Global shares flat, US yields fall after Fed delivers rate hike

NEW YORK, July 26 (Reuters) – Global shares were mostly flat while US yields fell on Wednesday after the Federal Reserve delivered its 11th consecutive hike in interest rates aimed at reining in rising consumer prices.

The rate hike, which was in line with market expectations, took the benchmark overnight interest rate to between 5.25% and 5.50% – the highest level since around the global financial crisis in 2007-2009.

The Fed also left open the door for more rate hikes, stating that it would keep studying economic data as it determines “the extent of additional policy firming that may be appropriate” to reach its 2% inflation target.

During his press conference, Fed Chair Jerome Powell said central bank staff are no longer forecasting a US recession, and “we do have a shot” for inflation to return to target without high levels of job losses.

“It was exactly what the market was anticipating, almost like a non-event with markets dead flat,” said Lamar Villere, portfolio manager at Villere & Co in New Orleans.

“It’s our sense that the way inflation data has been coming in and the way the Fed has been slowing the pace of hikes, that they’re looking to stop,” Villere added

The MSCI world equity index, which tracks shares in nearly 50 countries, rebounded shortly after the Fed announcement and was up 0.03%. In Europe, stocks fell 0.53%, snapping a six-day winning run, with equities in Germany and France shedding 0.49% and 1.35%, respectively.

On Wall Street, the benchmark S&P 500 lost steam and finished flat while the tech-heavy Nasdaq closed lower, dragged down by mostly technology stocks.

The Dow Jones Industrial Average rose 0.23% to 35,520.12, the S&P 500 lost 0.02% to 4,566.75 and the Nasdaq Composite dropped 0.12% to 14,127.28.

“Powell and the committee are taking a very data-dependent approach to future rate hikes,” said Angelo Kourkafas, investment strategist at Edward Jones. “He kept very close to the script. It didn’t sound as hawkish as some had feared and wasn’t a strong message to push expectations one way or the other.”

US Treasury yields slipped in choppy trading after the Fed’s rate decision. The yield on 10-year Treasury notes was down at 3.865%, while the two-year yield, which typically reflects interest rate expectations, fell to 4.8433%.

The dollar edged lower against major currencies. The dollar index fell 0.316%, with the euro up 0.33% to USD 1.109.

Oil prices settled lower as data showed US crude inventories fell less than expected. Brent crude futures settled down 0.92% to USD 82.92 a barrel, while US West Texas Intermediate (WTI) crude dropped 1.1% to USD 78.78.

Gold prices gained buoyed by a pullback in the dollar and bond yields. Spot gold added 0.5% to USD 1,973.53 an ounce, while US gold futures gained 0.50% to USD 1,968.90 an ounce.

(Reporting by Chibuike Oguh in New York; Additional reporting by Sinead Carew; Editing by Chizu Nomiyama and Jonathan Oatis)

US rate futures see slightly higher chance of Sept hike after Powell’s comments

NEW YORK, July 26 (Reuters) – US interest rate futures on Wednesday saw an increased probability of another interest rate increase by the Federal Reserve this year in September after Chair Jerome Powell said the Fed has not ruled out raising rates in consecutive meetings.

The Fed raised rates by 25 basis points (bps) on Wednesday, as was widely expected, citing still-elevated inflation. The rate hike, the Fed’s 11th in its last 12 meetings, set the benchmark overnight interest rate in the 5.25% to 5.50% range,

“It is certainly possible we would raise the funds rate at the September meeting if the data warranted, and I would also say it’s possible that we would choose to hold steady at that meeting” if that’s what the data called for, Powell said, after the Fed decision.

He noted the US central bank will be making decisions on monetary policy on a meeting-by-meeting basis.

In afternoon trading, the benchmark fed funds futures factored in a 22% chance of a hike in September, compared with 21% late on Tuesday, and just 13.7% a week ago, according to the CME’s FedWatch.

For the November policy meeting, rate futures traders have priced in a 32% chance of a 25-bps hike, down moderately from 34.1% late Tuesday.

(Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan Oatis)

Gold rises as US dollar, yields slip after Fed rate hike

July 26 (Reuters) – Gold prices extended gains on Wednesday, helped by a weaker dollar and bond yields after the US Federal Reserve delivered a widely expected interest-rate hike and investors digested comments from Chair Jerome Powell.

Spot gold was up 0.5% at USD 1,974.09 per ounce by 03:21 p.m. EDT (1921 GMT). US gold futures settled 0.3% higher at USD 1,970.10.

