Gold advances over 1% as traders bet on Fed rate pause

July 18 (Reuters) – Gold rose over 1% on Tuesday to a more than one-month high, bolstered by a softer dollar and lower Treasury yields, with investors betting that recent US economic readings make the case for a pause in the Federal Reserve’s interest rate hikes.

Spot gold was up 1.1% at USD 1,975.49 per ounce by 2:03 p.m. ET (1803 GMT), after hitting the highest since late May. US gold futures settled 1.2% higher at USD 1,980.80.

The dollar index wobbled near more than a one-year low, making bullion more affordable to buyers holding other currencies. Benchmark Treasury yields ticked lower for the second straight day.

“Gold can certainly move towards USD 2,000 if incoming data suggests the Fed will back off after one more hike this month,” said Jim Wyckoff, senior market analyst at Kitco.

Gold traders also took stock of data showing headline US retail sales rose less than expected in June, though consumer spending appeared to be solid.

While the data boosted the idea of a less hawkish Fed by the end of this year, which would help gold, prices could fall to the USD 1,900 range if the central bank goes the other way, Wyckoff added.

Traders are pricing in another 25-basis-point rate hike at the Fed’s July 25-26 meeting.

Higher interest rates increase the opportunity cost of holding zero-yielding gold.

“Gold has now reached a key technical area around USD 1,980-USD 1,985, where it had previously found support and resistance. The bulls will need to see gold clear this level on a closing basis if they want to see USD 2,000 plus again,” Fawad Razaqzada, market analyst at City Index, said in a note.

Spot silver was up 0.6% at USD 25.01 per ounce, platinum rose 0.8% to USD 982.94 and palladium rose 2.5% to USD 1,315.91.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Paul Simao and Shounak Dasgupta)

Few “sustainable” funds aligned with EU green criteria, MSCI finds

LONDON, July 18 (Reuters) – The vast majority of European funds marketed as sustainable say they are not aligned with the EU’s list of climate-friendly investments, or “taxonomy”, largely because there is too little data to make an assessment, research firm MSCI has found.

The EU’s taxonomy is a complex system designed to classify which investments can be marketed as sustainable, aiming to improve transparency and encourage investment in fighting climate change.

Companies are asked to disclose how much of their revenue is in line with the taxonomy, which fund managers can then use to disclose the alignment of their portfolios.

In a report published on Tuesday, MSCI found that nearly nine in 10 so-called Article 8 funds – those partly focused on environmental, social, or sustainability (ESG) issues – and 63% of Article 9 funds – those with clear sustainability objectives – said they did not have taxonomy-aligned investments.

MSCI said this did not necessarily mean underlying companies had so little sustainable revenue, but showed how few currently disclose sufficient information.

“To justify and explain their sustainable nature, one avenue for investors is the EU taxonomy. Right now that avenue is not there,” said Rumi Mahmood, MSCI’s head of ESG and climate fund research.

“Disclosure will improve with time but the figures show the scale of the gap to bridge,” he said, adding that this limited the pool of funds for ESG-minded investors to buy.

Using estimates of taxonomy alignment, MSCI also calculated that only 2% of European-domiciled equity funds, and zero fixed-income funds, had at least 20% of their revenue taxonomy aligned.

The EU has not specified what proportion of a fund’s assets must be aligned to be deemed green, but analysts expect managers will need the majority of revenue to be sustainable.

MSCI also found that Article 9 funds were mostly invested in global or European equities, which Mahmood called a “challenge” for investors wanting diversification and to invest sustainably.

Despite limited taxonomy disclosures, Europe still has greater availability of data related to sustainability risks, encouraging more ESG-minded money into Europe and less to developing markets, MSCI found.

(Reporting by Tommy Reggiori Wilkes; Editing by David Holmes)

Oil prices up on expected economic support in China, weaker US output

NEW YORK, July 18 (Reuters) – Oil prices climbed more than 1% on Tuesday after China said it will act to support economic growth in the world’s biggest oil importer and on expectations the US Federal Reserve will stop raising interest rates soon and a forecast decline in US output.

Brent futures rose USD 1.13, or 1.4%, to settle at USD 79.63 a barrel, while US West Texas Intermediate (WTI) crude rose USD 1.60, or 2.2%, to settle at USD 75.75.

That cut Brent’s premium over WTI to its lowest since late May. The smaller premium makes it less likely energy firms will spend money to send ships to the US to pick up crude cargoes for export.

In the US, several pieces of economic news over the past week or so, including a report Tuesday showing retail sales rose by less than expected in June, have boosted expectations the Fed will stop hiking rates after a widely expected 25 basis-point increase at its July 25-26 meeting.

