S&P 500 ends sharply higher, jobs data fuels interest rate optimism

Aug 29 – Wall Street ended sharply higher on Tuesday, lifted by Tesla, Nvidia, and other megacap growth stocks after a drop in monthly job openings cemented expectations of a pause in interest rate hikes by the US Federal Reserve.

The S&P 500 and Nasdaq touched their highest in over two weeks during the session after the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) showed the number of job openings stood at 8.827 million in July, falling for the third straight month and signaling easing labor market pressures.

Investors also parsed a report from the Conference Board showing consumer confidence in the United States fell to 106.1 in August, compared with expectations of 116.

Interest rate futures signaled an 87% chance the Fed will keep rates steady at its September meeting and a 54% chance it will keep rates on hold through November, according to the CME Group’s FedWatch tool.

“Investors are of the mindset that ‘You know what, maybe interest rate hikes are indeed behind us. So let’s buy back into stocks,'” said Sam Stovall, chief investment strategist at CFRA Research.

According to preliminary data, the S&P 500 gained 64.39 points, or 1.45%, to end at 4,497.70 points, while the Nasdaq Composite gained 239.36 points, or 1.74%, to 13,943.37. The Dow Jones Industrial Average rose 294.97 points, or 0.85%, to 34,854.95.

The yield on the 10-year Treasury note eased to 4.11%, while that on the two-year note fell back below 5% after hovering around that level for the past few sessions.

The decline in yields supported growth stocks, with Apple (AAPL), Nvidia (NVDA), and Meta Platforms (META) all gaining.

Tesla (TSLA) rallied, even after documents showed a US regulator sent a special order to the electric vehicle maker asking questions about changes to the driver monitoring system for its Autopilot software.

Alphabet (GOOGL) received a boost from a swath of fresh artificial intelligence technology and partnerships unveiled by the Google-parent.

The July non-farm payrolls report on Friday will offer investors more clarity about the state of the labor market. The focus will also be on the personal consumption expenditures index, the Fed’s preferred inflation gauge, which is due on Thursday.

The lack of hawkish surprises in Fed Chair Jerome Powell’s comments at the Jackson Hole symposium last week buoyed stocks on Monday, with the focus now on the upcoming economic data to gauge how long the central bank could keep interest rates elevated.

Catalent (CTLT) jumped after the contract drugmaker reached a settlement with activist investor Elliott Investment Management to conduct a review.

Verizon (VZ) and AT&T (T) gained after Citi upgraded the telecom companies to “buy” from “neutral”.

US-listed shares of PDD Holdings rallied after the Chinese e-commerce firm beat second-quarter revenue estimates.

(Reporting by Shristi Achar A and Amruta Khandekar in Bengaluru, and by Noel Randewich in Oakland, Calif.; Editing by Shounak Dasgupta and Deepa Babington)

Gold hits three-week peak after weaker US jobs data

Aug 29 – Gold climbed to a three-week peak on Tuesday as the dollar and Treasury yields slipped after weaker labor market readings cast doubts over the chances of another rate hike by the Federal Reserve.

Spot gold was up 0.9% at USD 1,936.84 per ounce as of 1:55 p.m. EDT (1754 GMT). US gold futures settled 0.9% higher at USD 1,965.10.

The dollar fell against its rivals, reversing earlier gains, after data showed that US job openings fell in July. The benchmark 10-year Treasury yields also ticked lower.

The downbeat Job Openings and Labor Turnover Survey (JOLTS)and consumer confidence reports suggest the Fed may not raise rates as much as previously anticipated, and that’s helping gold along with some short-covering, said Jim Wyckoff, senior market analyst at Kitco.

Investors now await the US personal consumption expenditures price index due on Thursday and nonfarm payrolls on Friday for further clues on the interest rate trajectory.

According to the CME FedWatch tool, traders now see an 86% chance of the Fed leaving rates unchanged at its September meeting, up from 78% before the data.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

Reflecting sentiment, SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.3% on Monday.

“The fact that the price has been recovering since the middle of last week suggests that the selling pressure exerted by speculative financial investors has abated,” Commerzbank analyst Carsten Fritsch wrote in a note.

