Key markets gain on hopes of early Fed rate cuts

Nov 6 (Reuters) – Most major stock markets in the Gulf rose in early trade on Monday after softer-than-expected U.S. jobs data reinforced expectations that the Federal Reserve will not hike interest rates further.

Most Gulf Cooperation Council countries, including the UAE, peg their currencies to the US dollar and follow the Fed’s policy moves closely.

US job growth slowed in October in part as auto union strikes depressed manufacturing payrolls; the increase in annual wages was the smallest in nearly 2-1/2 years.

Saudi Arabia’s benchmark index added 0.1%, helped by 1.3% rise in Lumi Rental Co.

However, oil giant Saudi Aramco eased 0.2%, ahead of earnings announcement on Tuesday.

Saudi Arabia confirmed it would continue with its additional voluntary cut of 1 million barrels per day (bpd) in December to keep output at around 9 million bpd, a source at the ministry of energy said in a statement. The Saudi decision was in line with analysts’ expectations.

Dubai’s main share index gained 0.5%, with sharia-compliant lender Dubai Islamic Bank advancing 1.2%.

In Abu Dhabi, the index added 0.3%.

Oil prices – a key catalyst for the Gulf’s financial markets – edged up as top exporters Saudi Arabia and Russia said they would stick to extra voluntary oil output cuts until the end of the year, keeping supply tight, while investors watched out for tougher US sanctions on Iranian oil.

The Qatari benchmark increased 0.6%, driven by a 6.1% jump in Islamic lender Masraf Al Rayan.

(Reporting by Ateeq Shariff in Bengaluru; Editing by Bernadette Baum)

Oil rises by 1% as Saudi Arabia, Russia stick to cuts

LONDON, Nov 6 – Oil prices rose on Monday, after top exporters Saudi Arabia and Russia reaffirmed their commitment to extra voluntary oil supply cuts until the end of the year.

Brent crude futures LCOc1 rose USD 1.03, or 1.21%, to USD 85.92 a barrel by 0834 GMT, while US West Texas Intermediate crude CLc1 was at USD 81.58 a barrel, up USD 1.07, or 1.33%.

Oil rebounded on Monday after Brent and WTI futures each lost around 6% in the week to Nov. 3.

Saudi Arabia confirmed on Sunday it would continue with its additional voluntary cut of 1 million barrels per day (bpd) in December to keep output at around 9 million bpd, a source at the ministry of energy said in a statement.

Russia also announced it would continue its additional voluntary supply cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.

ING analysts said in a note that the oil market will be in surplus in the first quarter of next year, “which may be enough to convince the Saudis and Russians to continue with cuts.”

But price gains could have been capped by an easing of crude oil throughputs at Chinese refineries.

Refinery runs are easing from record levels in the third quarter because of eroding profit margins and a scarcity of export quotas up to year end, sources told Reuters.

“The reaction to the Saudi/Russian decision over the weekend to extend their respective output and exports cut throughout December has been, to some extent, countered by the anticipated fall in China’s refinery throughput this month,” PVM analyst Tamas Varga said.

Investors will be looking ahead to more economic data from China after the world’s second-largest oil consumer released disappointing October factory data last week.

(Reporting by Robert Harvey, Florence Tan and Colleen Howe, Editing by Louise Heavens)

Oil rises as Saudi Arabia and Russia stick to supply cuts

HOUSTON, Nov 6 – Oil prices edged higher on Monday after top exporters Saudi Arabia and Russia reaffirmed their commitment to extra voluntary oil supply cuts until the end of the year.

Brent crude futures settled 29 cents, or 0.34%, higher at USD 85.18 a barrel, while US West Texas Intermediate crude was up 31 cents, or 0.4%, at USD 80.82.

Saudi Arabia confirmed on Sunday it would continue its additional voluntary cut of 1 million barrels per day (bpd) in December to keep output around 9 million bpd, a ministry of energy source said.

Russia also announced it would continue its additional voluntary cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.

“The announcement shows that Saudi has its shoulder to the wheel as it looks to tighten markets and increase prices,” John Kilduff, partner at Again Capital LLC in New York.

The cuts could be extended into the first quarter of 2024 because of “seasonally weaker oil demand at the start of every year, ongoing economic growth concerns, and the aim of producers and OPEC+ to support the oil market’s stability and balance”, said UBS strategist Giovanni Staunovo.

Oil prices rebounded after both benchmarks lost about 6% in the week to Nov. 3, as supply concerns driven by Middle East tensions eased.

