US recap: EUR/USD drop holds key props, yen slammed by rates and risk

May 17 (Reuters) – The dollar headed toward a higher close on Wednesday but its initial gains, fueled by rising Treasury yields, were trimmed by risk-on flows due to a rebound in US regional banks stocks and less US debt default angst.

The main exception to the dollar’s retreat from earlier peaks came against the low-yield, haven yen, which fell broadly.

Rising Treasury yields and US stocks were a toxic mix for the Japanese currency, pushing it 0.9% lower against the dollar as USD/JPY sprinted toward this year’s 137.78/90 key peaks, with 139.58 eyed on a major breakout.

EUR/USD rebounded from 1.08105 lows on EBS that managed to hold above the 100-day moving average and 50% of the March-April rise at 1.0806 but still fell 0.2%.

The market continued pricing out some of the aggressive H2 Fed rate cuts it had earlier projected, while ECB rate hike expectations remain capped at two more 25bp rises to 3.75% versus the current 5.25% Fed funds rate.

Euro zone, and particularly German, data have mostly missed lately and a weaker reopening in China further dims demand prospects. But the ECB still has to deal with 7% euro zone inflation and a 7.3% core rate that is more than twice the current 3.25% ECB rate.

The core US inflation rate is at 5.5%, down from 2022’s 6.6% peak. That level of inflation remains too high for most Fed officials, thus 2-year Treasury yields 10bp rise Wednesday toward April’s highs and the 100-DMA.

Sterling’s greater risk sensitivity allowed it to rebound to about flat from fresh May lows before US stocks sped higher, led by the KBE bank stocks index’s nearly 6% rise.

Beyond monitoring US debt ceiling talks, Thursday’s main focus is US initial jobless claims, forecast at 254k versus the previous week’s 264k, the highest since January 2021. A drop would be good news for the dollar and vice versa. Philly Fed and existing homes sales are also out Thursday.

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

Gold slips as dollar rises on hawkish cues from Fed officials

May 17 (Reuters) – Gold retreated on Wednesday as the dollar advanced after hawkish comments from US Federal Reserve officials raised doubts over interest-rate cuts this year.

Spot gold dropped 0.4% to USD 1,981.39 per ounce by 2:15 p.m. EDT (1815 GMT) after touching its lowest since April 27. US gold futures settled down 0.4% at USD 1,984.90.

The dollar’s jump, partly driven by Fed officials generally “leaning hawkish overall,” has been weighing on the metals markets, said Jim Wyckoff, senior analyst at Kitco Metals.

He said a US debt default could be bullish for gold, but most of the market does not seem to agree.

US President Joe Biden and top congressional Republican Kevin McCarthy underscored their determination to reach a deal soon to raise the debt ceiling.

The dollar index hit a seven-week high, eroding the appeal for bullion, a rival safe haven. USD/

Underscoring the Fed’s resolve to curb inflation, Chicago Fed President Austan Goolsbee had said on Tuesday it was “far too premature to be talking about rate cuts,” while Cleveland Fed President Loretta Mester said rates were not yet at a point where it could hold steady.

Economists polled by Reuters saw the Fed holding rates steady this year. High interest rates increase the opportunity cost of holding zero-yield bullion.

Traders priced in a roughly 67% chance of the Fed standing pat on rates in June, with cuts still expected late in the second half of the year.

“We still look for higher prices over the next 12 months, with gold expected to reach USD 2,200/oz, but the next uptick in prices is likely to happen when the Fed’s tone is shifting to more dovish,” said UBS analyst Giovanni Staunovo.

Silver was mostly flat at USD 23.74 per ounce, platinum rose 1.1% to USD 1,068.74 while palladium dropped 0.9% to USD 1,488.23.

