US recap: Dollar gains on jobs beat outdone by risk-on flows

May 5 (Reuters) – The dollar index was down 0.1% afternoon trade on Friday, surrendering an initial bounce that followed seemingly stellar US jobs data as waning US banking concerns diverted recent risk-off flows away from the safe-haven US currency.

The recovery in Treasury yields in response to the employment data was limited a bit because March and February payrolls were revised down by 149k versus April’s 73k forecast beat.

But the unexpected jobless rate drops to a 44-year low and unforeseen rise in average hourly earnings sent 2-year Treasury yields up 20bp, erasing Thursday’s post-Fed and banking stress plunge.

Even with 2-year bund-Treasury yields spreads falling over 20bp, aided by euro zone March retail sales and industrial production’s unexpected plunges, EUR/USD recovered to a modest gain as the tide went out on dollar buying.

Worst off was the top haven yen, with USD/JPY up 0.39%, and EUR/JPY up 0.54%, as the more risk-sensitive and GBP/JPY and AUD/JPY surged 0.9% and 1.28%.

USD/JPY’s recovery high was capped by the 38.2% Fibo of this week’s 3% risk-off slide. To extend Friday’s rates and risk-driven rally prices will likely need more US data support and the nascent recovery in banks stocks to continue.

Weekly Fed data out Thursday showed less stress, not more, in the banking system, while officials assess possible market manipulation related the recent seemingly indiscriminate selling or shorting in regional bank shares.

Risk-sensitive sterling quickly shook off the stronger-than-forecast US jobs data pullback to make fresh one-year highs with a 0.5% rise.

EUR/GBP fell 0.45%. The BoE is further behind the inflation curve than the ECB, with its current 4.25% rate priced to rise to 4.82% by September, while the ECB rate at 3.25% is seen peaking at 3.55% in September.

Next week’s key events are US CPI on Wednesday and the BoE meeting on Thursday.

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

Gold slides on US jobs growth as Fed-led rally fizzles

May 5 (Reuters) – Gold beat a fast retreat on Friday after stronger-than-expected US payrolls data tempered expectations of interest rate cuts from the Federal Reserve.

Spot gold lost 1.7% to USD 2,015.33 per ounce by 1:40 p.m. EDT (1740 GMT) but was up 1.3% for the week after surging to USD 2,072.19 on Thursday, just shy of its record high of USD 2,072.49, following the Fed’s hint that its hiking cycle may be ending.

US gold futures settled 1.5% lower at USD 2,024.80.

But those gains were quickly unwound as US employers boosted hiring in April while raising wages.

“The data will not lead the Fed to hike rates in June, but it will likely remind the rate-cut fanciers to settle a bit,” and this is pressuring zero-yield gold, said Tai Wong, an independent metals trader based in New York.

Also weighing on gold, 10-year Treasury yields rose after the jobs data, dulling non-yielding bullion’s appeal.

Any further economic data “that points to a cooling US economy – and therefore to rate cuts in the mid to long term – is likely to support the price of gold. Conversely, positive surprises are likely to weigh” on prices, said Alexander Zumpfe, a precious metals dealer at Heraeus.

Also on the radar were developments surrounding the US banking sector and the US debt ceiling.

Economic uncertainty and lower rates boost demand for zero-yielding gold.

“If we see further panic around the debt ceiling or US banks, hold on to your hats as I fear price action could get nasty around these highs and punish bulls and bears,” said Matt Simpson, senior market analyst at City Index, warning that in “times of severe stress, all markets, including gold, can fall.”

Silver lost 1.8% to USD 25.60 per ounce, platinum rose 1.7% to USD 1,057.25, while palladium gained 3.4% to USD 1,496.96.

(Reporting by Deep Vakil, Arundhati Sarkar, and Ashitha Shivaprasad in Bengaluru; additional reporting by Arpan Varghese; Editing by Krishna Chandra Eluri, Emelia Sithole-Matarise, Nick Macfie, and Shilpi Majumdar)

Vietnam central bank bought USD 4.9B in first 4 months to boost reserves

HANOI, May 5 (Reuters) – Vietnam’s central bank bought USD 4.9 billion from credit institutions in the first four months of this year to shore up its foreign exchange reserves, the investment minister said on Friday.

Well-managed monetary policies and stable exchange rate have enabled the State Bank of Vietnam (SBV) to continue to buy foreign currency to boost foreign reserves, minister Nguyen Chi Dung said in a government statement.

The central bank earlier said it bought USD 4 billion worth of U.S. dollars in the first quarter.

Vietnam late last year was forced to sell a large amount of dollars to the market to support its dong currency, which hit record low due to global situations.

Vietnam recorded a USD 6.35 billion trade surplus and USD 5.85 billion in foreign direct investment in the January-April period.