“With the manufacturing sector languishing and inflation showing encouraging signs of slowing, the widely-anticipated July Federal Reserve interest rate hike may be the last,” analysts at bank ING said in a note.

Higher interest rates increase borrowing costs and can slow economic growth and reduce oil demand.

After posting sluggish gross domestic product data earlier in the week, China’s top economic planner pledged it would roll out policies to “restore and expand” consumption without delay.

Energy traders expect “the oil market will remain tight as Russian shipments drop and as China prepares to provide more support to households,” said Edward Moya, senior market analyst at data and analytics firm OANDA.

The International Monetary Fund’s (IMF) chief Kristalina Georgieva, however, told financial leaders of the Group of 20 nations that medium-term growth prospects remain weak.

US SUPPLY AND INVENTORIES

On the supply side, US shale oil production will likely decline in August for the first time since December, projections from the US Energy Information Administration (EIA) showed.

Looking ahead, the oil market is waiting for US oil inventory data from the American Petroleum Institute (API), an industry group, on Tuesday and the EIA on Wednesday.

Analysts in a Reuters poll forecast a 2.4-million-barrel draw from US crude stocks during the week ended July 14.

If correct, that would be the fourth crude stock decline in five weeks, and compares with a decrease of 0.4 million barrels in the same week last year and a five-year (2018-2022) average increase of 1.9 million barrels.

“Crude’s price action shows a bullish market outlook on crude oil stockpiles and inventories numbers … traders are keen to observe the impact of the hot temperatures felt in recent weeks on crude supply,” analysts at energy consulting firm Gelber and Associates said in a note.

Heat waves intensified across southern and eastern Europe, Asia, and much of the US as the World Meteorological Organization warned of an increased risk of deaths due to the extreme weather.

(Additional reporting by Natalie Grover in London, Stephanie Kelly in New York, and Andrew Hayley in Beijing; Editing by David Holmes, Jan Harvey, and Jonathan Oatis)

Oil prices inch up as US crude supplies seen tightening

July 18 (Reuters) – Oil prices edged higher in early trade on Tuesday after sinking in the previous session on weaker-than-expected Chinese economic growth, as investors eyed a possible tightening of US crude supplies.

Brent crude gained 11 cents to USD 78.61 a barrel by 0017 GMT, while US West Texas Intermediate crude rose 15 cents to USD 74.30 a barrel.

Both contracts fell more than 1.5% on Monday.

Investors awaited industry data later on Tuesday that was expected to show US crude oil stockpiles and product inventories likely fell last week.

Meanwhile, US shale oil production is projected to fall to nearly 9.40 million barrels per day (bpd) in August, which would be the first monthly decline since December 2022, data from the Energy Information Administration showed on Monday.

Still, global supplies could see a boost from the resumption of output at two of three Libyan fields that were shut last week. Output had been halted by a protest against the abduction of a former finance minister.

Concern about China’s economy is keeping a lid on prices. The country’s gross domestic product (GDP) grew 6.3% year-on-year in the second quarter, compared with analyst forecasts of 7.3%, as its post-pandemic recovery lost momentum.

(Reporting by Stephanie Kelly; Editing by Sonali Paul)

Global market outlook bright but China’s clouds darken

July 18 (Reuters) – Another day, another whoosh higher on Wall Street, but the double whammy of gloomy news from China on Monday is spoiling the party in Asia, and regional markets could struggle again on Tuesday.

Data on Monday showed that the world’s second-largest economy grew at a frail pace in the second quarter while China’s Evergrande Group, the world’s most indebted property developer, said it lost an eye-watering USD 81 billion over 2021 and 2022.

Chinese stocks fell almost 1% on Monday, their biggest loss in three weeks and dragging the broader MSCI Asia ex-Japan index into the red for the first time in six sessions.

No such issues on Wall Street as a near 1% rally in the tech-centric Nasdaq lifted stocks while the US earnings season goes up a gear this week. There was barely any change in the dollar or Treasury yields on Monday as investors brace for US retail sales figures on Tuesday.

The shadow over local markets cast by China’s second-quarter GDP data on Monday is unlikely to lift completely by Tuesday, and the pressure on policymakers in Beijing to deliver more stimulus to shore up activity will surely increase.

Chinese GDP grew 0.8% in April-June from the previous quarter, beating the consensus forecast of 0.5%. But on a year-on-year basis, GDP expanded 6.3%, well below the 7.3% forecast.

JPMorgan, Morgan Stanley, and Citigroup trimmed China’s growth forecast for 2023 to as low as 5%, with Morgan Stanley also trimming its 2024 GDP forecast by 40 basis points to 4.5%.

On the corporate front, Evergrande’s losses were compounded by a rise in total liabilities. There is no quick fix, especially when growth momentum is decelerating. Real estate, once the source of extraordinary growth and investment, is a drag on the overall economy.