Silver rose 1.9% to USD 24.71 per ounce. Platinum gained 1.5% to USD 978.45, its highest in a month. Palladium slipped 0.6% to USD 1,247.35.

(Reporting by Brijesh Patel and Harshit Verma in Bengaluru; Editing by Shilpi Majumdar)

Euro zone bond yields decline after weak US economic data

LONDON, Aug 29 – Euro zone government bond yields dropped on Tuesday as weak US economic data supported expectations the Federal Reserve may at least pause future interest rate hikes.

US job openings fell for a third straight month in July, but conditions remained tight, likely ensuring that the US central bank would keep interest rates high for some time.

Markets anticipate an 86% chance FEDWATCH of the Fed leaving its benchmark overnight interest rate unchanged next month, CME Group’s FedWatch Tool showed, but the probability of a rate hike in November is seen at just over 50%.

In the meantime, the risk-on mood lifting European equities dampened some appetite for safe-haven bonds. Bond prices move inversely with yields.

After central bankers at the Jackson Hole economic symposium in Wyoming on Friday did not provide indications on the direction of monetary policy, some analysts expect euro zone bonds to be range-bound until the euro zone CPI and US labour market data releases.

Germany’s 10-year government bond yield, the benchmark for the euro area, fell 5.5 basis points (bps) to 2.51%, after rising for three consecutive days.

“The question of whether we get more hikes will partly be determined by this week’s data, with several important releases coming up,” said Henry Allen, a Deutsche Bank analyst.

Italy’s 10-year bond yield, the benchmark for the euro area’s periphery, slipped 6.5 bps to 4.17%.

Germany and Spain will release inflation data on Wednesday. France, Italy, and the euro area’s aggregate numbers are due on Thursday.

In the United States, initial jobless claims will be published on Thursday, and monthly employment data on Friday.

A GfK institute survey on Tuesday showed German consumer sentiment in September is expected to fall more than analysts polled by Reuters had forecast, due to declining income expectations and propensity to buy.

Money market bets priced in a slightly below 50% chance of a 25-bp rate hike by the European Central Bank in September, after briefly peaking at around 50% right before the US data.

On Monday, market bets on a rate rise next month nudged up after Robert Holzmann, seen as a hawk on the ECB’s governing council, said he saw a case for raising rates further at the next policy meeting if there are no big surprises in inflation data before then.

Analysts’ views about the tightening path are mixed.

Althea Spinozzi, a strategist at Saxo Bank, said “yields might continue to rise in the upcoming weeks as the market realized that the fight against inflation is not over.”

(Reporting by Joice Alves and Stefano Rebaudo; Editing by Peter Graff, Alison Williams, Susan Fenton, and Paul Simao)

China companies’ fundraising options narrow after IPO restrictions

SHANGHAI/HONG KONG, Aug 29 – China’s surprise move to slow the pace of mainland initial public offerings (IPOs) in an attempt to bolster the secondary market will cloud the fundraising plans of hundreds of companies and will weigh on the economy, bankers and lawyers said.

The regulatory decision was part of a package of measures unveiled by Beijing over the weekend to revive a lagging stock market and boost investor confidence in the world’s second-largest economy, which is fast losing its growth momentum.

New share sales on the mainland had been one of the few bright spots in the Chinese financial sector this year, as geopolitical tensions and tightened regulatory curbs prompted domestic IPO aspirants to choose home bourses over offshore stock exchanges.

There has been USD 39.7 billion worth of IPOs so far this year, Dealogic data showed, down from USD 68.2 billion at the same time last year, but more than double the USD 13.1-billion raised in the United States.

The decision to slow IPOs comes as bond markets are difficult and expensive to tap for Chinese private companies due to the spillover effect of a deepening property sector debt crisis.

This, coupled with diminishing appetite for China investments by private equity firms, will leave fewer avenues for companies to tap for growth capital and will weigh on their near-term business plans, bankers and analysts said.

“Slowing the pace of IPOs will have little impact on the equity markets but will further dampen access to capital for the private sector at a time when the economy sorely needs a boost,” said Orient Capital Research Managing Director Andrew Collier.

