China stocks drop as weak recovery, lack of strong stimulus weigh

SHANGHAI – China and Hong Kong stocks closed lower on Thursday, as traders maintained a cautious stance on signs of weak recovery in the world’s second-largest economy and a lack of strong stimulus.

** China’s blue-chip CSI300 Index declined 0.5% and the Shanghai Composite Index slipped 0.2% at close.

** Hong Kong’s benchmark Hang Seng Index dropped 1.2%, and the Hang Seng China Enterprises Index was down 1.5%.

** Other Asian shares fell after global central banks reaffirmed their resolve to beat inflation, warning rates may need to rise further.

** Real estate developers in China lost 1.8%, as a lack of strong support measures for the sector disappointed investors.

** “There’s no indication they will abandon their fundamentally hawkish stance towards property, which they (policymakers) believe is in long-term decline,” said Gavekal Dragonomics analysts in a note.

** Shares of tourism companies fell 2.4%, while the food & beverage sector declined 1.5%.

** Data on Wednesday showed annual profits at China’s industrial firms extended a double-digit decline in the first five months as softening demand squeezed margins, reinforcing hopes of more policy support to bolster a stuttering post-COVID economic recovery.

** A Reuters poll showed on Thursday that China’s factory activity likely contracted for a third straight month in June, albeit at a marginally slower pace.

** Foreign investors sold a net 7.6 billion yuan (USD 1.05 billion) of Chinese shares on the day.

** US Treasury Secretary Janet Yellen said she hoped to travel to China to reestablish contact with Beijing, acknowledging there were disagreements between the two countries, MSNBC reported on Wednesday.

** The United States and China agreed to consider expanding commercial flights between the two countries to improve people-to-people contact.

** Tech giants listed in Hong Kong slumped 1.7%.

(Reporting by Shanghai Newsroom; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)

Dollar hits 7-month high vs yen on policy split; Sweden’s crown touches record low

LONDON – The US dollar touched a more than seven-month high against the yen on Thursday after the heads of the respective central banks reaffirmed the divergence in policy, while Sweden’s crown hit a record low after the Riksbank modestly raised its policy rate.

Federal Reserve Chair Jerome Powell – speaking on a panel with European Central Bank President Christine Lagarde, Bank of Japan Governor Kazuo Ueda and Bank of England Governor Andrew Bailey – noted that two rate rises were likely this year, and did not rule out the possibility of a hike in July.

By contrast, Ueda reiterated that “there’s still some distance to go” in sustainably achieving 2% inflation accompanied by sufficient wage growth, the conditions the BOJ has set for considering an exit from ultra-easy stimulus.

The dollar’s surge of as much as 11.6% since late March to reach 144.71 yen for the first time since Nov. 10 has prompted increased verbal warnings from Japanese government officials this week that the move may have been too rapid.

The ministry of finance and BOJ intervened in the currency market last autumn when the dollar strengthened beyond 145 yen.

The dollar was last down 0.1% at 144.24.

“The playbook of verbal intervention is consistent with intervention happening soon and if it gets above 145 we could quite easily get to see them intervene again,” said ING global head of markets Chris Turner.

“Last year they were bailed out by US rates, inflation and the dollar all turning lower but this time around there’s a risk they might get sucked into a longer campaign if inflation proves sticky.”

The US dollar index – which measures the currency against six major peers, including the yen, euro and sterling – was flat at 102.94.

Sweden’s crown briefly hit a record low of 11.829 per euro after Sweden’s Riksbank raised its key interest rate and increased its pace of bond sales, or quantitative tightening (QT). The crown was last little changed at 11.77 per euro.

“They’re expressing confidence that a faster rate of QT is going to deliver a stronger crown and I think that’s a bit unproven,” ING’s Turner said.

“One of the arguments of providing government bonds back to the open market is that they can improve liquidity and deliver higher bond yields but the crown hasn’t really bought into that just yet.”

The euro was little changed at USD 1.0908, after mixed inflation data from German states and Spain ahead of tomorrow’s euro areawide figure.