UN agency leaders demanded a humanitarian ceasefire on Monday, a month into the war in Gaza, as health authorities in the enclave said the death toll from Israeli strikes now exceeded 10,000.

A weaker dollar also helped oil prices. The dollar index fell as low as 104.84, the weakest since Sept. 20. A weaker dollar boosts demand for crude purchases by holders of foreign currency.

However, an easing of crude throughput at Chinese and US refineries hurt prices.

Refinery runs are easing at Chinese refineries from record levels in the third quarter because of eroding profit margins and a scarcity of export quotas to the end of the year, traders and industry consultants told Reuters.

Meanwhile, US crude oil refiners this quarter will pull back from red-hot summer run rates as weak gasoline margins and plant overhauls cool operating goals, according to company statements and oil analysts.

Investors will be watching for further economic data from China on Tuesday following weak October factory data last week.

Macroeconomic concerns persist in Europe, where Purchasing Managers’ Index (PMI) data showed the downturn in euro zone business activity accelerated in October as demand weakened further.

The Bank of England Chief Economist Huw Pill said it might wait until the middle of next year before cutting interest rates from their current 15-year high. Lower borrowing cost is likely to boost spending and demand for crude oil.

(Reporting by Robert Harvey, Florence Tan and Colleen Howe; Editing by Deepa Babington, Mark Potter, Christina Fincher and Bill Berkrot)

Stock investors see green light in falling Treasury yields

NEW YORK, Nov 3 – Hopes that a rout in Treasuries has run its course are tempting some investors back into the US stock market after a months-long selloff.

The relationship between stocks and bonds has been a tight one in recent months, with equities falling as Treasury yields climbed to 16-year highs. Higher yields offer investment competition to stocks while also raising the cost of capital for companies and households.

Over much of the last week, however, that dynamic has reversed, following news of smaller-than-expected US government borrowing and signs that the Federal Reserve is nearing the end of its rate hiking cycle.

Yields on the benchmark 10-year US Treasury, which move inversely to bond prices, are down about 35 basis points from 16-year highs hit in October. Meanwhile, the S&P 500 has surged nearly 6% from its October lows. The index is off 5% from its July peak, though still up nearly 14% year-to-date.

“The stability in rates is helping other asset classes find a footing,” said Jason Draho, head of asset allocation Americas as UBS Global Wealth Management. “If equities move higher you may find investors starting to feel as if they need to chase performance through the end of the year.”

Draho expects the S&P 500 to trade between 4,200 and 4,600 until investors determine whether the economy will be able to avoid a recession. The index was recently around 4,365.

Other factors may also be working in stocks’ favor. Exposure to equities among active money managers stands near its lowest level since October 2022, according to an index compiled by the National Association of Active Investment Managers – a compelling sign for contrarian investors who seek to buy when pessimism rises.

At the same time, the last two months of the year have tended to be a strong stretch for stocks, with the S&P 500 rising an average of 3%, according to data from CFRA Research. The best two weeks of the year for the index, during which it has risen an average of 2.2% – kicked off on Oct. 22, according to data from Carson Investment Research.

“We had an extremely oversold market in the midst of a strong economy, and the Fed coming out a little more dovish was the kindling we needed for a rally,” said Ryan Detrick, chief market strategist at Carson Investment Research, who believes the current rebound in stocks will take them past their July high.

Bullish sentiment received another boost on Friday from US employment data, which showed a slight gain in the unemployment rate and the smallest wage increase in 2 and a half years, suggesting that the labor market is cooling, bolstering the case for the Fed to stay its hand. The S&P 500 was recently up more than 1% on the day.

Of course, plenty of investors remain hesitant to return to stocks just yet. Technology bellwether Apple Inc (AAPL) was the latest of the market’s massive technology and growth stocks to offer an underwhelming outlook on Thursday after the iPhone maker gave a holiday sales forecast that was below Wall Street estimates. At least 14 analysts cut their price targets for the company, according to LSEG data.

At the same time, betting on reversals in Treasuries has been a losing proposition for most of the year, during which rebounds in the US government bond market have been followed by deeper selloffs. The 10-year Treasury yield is up around 125 basis points from its low for the year.

Some investors also worry that the so-called Goldilocks economy suggested by Friday’s jobs report may not last. Greg Wilensky, head of US fixed income at Janus Henderson Investors, believes that while signs of softer-than-expected growth are boosting stocks and bonds for now, they may eventually stir recession worries.

“Eventually ‘good’ moderation may turn into a debate of whether the economy and labor markets are weakening too much,” he said.

(Reporting by David Randall; Editing by Ira Iosebashvili and Louise Heavens)

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)

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