The China Securities Regulatory Commission (CSRC) said on Sunday it would start a phased restriction on IPOs in a bid to promote “dynamic equilibrium” between investment and financing. It didn’t say how long the curbs will last, and bankers expect tougher IPO vetting and a lengthier registration process.

More than 650 companies are waiting to list on the Shanghai and Shenzhen bourses, according to exchange data.

‘CONTROLLING IPOs’

Companies in the pipeline for a market debut on the mainland include robot maker JAKA Robotics Co, semiconductor firm Shenzhen Chipsbank Technologies Co and Swiss agrichemicals and seeds group Syngenta, which is eyeing a USD 9 billion IPO this year.

Bankers said that the regulatory move to slow the pace of IPOs goes against Beijing’s IPO reforms earlier this year, which sought to remove government intervention and introduce a US-style registration-based IPO mechanism, among other things.

“It’s going back to the old, myopic model of controlling IPOs to lift stock prices,” said a Shanghai-based investment banker, who declined to be named as he is not authorized to talk to the media.

“It also shows China’s registration-based IPO system is not genuine,” he said.

Even before the latest decision, bankers and lawyers were already grappling with tougher-than-normal queries from stock exchanges over companies’ fundraising plans and refinancing projects.

“I think many IPO candidates would give up their IPO plans,” the banker said.

With China tightening scrutiny of companies eyeing offshore IPOs, Hong Kong grappling with a liquidity shortage, and Sino-US tensions clouding New York listing hopes, the latest move will leave Chinese firms with very few equity fundraising options.

“Fundraising via equity is a good thing, better for many companies as they can’t raise debt so what purpose does this serve?” said Fraser Howie, author of several books on China’s financial system.

“These tweaks address symptoms such as the weak stock market, but do nothing to sort the problem which is the economy.”

(Reporting by Samuel Shen in Shanghai and Kane Wu in Hong Kong; Writing by Scott Murdoch; Editing by Sumeet Chatterjee and Sharon Singleton)

Japan’s Nikkei touches 2-week top on Wall Street boost

TOKYO, Aug 29 – Japan’s Nikkei share average advanced to a two-week high on Tuesday, buoyed by overnight gains in Wall Street, although nerves ahead of potentially pivotal US economic data this week limited the upside.

The Nikkei rose as much as 0.68% to 32,389.12 early in the session, its highest since Aug. 15. However, gains fizzled mid-day and the index ended 0.18% higher at 32,226.97.

The broader Topix added 0.16%.

Nomura Securities strategist Kazuo Kamitani said the 25-day moving average at around 32,276 is proving to be a firm barrier for further gains.

“It’s an environment where traders’ attention is easily drawn to the 25-day moving average,” he said, adding it was more likely that the Nikkei would stay below the level in the next couple of days.

Above 32,300 in particular, “the market feels quite heavy,” Kamitani added.

Wall Street’s three main indexes all gained 0.6% or more overnight. However, a data-heavy week culminating in monthly US payrolls figures on Friday has taken on added importance after Federal Reserve Chair Jerome Powell suggested rates could rise further.

Tokyo Electric Power Co. was the Nikkei’s top-performing stock by far, rallying 5.31%.

The utility has been releasing treated radioactive water into the Pacific Ocean, taking it into the final phase for decommissioning the wrecked Fukushima reactor. Testing of seawater and marine life has so far found no abnormalities.

The discharge has provoked protests in China, and Beijing has banned Japanese seafood imports. The potential for boycotts and other fallout weighed on several China-exposed stocks on Monday, but many were bought back in the latest session.

Cosmetics maker Shiseido jumped 2.18%. Department store operators J. Front and Takashimaya gained 2.48% and 2.15%, respectively.

Toyota Motor ended the day down 0.2%. It dipped as much as 0.82% earlier in the session after a system malfunction forced the automaker to idle domestic factories.

(Reporting by Kevin Buckland; Editing by Varun H K and Janane Venkatraman)

US commerce chief set to meet Chinese vice premier in Beijing

BEIJING, Aug 29 – US Commerce Secretary Gina Raimondo is meeting China’s vice premier He Lifeng on Tuesday, her second full day of talks in Beijing, aiming to boost business ties and communications.

