Oil prices fall 1% on uncertainty over global outlook, rate hikes

April 24 (Reuters) – Oil prices fell more than 1% on Monday as concerns about rising interest rates, the global economy and the outlook for fuel demand outweighed support from the prospect of tighter supplies on OPEC+ supply cuts.

Brent crude slipped 91 cents, or 1.11%, to USD 80.75 a barrel by 0627 GMT, while US West Texas Intermediate crude was at USD 76.96 a barrel, also down 91 cents, or 1.17% lower.

Both contracts fell more than 5% last week, their first weekly drop in five, as US implied gasoline demand fell from a year ago, fuelling worries of a recession at the world’s top oil consumer.

Weak US economic data and disappointing corporate earnings from the tech sector sparked growth concerns and risk aversion among investors, CMC Markets analyst Tina Teng said. The stabilising US dollar and climbing bond yields are also adding pressure on commodity markets, she added.

Central banks from the United States to Britain and Europe are all expected to raise interest rates when they meet in the first week of May, seeking to tackle stubbornly high inflation.

China’s bumpy economic recovery from COVID-19 also clouded its oil demand outlook, although Chinese customs data showed on Friday that the world’s top crude importer brought in record volumes in March. China’s imports from top suppliers Russia and Saudi Arabia topped 2 million barrels per day (bpd) each.

Still, refining margins in Asia have weakened on record production from top refiners China and India, curbing the region’s appetite for Middle East supplies loading in June.

Nevertheless, analysts and traders remained bullish about China’s fuel demand recovery towards the second half of 2023 and as additional supply cuts planned by OPEC+ – the Organization of the Petroleum Exporting Countries and allied producers including Russia – from May could tighten markets.

“Planned output cuts by the OPEC+ alliance and a strong demand outlook from China could provide a fillip to prices in the coming days, where Brent is likely to find key support around USD 79 a barrel, while for WTI crude support is aligned at USD 75 a barrel,” Sugandha Sachdeva, an independent oil markets expert, said.

In the United States, energy firms last week added oil and natural gas rigs for the first time in four weeks, energy services firm Baker Hughes Co said.

(Reporting by Florence Tan in Singapore and Mohi Narayan in New Delhi; Editing by Kenneth Maxwell and Jacqueline Wong)

Oil prices settle higher on optimism about fuel demand in China

April 24 (Reuters) – Oil prices settled higher on Monday, reversing losses as investors grew optimistic that holiday travel in China would boost fuel demand in the world’s largest oil importer.

Brent crude settled up USD 1.07, or 1.3%, at USD 82.73 a barrel while US West Texas Intermediate crude settled up 89 cents, or 1.1%, at USD 78.76.

Last week, both contracts fell more than 5% for their first weekly declines in five as US implied gasoline demand fell from a year earlier.

China’s bumpy economic recovery after the COVID-19 pandemic has clouded the oil demand outlook, though Chinese customs data on Friday showed record volumes of imports in March.

Bookings in China for trips abroad during the upcoming May Day holiday point to a continued recovery in travel to Asian countries, but the numbers remain far off pre-COVID-19 levels with long-haul airfares soaring and not enough flights available.

“There’s a lot of optimism around Chinese holidays as it relates to jet fuel demand, the first genuine numbers on Chinese demand construction,” said Bob Yawger, director of energy futures at Mizuho.

Supply tightness owing to additional supply cuts planned by the OPEC+ producer group from May could also lift prices.

“Planned output cuts by the OPEC+ alliance and a strong demand outlook from China could provide a fillip to prices in the coming days”, said independent oil analyst Sugandha Sachdeva.

Iraq’s northern oil exports also showed few concrete signs of an imminent restart after a month of standstill, as aspects of an agreement between Baghdad and the Kurdistan Regional Government (KRG) have yet to be resolved, according to four sources.

Refining margins in Asia have weakened on record production from top refiners China and India, curbing the region’s appetite for Middle East supplies loading in June.

