Gold races past USD 2,000/oz after weaker US data

April 4 (Reuters) – Gold extended gains on Tuesday and crossed the key USD 2,000 level as the dollar and yields fell, while weaker US economic data emboldened bets for slower rate hikes despite mounting concerns over oil-led inflation.

Spot gold was up 1.7% at USD 2,017.92 per ounce by 2:00 p.m. EDT (1800 GMT), after reaching its highest since March 9 last year at USD 2,024.89 earlier. US gold futures settled 1.9% higher at USD 2,038.20.

Tracking gold’s gains, silver jumped 3.8% to USD 24.91 per ounce, platinum rose 3.3% to USD 1,017.91, while palladium was up 0.3% at USD 1,456.05.

“We’re in this very positive backdrop for gold in which we have the slowing of economic data along with inflationary pressures remaining elevated,” said David Meger, director of metals trading at High Ridge Futures.

Burnishing gold’s appeal, especially among traders holding other currencies, the dollar added to its losses after data showed US job openings in February dropped to a near two-year low, while factory orders also dipped.

A surge in oil prices this week after a surprise output cut by OPEC+ has helped the zero-yield gold, traditionally considered the preferred inflation hedge, shake off the usual pressure from the likelihood of interest rate hikes that could be implemented to rein in rising price pressures. O/R

“From a technical perspective, the gold price is likely to remain strong and stabilize at its current level or even higher. The USD 2,050-mark could act as an important resistance level, and if breached, prices could quickly soar towards its all-time high,” said Alexander Zumpfe, a precious metals dealer at Heraeus.

Markets now see about a 43% chance of the Federal Reserve hiking rates by a quarter basis point in May, with a roughly 57% chance of a pause.

But Han Tan, chief market analyst at Exinity, said more rate hikes could cause gold to unwind some of its recent gains.

(Reporting by Deep Vakil in Bengaluru, additional reporting by Seher Dareen and Arpan Varghese; Editing by Rashmi Aich and Shilpi Majumdar)

Foreign cash streaming back to China after Alibaba’s plans

HONG KONG/SHANGHAI, April 4 (Reuters) – Foreign investors are steadily marching into China in the wake of Alibaba’s plans to restructure, with money managers reckoning it is the latest sign the national leadership is turning friendlier to business as economic growth gains traction.

Exchange data shows net foreign buying of mainland-listed stocks every day since Alibaba announced its intention to split up and float its business units last week, for a record quarterly total.

Investors have also turned positive on the company and the stock is up this year after heavy falls in 2021 and 2022.

The flow may be signalling a shift in sentiment among foreign investors who have been notably absent while China’s markets and economy roared back to life after Beijing abruptly lifted its stringent zero-COVID policy in December.

The MSCI China index gained 4.5% in March against a gain of only 2.8% for world stocks and the Shanghai Composite has just closed out its best quarter in more than two years, with a 5.9% gain.

Derrick Irwin, a portfolio manager at US asset manager Allspring Global Investments, said the Alibaba breakup and founder Jack Ma returning to China appear part of an effort by the government to extend an olive branch to entrepreneurs.

“This may reignite investment in the private sector,” he said.

China has since late 2020 waged a crackdown on a broad range of industries, leaving startups and its biggest companies alike operating in an uncertain environment. It punished tech companies for monopolistic behavior among other issues, levying large fines on e-commerce firms including Alibaba.

Rob Brewis, a portfolio manager at UK-based asset manager Aubrey Capital Management Ltd, said the firm had moved back into Chinese equities this year, mainly based on economic recovery hopes and cheap valuations.

Aubrey also bought Alibaba earlier in the year, having not owned it for the past two years. Alibaba’s recent plans are positive, said Brewis, who planned to keep “decent exposure”.

Alibaba’s shares are up more than 14% in the five days since the company’s announcement and some 11.7 billion yuan (USD 1.7 billion) in foreign cash has flowed into China’s markets.

That’s already more than the net 9.2 billion yuan in inflows in February and drove March flows to 35.4 billion yuan and the quarter’s inflow to a record of 186 billion yuan.

HUNDRED FLOWERS MOMENT?