She is the latest Biden administration official to visit Beijing in a bid to strengthen communications, particularly on economy and defense, as friction between the world’s two largest economies threatens to shake business ties.

At an earlier meeting on Tuesday, Raimondo and Tourism Minister Hu Hepin agreed to hold the 14th China-US Tourism Leadership Summit in China in the first half of 2024.

The step aimed to further revive and develop tourism co-operation between the two nations, the Commerce Department said in a statement.

The last such summit was held in 2019 in Seattle. Before that, it had met every year, alternating between the countries.

Raimondo has made boosting travel and tourism a big part of her trip.

This month, China and the United States agreed to double the number of flights permitted between them, which are still only a fraction of the number before the pandemic.

If China returned to 2019 US tourism levels, that would add USD 30 billion to the US economy and 50,000 US jobs, Raimondo said.

Raimondo plans a visit on Wednesday to Shanghai Disneyland, a joint venture of Walt Disney DIS.N and Chinese state-owned Shendi Group.

On Monday, Raimondo touted a decision by Washington and Beijing to agree to a new formal working group on commercial issues.

US firms have reported growing challenges with operating in China, which has sharply criticized US efforts to block its access to advanced semiconductors.

On Monday, the administration agreed to launch an effort to exchange information on export control enforcement.

The first meeting of the initiative was held on Tuesday at the commerce ministry in Beijing, led by Matthew Axelrod, US assistant secretary for export enforcement, the department said.

Such an exchange offered a platform to reduce misunderstandings of US national security policies, Raimondo said on Monday, but added, “We are not compromising or negotiating on matters of national security. Period.”

Xie Feng, China’s envoy to the United States, welcomed the announcement.

Raimondo and Commerce Minister Wang Wentao had “rational, candid and constructive communication” on China-US economic and trade ties and issues of common interest, Xie said in a post on X, formerly called Twitter.

Raimondo said on Monday she had raised concerns about curbs on chipmakers Intel and Micron in more than four hours of talks with Wang on a range of US business issues.

The trip would have wide benefits for American business operating in China, she said.

“We’re delivering. We will have that formal communication,” she said.

(Reporting by David Shepardson; Editing by Clarence Fernandez)

Oil rises 1% on softer dollar, US braces for hurricane hit

BENGALURU, Aug 29- Oil prices rallied more than a dollar a barrel on Tuesday as the greenback slid, while investors debated the potential impact on energy supply and demand from Hurricane Idalia set to hit Florida this week.

Brent crude futures rose by USD 1.07, or 1.3%, to settle at USD 85.49 a barrel, while US West Texas Intermediate futures settled at USD 81.86 a barrel, up USD 1.06, or 1.3%.

The US dollar index dropped on Tuesday after data showed that US job openings, a measure of labor demand, fell in July. Softness in the labor market could encourage the Federal Reserve to slow down interest rate hikes, experts said.

A softer greenback makes dollar-denominated oil less expensive for investors holding other currencies, boosting demand.

Oil prices added slightly to Tuesday’s gains in low volume, post-settlement trade after industry data showed a large decline in US crude oil inventories last week, indicating strong demand. Brent crude was last trading up by 1.3% and WTI rose 1.5% by 5:20 p.m. EDT.

US crude stocks dropped by about 11.5 million barrels in the week ended Aug. 25, according to market sources citing American Petroleum Institute figures on Tuesday. Analysts polled by Reuters prior to the data had estimated on average a draw of 3.3 million barrels.

Official crude stockpile data from the US Energy Information Administration is due at 1430 GMT on Wednesday.

Meanwhile, Hurricane Idalia was forecast to reach Category 3 strength – classified as a major hurricane, with maximum sustained winds of at least 111 mph (179 kph) – before slamming ashore Florida’s Gulf Coast in the early hours of Wednesday, according to the Miami-based National Hurricane Center (NHC).

The storm will likely impact fuel distribution systems and hit fuel consumption in the affected regions just ahead of the Labor Day federal holiday on Sept. 4, said Mizuho analyst Robert Yawger.

The weather system is not expected to hit major oil-producing platforms in the US Gulf of Mexico. Oil major Chevron Corp (CVX) evacuated some staff from the region, but production was continuing at Chevron-operated Gulf of Mexico oil and gas facilities.