The Chinese mainland real estate index fell on Monday to its lowest level in nine years. It has lost 50% of its value in the last three years.

US Treasury Secretary Janet Yellen on Monday said slower growth in China could spill over to other countries, but she does not expect the US economy to enter a recession.

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

– G20 finance officials meeting in India

– Reserve Bank of Australia minutes of the last policy meeting

– US retail sales (June)

(By Jamie McGeever; Editing by Josie Kao)

Yields steady after New York manufacturing data

July 17 (Reuters) – US Treasury yields held steady on Monday after rising slightly on New York manufacturing data in the morning, as market participants await a signal for monetary policy at the US Federal Reserve’s meeting next week.

Benchmark 10-year note yields dipped slightly on the day to 3.810%, from around 3.824% before the data. They are down from an eight-month high of 4.094% reached on July 7.

Interest rate- ensitive two-year note yields held at 4.750%. They are down from 5.12% hit on July 6, their highest since June 2007.

The Empire State Manufacturing Survey’s general business conditions index, released on Monday morning, fell to 1.1 from 6.6 in June. It indicated that activity changed little in July at the same time as delivery times shortened and inventories declined steadily.

Just 29% of surveyed firms sounded off that conditions improved in July compared to June, while 27% said conditions had deteriorated.

At the same time, new orders edged higher while shipments increased and employment levels ticked up slightly from last month.

The survey results come as investors anticipate a small rate hike coming out of the US Federal Reserve’s next meeting on July 25-26.

“I think generally the Fed probably has one more hike to do in July,” said Tom di Galoma, managing director and co-head of global rates trading at BTIG in New York. “So I think that any time the market sees better-than-expected news, all of a sudden people start thinking about what the Fed’s going to do.”

What remains unclear is whether the Fed will hold rates steady after that or move forward with further hikes for the remainder of the year.

“The Treasury market at the moment feels pretty fragile to me because the narrative around what’s going on in the economy’s still very unstable,” said Ed Al-Hussainy, senior global rates strategist at asset manager Columbia Threadneedle in New York.

“If the Fed comes out and signals that they need to do more beyond the July meeting, the market is going to get caught offside a little bit,” he added.

The inversion in the yield curve between two-year and 10-year notes widened to minus 94 basis points from 93 basis points after Monday’s data.

Several major economic data points on Tuesday will further clarify the Fed’s remaining work needed to rein in inflation.

These include US retail sales data for June set to be released at 8:30 am ET (1230 GMT), while the home builder confidence index for July is set for release at 10 am ET (1400 GMT).

July 17 Monday 3:40 PM New York / 1940 GMT

	Price	Current Yield %	Net Change (bps)
Three-month bills	5.2525	5.4079	-0.003
Six-month bills	5.2475	5.4762	-0.004
Two-year note	99-196/256	4.7509	0.000
Three-year note	100-110/256	4.3451	-0.014
Five-year note	99-232/256	4.0207	-0.012
Seven-year note	98-248/256	3.9207	-0.007
10-year note	96-116/256	3.8107	-0.009
30-year bond	94-160/256	3.9324	0.007

DOLLAR SWAP SPREADS
	Last (bps)	Net Change (bps)
US 2-year dollar swap spread	18.25	-0.50
US 3-year dollar swap spread	15.75	0.75
US 5-year dollar swap spread	6.75	-0.25
US 10-year dollar swap spread	1.75	-0.50
US 30-year dollar swap spread	-38.75	-0.75

(Reporting by Matt Tracy, Editing by Nick Zieminski and Will Dunham)

Gold struggles for traction on doubts about Fed pause

July 17 (Reuters) – Gold prices were little changed on Monday, with bullion traders still doubtful about whether the Federal Reserve may soon signal an end to its monetary tightening path.

Spot gold was steady at USD 1,953.91 per ounce at 1:42 p.m. EDT (1742 GMT). US gold futures settled 0.4% lower at USD 1,956.40.

The dollar hovered near a more than one-year low, making gold less expensive for other currency holders.

“(Gold) investors at this point are quite reluctant to go fully bullish despite last week’s inflation data,” said Bart Melek, head of commodity strategies at TD Securities.

Bullion posted its biggest weekly gain since April last week on bets that the Fed could pause rate hikes after July after US data hinted at a disinflationary trend as consumer prices grew at their slowest pace in over two years.

Traders largely expect the central bank to hike rates in its July 25-26 meeting.

“Gold is likely to be under pressure as the US economy continues to be quite firm, particularly on the employment front. In my view it is very unlikely that the Fed is going to commit to a tilt towards a more dovish policy stance,” Melek added.