(Reporting by Seher Dareen in Bengaluru, additional reporting by Kavya Guduru; Editing by Sharon Singleton, Arun Koyyur, and Richard Chang)

Exchange operators, US debt ceiling jitters weigh on European shares

May 17 (Reuters) – European shares slipped on Wednesday as investors remained concerned about whether the outcome of the US debt ceiling negotiations would result in averting a default, while a slew of downbeat earnings, led by exchange operators, weighed on the mood.

The continent-wide STOXX 600 was down 0.3% as of 0716 GMT, with financial services companies and real estate firms leading declines.

Euronext dropped 4.2% after the exchange operator reported a fall in first-quarter revenue and income, while the London Stock Exchange Group dipped 4.2% after an investor consortium, including US buyout firm Blackstone and Thomson Reuters, sold shares worth about 2.7 billion pounds (USD 3.41 billion).

German lender Commerzbank AG slipped 3.7% even as its net profit nearly doubled in the first quarter.

UBS Group AG was flat after the Swiss bank said it expects a financial hit of about USD 17 billion from the takeover of Credit Suisse Group AG.

Among the bright spots, SAP added 1.6% after the German business software maker raised its 2025 total revenue outlook for continuing operations and announced a share buyback of up to 5 billion euros.

Siemens AG climbed 2.7% after the German engineering and technology group raised its full-year sales and profit guidance.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Sonia Cheema)

Factors to watch in UK stocks on May 17

May 17 (Reuters) – Britain’s FTSE 100 index is seen opening lower on Wednesday, with futures FFIc1 down 0.37%.

* BRITISH LAND: Property firm British Land Co Plc reported a drop in its property valuations, as elevated levels of interest rates and broader economic worries dented sentiment in the commercial real estate sector.

* JD SPORTS: JD Sports Fashion Plc said it expected profit to exceed 1 billion pounds for the first time this year as its offer of trainers, joggers and hoodies continues to chime with young shoppers.

* EXPERIAN: British credit data firm Experian Plc EXPN.L said it expects its annual organic revenue to grow between 4% and 6% on the back of steady demand from businesses and consumers.

* MITCHELLS & BUTLERS: Mitchells & Butlers PLC said its cost outlook in the medium term was improving, while the British pub group reported a rise in sales growth for the past six weeks.

* SAGE: Sage, a British provider of software to small and medium-sized companies, upgraded its full-year organic recurring revenue growth forecast to around 11% after a strong first half.

* SHELL: Shell Plc will use AI-based technology from big-data analytics firm SparkCognition in its deep sea exploration and production to boost offshore oil output, the companies said.

* LSEG: An investor consortium including U.S. buyout firm Blackstone and Thomson Reuters, the publisher of Reuters News, is looking to sell around USD 3 billion worth of shares in the London Stock Exchange Group.

* Britain’s FTSE 100 erased earlier gains and closed lower on Tuesday, as losses in financial and energy stocks coupled with weakness in China-exposed firms weighed.

* For more on the factors affecting European stocks, please click on:

(Reporting by Muhammed Husain and Anandita Mehrotra in Bengaluru; Editing by Dhanya Ann Thoppil)

Gold steady, rival dollar caps gains with US debt deal in focus

May 17 (Reuters) – Gold prices steadied on Wednesday with gains capped by a firmer dollar, as investors fretted over prolonged US debt-limit negotiations.

Spot gold was little changed at USD 1,988.29 per ounce by 0653 GMT. US gold futures steadied at USD 1,992.20.

Rival safe-haven dollar held firm on the day, making gold less appealing for overseas buyers.

Bullion has been well supported on price dips below USD 2,000 and with the debt ceiling “process dragging-on, there is some pent-up frustration in the market which is adversely affecting sentiment”, and that could bring safe-haven flows into gold, Tim Waterer, chief market analyst at KCM Trade said.

US President Joe Biden and top congressional Republican Kevin McCarthy edged closer to a deal to avoid a looming US debt default, as the threat of an economic nightmare prompted Biden to cut short an Asia trip this week.

Bullion slipped from the USD 2,000 level on Tuesday after US retail sales and hawkish remarks from Federal Reserve officials drove bets that interest rate cuts may be delayed.