Analysts from VNDirect securities estimated that Vietnam’s foreign reserves could recover and reach USD 102 billion by the end of this year.

Vietnam rarely discloses the value of its foreign reserves.

Speaking at a government meeting, Dung also said the real estate market “has shown signs of recovery”.

According to Dung, corporate bond issuance in the first four months of this year fell by more than 67% over the same period.

While bond redemption before maturity reached 24.3 trillion dong (USD 1.04 billion) and outstanding corporate bond debt as of April 21 was USD 48.19 billion, or 12% of last year’s gross domestic product.

(Reporting by Phuong Nguyen; Editing by Martin Petty)

UK Stocks: Factors to watch on May 5

May 5 (Reuters) – Britain’s FTSE 100 index is seen opening higher on Friday, with futures up 0.4%.

* SHELL: Ithaca Energy Plc said it signed an agreement with Shell UK to market the oil major’s 30% stake in the Cambo oil prospect in the British North Sea.

* IHG: Holiday Inn owner IHG Plc said its CEO Keith Barr would
step down on June 30 and the company’s Americas CEO Elie Maalouf would succeed him.

* IAG: British Airways-owner IAG said strong ticket sales for summer travel and a winter season which, beat expectations, meant 2023 profit would come in above its previous forecasts.

* CAPITA: British outsourcing company Capita has confirmed to pension clients that some data it processed was likely to have been hacked during a recent cyber incident, the Financial Times reported.

* IAG: International Airlines Group’s Spanish airline Iberia named Fernando Candela as its new acting president and chief executive officer, replacing Javier Sanchez-Prieto.

* STRIKES: Britain’s RMT trade union said on Thursday railway workers had voted in favour of further strike action in a new ballot as part of a long-running pay dispute with train operating companies.

* OIL: Oil prices rose slightly in Asian morning trade on Friday, but were set for a third straight week of losses after markets witnessed dramatic drops on fears of a weakening US economy and slowing Chinese demand.

* London’s FTSE 100 hit a one-month low on Thursday as a smaller interest rate hike by the European Central Bank did little to lift sentiment dampened by concerns about the banking sector, while Shell gained after posting upbeat earnings.

(Reporting by Muhammed Husain in Bengaluru)

Europe set for higher open

European futures are edging higher on Friday morning, a day after the ECB raised its key interest rates for the seventh consecutive meeting, with concerns about the state of the U.S. financial sector on pause as Apple earnings boosted sentiment.

The world’s largest company by market cap surprised investors with a rise in iPhone sales even as the global smartphone market slumps. Its Frankfurt-listed shares are up 2.1% this morning.

Futures on the Euro STOXX 50 are up 0.4%, with Germany’s DAX, France’s CAC 40, and Britain’s FTSE 100 futures all rising between 0.3%-0.4%.

Wall Street futures are also higher, while MSCI’s broadest index of Asia-Pac shares ex-Japan is up 0.4%.

Key US labour market data is in focus later for signs on whether previous tightening is starting to impact the economy.

Nonfarm payrolls are expected to have increased by 180,000 last month, the smallest increase in nearly 2-1/2 years, although wage growth is expected to have remained strong, rising 0.3% on the month and 4.2% y/y, which may offer little comfort in the Fed’s inflation fight.

(Samuel Indyk)

Oil prices jump but post third straight weekly fall on economic woes

HOUSTON, May 5 (Reuters) – Oil prices rose on Friday but fell for the third straight week after a sharp fall earlier this week ahead of benchmark interest rate rises and on concern that the US banking crisis will slow the economy and sap fuel demand.

Brent crude closed USD 2.80, or 3.9% higher, at USD 75.30 a barrel. US West Texas Intermediate settled up USD 2.78, or 4.1%, at USD 71.34 after four days of declines that sent the contract to lows last seen in late 2021.

The Brent benchmark finished the week with a decline of about 5.3%, while WTI plunged 7.1%, even after the rebound on Friday. Both benchmarks were down for three weeks in a row for the first time since November.

“Crude is trying to reverse the recent washout in prices triggered by higher interest rates and recession fears mostly in the banking sector,” said Dennis Kissler, senior vice president of trading at BOK Financial.

For some analysts, fundamentals in the physical market are stronger than the futures market would indicate.

“Rather than underlying fundamentals, the selling frenzy over the past week has been driven by worries about demand linked to recession risks and the strain in the US banking sector,” said PVM oil market analyst Stephen Brennock.

“The upshot is that there is a big disconnect between oil balances and oil prices.”

Commerzbank analysts noted oil demand concerns were overblown and expect a price correction upward in the coming weeks.

Equities, which often move in tandem with oil prices, also rose.

A better-than-expected jobs report helped ease some fears of an imminent economic downturn, spurred in part by renewed banking fears. Investors also broadly expect the Fed to pause rate hikes at its June policy meeting.