Higher interest rates dull gold’s allure as they increase the opportunity cost of holding the non-yielding asset.

Investors also took stock of data from China that showed the top bullion consumer’s economy grew at a frail pace in the second quarter.

Silver fell 0.5% to USD 24.82 per ounce.

“While sentiment may be good towards silver investment, industrial applications retain the majority of market share,” Heraeus analysts wrote in a note.

“An improvement in activity in China and Europe may be needed to see the (silver) price rise much further in the second half of 2023.”

Platinum rose 0.6% to USD 977.42 and palladium gained 1.2% to USD 1,286.13.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by David Holmes and Andrea Ricci)

Tepid China data, Richemont pull down European shares

European shares fell on Monday as China’s lackluster economic data knocked down commodity-linked stocks, while luxury group Richemont slumped on weaker-than-expected organic sales growth.

The pan-European STOXX 600 index was down 0.5% by 0706 GMT. The benchmark index posted gains of nearly 3% in the previous week, driven by hopes that the US Federal Reserve could wind up its interest rate hikes soon.

Data on Monday signaled China’s economy grew at a frail pace in the second quarter on weaker demand, leading to a fall in commodity prices, which dragged miners and energy firms down 1.6% and 0.8%, respectively.

Shares of Richemont dropped nearly 7% after the world’s second-biggest luxury firm reported a 19% rise in its quarterly organic sales, but fell short of analysts’ estimates.

Shares of other China-exposed luxury firms such as LVMH, Hermes, and Kering slumped between 2% and 2.7%.

(Reporting by Amruta Khandekar; Editing by Sherry Jacob-Phillips)

UK’s FTSE 100 falls at open as mining stocks slip on weak Chinese economic data

UK’s FTSE 100 slipped at the open on Monday, with mining stocks leading declines on lower metal prices after data showed weak growth in world’s second-largest economy China.

By 0705 GMT, the blue-chip FTSE 100 lost 0.3%, while the more domestically-focussed FTSE 250 midcap index fell 0.4%.

China’s economy grew at a frail pace in the second quarter, with the post-COVID momentum faltering rapidly and raising pressure on policymakers to deliver more stimulus to shore up activity.

Industrial metal miners dipped 1.8% as prices of most base metals came under pressure.

Global miners Rio Tinto and Glencore lost 1.6% and 1.8%, respectively.

Heavyweight energy stocks also fell 0.8% on lower oil prices.

Meanwhile, Gresham House soared 56.6% after US-based investment firm Searchlight Capital Partners said it will buy the alternative asset manager for 469.8 million pounds (USD 614.9 million).

(Reporting by Shashwat Chauhan in Bengaluru; Editing by Varun H K)

Gold prices edge lower as dollar uptick dampens appeal

Gold prices edged lower on Monday as a steady dollar make bullion more expensive for holders of other currencies, although investors largely bet on the US Federal Reserve hitting the brakes soon on its rate-hike trajectory.

Spot gold edged 0.1% lower to USD 1,952.35 per ounce by 0658 GMT. US gold futures were down 0.4% to USD 1,956.20.

The dollar edges up from its April 2022 lows, as traders waited on economic data and policy decisions before selling it down any further.

“Gold’s post-CPI rally has paused for breath, and that leaves the potential for a technically-driven retracement to the USD 1,940–USD 1,950 region,” said Matt Simpson, a senior market analyst at City Index.

Last week’s U.S. data hinted at a disinflationary trend as consumer prices grew at their slowest pace in more than two years.

“If peak cycles are close, it is another supportive feature for gold, alongside central bank buying,” Simpson added.

Hikes are expected from the Fed and European Central Bank next week, and markets see the U.S. central bank likely stop before cuts next year, while in Europe another hike is expected.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

Only a break above USD 1,961 could confirm a continuation of the uptrend towards the range of USD 1,971 to USD 1,977, according to Reuters technical analyst Wang Tao.

Top gold consumer China’s economy grew at a frail pace in the second quarter.

In the wider market, prices of base metals fell despite support from the recent weakness in the dollar as tepid economic data fanned demand concerns.

With hopes of stimulus measures in July or August, riskier assets such as base metals and equities would be bought more, which could dent gold’s demand, said Vandana Bharti, assistant vice-president of commodity research at SMC Global Securities.

“Otherwise, we are expecting a range-movement in gold with a bias to the upside.”

Spot silver fell 0.7% to USD 24.76 per ounce, platinum was down 0.6% to USD 965.39 while palladium XPD= dipped 0.8% to USD 1,261.47.

(Reporting by Seher Dareen in Bengaluru; Editing by Rashmi Aich, Eileen Soreng and Sherry Jacob-Phillips)

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