Consumer prices in North Rhine Westphalia, Germany’s most populous state, rose 6.2% on an annual basis in June, up from 5.7% in May.

Meanwhile, Spain’s 12-month inflation fell to 1.9%, the lowest since March 2021 but above the 1.7% expected by economists polled by Reuters.

The Chinese yuan weakened toward a seven-month trough despite the People’s Bank of China (PBOC) setting a much stronger than expected official rate, in the latest signal of its discomfort at the pace of recent declines.

The dollar added 0.1% to 7.2479 yuan in the offshore market, taking it close to the previous day’s 7-1/2-month low of 7.2694.

The PBOC set the midpoint rate at 7.2208, in what analysts at Citi called “the most forceful sign yet of official discomfort at the pace of yuan depreciation,” although adding they are “doubtful this will prevent more upside, as it has proven ineffective over time in the past.”

Elsewhere, the Australian dollar rose 0.4% to USD 0.6625 after stronger than expected retail sales data, regaining some composure following Wednesday’s 1.27% tumble.

(Reporting by Samuel Indyk and Kevin Buckland Editing by Shri Navaratnam, Mark Potter and Emelia Sithole-Matarise)

UPDATE 8-Oil settles higher, trade choppy as tight supply vie with rate hike fear

Rate hike expectations boost fears of slow economic growth

Weak economic data in China weighs on sentiment

Updates with settlement price, adds details on Fed rate hikes

By Arathy Somasekhar

HOUSTON, June 29 (Reuters) – Oil prices settled higher on Thursday after flip flopping during the session, supported by a bigger draw than expected in U.S. crude inventories but pressured by fears that rising interest rates could dent global economic growth.

Brent crude futures LCOc1 rose 31 cents, or 0.4%, to $74.34 a barrel. U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 30 cents, or 0.4%, to $69.86 a barrel.

On Wednesday, both benchmarks gained about 3% after the U.S. Energy Information Administration (EIA) said crude inventories dropped by 9.6 million barrels in the week ended June 23, far exceeding the 1.8-million barrel draw analysts had forecast in a Reuters poll.

“Crude traders remain torn between rising interest rates with fears of a global recession against elevated travel demand and shrinking crude supplies,” said Dennis Kissler, senior vice president of trading at BOK Financial.

Investors were concerned about rising interest rates and economic growth after Federal Reserve Chair Jerome Powell reiterated that he expects the moderate pace of interest rate decisions to continue in the coming months.

The number of Americans filing new claims for unemployment benefits fell last week by the most in 20 months, offering an upbeat picture of the labor market that could encourage the Fed to keep raising interest rates.

However, Atlanta Fed President Raphael Bostic reiterated his belief that moderating inflation should keep the central bank from raising its short-term rate target again.

European Central Bank President Christine Lagarde has cemented expectations for a ninth consecutive rise in euro zone rates in July.

Financial stability risk in the European Union remains at a “severe” level and the downturn in the housing market could become even more broad-based, she added.

Adding to pressure, annual profits at industrial firms in China, the world’s second-biggest oil consumer, extended a double-digit decline in the first five months as softening demand squeezed margins.

“The lack of prospects for fuel demand growth has limited the gain in oil prices, even with supply curbs by oil producers,” said Tetsu Emori, CEO of Emori Fund Management Inc.

Given falling prices, Saudi Arabia this month pledged to sharply cut its output in July, adding to a broader OPEC+ deal to limit supply into 2024.

(Additional reporting by Ahmad Ghaddar in London,Yuka Obayashi; editing by Jason Neely, David Evans, Barbara Lewis, David Gregorio and Deepa Babington)

((Ahmad.Ghaddar@thomsonreuters.com; +442075424435; Reuters Messaging: ahmad.ghaddar.thomsonreuters.com@reuters.net))

Cold reality of “higher for longer” sets in

June 29 (Reuters) – The cold reality of ‘higher for longer’ interest rates that cooled investor sentiment on Wednesday will lend a cautious tone to Asian trading on Thursday, with investors also wary of potential action from Tokyo and Beijing on exchange rates.