In China, however, factory activity contracted unexpectedly in April as orders fell and poor domestic demand dragged on the sprawling manufacturing sector.

However, expectations of potential supply cuts at the next meeting of the OPEC+ producer group in June have provided some price support, said Kelvin Wong, a senior market analyst at OANDA in Singapore.

US oil rig count, an indicator of future output, fell by 3 to 588 this week, data from oil services firm Baker Hughes showed.

(Reporting by Arathy Somasekhar in Houston; Additional reporting by Shadia Nasralla and Andrew Hayley in Beijing; Editing by Jan Harvey, Alexander Smith, David Gregorio, Emelia Sithole-Matarise and Jonathan Oatis)

Oil settles narrowly mixed after smaller ECB hike; demand concerns linger

May 4 (Reuters) – Oil prices settled nearly unchanged on Thursday after the European Central Bank (ECB) decided to slow the pace of interest rate hikes, with prices still down more than 9% for the week on demand concerns in major consuming countries.

Brent futures settled up 17 cents, or 0.24%, to USD 72.50 a barrel. US West Texas Intermediate (WTI) crude settled down 4 cents, or 0.06 to USD 68.56.

WTI in early trading on Thursday fell to a session low of USD 63.64 a barrel, the lowest price since December 2021.

Oil prices tumbled this week after concerns about the US economy and signs of weak manufacturing growth in the world’s largest oil importer China, sliding further after the US Federal Reserve raised interest rates on Wednesday. That capped near-term economic growth prospects.

However, the Fed’s signal that it may pause further interest rate increases to give officials time to assess the fallout from recent bank failures and to gain clarity on the dispute over raising the US debt ceiling helped support markets.

The ECB increased its three policy rates by 25 basis points, the smallest hike since the central bank started lifting them last summer, and kept its options open on future moves as it fights stubbornly high euro zone inflation.

Along with investor indigestion over central bank messaging, Wall Street stock indexes were under pressure Thursday from another rout in US bank shares, which have reeled from the collapse of a third major regional bank over the weekend.

“The ability of oil to recover today despite a significantly lower stock market attests to some independent price support,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a group known as OPEC+, started voluntary output cuts at the beginning of May.

Russian Deputy Prime Minister Alexander Novak said on Thursday that Russia was abiding by its voluntary pledge to cut oil output by 500,000 barrels per day (bpd) from February until the end of the year.

“What we’re seeing is a combination of economic headwinds and skepticism that OPEC cuts will actually occur,” said John Kilduff, partner at Again Capital LLC in New York.

(Reporting by Laura Sanicola; Additional reporting by Rowena Edwards in London; Sudarshan Varadhan in Singapore and Stephanie Kelly in New York; Editing by Jan Harvey, Mark Potter, Alexander Smith, Paul Simao and David Gregorio)

Gold flirts with all-time highs as banking concerns deepen

May 4 (Reuters) – Gold made another run toward record highs on Thursday as US banking concerns accelerated a flight to the safe-haven asset and sustained its stellar rally driven by bets for a pause in US rate hikes.

Spot gold was up 0.3% at USD 2,045.79 per ounce by 1:40 p.m. EDT (1740 GMT) after climbing earlier to USD 2,072.19, shy of a record high of USD 2,072.49.

US gold futures settled 0.9% higher at USD 2,055.70.

The melt-up in prices overnight associated with the banking stress revealed that traders are willing to deploy some of their dry powder, said Daniel Ghali, commodity strategist at TD Securities.

And although trend-following commodity trading advisors seem to be at their maximum long-position sizes, “discretionary traders still have a horde of dry powder to deploy, and this is the cohort we think is engaging in gold today”, Ghali added.

Wall Street’s main indexes fell after PacWest’s move to explore strategic options deepened concerns about the health of regional banks, countering optimism from the Federal Reserve signalling a likely pause in interest rate hikes.

“The same flight to safety buying that pushed us over USD 2,000 is still in this market,” said Bob Haberkorn, senior market strategist at RJO Futures.

Economic uncertainty and lower rates boost demand for zero-yield bullion.

The Fed Funds target rate stands in the 5%-5.25% range, with markets expecting rate cuts in the second half of the year.

“Inflation’s going to remain stubbornly sticky for some time and is not necessarily going to allow them (the Fed) to ease rates any time soon,” said David Meger, director of metals trading at High Ridge Futures.

In physical markets, lofty prices have tarnished gold demand in top Asian retail hubs.

Silver rose 1.4% to USD 25.94 per ounce, platinum dropped 0.9% to USD 1,040.58, while palladium gained 2.5% to USD 1,458.34.