Alibaba’s plans, which investors think augur another era of growth and capital raising for the company are being viewed as a broad sign of a policy shift because the firm and its billionaire founder were high-profile targets during the crackdown.

The 11th-hour scuttling of Ma’s Ant Financial’s USD 37 billion public listing in November 2020 ushered in a period of unpredictable government and regulatory scrutiny that sent Alibaba stock down some 80% over two years to last October.

Last week’s announcement comes on top of supportive comments from the authorities. Premier Li Qiang assured foreign investors that China would unswervingly adhere to reform and opening up, expanding market access and optimising the business environment.

As many as 67% of investors in the United States are now seeing the start of a trend towards more business-friendly actions from Beijing, a recent survey by BofA Securities found, according to a note seen by Reuters and a source familiar with the matter. BofA Securities declined to comment.

Ernest Yeung, a portfolio manager at US asset manager T. Rowe Price, anticipated “a gradual process of stabilization” of private enterprises and the internet sector.

His team has been focusing on investing in “forgotten or out-of-favor” stocks, and built a position in Alibaba last year.

The lingering question is how China reconciles its commitment to business with its political ideology.

Investors will watch “whether this is like Mao’s ‘Let a hundred flowers bloom’ campaign that will just be reversed if it doesn’t serve the interests of the Party,” said Brian Jacobsen, senior investment strategist with Allspring.

(USD 1 = 6.8822 Chinese yuan)

(Reporting by Xie Yu in Hong Kong and Jason Xue in Shanghai; Editing by Jacqueline Wong)

Most Gulf markets gain but economic woes cap gains

April 4 (Reuters) – Most Gulf stock markets rose in early trade on Tuesday amid rising oil prices, although renewed economic concerns after subdued US manufacturing activity data capped gains.

Crude prices–a key catalyst for the Gulf’s financial markets–rose after OPEC+ plans to cut more production jolted markets on Monday, with investor attention shifting to demand trends and the impact of higher prices on the global economy.

Saudi Arabia’s benchmark index gained 0.6%, with Retal Urban Development Co advancing 1% and Al Rajhi Bank rising 0.9%.

U.S. manufacturing activity slumped in March to the lowest level in nearly three years as new orders plunged, and analysts said activity could decline further due to tighter credit conditions.

Market watchers have been trying to gauge how much longer the Federal Reserve might need to keep raising interest rates to cool inflation and whether the U.S. economy might be headed for recession.

Most Gulf Cooperation Council countries, including Saudi Arabia, the United Arab Emirates and Qatar, have their currencies pegged to the U.S. dollar and follow the Fed’s policy moves closely, exposing the region to a direct impact from monetary tightening in the world’s largest economy.

Separately, Saudi Arabian auto rental firm Lumi has hired Saudi Fransi Capital and EFG Hermes to arrange the sale of 30% of its shares in a planned initial public offering (IPO), Reuters reported on Monday, citing two sources.

In Abu Dhabi, the index added 0.2%.

The Qatari benchmark climbed 0.8%, as most of the constituents on the index were in positive territory including Qatar Islamic Bank, which was up 1.2%.

Dubai’s main share index, however, was flat in early trading.

(Reporting by Ateeq Shariff in Bengaluru; Editing by Rashmi Aich)

Pound hits highest since June, euro up as dollar under pressure

LONDON/SINGAPORE, April 4 (Reuters) – The pound rose to a new 10-month high against the dollar on Tuesday, and the euro reached its highest in two months, as the greenback continued to be hurt by market bets that the end of the US rate-hiking cycle is near.

Sterling reached USD 1.2475, its highest since June 2022, and was last just below that level, up 0.4%.

The euro reached USD 1.0938, its most since early February, and was last up 0.17% at USD 1.0921.

“We’ve been saying that FX hasn’t really captured what’s been happening in rates, and there is scope still for the dollar to weaken a bit further,” said Derek Halfpenny head of research for global markets at MUFG.

“Short term spreads between core Europe and the US are more consistent with euro-dollar trading near USD 1.10 to USD 1.15.”

U.S. and European government bond yields fell dramatically last month as investors rushed to buy safe haven assets due to fears about the banking sector, and while they have rebounded a little they remain well below recent highs.

