Gold rises as dollar, yields slip after US jobs data

July 7 (Reuters) – Gold prices rose on Friday and were on track for their first weekly gain in four as the dollar and bond yields fell after weaker US nonfarm payrolls numbers cast doubts over the trajectory of interest rate hikes beyond July yet again.

Spot gold was up 0.8% at USD 1,926.54 per ounce at 2:06 p.m. EDT (1806 GMT). Bullion was up 0.4% so far this week.

US gold futures settled 0.9% higher at USD 1,932.50.

Labor department data showed nonfarm payrolls came in well below expectations last month, but the unemployment rate retreated from a seven-month high amid fairly strong wage gains.

Benchmark 10-year US Treasury yields retreated from a more than four-month peak, while the dollar slipped 0.9% to a more than two-week low after the data, making gold attractive for other currency holders.

Traders stuck to bets the Fed would raise interest rates this month, but were becoming more skeptical of the chance for hikes beyond that.

“Gold remains stubbornly bid – trading higher even before the number. Today’s report has given bulls some relief, at least short term,” said Tai Wong, a New York-based independent metals trader.

“Gold should hold above USD 1,910 but the real test is USD 1,950-60 level where the 100 and 200-day moving averages are converging. The report wasn’t soft enough to warrant that kind of rally today.”

Gold is sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion.

But this comes a day after another set of data showed people filing new claims for unemployment benefits increased only moderately last week, while private payrolls surged in June, showing a strong labor market remained.

Elsewhere, silver gained 1.5% to USD 23.08 per ounce, platinum rose 1% to USD 910.77 and palladium was up 0.6% at USD 1,248.66.

(Reporting by Arpan Varghese and Deep Vakil; Additional reporting by Seher Dareen and Brijesh Patel in Bengaluru; Editing by Jason Neely, Mark Potter, David Evans and Shilpi Majumdar)

Global investors extend buying streak into equity funds on signs of easing inflation

July 7 (Reuters) – Global investors extended their streak as net buyers of equity funds into a second week, drawing support from indications of cooling inflation that may moderate central banks’ inclination to raise rates further.

According to Refinitiv Lipper data, global equity funds received a net USD 5.94 billion in inflows in the week ended July 5, after witnessing net buying of USD 3.36 billion in the previous week.

Last week’s personal consumption expenditures (PCE) report from the US Commerce Department showed cooler-than-expected inflation in May, while consumer spending abruptly decelerated, providing further evidence that the Fed’s barrage of rate hikes is having their desired effect.

Investors allocated USD 4.44 billion to US equity funds and USD 2.29 billion to Asian equity funds, while withdrawing USD 1.29 billion from European funds.

Among sector funds, inflows of USD 871 million were observed in industrials, USD 278 million in consumer staples, and USD 275 million in technology. However, financials experienced an outflow of USD 548 million.

Meanwhile, global bond funds received a net USD 10.4 billion in a second straight week of net buying.

Global government bond funds attracted inflows of USD 1.82 billion, while corporate bond funds recorded the largest weekly inflow in six weeks with USD 2.19 billion. Additionally, high-yield funds saw net purchases of USD 536 million, rebounding after two consecutive weeks of outflows.

Investors also pumped USD 53.1 billion into money market funds, marking their first weekly net buying in four weeks.

Data for commodity funds showed that investors withdrew USD 767 million from precious metal funds in a sixth straight week of net selling, but energy funds received about USD 35 million after two weekly outflows in a row.

Meanwhile, data for 24,130 emerging market funds showed equity funds had USD 504 million worth of outflow during the week, the first in four weeks, but bond funds received about USD 1.4 billion in inflows.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Maju Samuel)

Dollar holds steady ahead of jobs data; Japan wage data boosts yen

LONDON (Reuters) – The dollar held steady against most major currencies on Friday ahead of U.S. employment figures that could confirm rates are likely to stay higher for longer, but fell sharply against the yen, which got a lift from Japanese wage data.

The US nonfarm payrolls report is due later on. Expectations are for the US economy to have created 225,000 jobs in June.

The release follows data on Thursday that showed private payrolls surged last month, while the number of Americans filing new claims for unemployment benefits increased only moderately last week, suggesting the jobs market is on solid ground.

That pushed short-dated Treasury yields to their highest since 2007, reflecting the view that the Federal Reserve is likely to keep raising rates to tame inflation.

By Friday, the dollar index clung to its recent trading range, as most currencies held steady, bar the yen, which headed for its biggest one-day rise against the dollar in a month.

Data from the Japanese labour ministry showed regular wages posted their largest annual increase in May since early 1995, reinforcing the view among investors that the Bank of Japan (BOJ) will have to modify its ultra-loose monetary policy sooner rather than later.

“The stronger wage negotiations are starting to feed through, which is what the BOJ wants. They’ve said very clearly that if they see evidence of more sustained, stronger wage growth that could give them more confidence that they can beat their inflation target and then look obviously to moving away from loose policy settings,” MUFG strategist Lee Hardman said.