On the regional data front retail sales and consumer confidence from Japan and Australian retail sales take center stage, while investors with exposure to Vietnam will be paying close attention to second-quarter GDP growth figures from Hanoi.

The broader narrative running through markets on Wednesday was more downbeat than Tuesday – and less coherent – after the leaders of the G4 central banks sent hawkish signals from the European Central Bank’s annual jamboree in Sintra, Portugal.

Wall Street struggled under the weight of rising US rate expectations, the dollar rose and Treasuries rallied, and the US yield curve inversion deepened a bit. So far, so ‘risk off’.

But US equity market volatility fell, oil jumped, Apple shares climbed to a new all-time high, and other mega tech stocks rose too.

Asian tech may rise in sympathy on Thursday, but the sector is one of the major sources of US-Sino tensions – US officials are considering tightening an export control rule designed to slow the flow of artificial intelligence chips to China by clamping down on the amount of computing power the chips can have.

On the macro front, another plunge in Chinese industrial profits was yet another reminder of the difficulties the world’s second-largest economy is experiencing.

Annual profits at China’s industrial firms extended a double-digit decline in the first five months as softening demand squeezed margins.

The economy appears to be losing steam on many fronts. Further monetary easing could be in the cards and if it is, the yuan is likely to inch closer to a fresh 15-and-a-half-year low through 7.30 per dollar.

Investors are wondering exactly where Beijing stands on the yuan right now, after acting to support the currency for the first time in nearly eight months on Tuesday, then allowing it to slide again on Wednesday.

The yen, meanwhile, fell to a new seven-month low on Wednesday near 145.00 per dollar. Many analysts say yen-buying intervention from Japanese authorities between 145.00 and 150.00 per dollar is increasingly likely.

Both the yuan and the yen are historically weak. If one declines, authorities in the other country could be minded to let their currency slide too.

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

– Japan retail sales and consumer confidence (May)

– Australia retail sales (May)

– Vietnam GDP (Q2)

(By Jamie McGeever)

Dollar strengthens after ECB conference, yen stays soft

NEW YORK, June 28 (Reuters) – The dollar index rose on Wednesday following comments from a host of global central bank leaders, including Federal Reserve Chair Jerome Powell, who did not rule out the possibility of another rate hike by the Fed at its next meeting in July.

Powell, speaking at a European Central Bank (ECB) conference along with Bank of England Governor Andrew Bailey, ECB President Christine Lagarde, and Bank of Japan Governor Kazuo Ueda, noted that two rate rises are likely this year, and did not rule out the possibility of a rate increase at its next policy meeting set for July 25-26.

In addition, Powell also said he does not see inflation coming down to the Fed’s 2% target until 2025.

Expectations for a 25-basis-point hike at the July meeting moved up to 81.8 from 76.9% a day earlier, according to CME’s FedWatch Tool.

“It’s not a big change. To me they are all reading from the same scripts from their recent central bank meetings,” said Erik Bregar, director, FX & precious metals risk management, at Silver Gold Bull in Toronto.

Earlier economic data showed the US trade deficit in goods narrowed in May as imports fell, but was likely not enough of an improvement to keep trade from weighing on second quarter economic growth, although a rise in inventory investment could also offset the drag from trade.

The dollar index rose 0.371% to 102.870.

The yen, which has been under pressure as the BOJ has been an outlier among global central banks by keeping a loose monetary policy, weakened to a fresh 7-month low of 144.61 per dollar. BOJ Governor Kazuo Ueda said the central bank would see a good reason to alter its monetary policy if it became “reasonably sure” inflation would start to re-accelerate into next year after a period of moderating.

Softness in the yen has prompted warnings from Japanese currency officials this week that the central bank could intervene to prop up the yen, something that last took place when it traded at around 145 per dollar.

“The only thing kind of notable to me is Ueda’s lack of pushback on yen weakness, so if his position is that other G7 policies are the more dominant factor for yen weakness, he is really opening the door here to further weakness,” said Bregar.