Higher rates blunt the non-yielding bullion’s appeal.

“Any inflation-fighting rhetoric from Fed officials between now and the June meeting would hinder the gold price,” Waterer further said, adding, the prevailing dollar strength was capping gold’s upside for the time being.

Traders are currently pricing in a 78.6% chance of the U.S. central bank holding rates in June, according to the CME FedWatch tool.

Separately, a resolution of the debt crisis will momentarily see some selling in gold, while in case of a default, “there is no telling how high gold will scream,” said Clifford Bennett, chief economist at ACY Securities.

Among other precious metals, spot silver was flat at USD 23.73 per ounce after hitting a six weeks low in the previous session.

Platinum rose 0.6% to USD 1,063.90 per ounce, and palladium was little changed at USD 1,501.45.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Sherry Jacob-Phillips, Uttaresh Venkateshwaran, Varun H K and Louise Heavens)

Oil dips on demand worries after unexpected US crude build

TOKYO, May 17 (Reuters) – Oil prices fell for a second day on Wednesday after a surprise rise in US. crude inventories stoked demand concerns on the heels of weaker-than-expected economic data from the United States and China, the world’s two biggest oil consumers.

Brent crude futures slipped 49 cents, or 0.7%, to USD 74.42 a barrel. US West Texas Intermediate crude was down 55 cents, or 0.8%, to USD 70.84 at 0657 GMT.

“Crude prices remain heavy as energy traders just can’t shake off global demand concerns. It doesn’t matter how upbeat everyone is for China’s second half of the year, the current situation is too disappointing,” said Edward Moya, an analyst at OANDA.

US crude stockpiles rose by about 3.6 million barrels in the week ended May 12, according to market sources citing American Petroleum Institute figures. Seven analysts polled by Reuters, had expected a 900,000 barrel drawdown.

US government data on crude and product stockpiles is due at 1430 GMT.

The crude inventory build added to concerns about US growth after data showed retail sales rose 0.4% in April, short of estimates for an increase of 0.8%.

Talks on raising the US debt ceiling continue to weigh on the market. The US Treasury Department has estimated that the United States will go into a crippling default as early as June 1 if Congress does not lift the ceiling.

In China, April industrial output and retail sales growth undershot forecasts, suggesting the economy lost momentum at the beginning of the second quarter.

“Sentiment soured amid stalled US debt ceiling talks and disappointing retailers’ earnings overnight. Recession fears again dragged on the global markets,” said Tina Teng, an analyst at CMC Markets.

Markets are closely following any new steps on expanding sanctions on Russia by the Group of Seven (G7) leaders when they meet in Japan on May 19-21.

The G7 is looking to target sanctions evasion involving third countries, aiming to limit Russia’s future energy production and curb trade that supports Russia’s military, officials with direct knowledge of the discussions have said.

(Reporting by Katya Golubkova Editing by Sonali Paul and Mark Potter)

Oil settles up USD 2 on optimism about US debt ceiling, demand

May 17 (Reuters) – Oil prices settled up about USD 2 on Wednesday as optimism over oil demand and US debt ceiling negotiations outweighed worries about abundant supply.

Brent crude futures settled up USD 2.05, or 2.7%, to USD 76.96 a barrel. West Texas Intermediate US crude settled up USD 1.97 or 2.8% to USD 72.83.

“Today’s strong oil trade was all about the expectation of a debt ceiling agreement, likely by the end of this week, that appeared to lift a negative burden across most asset classes, including oil,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

President Joe Biden and top US congressional Republican Kevin McCarthy on Wednesday
underscored their determination to reach a deal soon to raise the federal government’s USD 31.4 trillion debt ceiling and avoid an economically catastrophic default.

After a months-long standoff, the Democratic president and speaker of the House of Representatives on Tuesday agreed to negotiate directly. An agreement needs to be reached and passed by both chambers of Congress before the federal government runs out of money to pay its bills, as soon as June 1.

