Oil settles lower as rate-hike worries balance tighter supplies

April 10 (Reuters) – Oil prices settled lower on Monday, after rising for three straight weeks, as concern about further interest rate hikes that could curb demand balanced the prospect of a tighter market due to supply cuts from OPEC+ producers.

The US dollar rose after US jobs data pointed to a tight labor market, heightening expectations of another Federal Reserve rate hike. Dollar strength makes oil more expensive for other currency holders and can weigh on demand.

Brent crude settled down 96 cents, or 0.2%, at USD 84.58 a barrel while US West Texas Intermediate also fell 94, or 0.1%, to USD 79.74. Both benchmarks fell by more than USD 1 earlier in the session

“We look for this week’s trade to be heavily influenced by inflation data featured by Wednesday’s CPI and Thursday’s PPI that will likely revive the specter of higher interest rates that could strengthen the US dollar,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

Crude last week jumped more than 6% after OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, surprised the market with a new round of production cuts starting in May.

Oil also drew support from a steeper-than-expected drop in US crude inventories last week, as well as a decline in gasoline and distillate stocks, hinting at rising demand.

In global financial markets, a US inflation report to be released on Wednesday could help investors gauge the near-term trajectory for interest rates.

Also coming up are monthly reports from OPEC on Thursday and the International Energy Agency on Friday, which will update oil demand and supply forecasts.

(Additional reporting by Alex Lawler; Additional reporting by Florence Tan in Singapore and Mohi Narayan in New Delhi; Editing by Christopher Cushing, Kirsten Donovan, Barbara Lewis and Sandra Maler)

Major Gulf markets retreat in early trade

April 5 (Reuters) – Major stock markets in the Gulf were subdued in early trade on Wednesday, as signs of a slowing US labour market made investors nervous about the economic outlook.

Asia trade was thinned by holidays in Hong Kong and China, leaving MSCI’s Asia-Pacific index excluding Japan faring little better than flat, while Japan’s Nikkei fell 1.6% and was set for the biggest one-day percentage fall since mid-March.

Saudi Arabia’s benchmark index eased 0.2%, hit by a 1.5% fall in Dr Sulaiman Al-Habib Medical Services and a 0.4% decrease in Al Rajhi Bank.

Elsewhere, Arabian Centres Co slid 4.4% as the stock traded ex-dividend.

In the previous two sessions, the Saudi index posted sharp gains after a surprise announcement by OPEC+ to cut more production jolted markets.

Surprise new cuts to the OPEC+ group’s output targets could push oil prices towards USD 100 a barrel, setting the scene for another clash with the West grappling with higher interest rates, analysts and traders said on Monday.

Dubai’s main share index dropped 0.1%, with utility firm Dubai Electricity and Water Authority losing 0.8%.

In Abu Dhabi, the index retreated 0.2%.

Separately, non-oil business activity growth in the United Arab Emirates bounced back to the fastest pace in five months in March, a business survey showed on Wednesday, supported by new orders and the quickest jobs growth in almost seven years.

The Qatari index fell 0.2%, on course to end two sessions of gains, weighed down by 1.7% fall in Commercial Bank.

(Reporting by Ateeq Shariff in Bengaluru; editing by Uttaresh Venkateshwaran)

Euro zone yields edge up amid mixed signals about monetary policy

April 5 (Reuters) – Euro zone government bond yields edged higher on Wednesday amid mixed signals about the monetary tightening path from economic data and central banks’ officials.

Germany’s 10-year government bond yield, the bloc’s benchmark, was up 0.5 basis points (bps) at 2.27%. Its 2-year bond yield, the most sensitive to expectations for policy rates, was up 1.5 bps at 2.64%.

ECB governing council member Gabriel Makhlouf on Tuesday argued that the euro area would need a stronger monetary policy response if it ends up in a wage-price spiral.

German industrial orders rose more than expected in February, increasing by 4.8% from the previous month.

In the United States, Treasury yields slid on Tuesday after US job openings suggested the labour market was finally cooling and could allow the Federal Reserve to loosen its grip on monetary policy.

After the release of data, the Fed’s Loretta Mester said the US central bank likely has more interest rate rises ahead amid signs the recent banking sector troubles have been contained.