The Japanese yen weakened 0.16% to 144.27 per dollar while the euro fell 0.2% against the yen to 157.59 after earlier hitting a new 15-year high of 158.00.

Lagarde said the ECB is still not seeing enough evidence that underlying inflation has embarked on a downward path, while BoE Governor Andrew Bailey said it remained to be seen if financial markets are correct about the number of interest rate increases they are expecting from the British central bank and how long before the first cut is made.

Aside from Lagarde, ECB policymaker Francois Villeroy de Galhau said the length of time the ECB keeps rates elevated is more important than the level itself, although they are currently close to what is needed to get inflation on the path towards a 2% target.

The euro was down 0.35% to USD 1.0921 while sterling was last trading at USD 1.2647, down 0.78% on the day.

(Reporting by Chuck Mikolajczak; Editing by Christina Fincher and Emelia Sithole-Matarise)

US recap: EUR/USD down on euro zone-US data divergence

June 28 (Reuters) – The dollar index rose 0.4% on Wednesday as signs of economic weakness in the eurozone and elsewhere contrasted with a trend of generally positive US data surprises recently.

Data on Wednesday showed euro zone bank lending took another hit and Italy’s June inflation retreated slightly faster than forecast.

This followed a report showing Australian inflation hit a 13-month low while China reported tumbling industrial profits, raising questions about whether government stimulus will be enough to boost the world’s second-largest economy and commodity currencies.

All of this contrasted with US data on Tuesday showing above-forecast consumer confidence, capital goods orders, new home sales, and house prices.

There were only fleeting hawkish market responses to ECB, Fed, and BoE chiefs reaffirming their inflation-fighting efforts at the ECB’s conference in Sintra Wednesday.

EUR/USD, after bouncing from its 1.0896 Wednesday lows, lost 0.35%, in line with slightly more negative 2-year bund-Treasury yields spreads. The market continues to price in most of two additional 25bp ECB hikes before a subtle shift toward cuts in 2024.

The Fed, after leaving rates unchanged in June for the first time in 10 meetings, is fully priced to hike 25bp by September, with a slight risk of another in November. But as Chair Jerome Powell reminded markets, the Fed is increasingly data-dependent.

Thursday and Friday feature eurozone and US inflation data, with jobless claims also due.

Sterling, after recovering a bit of its earlier slide to 1.2607 by 50% of June’s sharp advance, fell 0.8%. The BoE’s inflation fight dilemma was put in sharper contrast by a report that one in seven Britons faced hunger in 2022.

USD/JPY came off 144.62 highs on EBS just beyond key resistance at 144.50, but was still up 0.18%. BoJ governor Kazuo Ueda’s defense of ongoing massive stimulus amid aggressive G7 policy tightening rang somewhat hollow. He did at least allow that policy could change if inflation persists in 2024.

The Japanese MoF’s heightened warnings against the yen weakening continue to inject uncertainty into the one-sided USD/JPY rally since June Fed and BoJ meetings.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold hits near 4-month low on bets for hawkish Fed strategy

June 28 (Reuters) – Gold prices on Wednesday fell to their lowest in nearly 4 months on bets for interest rates remaining higher for longer, while US Federal Reserve Chair Jerome Powell reiterated a hawkish stance.

Spot gold fell 0.1% to USD 1,912.49 per ounce by 1:43 p.m. EDT (1743 GMT), after hitting its lowest since mid-March. US gold futures settled 0.1% lower at USD 1,922.20.

Powell reiterated that more rate rises likely lie ahead for the central bank, and did not rule out a boost in the cost of borrowing at a policy meeting scheduled for the end of July.

“Although the market is pricing in a decent chance the Fed is going to hike in July, the more relevant factor for gold is that the market has been simultaneously pricing out the number of cuts we could expect over the next year,” said Daniel Ghali, commodity strategist at TD Securities.

Markets were pricing in an 82% chance of a rate hike at the Fed’s next meeting in July, seeing little odds of any easing in monetary policy by the end of this year, according to the CME FedWatch tool.