The Fed raised interest rates by a quarter of a percentage point on Wednesday, marking the 11th hike in the US central bank’s past 12 policy meetings, and the accompanying policy statement left the door open to another increase.

Powell said “it’s not an environment where we want to provide a lot of forward guidance” about future rate actions, and whether the Fed hikes again will be determined by where the data stands at the time of future policy gatherings.

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

“The general consensus is that the Fed is getting closer to the end of its interest rate hike cycle. As a result, there is an expectation that yields will slowly come down, and that is, generally a supportive environment for gold,” said David Meger, director of metals trading at High Ridge Futures.

The dollar index fell 0.4% against its rivals after the Fed statement, making gold less expensive for other currency holders. US 10-year Treasury yields slipped to 3.862%.

Focus now shifts to policy decisions from the European Central Bank and Bank of Japan due this week.

“Bulls remain nominally in control of the gold narrative but they need to drive prices back above USD 1,988 per ounce recent highs to maintain momentum,” said Tai Wong, a New York-based independent metals trader.

Elsewhere, silver gained 0.9% to USD 24.92 per ounce, platinum was steady at USD 964.60, while palladium lost 1.8% to USD 1,261.13.

(Reporting by Brijesh Patel in Bengaluru; Editing by Krishna Chandra Eluri and Arun Koyyur)

Dollar near two-week high before Fed; Aussie falls after CPI

TOKYO (Reuters) – The dollar hovered close to a two-week high versus the euro on Wednesday, while the yen consolidated near the middle of its range this month as traders awaited crucial policy decisions from the respective nations’ central banks this week.
The Australian dollar slid after slower-than-expected inflation data suggested the Reserve Bank of Australia would forgo a rate hike next week.

The US dollar index, which measures the currency against six major peers, but is heavily weighted toward the euro – was little changed at 101.33 in the Asian afternoon, after pushing as high as 101.65 overnight for the first time since July 11.

The euro slipped 0.08% to USD 1.10495, bringing it close to the previous session’s low of USD 1.1036, a level last seen on July 12.

Continued signs of a resilient US economy in the face of the Federal Open Market Committee’s (FOMC) steep series of interest rate increases has helped buoy the dollar index from a 15-month trough of 99.549 reached a week ago.

In the latest data, US consumer confidence rose to a two-year high in July amid a persistently tight labor market and receding inflation.

Money market traders see a quarter point hike from the US Federal Reserve later on Wednesday as a near certainty, but are split on the odds of another later in the year, putting it at more or less a coin toss.

Elsewhere, the European Central Bank sets policy on Thursday. Again, a quarter point hike is widely expected, but building evidence of an economic slowdown has called into question the chances of another by year-end.

“Given the deceleration in underlying inflation, we think the risk is (Fed Chair Jerome) Powell cools on another hike by describing the FOMC as ‘data dependent,'” which would pressure the dollar, said Joseph Capurso, a strategist at Commonwealth Bank of Australia.

“If the ECB retain their hawkish bias, by no means guaranteed but more likely than the FOMC, EUR is likely to track higher this week.”

The Bank of Japan sets policy on Friday, and speculation for a hawkish tweak to the yield curve control (YCC), which had soared earlier in the month, has steadily receded over recent days.

The dollar edged 0.04% higher to 141.025 yen on Wednesday, following a rebound from a multi-week low of 137.245 mid-month.

Sterling eased 0.1% to USD 1.2888. The Bank of England sets rates on Aug. 3.

The Australian dollar, one of the big movers in the Asian session, slid 0.43% to USD 0.6763 after inflation slowed more than expected in June, reducing pressure for another hike in rates by the central bank on August 1.

That unwound much of the Aussie’s 0.79% gain of the previous day, after Beijing announced stimulus, lifting the economic outlook for Australia’s key trading partner.

“Just when it looked safe to get back in the water with Aussie longs on the China sentiment rebound, the downside surprise on inflation casts fresh doubt on the extent of further RBA tightening needed,” said Sean Callow, a strategist at Westpac, predicting the currency could drop below USD 0.67 near term.

Against the Chinese yuan, the US dollar strengthened 0.29% to 7.1577 yuan in offshore trading retracing part of the previous day’s 0.67% decline.

(Reporting by Kevin Buckland; Editing by Muralikumar Anantharaman & Shri Navaratnam)

Oil falls 1% after Fed rate hike, smaller-than-expected US crude stockdraw

HOUSTON, July 26 (Reuters) – Oil prices fell about 1% on Wednesday after data showed US crude inventories fell less than expected and the Federal Reserve raised interest rates by a quarter of a percentage point.