While Idalia may not pose a major supply risk, it does point to a rising risk of potential future outages in the Gulf of Mexico in what is expected to be a busy hurricane season, Yawger noted.

Adding to supply concerns, the US oil rig count, an early indicator of future production, declined in August for the ninth month in a row, energy services firm Baker Hughes reported on Friday.

“Even with the potential for some demand destruction (from hurricane Idalia), the coming crude oil supply squeeze is becoming more painfully obvious,” said Price Futures Group analyst Phil Flynn.

(Reporting by Shariq Khan in Bengaluru; Additional reporting by Natalie Grover in London, Emily Chow in Singapore and Arathy Somasekhar in Houston; Editing by Josie Kao, Nick Zieminski, and Lincoln Feast)

China’s stock flame fizzling already?

Aug 28 – Asian markets look set to open on a fairly strong footing on Tuesday, supported by a global equity upswing and lower bond yields but tempered by caution surrounding the latest efforts from Beijing to support the Chinese stock market.

The Asian economic calendar is light, with only Japanese unemployment and the latest industrial production, trade, and inflation figures from Vietnam on tap. Trading volumes should return to more normal levels with UK markets open again.

The reaction of Chinese stocks on Monday to new measures from Beijing to boost local markets at once emboldened the bull and bear cases – bulls will point to the rise of more than 1% for the best day in a month, while bears will note that stocks had risen 5.5%, so the close was extremely lackluster.

Despite the latest steps to boost confidence, foreign investors offloaded a net 8.2 billion yuan (USD 1.12 billion) of Chinese stocks via the Stock Connect on Monday, and have now been net sellers in 15 out of the last 16 sessions.

This helps explain why the yuan remains under sustained downward pressure, languishing around the weakest level of the year against the dollar near the key 7.30 level. A break below that will take the yuan into territory not recorded since late 2007.

Staying in China, a raft of top-tier companies this week release corporate earnings reports, including conglomerate CITIC, financials Bank of China and ICBC, and beleaguered property developer Country Garden.

Fellow real estate developer China Resources Land publishes half-year results on Tuesday, while Evergrande shares trade for a second day after Monday’s long-awaited reopening. The firm’s shares are virtually worthless.

US Commerce Secretary Gina Raimondo continues her visit to China, with investors watching closely how she treads the line between strengthening economic ties between the two countries and raising concerns over what Washington deems unfair business practices in a number of sectors.

Elsewhere in ‘business meets politics’, Terry Gou, the billionaire founder of major Apple supplier Foxconn, on Monday announced a bid to be Taiwan’s president in January elections, saying he wanted to unite the opposition and ensure the island did not become “the next Ukraine.”

FX traders will be on heightened Japanese intervention alert after the yen slipped to a new low for the year on Monday near 147 per dollar. With the two-year US-Japanese yield spread more than 500 basis points in the dollar’s favor, the yen’s weakness may be justified from a fundamental standpoint.

Japanese authorities seem less willing to intervene to support than they were last year when the yen was at these levels, but a further decline toward the 150 per dollar area could change their thinking.

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

– Japan unemployment (July)

– Vietnam inflation (August)

– US Commerce Secretary Gina Raimondo in China

(By Jamie McGeever; Editing by Josie Kao)

Wall Street ends higher as investors await US inflation, jobs data

Aug 28 – Wall Street ended higher on Monday, with gains in 3M and Goldman Sachs ahead of key inflation and jobs data this week that will offer more clues on the Federal Reserve’s interest rate path.

All three major stock indexes rose as investors digested last Friday’s comments from Fed Chair Jerome Powell that the US central bank may need to raise interest rates further to ensure inflation is contained.

Focus now shifts to a report on the personal consumption expenditures price index, the Fed’s preferred inflation gauge, to be released on Thursday, and non-farm payrolls data due on Friday.

“The fact that Powell didn’t come out and say anything particularly hawkish or particularly unnerving to markets – that has proven to make this a bit of a risk-on day, even if he wasn’t outright dovish either,” said Ross Mayfield, Investment Strategy Analyst at Baird.

Nvidia rose 1.78% and was the most traded stock in the S&P 500, with USD 31 billion worth of the chipmaker’s shares exchanged.