The German two-year yield has dropped 70 basis points since its March highs and was last at 2.687%, but US moves have been even more dramatic.

The US two-year yield was last at 3.9978%, down a full percentage point from its early March highs, after the banking turmoil caused traders to reassess expectations that there were still several Federal Reserve rate hikes ahead.

The latest data to support that was from a Monday survey by the Institute for Supply Management (ISM) that showed that manufacturing activity fell to the lowest in nearly three years in March as new orders continued to contract, with all sub-components of its manufacturing PMI below the 50 threshold for the first time since 2009.

Traders still think the European Central Bank has more rate hikes to come.

There were also technical factors in play, particularly for the pound, suggesting it could have further gains ahead.

“1.2448 has been a huge technical chart resistance. It has been a high twice this year,” said Joe Tuckey, head of FX analysis at Argentex.

“Breaking through this means it is an initiation point for fresh sterling buyers, a short covering area for sterling shorts.”

In a further sign that the end of global rate hikes is approaching, the Reserve Bank of Australia (RBA), as expected, left its cash rate unchanged at 3.6%, breaking a run of 10 straight hikes as policymakers said additional time was needed to “assess the impact of the increase in interest rates to date and the economic outlook”.

The Australian dollar was last down 0.6% at USD 0.67465.

“(The RBA) seem content that inflation has peaked and opted to not pull the hiking trigger ahead of the quarterly inflation report in a few weeks,” said Matt Simpson, senior market analyst  at City Index.

“Unless the RBA are presented with a surprise uptick on the quarterly inflation print, I think the RBA will be happy to sit with 3.6% for the next two to three months.”

Elsewhere, the dollar rose to 132.84 against the Japanese yen, and the US dollar index, which tracks the unit against a basket of currencies dipped 0.1% to 101.92.

(Reporting by Alun John in London and Rae Wee in Singapore; additional reporting by Harry Robertson in London; Editing by Edmund Klamann and Bernadette Baum)

Hong Kong stocks fall as Sino-US tensions weigh

SHANGHAI, April 4 (Reuters) – Hong Kong shares fell on Tuesday, led by technology stocks, as elevated Sino-US tensions dented sentiment.

In China, shares rose as a sustained strength in artificial intelligence-related stocks and state-owned enterprises stocks countered weakness elsewhere.

** China’s blue-chip CSI300 Index closed up 0.3%, while the Shanghai Composite Index .SSEC gained 0.5%.

** Hong Kong’s benchmark Hang Seng Index was down 0.7%, and the China Enterprises Index lost 0.9%.

** China warned US House Speaker Kevin McCarthy on Tuesday not to “repeat disastrous past mistakes” and meet Taiwan President Tsai Ing-wen, who is visiting the United States.

** Meanwhile, US President Joe Biden’s administration said on Monday it could not confirm reports that China was able to collect real-time data from a spy balloon as it flew over sensitive military sites earlier this year, saying analysis was still ongoing.

** Tech stocks in Hong Kong slumped 1.6%, with Alibaba and Meituan down 3.0% and 4.4%, respectively.

** Shares of Chinese electric-vehicle makers traded in Hong Kong also plunged, following a drop in Tesla shares in the United States. Shares of Nio and XPeng declined 7.6% and 6.5%, respectively.

** In China, shares of state-owned enterprises and semiconductor companies lent some support to the market, while new energy-related sectors gave up some of their earlier gains.

** The China CSI AI Index jumped 2.5% to a 14-month high.

** Shares of China Railway Group Ltd and China Communications Construction Co Ltd rose to a maximum 10.0% and 9.3%, respectively.

** Shares of Semiconductor Manufacturing International Corp rallied 3.8% to its highest in more than a year.

(Reporting by Shanghai Newsroom; Editing by Subhranshu Sahu and Uttaresh Venkateshwaran)

European shares rise ahead of euro zone inflation data

April 4 (Reuters) – European shares rose on Tuesday as investors rebuffed concerns over surprise output cuts by the OPEC and its allies, while awaiting euro zone producer prices for more clues on the European Central Bank’s (ECB) monetary tightening path.