The optimism outweighed a crude inventory increase of 5 million barrels in the week ended May 12 reported by the Energy Information Administration. Analysts polled by Reuters had expected a 900,000-barrel drop.

The crude inventory build added to concerns about US growth after data showed retail sales rose 0.4% in April, short of estimates for an increase of 0.8%.

However, gasoline stocks drew down by 1.4 million barrels as the four-week gasoline product supplied – a proxy for demand – rose to its highest level since December 2021.

The International Energy Agency on Tuesday predicted demand would outpace supply by 2 million barrels per day (bpd) in the second half of the year, with China making up 60% of oil demand growth in 2023.

In China, April industrial output and retail sales growth undershot forecasts, suggesting the economy lost momentum at the beginning of the second quarter.

Markets are in a “wait-and-watch mode” over the outcome of the debt ceiling negotiations, said Vandana Hari, founder of oil market analysis provider Vanda Insights.

“A bunch of Chinese macro-economic data for April released on Tuesday confirmed the narrative of a patchy and slow recovery in the country and continue to weigh on oil market sentiment.”

(Additional reporting by Katya Golubkova; editing by Deepa Babington, Kirsten Donovan and David Gregorio)

Wall Street closes lower after Home Depot outlook, US retail sales

NEW YORK, May 16 (Reuters) – US stock indexes closed lower on Tuesday after a disappointing forecast from Home Depot and US retail sales data for April pointed to softer consumer spending, while uncertainty about interest rates and debt limit negotiations weighed on sentiment.

Home Depot (HD) declined 2.15% as one of the biggest drags on both the Dow Industrials and S&P 500 after the home improvement retailer cut its annual sales forecast and projected a steeper-than-expected decline in profit. Shares of peer Lowe’s Companies Inc (LOW) fell 1.16%.

“You can argue that people are tired of spending on the house, they want experiences, they want to go out they want to do other things, they don’t want to fix up the house according to Home Depot, because they had horrendous earnings,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

The Commerce Department reported retail sales rose 0.4% in April, short of the estimate for an increase of 0.8%. But core retail sales rebounded, a figure excluding automobiles, gasoline, building materials, and food services.

“There is a sense that people are starting to get a little bit more sensitive to the Fed being successful and this ongoing drama of the debt ceiling is causing angst.”

The Dow Jones Industrial Average fell 336.46 points, or 1.01%, to 33,012.14, the S&P 500 lost 26.38 points, or 0.64%, to 4,109.9 and the Nasdaq Composite dipped 22.16 points, or 0.18%, to 12,343.05.

Recent data has indicated a slowing in the US economy following a string of rate hikes by the Federal Reserve to fight high inflation. That slowing along with recent negotiations over the US debt ceiling has focused attention on when the central bank will pause hiking or cut interest rates.

While the market is currently pricing in a rate cut by the end of the year, recent comments from Fed officials suggested they are not ready to cut rates soon.

Richmond Fed President Thomas Barkin said he was “comfortable” with raising interest rates further if needed but liked the “optionality” implied in the latest policy statement.

Cleveland Fed President Loretta Mester said she does not think the central bank can hold interest rates steady yet.

Lawmakers held a new round of talks about raising the debt ceiling. The Treasury Department has warned it could run out of money as soon as June 1 without a deal, which would trigger a default and likely cause a sharp economic slump.

Horizon Therapeutics (HZNP) tumbled 14.17% as the Federal Trade Commission said it would file a lawsuit to block Amgen Inc’s (AMGN) USD 27.8 billion deal to buy the company. Shares of Amgen fell 2.42%.

The decline in both stocks weighed on the Nasdaq Biotech Index, which closed at a three-week low after dropping 2.44%, its biggest one-day percentage decline in three months.

Shares of Capital One Financial Corp (COF) climbed 2.05% the day after Berkshire Hathaway Inc (BRKa) disclosed it had taken a stake of nearly USD 1 billion in the stock.