Other megacaps also gained, with Apple and Alphabet both adding 0.9%.

3M jumped 5.2% after a report that the conglomerate has tentatively agreed to pay more than USD 5.5 billion to resolve over 300,000 lawsuits claiming it sold the US military defective combat earplugs.

Goldman Sachs gained 1.8% after the lender struck a deal to sell an investment advisory business to wealth management firm Creative Planning LLC.

The S&P 500 climbed 0.63% to end the session at 4,433.31 points.

The Nasdaq gained 0.84% to 13,705.13 points, while Dow Jones Industrial Average rose 0.62% to 34,559.98 points.

US-listed shares of Chinese companies including JD.com, Baidu, and Alibaba rallied over 2% after China halved the stamp duty on stock trading effective Monday to boost its ailing market.

US Commerce Secretary Gina Raimondo discussed concerns about restrictions on American businesses including Intel and Micron with Chinese Commerce Minister Wang Wentao. Micron’s stock rose 2.5% and Intel added 1.1%.

The US Federal Trade Commission suspended its challenge of Amgen’s USD 27.8 billion purchase of Horizon Therapeutics. Horizon’s shares 5.2%.

Advancing issues outnumbered falling ones within the S&P 500 by a 5.5-to-one ratio.

The S&P 500 posted 10 new highs and 2 new lows; the Nasdaq recorded 54 new highs and 162 new lows.

Volume on US exchanges was relatively light, with 8.1 billion shares traded, compared to an average of 10.8 billion shares over the previous 20 sessions.

(Reporting by Shristi Achar A and Amruta Khandekar in Bengaluru, and by Noel Randewich in Oakland, Calif.; Editing by Shounak Dasgupta and David Gregorio)

Hedge fund exposure to 7 biggest tech stocks at record high, Goldman Sachs says

LONDON/NEW YORK, Aug 28 – Hedge funds hold record exposure to the seven biggest tech stocks by market capitalization, according to data released on Friday by Goldman Sachs, in a week Nvidia hit an all-time high after beating revenue expectations.

The largest seven US stocks collectively now make up about 20% of the total net market value held by hedge funds tracked by Goldman Sachs. They have also been instrumental in the gains in the broader US equity market this year.

Microsoft, Apple, Alphabet, Meta, Amazon, Nvidia, and Tesla saw the biggest percent of single stock exposure as of Aug. 24, meaning the positions were trades in individual stocks, not just in the indices like the Nasdaq.

“Hedge funds continue to embrace mega-cap tech and the artificial intelligence theme,” Goldman Sachs’ prime brokerage said in a note sent to a restricted group of clients and obtained by Reuters. The investment bank did not immediately comment on the note.

The companies did not immediately respond to a request for comment.

Last week, Nvidia reported record quarterly revenue fueled by strong demand for its artificial intelligence (AI)-focused chips and said the AI boom has legs.

“We essentially have had two markets: the ‘Magnificent Seven’ and all the rest of equities. Hedge funds will be forced into capturing these returns regardless of analysis,” said Jim Neumann, chief investment officer of Sussex Partners.

“It is momentum on steroids,” he said, adding that stock-picking hedge funds might find it harder to outperform investments in other asset classes, like fixed income.

Goldman Sachs, which runs one of Wall Street’s largest prime brokerages, is able to track trends in flows.

Shares in these companies have all risen over 35% this year, with performances ranging from Apple’s 38% rise to Nvidia’s 211% jump.

“The primary objective of hedge funds is to generate returns, rather than to be imaginative for the sake of diversification,” said Bruno Schneller, managing director at INVICO Asset Management.

Given the stocks’ outperformance, it makes sense to have invested in them, Schneller said.

Daniel Loeb, the CEO of Third Point – which had around USD 12.6 billion in assets under management at the end of February – said earlier in August that his top five winners in 2023 had included Microsoft, Amazon, and Alphabet.

HFR’s long/short index, which tracks the performance of stock-trading hedge funds that buy and sell stocks, was up about 7% for the year through July, according to the data company’s website.

(Reporting by Nell Mackenzie and Carolina Mandl; Editing by Sharon Singleton and Paul Simao)

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