The pan-European STOXX 600 index edged 0.2% higher after a subdued trading session on Monday as a jump in oil prices stoked fears of stubborn inflation.

Real estate and retail shares led the gains for the broader markets while oil and gas stocks continued its upswing, with the index adding 0.2% after clocking its biggest one-day gain since November on Monday.

Tech shares, however, dipped 0.1% as bond yields rose following fears of inflation emanating from OPEC+ slashing oil output by further 1.16 million barrels per day (bpd).

“The surprise production cut from OPEC+ continues to stoke concerns around inflation, with brent crude trading over USD 85 a barrel,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said in a note.

“There are some outside concerns this could encroach on the USD 100 mark once more, which would have legitimate ramifications for monetary policy and has already led to a reduction in short positions in oil.”

Oil prices rose for a second consecutive day after the surprise cut by OPEC+, with Brent and US WTI crude rising more than 1% each. O/R

Euro zone producer prices for February will be on investors’ radar during the day, and are expected to show a contraction in prices in February on a monthly basis.

Euro zone consumers cut their inflation expectations in February and also took a more optimistic view on growth and unemployment, an ECB survey showed.

Investors will also closely monitor Credit Suisse’s annual general meeting, where the management of the Swiss bank will face shareholders’ ire for the first time after it was rescued last month by rival UBS.

L’Oreal shares OREP.PA inched up 0.2% after the cosmetics group struck a deal with Brazil’s Natura & Co to buy Aesop, its Australian luxury brand, at an enterprise value of USD 2.53 billion.

“This pivot towards a more luxury and hedonistic brand suggests L’Oreal is padding out its offering to help insulate against an increasingly tough market,” Lund-Yates said.

Bayer AG added 0.2% after a Delaware judge dismissed Merck lawsuit seeking to hold Bayer responsible for more talc-related liabilities stemming from its purchase of Merck’s consumer care business in 2014.

(Reporting by Shubham Batra and Sruthi Shankar in Bengaluru; Editing by Uttaresh Venkateshwaran and Sherry Jacob-Phillips)

Oil steady as markets weigh OPEC+ surprise cuts amid demand woes

HOUSTON, April 4 (Reuters) – Oil prices were little changed in choppy trading on Tuesday as investors weighed OPEC+ planned production cuts against weak US and Chinese economic data that could suggest cooling oil demand.

Brent crude futures settled 1 cent higher at USD 84.94 a barrel, while US West Texas Intermediate (WTI) crude futures closed up 29 cents, or 0.4%, at USD 80.71 a barrel.

“We will need to see demand hold and grow to push crude into the upper USD 80’s,” said Dennis Kissler, senior vice president of trading at BOK Financial.

Brent crude and WTI had jumped by more than 6% on Monday after the Organization of the Petroleum Exporting Countries and allies including Russia, collectively known as OPEC+, rocked markets with an announcement of voluntary production cuts of 1.66 million barrels per day (bpd) from May until the end of 2023.

US job openings in February fell to the lowest level in nearly two years and a
slump in US manufacturing activity in March raised concerns about oil demand. Weak manufacturing activity in China last month also added to the woes.

Stock markets declined on the weaker economic data, while gold crossed the key USD 2,000 level as investors rushed to buy the safe haven asset.

The economic signals ran alongside fears of an inflationary hit to the world economy, as rising oil prices fuel higher interest rates.

OPEC+’s latest output targets bring the total volume of cuts by OPEC+ to 3.66 million bpd, including a 2 million-barrel cut last October, equal to about 3.7% of global demand.

The production curbs led many analysts to raise their Brent oil price forecasts to around USD 100 per barrel by year-end. Goldman Sachs lifted its forecast for Brent to USD 95 a barrel by the end of 2023, and to USD 100 for 2024.

Meanwhile, US crude oil stockpiles drew by more than 4 million barrels last week, according to market sources citing American Petroleum Institute figures on Tuesday. A preliminary Reuters poll had estimated a 2.3 million barrel drop in inventories.

The US Energy Information Administration will release its data at 10:30 a.m. (1430 GMT) on Wednesday.

Market watchers have been trying to gauge how much longer the US Federal Reserve Bank may need to keep raising rates to cool inflation, and whether the US economy may be headed for a recession.