(Reporting by Laura Sanicola; Additional reporting by Noah Browning in Lodndon, Florence Tan in Singapore and Mohi Narayan in New Delhi; Editing by David Goodman and Sharon Singleton)

Funds ignore Wall Street’s resilience, most bearish since 2011

ORLANDO, Florida, April 23 (Reuters) – Hedge funds remain unconvinced by Wall Street’s recovery from the March banking shock and have instead amassed their biggest bet in over a decade that the S&P 500 will fall.

Commodity Futures Trading Commission (CFTC) data for the week ending Tuesday, April 18 show that funds and speculative accounts increased their net short position in S&P 500 index futures by 36,645 contracts to just over 680,000 contracts.

That is the biggest net short position since October 2011 and marks the fourth week in five that funds have increased their bet on weaker US stocks.

A short position is essentially a wager that an asset’s price will fall, and a long position is a bet it will rise. Hedge funds take positions in futures markets for hedging purposes, so the CFTC data is not always reflective of purely directional bets. But it is a pretty good guide.

The latest doubling down from hedge funds comes as the first quarter US earnings season kicks into gear. It has been a mixed bag with almost a fifth of the S&P 500 firms having reported.

Some 76% have posted earnings beats and 65% have registered revenue beats, but estimates were low to begin with.

What’s more, the consensus forecast is still for a 4.7% fall in first-quarter earnings, according to IBES data from Refinitiv, which would confirm an “earnings recession” of two consecutive quarters of earnings contraction.

Earnings are likely to drive market sentiment and direction in the coming week, with ‘mega tech’ firms like Alphabet (GOOGL) and Microsoft (MSFT), as well as Amazon (AMZN), scheduled to report their results.

In some ways, funds’ bearish outlook is justified. The economic data is mixed – Citi’s US economic surprises index last week slid to a two-month low – uncertainty around banking stress persists, and debt ceiling worries are bubbling up.

Goldman Sachs’s equity strategy team led by David Kostin expects the S&P 500 will end the year at 4000, implying a small decline of around 3% from current levels.

But the market refuses to buckle. The S&P 500 has rebounded nearly 10% from the March banking shock lows, and if the options market is any guide, traders are sanguine about the near-term outlook.

The VIX index of implied volatility – the Wall Street “fear index” – last week hit its lowest since November 2021. Not only that, at around 16.7 it is below the long-term average of any time since the index was launched in 1990.

There are plausible explanations for this resilience.

Bank of America’s latest fund manager survey showed US equity allocation in April at a net 34% underweight, up from March but still among the most bearish positions of the past 20 years and 1.5 standard deviation below its long-term average.

Hedge funds are also their most gloomy in years. Perhaps the bearish positioning is simply overdone.

Diane Jaffee, lead portfolio manager at TCW, thinks so. While stocks’ attractiveness relative to bonds has diminished, they still offer better returns.

“Plus you have the potential for earnings growth. Equity investors should be thinking in multiple years, not just this year,” Jaffee said.

(By Jamie McGeever in Orlando, Florida; Editing by Christopher Cushing; The opinions expressed here are those of the author, a columnist for Reuters.)

Oil rises but post weekly loss as economic uncertainty weighs

HOUSTON, April 21 (Reuters) – Oil prices edged higher on Friday on strong economic data in the euro zone and Britain, but futures fell for the week as interest rate and demand uncertainty weighed.

Brent futures settled up 56 cents at USD 81.66 per barrel. US West Texas Intermediate crude (WTI) rose 50 cents to USD 77.87 per barrel.

Brent posted a weekly loss of 5.4%, while WTI fell 5.6%.

Both crude benchmarks slid by more than 2% on Thursday – to their lowest since the unexpected announcement in early April of production cuts by some OPEC countries – on recession fears and swelling US gasoline inventories.

Survey data from the euro zone and Britain lifted oil prices on Friday.

