regulator Ofcom will push for an antitrust investigation into the companies’ dominance of the UK cloud computing market.

Investors are getting ready for US companies in the coming weeks to begin reporting on the last quarter, with some hoping the results could provide some positive news again for the market.

While the Dow is down 0.4% for the year, the Nasdaq remains up about 25% since Dec. 31 after a rally driven by enthusiasm over artificial intelligence.

Volume on US exchanges was 11.16 billion shares, compared with the 10.57 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancers on the NYSE by a 5.61-to-1 ratio; on Nasdaq, a 3.52-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and 63 new lows; the Nasdaq Composite recorded 15 new highs and 439 new lows.

(Reporting by Caroline Valetkevitch; additional reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Vinay Dwivedi, Maju Samuel, and Richard Chang)

Gold at seven-month low as US dollar, yields extend rally

Oct 3 – Gold prices languished near a seven-month low on Tuesday, weighed down by a robust dollar and elevated bond yields as the likelihood of US interest rates staying higher for longer dominated sentiment.

Spot gold was down 0.1% at USD 1,825.09 per ounce at 1:49 p.m. EDT (1749 GMT), after hitting its lowest level since early March.

US gold futures settled 0.3% lower at USD 1,841.50 per ounce.

US job openings unexpectedly increased in August, pointing to tight labor market conditions that could compel the US Federal Reserve to raise interest rates next month.

“The JOLTS report has surprised the market as it raises prospects of another hike but also lowers expectation of a slowdown in the US economy, pressuring precious metals,” said Edward Moya, senior market analyst at OANDA.

Gold is considered a hedge against inflation and economic uncertainties. But higher interest rates raise the opportunity cost of holding bullion, which is priced in dollars and does not yield interest.

Gold prices briefly ticked up earlier in the session as the dollar sharply weakened against the yen, just moments after briefly rising above 150 for the first time since October 2022, signaling a possible intervention by the Bank of Japan.

“If the Bank of Japan intervenes, it could weaken the dollar in the short term and provide some support to the precious metals,” Moya added.

The market focus is now on September nonfarm payrolls data due on Friday.

“We reiterate our 12-month target of USD 1,725 per ounce and remain cautious on gold,” said Julius Baer analyst Carsten Menke.

Spot silver rose 0.6% to USD 21.20 per ounce. Platinum fell 0.7% to USD 871.40.

Palladium, primarily used by automakers, slipped 1.5% to USD 1,183.20, its lowest since late 2018.

“Palladium looks structurally challenged because demand is geared towards cars with an internal combustion engine,” BofA wrote in a note dated Oct. 2.

“Palladium may be the first casualty of the energy transition.”

(Reporting by Ashitha Shivaprasad in Bengaluru; editing by Christina Fincher and Alexander Smith)

Tech giants’ market cap dips on rising bond yields, AI caution

Oct 3 – Global technology giants faced the biggest drop in their market capitalization in September, hit by a rise in US bond yields and waning enthusiasm over artificial intelligence (AI).

The market cap of Apple Inc (AAPL) shed about 9% to 2.67 trillion at the end of September, while Microsoft Corp (MSFT) and Alphabet Inc’s (GOOGL) market cap declined about 4% each to USD 2.3 trillion and USD 1.6 trillion, respectively.

US economic data released last month showed a tight labor market and a resilient economy, feeding concerns inflation levels would stay elevated and that the Federal Reserve would need to keep interest rates higher for an extended time to curb inflation.

Those worries pushed US 10-Treasury yields to hit a 16-year high last month, tarnishing the allure of riskier assets.

Tech stocks were particularly impacted, as the rise in Treasury yields, which are regarded as risk-free rates, diminished the value of the future cash flow of tech firms.

The market cap of Nvidia Corp, which benefitted from a boom in AI earlier this year, dropped nearly 12% to USD 1.07 trillion. Still, the company’s market cap has risen almost 200% this year.

Still, Goldman Sachs was optimistic about the outlook for mega-cap stocks, saying the consensus sales and earnings expectations for the largest US tech stocks have been upgraded since the start of August.

“The divergence between falling valuations and improving fundamentals represents an opportunity for investors: On a growth-adjusted basis, the mega caps trade at the largest discount to the median S&P 500 stock in over six years,” it said.

On the other hand, Exxon Mobil Corp (XOM) and UnitedHealth Group Inc (UNH) climbed about 6% each to USD 470.7 billion and USD 467 billion, respectively.

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Bernadette Baum)

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