Investors now see an about 40% chance the Fed will hike rates by a quarter basis point in May, with a roughly 60% chance of a pause.

(Reporting by Arathy Somasekhar in Houston; Additional reporting by Ahmad Ghaddar in London, Yuka Obayashi in Tokyo and Andrew Hayley in Beijing; Editing by Jonathan Oatis, Matthew Lewis, Deepa Babington and Richard Chang)

Brent crude jumps USD 5/bbl after output cuts; stocks rise

NEW YORK, April 3 (Reuters) – Brent crude oil climbed USD 5 a barrel on Monday after Saudi Arabia and other OPEC+ producers announced new production cuts, and gains in energy shares helped lift world stock indexes.

The Dow and S&P 500 ended higher, with the S&P energy sector rising 4.9% for its biggest daily percentage gain since October.

In a surprise move, the OPEC+ group on Sunday announced cuts to production amounting to about 1.16 million barrels per day.

Brent crude rose USD 5.04, or 6.3%, to settle at USD 84.93 a barrel, while West Texas Intermediate crude climbed USD 4.75, or 6.3%, to settle at USD 80.42.

While the jump in oil prices benefited energy shares, the news added to investor worries about higher costs for businesses and consumers.

Market watchers have been trying to gauge how much longer the Federal Reserve may need to keep raising interest rates to cool inflation and whether the US economy may be headed for recession.

Goldman Sachs lifted its forecast for Brent to USD 95 a barrel by the end of the year and to USD 100 for 2024 following the oil output change.

Investors also digested Monday’s economic data, which showed US manufacturing activity in March slumped to its lowest level in nearly three years as new orders continued to contract.

The Dow Jones Industrial Average rose 327 points, or 0.98%, to 33,601.15, the S&P 500 gained 15.2 points, or 0.37%, to 4,124.51 and the Nasdaq Composite dropped 32.45 points, or 0.27%, to 12,189.45.

The pan-European STOXX 600 index dipped 0.03% and MSCI’s gauge of stocks across the globe gained 0.42%.

“There’s going to be this balance between inflation coming off and then the potential for economic recession,” said George Cipolloni, portfolio manager at Penn Mutual Asset Management.

Shares of Exxon Mobil Corp (XOM) ended 5.9% higher on Monday, while Chevron Corp (CVX) gained 4.2%.

At the same time, US consumer discretionary shares fell, with the sector ending the day down 0.9%.

Shares of Tesla Inc (TSLA) dropped 6.1% after disclosing March-quarter deliveries rose just 4% from the previous quarter, even after CEO Elon Musk slashed car prices in January to boost demand.

The dollar declined, giving up early gains following the oil output cuts, as data showed the US economy continued to slow with the declines in manufacturing and construction spending.

The Institute for Supply Management said its manufacturing PMI fell to 46.3 last month, the lowest since May 2020, from 47.7 in February.

US construction spending also weakened, down 0.1% in February after increasing 0.4% in January.

The US dollar index was last down 0.9% while the euro was up 0.6% at USD 1.0902.

Treasury yields retreated after the US manufacturing data, which increased expectations for some investors the Fed will cut rates later this year as the economy slows.

The yield on 10-year notes fell 6.6 basis points to 3.425%.

Spot gold added 0.8% to USD 1,983.98 an ounce.

(Reporting by Caroline Valetkevitch, with additional reporting by Herbert Lash in New York and Ankika Biswas and Amruta Khandekar in Bengaluru, and Wayne Cole in Sydney and Alun John in London; Editing by Susan Fenton, Angus MacSwan, Andrew Heavens and Bill Berkrot)

S&P 500 ends higher as oil stocks rally; Tesla tumbles

April 3 (Reuters) – The S&P 500 ended higher on Monday, lifted by energy stocks following surprise cuts to the OPEC+ group’s oil output targets, while Tesla tumbled after its electric vehicle deliveries for the first quarter disappointed investors.

Tesla Inc (TSLA) dropped 6.1% after disclosing March-quarter deliveries rose just 4% from the previous quarter, even after CEO Elon Musk slashed car prices in January to boost demand.