Brent crude futures closed down 72 cents, or 0.9%, at USD 82.92 a barrel, while US West Texas Intermediate (WTI) crude settled at USD 78.78, down 85 cents, or 1.1%.

Both benchmarks fell by more than USD 1 earlier in the session, after hitting three-month highs on Tuesday.

The rate hike, the Fed’s 11th in its last 12 meetings, set the benchmark overnight interest rate in the 5.25%-5.50% range, and the accompanying policy statement left the door open to another increase.

Higher interest rates increase borrowing costs for businesses and consumers, which could slow economic growth and reduce oil demand.

Meanwhile, US crude inventories drew by 600,000 barrels last week, according to the Energy Information Administration, compared with estimates for a draw of 2.35 million barrels. Industry group American Petroleum Institute figures had indicated a 1.32 million-barrel build.

Gasoline and diesel stocks also drew less than expected, EIA data showed.

“The drawdowns weren’t all that spectacular. It was a neutral to bearish report, plus the Federal Reserve rate hike can have a dampening hit on demand and prices,” said John Kilduff, partner at Again Capital LLC in New York.

Oil prices have rallied for four weeks, buoyed by signs of tighter supplies, largely linked to output cuts by Saudi Arabia and Russia, as well as Chinese authorities’ pledges to shore up the world’s second-biggest economy.

Although the market expects Saudi Arabia to roll over its August output cuts to September, sources told Reuters on Wednesday that Russia is expected to significantly increase oil loadings in September, bringing to an end steep export cuts.

Meanwhile, concern is high over whether China, also the world’s second-biggest oil consumer, will deliver on its policy pledges.

“We still need to wait for actual policies – the risk is that these policies fall short of expectations,” said ING head commodities strategist Warren Patterson.

“The market will continue to be in a tug-of-war between tightening global supply and fears of slowing demand due to the global economic slowdown,” Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, added.

(Reporting by Arathy Somasekhar in Houston, Natalie Grover in London; Additional reporting by Yuka Obayashi and Trixie Yap; Editing by Marguerita Choy and David Evans)

Gold listless as traders avoid big bets ahead of Fed decision

July 26 (Reuters) – Gold struggled for momentum on Wednesday as traders refrained from making big bets ahead of the US Federal Reserve’s policy decision later in the day.

Spot gold held steady at USD 1,963.99 per ounce by 0546 GMT, while US gold futures were up 0.1% to USD 1,965.20.

“Broader markets are looking for an extended rate pause through the rest of the year, while Fed officials could push back by leaving the door open for one more hike in September or November,” said Yeap Jun Rong, a market strategist at IG.

While most traders see rates holding in the 5.25%-5.5% range in 2023, 35% see a chance for another 25 basis point hike in November, according to CME’s Fedwatch tool.

Gold is highly sensitive to rising interest rates as they increase the opportunity cost of holding non-yielding bullion.

However, “over the medium term, the yellow metal could still retain its upward trend, given that we are in the final phase of the Fed’s tightening cycle,” Yeap said.

The dollar and US Treasury yields were close to their two-week highs from Tuesday, weighing on zero-interest-bearing gold.

Along with policy guidance from the European Central Bank, traders also await second-quarter U.S. GDP data due on Thursday. The US economy was expected to have risen 1.8% during April-June compared to a 2% rise in the first quarter.

Markets will also keep an eye out for the June personal consumption expenditures (PCE) print due on Friday. Core PCE, the Fed’s preferred inflation gauge, was estimated to have climbed 0.2% in June compared to a 0.3% rise in May.

In Asia, business sentiment in Japan picked up in July, ahead of the Bank of Japan’s meeting on Friday. As per the International Monetary Fund, the bank should start preparing for future
monetary tightening.

Among other metals, spot silver fell 0.4% to USD 24.60 per ounce, platinum rose 0.1% to USD 965.99 while palladium was little changed at USD 1,283.89.

(Reporting by Seher Dareen in Bengaluru; Editing by Sherry Jacob-Phillips, Subhranshu Sahu and Sonia Cheema)

Limited support for central bank digital currencies in global investment industry survey

LONDON – The most comprehensive survey of the global investment industry on central bank digital currencies to date has shown both limited support and a lack of understanding of how a digital dollar, euro, yen or pound would work.

The survey carried out by the CFA Institute, a worldwide association for bankers, investors and finance chiefs, found that only 42% of the more than 4,150 respondents who took part believed that central bank digital currencies, or CBDCs, should be launched.

