Gold gains on economic risks with US inflation in focus

May 9 (Reuters) – Gold gained on Tuesday as investors sought cover from economic uncertainty while also positioning for the US inflation print for cues on the trajectory of interest rates.

Spot gold was up 0.8% at USD 2,036.56 per ounce by 1:41 p.m. EDT (1741 GMT), while US gold futures settled 0.5% higher at USD 2,042.90.

Equities markets fell on concerns about China’s domestic demand recovery after weak Chinese trade data, and the impasse over the US debt ceiling.

“It’s going to be a risk-off day” as markets await US consumer price index data on Wednesday, said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago.

Hotter-than-expected CPI would bolster bets for rate hikes, but much weaker data could cause “a big rush into commodities across the board and further liquidation in the dollar”, Streible added.

While gold is considered a hedge against inflation, rising interest rates dull non-yielding bullion’s appeal.

Fed Governor Philip Jefferson said the US economy is slowing in an “orderly fashion” allowing inflation to decline even as growth continues. New York Fed chief John Williams said inflation remains too high, but tighter credit should slow the economy, blunting how far the Fed might need to go.

Markets are pricing in an 82% chance of the Fed keeping rates on hold in June and a 33% chance of a cut in July.

Commerzbank analyst Carsten Fritsch, however, wrote in a note that there is no scope for the Fed to implement rate cuts this year.

Investors were also monitoring developments in the US banking sector after a Fed survey released on Monday showed banks tightened credit standards over the first months of the year.

Silver was up 0.4% at USD 25.66 an ounce, while platinum jumped 3.1% to USD 1,103.25. Palladium gained nearly 1% to USD 1,569.02.

(Reporting by Deep Vakil and Arundhati Sarkar in Bengaluru; Editing by Paul Simao and Shilpi Majumdar)

Global hedge fund launches at lowest level since 2017 – Preqin

LONDON, May 9 (Reuters) – Hedge fund launches in 2023 are at their lowest level globally since 2017, data provider Preqin said, against a backdrop of banking upheaval and bouts of market volatility.

So far this year, 180 funds have started or plan to start trading, Preqin told Reuters on Tuesday.

Untried trend managers in particular have found capital raising tough given market turbulence which has forced many established macro and trend-following funds to cut positions from bad portfolio bets.

Managed futures hedge funds using computer-led strategies to follow market trends and firms trading on macroeconomic signals have had three and eight launches respectively this year.

There have been 36 launches of equity strategy funds, making them the most popular strategy, Preqin data showed.

Meanwhile, credit has seen seven new funds launched and multi-strategy firms trading many different kinds of strategies together had six launches so far in 2023, with one further expected in the third quarter.

Global mergers and acquisitions (M&A) activity shrank to its lowest level in more than a decade in the first quarter, and only six new event driven hedge funds have started this year.

“The strong public equity performance this quarter was encouraging for a strategy that correlates highly with public markets. Meanwhile, macro strategies fell out of favor just as quickly as they had come in,” Preqin said in its Hedge Funds Q1 2023 report, which was released earlier this month.

(Reporting by Nell Mackenzie; Editing by Alexander Smith)

PacWest gains ground in choppy trading for US regional banks

May 9 (Reuters) – PacWest Bancorp shares (PACW) regained earlier session losses on Tuesday as investor uncertainty about the financial health of US regional banks underpinned skittish trading in their stocks.

PacWest rose 2.3% after losing as much as 10% earlier in the day following a decision by the Los Angeles-based lender to cut its quarterly dividend in an effort to bolster its liquidity.

The bank’s stock has rallied by more than 92% in the last three sessions after a bruising sell-off sent it to a record low last week.

“We believe that PacWest and other banks have not been trading in line with their fundamentals,” said Piper Sandler analyst Matthew Clark, who currently has an “overweight” rating on PacWest shares.

The shares of other regional banks were also choppy. Western Alliance (WAL) fell 1.4%, Valley National Bancorp (VLY) lost 1.5%, First Horizon Corp (FHN) shed 1.3%, and Synovus Financial Corp (SNV) dropped nearly 1%. But Comerica Inc (CMA) and Zion Bancorp (ZION) were up 0.39% and 0.66%, respectively.