The euro zone economic recovery has unexpectedly gathered pace this month as the bloc’s dominant services industry saw already-buoyant demand rise, more than offsetting a deepening downturn in manufacturing, surveys showed.

“It looks like the economy is rebounding from a feeble winter at the moment, but manufacturing weakness remains a concern and dampens the upturn,” ING economics said in a note.

British businesses also reported a bounce in activity and the slowest input cost inflation in more than two years, an industry survey showed.

In India, refiners’ crude oil processing stayed near record peaks in March, provisional government data showed, catering to solid seasonal demand in the world’s third biggest oil consumer.

The prospect of tighter supply added support, with analysts expecting draws from inventories from next month, as a result of OPEC’s reduced output targets and rising Chinese demand.

“The foreseeable tightening of supply is likely to push prices up in the medium term,” Commerzbank said in a note.

Oilfield services giant SLB (SLB) beat Wall Street estimates for first-quarter profit, as elevated crude prices and tight supplies increased demand for its services.

However, economic uncertainty and the prospect of rising interest rates continued to hang over oil markets.

Uncertainty over demand, especially for the upcoming summer driving season, continues to weigh on traders’ minds, said Andrew Lipow, president of Lipow Oil Associates in Houston.

“The market is still under pressure with concerns about demand,” Lipow said.

The US Federal Reserve, the Bank of England and the European Central Bank are all expected to raise rates when they meet in the first week of May.

In US supply, US energy firms this week added oil and natural gas rigs for the first time in four weeks, energy services firm Baker Hughes Co BKR.O said.

The oil rig count, an early indicator of future output, rose three to 591 in the week to April 21.

Money managers raised their net long US crude futures and options positions by 11,736 contracts to 199,622 in the week to April 18, the US Commodity Futures Trading Commission (CFTC) said.

(Reporting by Erwin Seba in Houston; additional reporting by Stephanie Kelly, Rowena Edwards, Yuka Obayashi and Jeslyn Lerh; Editing by Marguerita Choy, Alexander Smith and Barbara Lewis)

Gold retreats to mark weekly loss on hawkish Fed

April 21 (Reuters) – Gold prices fell sharply on Friday and were headed for their worst week in eight as hawkish remarks by U.S. Federal Reserve officials through the week bolstered bets for at least one more interest rate hike and buoyed the dollar.

Spot gold dropped 1.2% to USD 1,979.63 per ounce by 2:35 p.m. EDT (1835 GMT). U.S. gold futures settled 1.4% lower to USD 1,990.50.

Bullion has shed about 1.2% so far this week, pressured by the dollar’s gains overall, which made bullion more expensive for overseas buyers.

Fed officials said on Thursday inflation remains “far above” the central bank’s 2% target. Fed Governor Michelle Bowman reiterated that more work needs to be done to tame inflation.

While a rate hike will initially dull gold’s appeal, an eventual pause will send gold to its recent all-time highs, said Bob Haberkorn, senior market strategist at RJO Futures, adding that “the Fed has a breaking point where they can’t go anymore on rates without doing significant damage to the economy.”

Gold was also pressured by an S&P Global survey that showed U.S. business activity accelerated to an 11-month high in April, which was at odds with growing signs that higher interest rates were cooling demand.

Markets now see an 85.4% chance of a 25-basis-point rate hike at the Fed’s May 2-3 meeting.

Rate hikes raise the opportunity cost of holding non-interest-bearing gold.

Silver fell 1.1% to USD 25.02 per ounce, headed for its first weekly decline in six.

Platinum and palladium, used in catalytic converters to curb emissions in cars, bucked the trend. Platinum surged 2.7% to an over one-year high at USD 1,122.80, while palladium gained 1.1% to USD 1,604.74, on track for its best week since November.

Supply concerns due to rampant power issues in key producer South Africa could be driving platinum, while palladium was additionally benefiting from short-covering, said Daniel Ghali, commodity strategist at TD Securities.