A number of countries including the Bahamas and Nigeria have already launched CBDCs, and around 130 more representing 98% of the global economy are exploring whether to do the same.

“Even for a sophisticated and financially literate cohort like our members there is very little understanding of what CBDCs are,” the CFA Institute’s Olivier Fines told Reuters.

There was also “a general feeling of scepticism” about their possible benefits, especially in developed economies where people can already pay for things instantly online or using mobile phones, he said.

Only 37% of respondents from developed markets said they favoured a CBDC versus 61% from emerging markets.

Just 31% of those in the United States supported the creation of a digital dollar, followed by 38% in Canada, 45% in the European Union and 46% in the United Kingdom.

In China, in contrast, where the People’s Bank of China is currently running the world’s biggest CBDC pilot project, the support rate was 70% while in India, which hopes to launch an e-rupee next year, it was 66%.

“There is a clear and very significant divide,” Fines said, putting it down to a likely “perception in developing economies that a CBDC could fill a gap that may not exist in the developed world”.

Central banks themselves, including the head of the Bank of England, Andrew Bailey, have raised questions about CBDCs, saying they may be “a solution looking for a problem”.

Among UK respondents who opposed launching a CBDC, the top reason cited by almost half was a belief that their introduction would not address a compelling need.

By far the biggest outright concern about CBDCs globally was the risk of cyberhacking, at 69%. Data privacy was also a major concern for 64% of respondents in developed markets and 57% in developing economies.

Age is also correlated with the level of support for or opposition to CBDCs. Less than a quarter of respondents under 30 opposed them, the survey found, compared with 37% among those over 55.

“Clearly the younger you are the more receptive you are to a CBDC, like with crypto assets more generally,” Fines said. “The question is will this stabilise over time or as people get older will their mindset shift?”

Overall, though, the main questions were what benefits CBDCs will bring compared with existing payment systems. “I don’t think the argument has been settled on whether this is absolutely necessary,” Fines said.

China hopes, US big tech fire up markets

July 26 (Reuters) – Asian stock markets will open strongly on Wednesday if the previous day’s China- and US-fueled momentum doesn’t wilt, as investors brace for a triple whammy of major central bank policy decisions over the coming 72 hours.

On the regional data front, Australian consumer inflation grabs the spotlight. Economists expect inflation to have slowed in June and over the second quarter, which could lean investors toward thinking interest rates have peaked at 4.10%.

It’s not often China is the source of much optimism for investors these days, but that it exactly where markets find themselves after the country’s top leaders on Monday pledged to ramp up support for the struggling economy.

China’s blue chip equity index rose nearly 3% for its best day this year, and Chinese property stocks surged 8% for their biggest rise this year too. Hong Kong’s main property stocks index jumped 14%, the biggest rise since March last year.

Beijing’s top policy-making Politburo said it will implement macro adjustments “in a precise and forceful manner” to support an economy undergoing a “tortuous” post-COVID recovery.

Fine words and sentiment, but as analysts at Investec note, no details on actual policies were forthcoming. This is what will determine China’s recovery, so until more clarity emerges, investors’ optimism may fade as quickly as it appeared.

The mainland property index is still down 13% this year and the Hong Kong-based index is down 25%. Maybe they are cheap enough to draw in buyers, but the problems run deep.

That said, MSCI’s Asia ex-Japan equity index on Tuesday ended a six-day losing streak and rallied 2%. The MSCI World index rose for the 10th session of the last 12, reaching its highest level since April last year, and the S&P 500 also climbed to a new 15-month high.

Surprisingly strong US consumer confidence, growing faith in an economic ‘soft landing’, and the Artificial Intelligence buzz around juicy earnings reports from Big Tech firms all contributed to the latest Wall Street rally.

Strong results from Microsoft and Alphabet after the bell will only strengthen the upbeat tone in Asia on Wednesday too.

All this comes ahead of the first of three major central bank policy decisions this week – the Federal Reserve is expected to raise rates 25 basis points on Wednesday, followed by a similar move from the European Central Bank on Thursday and the Bank of Japan holding the line on Friday.

(By Jamie McGeever)

Global equities, US yields gain ahead of Fed, corporate results

July 25– Global equity markets and US Treasury yields rose on Tuesday ahead of the Federal Reserve’s expected interest rate hike and as markets awaited a stream of quarterly results from corporate heavyweights.