The dollar index firmed 0.4%, making gold less attractive for overseas buyers. A drop in benchmark 10-year Treasury yields limited further downside.

“Good US economic data remains a headwind for the yellow metal, as it likely keeps Fed officials reiterating a hawkish tone,” UBS analyst Giovanni Staunovo said.

Sales of new US single-family homes surged to the highest in nearly 1-1/2 years in May, while US consumer confidence also jumped in June.

“We still expect at some point the aggressive monetary policy tightening to weaken US economic data and result in a change of tone by the Fed,” Staunovo added.

High interest rates discourage traders from investing in non-yielding gold.

Silver fell 0.3% to USD 22.81 per ounce, platinum shed 1.4% at USD 912.20 after falling to an eight-month low, and palladium plunged 3.7% to USD 1,248.06, its lowest in 4-1/2 years.

(Reporting by Deep Vakil, Arundhati Sarkar, and Ashitha Shivaprasad in Bengaluru; Editing by Emelia Sithole-Matarise and Krishna Chandra Eluri)

Oil prices jump 3% on bigger-than-expected decline in US crude storage

NEW YORK, June 28 (Reuters) – Oil prices climbed about 3% on Wednesday as the second straight weekly draw from US crude stockpiles was bigger than expected, offsetting worries that further interest rate hikes could slow economic growth and reduce global oil demand.

Brent futures rose USD 1.77, or 2.5%, to settle at USD 74.03 a barrel. US West Texas Intermediate (WTI) crude rose USD 1.86, or 2.8%, to settle at USD 69.56, narrowing Brent’s premium over WTI to its lowest since June 9.

The US Energy Information Administration (EIA) said crude inventories dropped by 9.6 million barrels in the week ended June 23, far exceeding the 1.8-million-barrel draw analysts forecast in a Reuters poll and also much bigger than the 2.8 million barrel draw a year earlier. It also exceeded the average draw in the five years from 2018-2022.

“Overall, very solid numbers that kind of fly in the face of people who have been saying that the market is oversupplied. This report could be a bottom (for oil prices),” said Phil Flynn, an analyst at Price Futures Group.

Investors remained cautious that interest rate hikes could slow economic growth and reduce oil demand.

“If anybody is going to rain on the bull market it will be (US Federal Reserve Chair) Jerome Powell,” Flynn said.

Leaders of the world’s top central banks reaffirmed that they see further policy tightening needed to tame inflation. Powell did not rule out further hikes at consecutive Fed meetings while European Central Bank President Christine Lagarde confirmed expectations the bank will raise rates in July, calling such a move “likely”.

The 12-month backwardation for Brent and WTI – a pricing dynamic indicating higher demand for immediate delivery – both at their lowest levels since December 2022. Analysts at energy consulting firm Gelber and Associates said that suggested “diminishing worries over potential supply shortages.”

Some analysts expect the market to tighten in the second half, citing ongoing supply cuts by OPEC+, the Organization of the Petroleum Exporting Countries (OPEC), and allies like Russia, and Saudi Arabia’s voluntary reduction for July.

In China, the world’s second-biggest oil consumer, annual profits at industrial firms extended a double-digit decline in the first five months as softening demand squeezed margins, reinforcing hopes of more policy support for a stuttering post-COVID economic recovery.

(Additional reporting by Shariq Khan in Bengaluru, Alex Lawler in London, and Mohi Narayan in New Delhi; Editing by Emma Rumney, Mark Potter, David Gregorio, and Cynthia Osterman)

Gold prices climb as softer dollar lifts appeal

Reuters – Gold climbed on Monday after a weaker dollar made bullion more attractive for overseas investors, although prices hovered close to three-month lows as traders assessed prospects of more interest rate hikes by the US Federal Reserve.

Spot gold rose 0.3% to USD 1,926.19 per ounce by 0538 GMT. US gold futures also gained 0.3% to USD 1,936.00.

Bullion slumped nearly 2% in the previous week as hawkish comments from Fed officials signaled more rate hikes to tame sticky inflation.