The S&P 500 energy sector index surged 4.9% after Saudi Arabia and other OPEC+ oil producers announced unexpected output cuts that could push oil prices toward USD 100 a barrel. Chevron Corp (CVX), Exxon Mobil Corp (XOM) and Occidental Petroleum Corp (OXY) all rallied more than 4%.

However, the prospect of higher oil costs added to inflation worries on Wall Street just days after evidence of cooling prices raised expectations that the US Federal Reserve might soon end its aggressive monetary tightening campaign.

“The decision to cut production is a headwind for inflation … and that’s why, on balance we’re seeing a generally ‘risk off’ bias,” said Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis.

The Dow was lifted in part by a 4.6% rally in UnitedHealth Group Inc (UNH) on better-than-proposed Medicare Advantage rates for 2024.

Investors worried about inflation drew comfort from surveys by the Institute for Supply Management and S&P Global that reflected weakness in manufacturing activity in March.

Interest rate futures imply 56% odds the Fed will raise rates by 25 basis points at its meeting in May, and 44% odds it will keep interest rates unchanged, according to CME Group’s Fedwatch tool.

The S&P 500 climbed 0.37% to end the session at 4,124.49 points.

The Nasdaq declined 0.27% to 12,189.45 points, while the Dow Jones Industrial Average rose 0.98% to 33,601.15 points.

Despite turbulence in the global banking sector, the S&P 500 jumped 7% in the first quarter and the tech-heavy Nasdaq rallied 17%.

First-quarter earnings season is around the corner, with big banks among the first to report in coming weeks and offer details about the sector’s overall health after the March collapse of Silicon Valley Bank sparked a fears of a broader industry crisis.

Across the US stock market, advancing stocks outnumbered falling ones by a 1.1-to-one ratio.

The S&P 500 posted 20 new highs and no new lows; the Nasdaq recorded 85 new highs and 121 new lows.

Volume on US exchanges was relatively light, with 10.9 billion shares traded, compared with an average of 12.7 billion shares over the previous 20 sessions.

(Reporting by Ankika Biswas and Amruta Khandekar in Bengaluru and by Noel Randewich in Oakland, California; Editing by Shounak Dasgupta and Matthew Lewis)

Gold rallies on dollar retreat as markets grapple with OPEC surprise

April 3 (Reuters) – Gold rallied 1% on Monday as the dollar’s retreat burnished bullion’s appeal as a safe-haven after a surprise output cut by OPEC+ rekindled fears of prolonged inflation and triggered uncertainty about the central bank response.

Spot gold gained 0.9% at USD 1,984.75 per ounce by 1:45 p.m. EDT (1745 GMT). US gold futures settled 0.7% higher at USD 2,000.40.

“We’re getting hit consistently by big major events here and that is keeping investors nervous,” said Edward Moya, senior market analyst at OANDA, referring to the global banking turmoil that pushed gold nearly 8% higher last month.

The shock decision by OPEC+ is “really driving that inflation hedge trade for gold”, Moya added.

While gold has struggled to gain from its traditional status as a hedge against inflation since higher interest rates to combat the rising prices also dim appeal for zero-yield bullion, the surprise cut on Monday also drove a sharp retreat in the dollar, in which bullion is priced.

Also burnishing gold’s appeal, US manufacturing activity slumped to the lowest level in nearly three years in March amid tightening credit conditions, extending losses for benchmark 10-year Treasury yields.

Earlier in the session, gold brushed against a four-session low of USD 1,949.55.

That seemed to be a “knee jerk reaction” to the dollar’s initial rise, said StoneX analyst Rhona O’Connell.

Bullion reversed course later on, mirroring a flip in the dollar.

However, analysts said higher interest rates could still prove a headwind for gold later on.

“Gold is now vulnerable to a move down to USD 1,900, given the potential for a higher terminal Fed rate that markets are currently pricing in,” said Matt Simpson, senior market analyst at City Index.

Silver fell 0.7% to USD 23.91 per ounce, platinum was down 0.5% at USD 986.07, while palladium was mostly flat at USD 1,460.52.

(Reporting by Deep Vakil in Bengaluru; Editing by Josie Kao and Shilpi Majumdar)

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