(Reporting by Deep Vakil in Bengaluru; Editing by Shounak Dasgupta, Sherry Jacob-Phillips and Krishna Chandra Eluri)

Investors cut cash holdings as market focus shifts to inflation

LONDON, April 21 (Reuters) – Investors cut their cash holdings for the first time in eight weeks in the week to Wednesday, while shedding equities and gold, according to a report from BofA Global Research on Friday.

Market focus has shifted to inflation and the outlook for monetary tightening in recent weeks as fears around banking stocks receded and a market measure of volatility fell to its lowest level since November 2021.

Cash funds saw outflows of USD 65.3 billion, BofA said, citing EPFR data. Bond funds recorded inflows of USD 4.6 billion, while investors sold USD 2.6 billion of global stocks and pulled USD 70 million out of gold funds.

Last week data showed US consumer prices rising in March, while data this week showed signs of the labor market cooling.

“Core inflation in big economies remains stubbornly high,” the BofA analysts said, adding that inflation is being aided by structurally low unemployment rates.

Almost all central banks are on hold or close to the end of the rate hike cycle, thus “locking in” high inflation, they said, “as is (the) trajectory of government spending, deficits and debt”.

Emerging market debt funds saw their first weekly inflow in 10 weeks, of USD 600 million. Investors put USD 2.3 billion into emerging markets equities, the biggest inflow in four weeks.

BofA said its bull and bear indicator – a measure of market sentiment that runs from 1 to 10, with a higher reading more bullish – jumped from 2.3 to 2.8 on “stronger bond inflows, EM stock inflows, (and) improving credit technicals”.

(Reporting by Lucy Raitano; Editing by Amanda Cooper and Jan Harvey)

Foreigners boost Chinese bond holdings in March, regulator sees more inflows

BEIJING, April 21 (Reuters) – Foreign investors increased their holdings of China’s onshore yuan bonds in March, the foreign exchange regulator said on Friday, expecting more capital inflows amid signs of economic recovery.

A retreat in the US dollar, a shrinking yield gap between the world’s two largest economies and signs that China’s economy is improving all contributed to foreign capital inflows, the regulator said.

“China’s economy will continue to rebound and the opening up of the financial markets will be steadily promoted, and there is still room for foreign capital inflows,” said Wang Chunying, spokesperson of the State Administration of Foreign Exchange (SAFE).

Wang said that proportions of foreign investment in both bonds and stocks remained relatively low.

Global institutional investors increased their holdings of Chinese onshore bonds traded in the interbank market in March by 10 billion yuan (USD 1.45 billion) to 3.21 trillion yuan, official data from the central bank’s Shanghai head office showed on Friday, snapping two straight months of outflows.

China’s economy grew at a faster-than-expected pace in the first quarter, as the end of strict COVID curbs lifted businesses and consumers out of crippling pandemic disruptions, although headwinds from a global slowdown point to a bumpy ride ahead.

Separately, the FX regulator also pledged to fend off risks from external market shocks while “making every effort” to maintain prudent operations of the foreign exchange market and financial safety.

“We’ve seen there are still unstable and uncertain factors in the external environment,” Wang said, adding the regulator will continue to monitor and analyse impact from various factors, and improve its macro-prudential management and tool box.

It also said that the regulator will deepen FX reforms and push forward with opening up its capital account.

(USD 1 = 6.8944 Chinese yuan)

(Reporting by Beijing Newsroom and Tina Qiao; Editing by Muralikumar Anantharaman and Kim Coghill)

Russian rouble edges higher after slipping on oil price drop

April 20 (Reuters) – The Russian rouble firmed slightly against the dollar on Thursday, halting a slide sparked by falling oil prices in the previous session and set to gain support from a favourable upcoming tax period.

At 0727 GMT, the rouble was 0.1% stronger against the dollar at 81.80 and was unchanged at 89.60 versus the euro. It was steady at 11.86 against the yuan.

“On the oil negative, the rouble sank by more than half a percent against the dollar yesterday,” said Alexei Antonov of Alor Broker. “This morning, the Russian currency is trying to recoup part of the losses. Next week will be the peak of the tax period, so buying the dollar against the rouble is very risky.”

