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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)

 

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)

 

HOUSTON, Aug 28 – Oil prices held steady on Monday, pressured by worries further US interest rate hikes could dent demand but supported by the potential of a supply disruption from a tropical storm off the US Gulf Coast.

Brent crude settled 6 cents lower at USD 84.42 a barrel, after touching a session high of over USD 85 earlier in the day. US West Texas Intermediate crude was 27 cents, or 0.3%, higher at USD 80.10.

On Friday, crude posted a second week of losses after Federal Reserve Chair Jerome Powell said the US central bank may need to raise rates further to cool stubborn inflation.

“There are concerns still about demand going to lighten especially if we see another click higher in interest rates, the market is very nervous,” said Dennis Kissler, senior vice president of trading at BOK Financial.

Personal consumption expenditures price index, the Fed’s preferred inflation gauge, is set for release on Thursday and non-farm payrolls data is due on Friday.

China halved stamp duty on stock trading, but Chinese stock markets erased most of their strong opening gains on nagging worries about a stuttering economy.

The oil market’s focus is on “China actions to support its economy, Tropical Storm Idalia heading for Florida and whether Brent can regain momentum on a break above USD 85,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Tropical Storm Idalia was expected to intensify into a major hurricane on Monday as it barrelled toward Florida’s Gulf Coast. Some worried it could hit the eastern side of US Gulf Coast crude production.

Idalia most likely impact was a day or two of power outages, said IG market analyst Tony Sycamore. That “should see some short-term support for the oil price”, he said.

Oil prices have remained above USD 80 a barrel with support from falling oil inventories and supply cuts from the OPEC+ group of oil producers.

Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels a day into October, analysts told Reuters last week, as the kingdom seeks to further support the market.

(Additional reporting by Alex Lawler in London, Florence Tan, and Sudarshan Varadhan; editing by Jason Neely, Kirsten Donovan, Louise Heavens, Sharon Singleton, David Gregorio, and Tomasz Janowski)

 

SINGAPORE/LONDON, Aug 28 – Investors looking for clues about the state of China’s economy beyond official data are seeing red warnings flash across a range of informal gauges, prompting many to back out of global assets exposed to the slowdown.

The selling is sucking the wind out of stock markets from London to Bangkok and weighing on China proxies from the Australian dollar to New Zealand dairy prices and shares from luxury goods giant LVMH to miner BHP and casino Las Vegas Sands.

As the post-pandemic period has failed to bring a sustained recovery in consumer spending or to thaw the near-frozen property market, most analysts now figure the world’s second-largest economy is going to miss its 5% growth target this year.

Beneath the headlines, investors are even gloomier with higher-frequency and more arcane data from a shrinking current account surplus to ballooning deposits and soft surveys pointing to a deep-seated confidence problem.

“It’s pretty weak,” said Sat Duhra, a portfolio manager at Janus Henderson who devises a macro score for countries by tracking seven factors including PMI surveys, real exchange rates, current accounts, growth estimates and liquidity.

“PMIs have been weak, GDP is being revised downward. It’s a tricky situation,” he said. “And I don’t see any point, at this point, in taking a bullish view on China when all of these things are going on.”

His fund invests in China, but away from economically sensitive sectors such as banks, property or industrials.

Beyond China, which is the largest trading partner of most of its neighbors and other big economies, souring demand is beginning to take a toll.

New Zealand’s Fonterra, the world’s biggest dairy exporter, has cut its farmgate milk price forecast twice in a month citing “reduced demand from key importing regions.” It previously noted that the largest slowdown was in China.

Last week BHP Group posted its weakest annual profit in three years and manganese-focused spinoff South32 said profit fell by nearly two-thirds. New Zealand’s a2 Milk Co warned of weak growth in China’s infant formula market.

Shares of BHP, S32 and a2 fell.

Seema Shah, chief global strategist at Principal Global Investors in London, sees the slowdown biting in Europe, where investors tend to connect the fortunes of German manufacturers with those of their Chinese customers.

“We have become a bit more gloomy on Europe,” she said, noting China also poses a risk to US equities.

RETREAT

This year’s run of bad indicators has wrong-footed investors, who had been positioning for companies such as BHP and currencies such as the Australian dollar and Thai baht to rally as China emerged from the COVID-19 pandemic in a blaze of spending.

Instead, Chinese visitors to top destination Thailand, for example, are barely a third of pre-pandemic levels, the baht is stalled and in Asia, only Hong Kong’s Hang Seng has fallen further than Thai stocks’ 6.5% drop.

Even in Japan, the stock market success story of the year so far, portfolio manager Zuhair Khan at UBP Investments says he’s shorting or avoiding companies reliant on China sales.

The scale of the problem, with data showing consumer and producer prices falling and youth unemployment running over 20%, indicates an aggressive policy response is needed, and quickly, he said, something that is so far yet to arrive.

To be sure, although they too have lately retreated, stocks of companies such as casino operator Las Vegas Sands and luxury-goods seller LVMH are up 11% and 16%, respectively, this year, against a 10% gain for world stocks, and some investors remain bullish.

“We expect group travel to resume in late 2023 and support Chinese spend on luxury goods globally,” said Prashant Bhayani, Asia chief investment officer at BNP Paribas Wealth Management.

But it’s now a waiting game for valuations to reflect more realistic assumptions.

“The China reopening as a thematic has played out to some extent. However, I think more importantly, it has fallen short of initial expectations,” said Jagdeep Ghuman, a portfolio manager for US asset manager Nuveen.

“It’s (now) very much on a case-by-case basis, driven by valuations. Overall, we have seen that reset of expectations play out in the market and so there has been volatility in the shares of these companies.”

(Reporting by Tom Westbrook and Rae Wee in Singapore, Dhara Ranasinghe in London and Summer Zhen and Xie Yu in Hong Kong. Editing by Sam Holmes)