(Reporting by Seher Dareen, Deep Vakil and Arpan Varghese in Bengaluru; Editing by Kirsten Donovan, Shilpi Majumdar and Maju Samuel)

Global issuance of mortgage-backed securities falls to a 23-year low

May 4 (Reuters) – The issuance of global mortgage-backed securities (MBS) slumped to a 23-year low in the first four months of this year, highlighting the turmoil in the real estate sector as higher mortgage rates hit property sales and refinancing.

According to Refinitiv data, global MBS issuance stood at USD 100 billion in the first four months of this year, the lowest since 2000.

The property sector, often a leading indicator for other economic activity, has seen a slump this year due to a spike in mortgage rates as global central banks increased interest rates to tame inflation.

MBS consist of pools of home loans and other real estate debt and typically carry higher yields than US Treasuries.

Analysts said the slower issuance of bonds could point to more trouble for the sector as there would be a smaller supply of funds for borrowers, who are already hit by banks’ tighter lending standards after the recent banking turmoil.

“The decline in the issuance of MBS could lead to a reduction in the availability of credit, making it harder for homeowners and property developers to secure financing,” said Armstead Jones, strategic real estate advisor at Real Estate Bees.

“This could, in turn, lead to a slowdown in the property sector’s growth and development. The refinancing of existing mortgages may also be affected, as there may be fewer lenders available to refinance existing loans leading to private lenders and higher rates.”

The fall in issuance also comes from less demand from banks as they look to ditch MBS after the failure of Silicon Valley Bank and Signature Bank in March.

The two banks held large amounts of MBS, and the slump in bond prices prompted investors to withdraw deposits for fear the banks would be unable to service their liabilities.

The data showed the issuance of Agency MBS, issued by government agencies such as Fannie Mae, Ginnie Mae, and Freddie Mac, dropped 47% over last year to USD 42 billion.

Issuance by banks dropped to USD 38.3 billion, a 71% fall.

Issuance of MBS shot up since 2020 as central banks slashed interest rates and the Federal Reserve bought them in bulk to bolster credit markets. The Fed holds about a quarter of the total USD 12 trillion US MBS market.

Brian Quigley, a senior portfolio manager of MBS at Vanguard, said the supply of MBS should increase as the Fed and the US Federal Deposit Insurance Corporation offload holdings, including the massive amount of MBS from SVB and Signature Bank.

The spread between the ICE BoFA US Mortgage Backed Securities Index and the 10-year US Treasury index has widened to 105 basis points, up from 85 bps at the start of the year.

“We expect more underperformance in MBS. Because of the turmoil in the banking sector, with MBS being a reason, there is going to be less demand from banks for MBS in the market,” said Vanguard’s Quigley.

“That should pressure spreads to widen as well.”

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Vidya Ranganathan)

Asian equities receive biggest foreign inflows in three months

May 4 (Reuters) – Foreigners turned net buyers of Asian stocks in April, bolstered by rising expectations the US Federal Reserve will pause its aggressive tightening cycle, and by other factors such as a weaker dollar and strong first-quarter company earnings.

Data from stock exchanges in India, Indonesia, the Philippines, South Korea, Taiwan, Thailand, and Vietnam showed foreigners purchased a net USD 872 million of equities in April – the biggest monthly buying since January.

Bets on more tightening by the Fed have waned recently as the failure of three US regional banks stoked concerns of a recession, while higher interest rates have increased borrowing costs for businesses and consumers.

The Fed raised interest rates by a quarter of a percentage point on Wednesday as expected and signaled it may pause further increases, giving officials time to assess the fallout from recent bank failures and inflation trends.

Chetan Seth, an equity strategist at Nomura, said any weakness in Asian stocks due to US recession concerns will be an opportunity for investors to raise exposure to the region due to supportive factors such as China’s recovery, an expected bottoming out of the tech sector downturn and a strong 2024 earnings recovery.

According to Refinitiv data, Asian companies have beaten net income expectations by 3% in the March quarter.

Indian equities received a net USD 1.42 billion worth of foreign inflows, the biggest since November 2022, thanks to a rally in local shares.

Indian shares were the best performers in the region last month, with Nifty 50 marching 4.1% in its biggest monthly rise since November 2022.

Foreigners also purchased Indonesian, South Korean, and Philippine equities of USD 830 million, USD 616 million, and USD 34 million, respectively.

Meanwhile, Taiwan saw USD 1.73 billion worth of net selling, and Thai equities saw outflows of USD 231 million.

Yeap Jun Rong, a strategist at IG, said the US dollar staying near a one-year low was also supportive of EM Asia equities.

The greenback fell 0.94% in a second straight month of decline against a basket of major world currencies in April as expectations of further Fed rate hikes eased.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Kim Coghill)

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

Inflation Update: Weak demand softens shocks

Monthly Economic Update: Fed cuts incoming