The rouble is expected to gain support from month-end tax payments that usually lead exporters to convert foreign currency revenues to meet local liabilities. Those taxes are due on April 28.

The Russian currency should also get a delayed boost from this month’s higher oil prices, which translate to higher export revenues.

Brent crude oil, a global benchmark for Russia’s main export, jumped to 2-1/2-month highs after OPEC announced surprise supply target cuts in early April. On Thursday, Brent was down 1.6% at USD 81.8 a barrel, its weakest mark since May 31.

Russian stock indexes were lower, dropping back from a more than one-year high hit in the previous session.

The dollar-denominated RTS index was down 0.6% to 998.4 points. The rouble-based MOEX Russian index was 0.6% lower at 2,592.3 points.

(Reporting by Alexander Marrow)

Japan’s Nikkei gains as retailers surge on tourism boost, chip stocks rebound

TOKYO, April 20 (Reuters) – Japan’s Nikkei share average rose on Thursday, clawing back losses from the previous day as retailers surged from an increase in foreign visitors and semiconductor shares rebounded from early declines.

The Nikkei added 0.18% to 28,657.57, finishing near the day’s high after starting out in the red, and putting it not far from Tuesday’s nearly six-week high of 28,698.22.

The broader Topix remained slightly in the red at the end of trading though, losing 0.03% to 2,039.73.

“Although the market is cautious after the Nikkei reached a high on Tuesday, there isn’t really any major negative news to drive a decline,” said Maki Sawada, a strategist at Nomura Securities.

Investors will be closely watching chip-making equipment maker Disco Corp earnings later in the day, she said.

Chip-making equipment giant Tokyo Electron Ltd rose 1.75% and chip-testing equipment maker Advantest Corp gained 2.2%, adding 27 and 27 index points respectively to the Nikkei’s tally to be the no. 2 and 3 supports. They began the day in the red, tracking declines in US peers.

Uniqlo store operator Fast Retailing Co Ltd delivered about 46 points with a 1.4% advance.

Fellow retailer Takashimaya Co Ltd was the biggest percentage gainer, jumping 3.71%.

Among Tokyo Stock Exchange industry sectors, banking and insurance were among the best performers, rising around 0.4% each.

Paper & pulp was the top performer, up 1%, while mining led losers with a 0.85% slide.

Startup investor SoftBank Group Corp was the Nikkei’s biggest drag, shaving off 17 index points with a 1.64% retreat.

On the Nikkei, 128 stocks advanced and 88 fell, with nine flat.

(Reporting by Kevin Buckland; Editing by Varun H K)

European shares slip as investors eye more corporate earnings

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April 20 (Reuters) – European shares edged lower on Thursday following a mixed bag of earnings on Wall Street, while investors awaited more economic data from the euro zone and corporate results to assess the strength of the region.

The pan-European STOXX 600 index .STOXX was down 0.2%, with utilities .SXPP and automobile shares .SXAP dragging the index, falling 1.2% and 2.1%, respectively.

However, bank shares .SX7P rose 1.0%, limiting losses.

Investors will keep a close eye on consumer confidence data, due at 1400 GMT, which is expected to show a slight improvement in consumers’ expectations of the economic conditions in the region in April compared to a month ago.

On earnings front, Sartorius AG SATG.DE dropped 11.0% after the Franco-German lab equipment maker reported a decline in Q1 2023 sales revenue and earnings.

Sweden’s AB Volvo VOLVb.ST rose 1% as the truck maker lifted its outlook for key heavy-duty truck markets in Europe and North America this year on Thursday.

German producer prices rose less than expected in March. Producer prices of industrial products were up 7.5% year-on-year, compared to a Reuters poll that had indicated a rise of 9.8%.

(Reporting by Shubham Batra in Bengaluru; Editing by Varun H K)

((Shubham.Batra@thomsonreuters.com;))

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