Fed officials are gathering for their July monetary policy meeting, starting on Tuesday, where the central bank’s rate-tightening cycle will be top of the agenda. Most market participants expect the Fed to deliver a 25 basis-point rate hike when the meeting concludes on Wednesday.

US Treasury yields advanced, with benchmark 10-year notes rising to 3.890% while rate-sensitive two-year notes were up at 4.8806%.

Google owner Alphabet and Microsoft are among US technology giants whose quarterly earnings on Tuesday give investors a glimpse of the health of the US economy. The performance of these megacap tech companies underlies the nearly 19% year-to-date rally in the benchmark S&P 500.

After the bell on Tuesday, Alphabet said second-quarter profit exceeded Wall Street expectations. Microsoft on Tuesday surpassed Wall Street estimates for fourth-quarter revenue and profit as its cloud business benefited from product upgrades featuring new artificial intelligence (AI) technology.

“There’s a bit of catch-your-breath mentality before what could really be a big market moving event with the big Fed meeting tomorrow,” said Ryan Detrick, chief market strategist at Carson Group.

“At the same time, the Fed is important but corporate earnings matter. Overall, it’s been fairly positive and people expect earnings to come in better than expected,” Detrick said.

The MSCI All-World index, which tracks equities in more than 50 countries, rose 0.47%.

Europe’s STOXX 600 gained 0.48%, led in part by shares in mining companies, which rallied after China’s leaders pledged to bolster their sputtering economy.

On Wall Street, the three main indexes closed higher, led by gains in shares of technology, materials, and communication services companies.

The Dow Jones Industrial Average rose 0.08% to 35,438.07, the S&P 500 gained 0.28% to 4,567.46 and the Nasdaq Composite added 0.61% to 14,144.56.

“A 25 basis-point hike is pretty much baked in but clearly what matters more is whether (in Fed Chair Jerome Powell’s press conference) it’s going to be a dovish or hawkish hike,” Detrick added.

Oil prices rose to three-month highs as signs of tighter supplies and pledges by Chinese authorities lifted sentiment.

Brent futures settled up 1% at USD 83.64 a barrel after hitting USD 83.87 earlier, the highest level since April 19. US West Texas Intermediate (WTI) crude rose 1% to settle at USD 79.63.

The US dollar weakened, losing earlier session gains, ahead of the Fed meeting as well as rate decisions from other key central banks, including the European Central Bank and the Bank of Japan. The dollar index fell 0.128%, with the euro down 0.1% to USD 1.1051.

Gold prices strengthened as the dollar fell. Spot gold added 0.5% to USD 1,964.34 an ounce, while US gold futures GCc1 gained 0.07% to USD 1,961.70 an ounce.

(Reporting by Chibuike Oguh in New York. Editing by Sharon Singleton and Matthew Lewis)

Japan’s Nikkei ends lower on caution ahead of key rate decisions

TOKYO – Japan’s Nikkei share average ended lower on Tuesday, with heavyweight technology stocks leading the losses, as risk appetite was sapped by caution ahead of interest rate decisions from key global central banks, including Japan’s.

The Nikkei index slipped 0.06% to end at 32,682.51, having pulled back from a drop of 0.6% earlier in the session. The broader Topix ended up 0.18% to 2,285.38.

“We should not take this level of decline seriously but market players were not actively making bets ahead of the central banks’ decision in Japan, the US and Europe,” said Takehiko Masuzawa, trading head at Phillip Securities Japan.

“The market consensus is that the Bank of Japan (BOJ) will keep its monetary policy unchanged but the outcome may be the opposite. It is hard to make a move also during the earnings season.”

The BOJ, whose two-day policy meeting starts on Thursday, is widely expected to keep its ultra-low rate policy intact.

But investors remember a surprising tweak in the yield curve control policy in December when the BOJ widened the trading band of the benchmark 10-year bond yield.

The US Federal Reserve is expected to raise interest rates by 25 basis points at its policy meeting on Wednesday.

Among stocks, chip-making equipment maker Tokyo Electron fell 0.51%. Technology investor SoftBank Group lost 0.88%.

Electric motor maker Nidec slipped 3.25% to become the worst performer on the Nikkei.

Uniqlo brand owner Fast Retailing fell 1.27%.

Seven & i rose 0.48% after local media reported that the convenience store operator has reached an agreement to sell its department store operations to US investment fund Fortress Investment Group as early as September, ending stalled negotiations with local people where the flagship outlet is located.

(Reporting by Junko Fujita; Editing by Varun H K and Savio D’Souza)

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