The KBW Regional Banking Index dropped 0.72% on Tuesday and was hovering near its 30-month low hit last week after the collapse of First Republic Bank and PacWest’s decision to explore strategic options.

“Volatility is back. We had hoped that a resolution of (First Republic) would bring some calm and cooler heads back to the market. Instead, it seemed only to re-intensify wild price swings,” Piper Sandler analysts, led by Scott Siefers, wrote in a note to investors.

New York Federal Reserve President John Williams on Tuesday said the US banking system remained sound and resilient, and that the acute phase of the ongoing crisis was likely over, with problems limited only to a few banks.

Williams also said Fed was eyeing an end to the rate-hike cycle as inflation pressures have eased a bit and tighter financial conditions tied to banking sector troubles were expected to help further cool the economy.

PacWest and Western Alliance, which have been at the heart of the recent sell-off in regional banks, saw the steepest drop in deposits in the first quarter after First Republic Bank, according to S&P Global Market Intelligence data.

Analysts have called on the Federal Deposit Insurance Corp (FDIC), which currently insures USD 250,000 in deposits per person per bank, to raise its deposit coverage to end the current crisis with regional banks. The FDIC released a report last week, saying it saw merits in increasing the backstop for business accounts.

“The FDIC needs to raise its limits because that’s what will going to instill confidence in people and stop them from moving their money to larger banks,” said Michael Ashley Schulman, chief investment officer at Running Point Capital in California. “Otherwise smaller banks will be destroyed.”

(Reporting by Medha Singh and Vansh Agarwal in Bengaluru and Chibuike Oguh in New York, additional reporting by Bansari Mayur Kamdar; Editing by Arun Koyyur, Subhranshu Sahu and Jamie Freed)

UK’s FTSE 100 muted at the open in run-up to US inflation data

May 9 (Reuters) – London’s FTSE 100 was flat on Tuesday morning, with UK markets reopening after a long weekend, and as investors waited for the April U.S. consumer price inflation report due later in the week before placing big bets.

By 0715 GMT, the blue-chip FTSE 100 was subdued.

International Consolidated Airlines Group S.A. gained 1.7% after Peel Hunt raised the British Airways owner’s rating to “buy” from “hold”.

Britain’s biggest sportswear retailer JD Sports Fashion said it has proposed to acquire France-based sportswear retailer Courir for an enterprise value of 520 million euros (USD 572.4 million). Its shares gained 2.9%.

Weighing on the commodity-heavy FTSE 100 index, energy stocks dipped 0.5% as oil prices relinquished some of the strong gains of the previous two sessions ahead of US inflation figures for further cues on Fed’s rate hike path.

US April consumer price inflation is expected to rise 0.4%, and is due on Wednesday.

The more domestically-focussed FTSE 250 midcap index fell 0.1% as Direct Line Insurance Group lost 7.0% after the motor insurer said 2023 earnings outlook continues to be challenging.

(Reporting by Shashwat Chauhan in Bengaluru; Editing by Nivedita Bhattacharjee)

European shares fall as Sweden’s SBB drags

May 9 (Reuters) – European shares fell on Tuesday, with Sweden’s SBB leading declines after delaying its dividend payment while investors remained wary ahead of crucial upcoming US economic data releases.

The pan-European STOXX 600 index fell 0.2% by 7:06 GMT, with investor focus on US consumer prices data due later this week for cues on whether the Federal Reserve can pause future rate hikes.

SBB dropped 7.7% after the Swedish landlord on Monday said it would delay its dividend payment and no longer carry out a 2.63 billion Swedish crowns (USD 259.1 million) rights issue after S&P Global cut its credit rating to junk.

Limiting losses, Banco BPM climbed 4.9% after Italy’s third-largest bank raised its profit target for this year and the next, following stronger-than-expected first-quarter earnings.

Fresenius Medical Care advanced 1.4% after the German dialysis specialist reported a smaller-than-expected drop in its first-quarter adjusted operating income.

(Reporting by Amruta Khandekar)

Yields on T-bills jump on concerns over debt ceiling

May 9 (Reuters) – Yields on US short-dated T-bills jumped in early London trade on Tuesday, as investors sold off bonds that will mature around the time the US could hit its debt limit.

On Monday, Treasury Secretary Janet Yellen said that a failure by Congress to raise the USD 31.4 trillion federal debt limit would cause a huge hit to the US economy and weaken the dollar as the world’s reserve currency.