Sticky inflation

Analysts said that even a recession and a drop in inflation might not end inflation fears. The so-called “Three Ds” – demographics, decarbonisation, and deglobalisation – are fueling some investors’ view that a subsequent economic recovery will see a return of above-target inflation.

That is one of the reasons why some expect long-dated rates to have little to fall in this cycle, as more dovish action from central banks would result in a more significant inflation premium.

Market expectations about the ECB terminal rate stood at around 3.5%, with the September 2023 ECB euro short-term rate (ESTR) forward at 3.45%, implying an ECB deposit facility rate at 3.55% by summer.

The November 2023 forward peaked at around 4% before fears of a banking crisis hit markets in mid-March.

“Yesterday’s price action was another sign that lower inflationary pressures may not be enough to content the ECB,” said Antoine Gaveau, European rate strategist at Citi, who pointed to recent ECB officials’ comments “keeping the door to a 50bp hike in May open.”

Data on Tuesday showed euro zone producer prices fell more than expected, while consumers cut their inflation expectations.

Italy’s 10-year government bond yield rose 1 bp to 4.14%, with the spread between Italian and German 10-year yields–a gauge of confidence in the euro zone’s more indebted countries – at 186 bps.

(Reporting by Stefano Rebaudo, Editing by Conor Humphries)

Russian rouble hits near 1-year low vs dollar amid lower FX supply

MOSCOW, April 5 (Reuters) – The Russian rouble touched a near one-year low against the dollar and euro on Wednesday, hampered by lower FX supply and capital outflows amid limited liquidity, even as oil prices held near recent highs.

At 0755 GMT, the rouble was 0.2% weaker against the dollar at 79.70, its weakest point since April 19, 2022.

It had lost 0.6% to trade at 87.35 versus the euro, also a near one-year low, and had shed 0.6% against the yuan to 11.57.

“Since the start of the year, there has been consensus on the market that the rouble would weaken, but few expected it at such speed,” said Dmitry Polevoy, head of investment at Locko-Invest.

Polevoy said capital outflows, from Western investors selling assets, wealthy Russians converting roubles and periodic Eurobond payments that require swift conversion into hard currency, were partially behind rouble weakness.

“We believe the sharp movements of recent days have a largely local character and are formed under the influence of shrinking liquidity on the FX market,” said Veles Capital in a note, expecting the rouble rate to stabilise soon.

Brent crude oil LCOc1, a global benchmark for Russia’s main export, was up 0.3% at USD 85.2 a barrel, boosted this week by surprise production target cuts from OPEC+.

Although higher oil prices usually boost the rouble, reduced FX supply is hurting the Russian currency. Month-end tax payments that usually see exporters convert foreign exchange revenues into roubles were due last week.

Russian stock indexes were mixed.

The dollar-denominated RTS index was down 0.1% to 982.3 points. The rouble-based MOEX Russian index was 0.2% higher at 2,484.6 points, not far from its highest mark since April 2022, hit on Tuesday.

Shares in state lender VTB slid 5.5% after the bank reported a sanctions-induced USD 7.7 billion 2022 loss, but said it expects to bounce back with record profits this year, boosted by the purchase of rival Otkritie Bank and a profitable start to the year.

The finance ministry will hold two OFZ treasury bond auctions on Wednesday.

(Reporting by Alexander Marrow; editing by Uttaresh Venkateshwaran)

Oil prices stable as economic fears balance OPEC+ cuts, US stock draw

LONDON, April 5 (Reuters) – Oil prices were stable on Wednesday, as the market weighed gloomy economic prospects against expectations of US crude inventory declines and OPEC’s voluntary output cuts announcement.

Brent crude futures LCOc1 gained 22 cents, or 0.26%, to USD 85.16 a barrel by 0747 GMT. West Texas Intermediate US crude was up 12 cents, or 0.15%, to USD 80.83 a barrel.

Support followed an industry report showed showing US crude inventories fell by about 4.3 million barrels in the week ended March 31. The official inventory report by the US Energy Information Administration is due at 1430 GMT on Wednesday.

Bullish sentiment continued after voluntary cuts pledged by the Organization of Petroleum Exporting Countries and allies including Russia, a group known as OPEC+.