Declining issues outnumbered advancing ones on the NYSE by a 4.05-to-1 ratio; on Nasdaq, a 2.28-to-1 ratio favored decliners.

The S&P 500 posted 12 new 52-week highs and 13 new lows; the Nasdaq Composite recorded 47 new highs and 188 new lows.

Volume on US exchanges was 9.36 billion shares, compared with the 10.58 billion average for the full session over the last 20 trading days.

(Reporting by Chuck Mikolajczak; Editing by David Gregorio)

Gold retreats as US data, Fedspeak sow doubts on rate cuts

May 16 (Reuters) – Gold fell below USD 2,000 on Tuesday after US economic data and hawkish remarks from Federal Reserve officials drove bets that interest rate cuts may be delayed, while traders kept an eye on the US debt-ceiling talks.

Spot gold shed 1.6% to USD 1,987.39 per ounce by 1:40 p.m. EDT (1740 GMT), after touching its lowest in two weeks at USD 1,989.10 earlier.

US gold futures settled 1.5% down at USD 1,993.

US retail sales increased less than expected in April, but the underlying trend was solid, driving an uptick in the dollar and sending 10-year Treasury yields to a two-week high. USD/ US/

Richmond Fed President Thomas Barkin said he was “comfortable” with raising interest rates further if needed to lower inflation. Cleveland Fed chief Loretta Mester said the US central bank was not at a point yet where it can hold rates steady for a period of time.

This followed hawkish comments from other Fed officials on Monday who saw interest rates staying high and, if anything, going higher.

“We needed to see more signs of a pivot from the Federal Reserve and we haven’t really fully seen that yet,” said Craig Erlam, a senior market analyst at OANDA.

High interest rates dull non-yielding bullion’s appeal, although it’s considered a hedge against economic uncertainties.

But overall, traders could keep buying any dip in gold prices “as they wait out this debt ceiling fiasco”, said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago.

Democratic President Joe Biden and top congressional Republican Kevin McCarthy are expected to discuss new work requirements for benefits programs for low-income Americans during Tuesday’s debt-ceiling negotiations, sources familiar with the talks said.

Spot silver slid 1.5% to USD 23.74 per ounce. Platinum lost 0.6% at USD 1,058.41 and palladium fell 2.3% to USD 1,496.54.

(Reporting by Deep Vakil and Kavya Guduru in Bengaluru; Editing by Sherry Jacob-Phillips, Sohini Goswami, Christina Fincher, and Shilpi Majumdar)

Europe has a data fest, and growth worries

Tuesday’s a busy day for European markets. We get preliminary growth numbers for the euro zone, inflation in Italy, jobless data for Britain and, crucially, the German economic sentiment ZEW survey.

No surprises are seen in euro zone GDP data – rather, analysts assume the tepid pace seen in the fourth quarter hasn’t picked up.

That leaves the German ZEW survey for May in the spotlight. There, too, the economic situation was considered relatively negative last month.

Weakness in the euro zone’s largest economy will be a matter of concern for market bulls, given they just saw Asia’s largest economy is still struggling to get demand going and doing little for global trade.

As stock markets pause to take stock, the dollar too is ceding a bit of ground mainly to sterling and the Canadian dollar, and a bit to the euro.

A June rate rise by the European Central Bank seems certain, and a Reuters poll shows the ECB will hike at each of the next two meetings.

UK labour market data is a biggie too for sterling this week, offering insight into the headline pay growth that the hawkish Bank of England is eyeing.

In the background to all this data-diving is the usual drawn-out US debt ceiling debate. With a little more than two weeks to go before the US government could run short of money to pay its bills, President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy meet on Tuesday to find common ground on spending levels and whatever else it takes to agree on an increase in the nation’s USD 31.4 trillion debt limit. Here’s an explainer.

(Reporting by Vidya Ranganathan; Editing by Edmund Klamann)

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