President Joe Biden and top Republicans and Democrats from Congress meet on Tuesday to attempt to break the impasse.

The 1-month Treasury bill yield rose 15 bps to 5.61%, while yields on the 2-month T-bill climbed 13 bps to 5.26%.

Yellen last week notified Congress that the Treasury could run short of cash to pay its bills by early June.

Analysts flagged that Yellen’s letter noted the actual date could be a “number of weeks” after this estimate, raising the odds of a short-term extension to July, or late September, or a scenario with no deal even later.

Congress has often paired debt-ceiling increases with other budget and spending measures.

(Reporting by Stefano Rebaudo, editing by Amanda Cooper)

Oil recoups losses on plans for SPR refill, higher seasonal demand

HOUSTON, May 9 (Reuters) – Oil prices ticked up on Tuesday, reversing a more than 2% drop earlier in the session, as markets weighed US government’s plans to refill the nation’s emergency oil reserve and anticipated higher seasonal demand.

Brent crude settled 43 cents, or 0.6% higher, at USD 77.44 a barrel, while US West Texas Intermediate (WTI) crude closed up 55 cents, or 0.8%, at USD 73.71.

Both benchmarks had fallen about 2.5% earlier in the session after two days of gains.

Biden administration plans to begin purchasing oil to replenish the Strategic Petroleum Reserve helped cover speculative short positions, said Robert Yawger, executive director of energy futures at Mizuho.

Energy Secretary Jennifer Granholm has said the administration could start buying back crude oil for the Strategic Petroleum Reserve late this year after President Joe Biden last year directed the largest sale yet from the stockpile.

A report from the Energy Information Administration (EIA) pointing to higher seasonal demand and lower-than-expected output also supported prices.

“We expect the seasonal rise in oil consumption and a drop in OPEC crude oil production to put some upward pressure on crude oil prices in the coming months,” the Energy Information Administration said in its Short-Term Energy Outlook.

The EIA also forecasts US crude production will rise 5.1% to 12.53 million barrels per (bpd) day this year, but lowered its output estimate for this year and next from previous forecasts.

It cut its estimate for Brent and WTI prices by more than 7% each to USD 78.65 and USD 73.62 a barrel, respectively.

US crude oil inventories rose by about 3.6 million barrels in the week ended May 5, according to market sources citing American Petroleum Institute figures on Tuesday, compared with analysts’ estimate for a drawdown of about 917,000 barrels.

Prices were held back, however, by data that showed China’s imports contracted in April, while exports rose at a slower pace, implying weak domestic demand.

Markets were also monitoring US President Joe Biden and top Republican lawmakers’ comments on raising the USD 31.4 trillion US debt ceiling, fearing an unprecedented default if Congress does not act in three weeks.

US consumer price index (CPI) figures for April are due to be released on Wednesday and could determine the Federal Reserve’s next interest rate decision.

New York Fed President John Williams said inflation remains too high and that the central bank will raise rates again if necessary, even though the US central bank dropped guidance about the need for future hikes.

While doubts about the economy could weigh on markets, crude prices were supported as wildfires prompted oil producers in the Canadian province of Alberta to shut in at least 319,000 barrels of oil equivalent per day, more than 3.7% of Canada’s output.

(Reporting by Arathy Somasekhar in Houston; Additional reporting by Ahmad Ghaddar in London, Katya Golubkova in Tokyo, and Emily Chow in Singapore; Editing by Andrea Ricci and Matthew Lewis)

China’s exports seen rising in April but at slower pace

BEIJING, May 8 (Reuters) – China’s exports were expected to have risen again in April, albeit at a less robust pace than a month earlier, a Reuters poll showed, supported by unfulfilled orders after last year’s COVID disruptions though slowing global growth is darkening the outlook.

Outbound shipments last month from the world’s second largest economy is expected to show growth of 8.0% year-on-year, following an unexpected surge of 14.8% in March, according to the median forecast of 27 economists in the poll finalised on Monday.

Imports are still expected to paint a less favourable picture of the overall economy, with economists predicting no growth, similar to April, 2022, after falling by 1.4% year-on-year in March.

The trade data will be released on Tuesday.