“Energy traders are still digesting the OPEC+ surprise production cut and any news that suggests the oil market will remain even tighter is going to send prices even higher,” said Edward Moya, an analyst at OANDA.

The OPEC+ plan would bring the total volume of cuts by the group to 3.66 million barrels per day (bpd), including a 2 million bpd cut last October, equal to about 3.7% of global demand.

However, weak manufacturing activity in the US and China–the two biggest oil consumers–have capped oil oil price gains.

“The present raises concerns about healthy economic expansion as Chinese, euro zone and US manufacturing activity slowed last month,” said Tamas Varga of oil broker PVM.

Record Russian diesel flows to the Middle East in March, and the sluggish performance of middle distillates contracts have “acted acted as a brake on any attempt to push crude oil prices meaningfully higher,” Varga said.

Traders will be looking for cues on broader economic trends from the US non-farm payrolls data due later this week, analysts say.

“The US non-farm payroll will probably be the most influential economic data that drives the broad market’s movements,” said Tina Teng, an analyst at CMC Markets.

(Reporting Sudarshan Varadhan in Singapore, by Laila Kearney in New York; Editing by Louise Heavens)

Stocks, yields fall; data suggests US economy cooling

NEW YORK, April 4 (Reuters) – World stock indexes declined on Tuesday, with all three major US stock indexes ending lower, while the US dollar fell to a two-month low and Treasury yields eased after data suggested a cooling in the US labor market.

The US Labor Department report showed US job openings in February dropped to the lowest level in nearly two years.

In addition, a separate report showed new orders for US-manufactured goods fell for a second straight month in February amid ebbing demand for civilian aircraft.

The S&P 500 was pressured the most by the economically sensitive industrial sector, which ended down 2.3%. Materials also finished lower.

The yield on two-year Treasuries, which typically move in step with interest rate expectations, fell 14 basis points to 3.840%, while the benchmark 10-year note’s yield slid 9 basis points to 3.342%.

Crude oil prices were near flat after Monday’s sharp rally tied to Sunday’s announcement of an output target cut by the Organization of the Petroleum Exporting Countries (OPEC) and its partners.

Brent crude rose 1 cent to settle at USD 84.94 a barrel, while US crude gained 29 cents to settle at USD 80.71.

The recent spike in oil prices has added to concerns about higher costs for businesses and consumers, but some investors think US data signaling some cooling in the economy could possibly allow the Federal Reserve to loosen monetary policy.

The Dow Jones Industrial Average fell 198.77 points, or 0.59%, to 33,402.38, the S&P 500 lost 23.91 points, or 0.58%, to 4,100.6 and the Nasdaq Composite dropped 63.13 points, or 0.52%, to 12,126.33.

The pan-European STOXX 600 index lost 0.08% and MSCI’s gauge of stocks across the globe shed 0.24%.

The Fed and other central banks have been raising interest rates to bring down inflation, and investors have been trying to gauge how much longer the tightening cycle will continue.

“Cooling down of the labor market is one of the things necessary to combat inflation,” said Andrzej Skiba, head of the BlueBay US fixed income team at RBC Global Asset Management in New York.

On Tuesday, rate futures markets were pricing in a roughly even chance of a 25 basis-point rate hike in May, with rest of the odds tilted toward a pause from the Fed. On Monday, the probability of a 25-bp hike was more than 65%.

The US dollar index dropped to a two-month low of 101.45 and was last down 0.5% at 101.56. Sterling rose to a new 10-month high against the dollar, while the euro reached its highest level since February. The euro was last up 0.5% at USD 1.09550.

“We believe the buck will slowly but surely continue to dwindle as the challenges of a recovering economy that wants to get away from dollar dominance will put downward pressure on its value,” said Juan Perez, director of trading at Monex USA in Washington.

The Australian dollar came under pressure after the Reserve Bank of Australia left interest rates unchanged after 10 straight increases. It was last down 0.5% against the US dollar at USD 0.6754.

Spot gold added 1.8% to USD 2,020.42 an ounce.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Amanda Cooper in London and Herbert Lash and Gertrude Chavez-Dreyfuss in New York; Editing by Jonathan Oatis, Matthew Lewis and Deepa Babington)

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)

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