Higher interest rates make non-yielding gold less appealing.

“We are near the end of tightening cycle, but still not quite at the end as there is still the risk of it being extended, hence the depressed price action,” said OCBC FX strategist Christopher Wong.

Investors now expect a 72% chance of a rate hike in July, with rate cuts seen from 2024 onwards, per CME’s Fedwatch tool.

The dollar index edged 0.2% lower.

Yet the lower trend in gold was “in part offset by strong physical consumption from central banks and China and some recession tail hedging,” Citi analysts said in a note.

Speculators raised their net log position in COMEX gold by 1,322 to 94,626 in the week ended June 20, CFTC data showed on Friday.

Oil prices were slightly higher as weekend troubles in Russia raised questions about crude supply, but left investors hesitant to draw any further conclusions.

“The Wagner fallout with Russia certainly added impetus to the gold market in early Asia. With that situation de-escalating quickly, gold is holding up just the same,” said Clifford Bennett, chief economist at ACY Securities.

Spot silver jumped 1.5% to USD 22.75 per ounce while platinum gained 1.3% to USD 928.74.

Auto-catalyst material palladium rose 0.8% to USD 1,294.59.

“We expect the downtrend to continue (in palladium)… but also note the increasing short squeeze risk in the event of any supply disruption or demand surprise to the upside,” Citi analysts added.

(Reporting by Seher Dareen in Bengaluru; Editing by Sherry Jacob-Phillips)

Stocks fall, dollar up as investors weigh more rate hikes

NEW YORK, June 23 (Reuters) – Global stock indexes fell and the US dollar rose on Friday as investors digested comments from Federal Reserve officials that signaled further interest rate hikes ahead.

Major US stock indexes posted losses for the week, with the Nasdaq snapping an eight-week winning streak. The S&P 500 ended a five-week streak of gains.

San Francisco Fed Bank President Mary Daly said in an interview with Reuters that two more rate hikes this year is a “very reasonable” projection.

Fed Chair Jerome Powell in testimony to US lawmakers this week suggested the central bank has not reached the end of its tightening cycle, while he provided reassurance that the Fed would proceed with caution.

Nasdaq led losses on Wall Street, and all of the major S&P 500 sectors ended lower on the day.

The Dow Jones Industrial Average fell 219.28 points, or 0.65%, to 33,727.43, the S&P 500 lost 33.56 points, or 0.77%, to 4,348.33 and the Nasdaq Composite dropped 138.09 points, or 1.01%, to 13,492.52.

The pan-European STOXX 600 index lost 0.34% and MSCI’s gauge of stocks across the globe shed 0.95%.

Treasury yields fell as the market allowed for at least one more Fed rate hike in the near term and weighed the potential for slower growth following weaker-than-expected growth in the euro zone.

“The Treasury market is pricing in the reality of monetary policymakers’ willingness to risk an economic slowdown of some significance in their endeavor to re-establish price stability,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.

Benchmark 10-year notes were down 6.2 basis points to 3.737%, from 3.799% late on Thursday.

Euro zone government bond yields fell on news that German business activity, as measured by purchasing managers indexes (PMI) slowed notably in June, while French business activity contracted this month for the first time in five months.

In the foreign exchange market, the dismal business activity data from around the globe also soured risk sentiment. Data Friday showed US business activity fell to a three-month low in June as services growth eased for the first time this year and the contraction in the manufacturing sector deepened.

The dollar index rose 0.469%, with the euro down 0.58% to USD 1.0892.

Oil prices ended lower on the day and posted a weekly decline as traders worried about demand.

Brent crude fell 29 cents to settle at USD 73.85 a barrel. US West Texas Intermediate (WTI) crude slipped 35 cents to USD 69.16.

(Additional reporting by Gertrude Chavez-Dreyfuss and Herbert Lash in New York; and Huw Jones and Tom Westbrook, Editing by David Evans, Nick Zieminski, and Aurora Ellis)

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Policy rate views: Fed expected to do baby steps

Inflation Update: Faster but full-year average within target