With many of China’s major trade partners on the brink of recession, analysts remain wary about the outlook, noting that the stunning improvement in March partly reflects suppliers catching up with unfulfilled orders from last year’s COVID disruptions.

The cautious stance was backed by the recent official manufacturing purchasing managers’ index for April showing new export orders contracting sharply and underlining the challenge facing Chinese policymakers and businesses hoping for a robust post-COVID economic recovery.

“We believe March’s 14.8% year on year growth is unsustainable and monthly export growth may drop to low single-digit or even into negative territory again,” Ting Lu, chief China economist at Nomura, wrote in a note, citing a slowing global economy and rising geopolitical tensions.

South Korean exports to China, a leading indicator of China’s imports, were down 26.5% in April, continuing 10 consecutive months of decline.

China’s economy grew faster than expected in the first quarter thanks to robust services consumption, but factory output has lagged amid weak global growth. Property market weakness, slowing prices and surging bank savings are raising doubts about demand.

The government has set a modest GDP growth target of around 5% for this year, after badly missing the 2022 goal.

(Reporting by Joe Cash; Polling by Sujith Pai and Devayani Sathyan in Bengaluru; Editing by Shri Navaratnam)

Europe signals quiet start

European shares looked set to open broadly unchanged on Monday, in a quiet start to the week also due to a holiday closure of UK markets, just as debt ceiling talks in the US remain at a stalemate.

EuroSTOXX50 and DAX futures were both trading around parity. US contracts pointed to a muted start on Wall Street, following Friday’s gains that saw the S&P 500 gain 1.9%, as US regional banks rallied and Apple soared following strong results.

US Treasury Secretary Janet Yellen warned on Sunday that a failure by Congress to act on the debt ceiling could trigger a “constitutional crisis” and call into question the federal government’s creditworthiness.

Among data to watch is the US CPI on Wednesday. Any big surprise to the upside could put in question bets the Fed could even start cutting rates as soon as July. Eyes also on the Fed’s bank lending survey for Q1 due after the European market close.

On the European corporate news front it was rather quiet too. Postal group PostNL and pharmaceutical firm Almirall could move after both beat quarterly profit expectations.

(Danilo Masoni)

Oil prices climb as recession fears begin to fade

SINGAPORE, May 8 (Reuters) – Oil prices rose on Monday as fears of a recession in the U.S., which drove prices down for three straight weeks for the first time since November, started receding.

Brent crude futures were up 43 cents, or 0.6%, at USD 75.73 a barrel at 0624 GMT. US West Texas Intermediate (WTI) crude futures were up 45 cents, also 0.6%, at USD 71.79 a barrel.

“Oil’s rebound follows energy stocks’ comeback on Wall Street last Friday after the U.S. reported strong job data, which eased concerns about an imminent economic recession that led to the selloff early in the week,” said Tina Teng, an analyst at CMC Markets.

Fears that the U.S. banking crisis will slow the economy and sap fuel demand in the world’s biggest oil consuming nation drove the Brent benchmark down 5.3% last week, while WTI plunged 7.1%.

However a healthy U.S. jobs report for April, a weaker dollar, and expectations of supply cuts at the next meeting of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, in June, helped the benchmarks rebound about 4% each on Friday.

“Crude prices are trying to stabilize as energy traders wait to see if OPEC+ might have to signal they are willing to reduce output even further,” said Edward Moya, an analyst at OANDA.

Goldman Sachs analysts said in a note on Saturday that concerns over near-term demand due to stress in the US banking system and an industrial slowdown, and elevated global supply due to limited compliance with OPEC+ cuts were “overblown”.

The investment bank maintained its Brent price forecast of USD 95 per barrel by December and USD 100 by April. ANZ Research analysts said they believed that the market focus would now shift away from economic concerns to tightening oil supply.

The United States is expected to report consumer price inflation figures for April on Wednesday, which could provide further clues on interest rate moves amid broad expectations that the U.S. Federal Reserve will pause rate hikes.

Traders this week will also keenly watch Chinese economic indicators including trade, inflation, lending and money supply figures for April, as market participants continue to gauge economic recovery in the world’s second largest oil consumer.

“Crude prices may continue to take the rebounding tailwind,” CMC Markets’ Teng said.

(Reporting by Sudarshan Varadhan; Editing by Sonali Paul)

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