The dollar was last down 0.7% against the yen at 143.04, having fallen by nearly 0.9% this week, marking its biggest weekly fall against the Japanese currency in two months.

Adding a tailwind to the rally in the yen was some position-squaring among speculators, who have built up fairly sizeable bearish positions, MUFG’s Hardman said.

Yen bears, beware
Weekly data from the US regulator shows speculators hold a short position in the yen worth USD 9.793 billion, the largest since May 2022, having almost doubled in size in the last three months alone.

The yen has held just below the 145 level – which prompted the BOJ’s first intervention in decades last autumn – for about two weeks and authorities have made clear they are concerned about the weakness in the currency.

The euro fell 0.9% against the yen to 155.5 and was down 0.1% against the dollar at USD 1.0876

Sterling was flat at USD 1.2746, having touched a two-week high of USD 1.2780 on Thursday, as markets bet the Bank of England would raise interest rates to 6.5% early next year, up from a previous expected peak of 6.25%.

The dollar drew extra support from a rise in two-year Treasury yields, which are the most sensitive to changes in interest rate expectations. The two-year Treasury yield rose above 5% on Friday, nearing the previous day’s 16-year high of 5.12%.

“The bond market, at least, is still concerned about the impact of restrictive monetary policy in the U.S. on the economy, and in fact, we still expect the U.S. economy to enter a recession later this year,” Carol Kong, a currency strategist at Commonwealth Bank of Australia, said.

The Australian dollar rose 0.2% to USD 0.6638, but was still heading for a third straight weekly loss, having been battered by weak Chinese economic data and broad risk aversion in the previous sessions, while the offshore yuan rose, leaving the dollar 0.2% lower on the day at 7.2434.

(Additional reporting by Rae Wee in Singapore; Editing by Sam Holmes and Mark Potter)

Yellen says US wants healthy competition with China, not ‘winner-take-all’ approach

BEIJING (Reuters) – The United States is seeking a healthy competition with China based on fair rules that benefit both countries, not a “winner-take-all” approach, U.S. Treasury Secretary Janet Yellen told Chinese Premier Li Qiang in a meeting in Beijing on Friday.

Yellen, in prepared remarks, told Li she hoped her visit would spur more regular channels of communication between the world’s two largest economies, adding that both countries had a duty to “show leadership” on global challenges such as climate change.

She said Washington would “in certain circumstances, need to pursue targeted actions to protect its national security,” but disagreements over such moves should not jeopardize the broader relationship.

“We may disagree in these instances. However, we should not allow any disagreement to lead to misunderstandings that unnecessarily worsen our bilateral economic and financial relationship,” she said.

Yellen cited Li’s remarks in January at the World Economic Forum in Davos, Switzerland, where he said “differences should not be a cause for estrangement, but a driver for more communication and exchange,” and underscored her hope to expand communication with China.

“We seek healthy economic competition that is not winner-take-all but that, with a fair set of rules, can benefit both countries over time,” she said.

(Reporting by Andrea Shalal; Editing by Michael Perry and Kim Coghill)

Oil prices set for second straight weekly gain after U.S. data

LONDON (Reuters) – Oil prices rose on Friday and were on track for their second straight weekly gain, as resilient demand resulted in a larger-than-expected fall in US oil stockpiles, offsetting fears of higher US interest rates.

Brent crude futures were up 31 cents, or 0.4%, at USD 76.83 a barrel at 0819 GMT, while US West Texas Intermediate crude gained 31 cents, or 0.4%, to USD 72.11 a barrel.

Both benchmarks were set to gain about 2% on the week.

Brent is still trading around USD 10 a barrel below April peaks, and has remained between around USD 71 and USD 79 a barrel since early May in the face of interest rate hikes and weak Chinese economic data.

“The crude demand outlook is starting to look better as we enter peak summer travel in the US, and as the Saudis were able to raise prices to Europe and Asia,” said Edward Moya, an analyst at OANDA.

US crude stocks fell more than expected on strong refining demand, while gasoline inventories posted a large draw after an increase in driving last week, the Energy Information Administration said on Thursday.

However, oil price gains were capped by strengthening expectations that the US Federal Reserve is likely to raise interest rates at its July 25-26 meeting, which could weigh on growth and thus oil demand.

The number of Americans filing new claims for unemployment benefits increased moderately last week, while private payrolls surged in June, data showed on Thursday.

More US employment data is due at 1230 GMT.

Top oil exporters Saudi Arabia and Russia this week have also announced fresh output cuts for August. The total cuts by OPEC and its allies now stand at around five million barrels per day (bpd), equating to 5% of global oil output.

OPEC will likely maintain an upbeat view on oil demand growth for next year, sources close to OPEC said.

Investors will look for cues on rate paths from U.S. and Chinese inflation data next week.

(Additional reporting by Sudarshan Varadhan in Singapore; editing by Jason Neely)

Oil prices up 3% to 9-week high on supply concerns

NEW YORK, July 7 (Reuters) – Oil prices climbed about 3% to a nine-week high on Friday as supply concerns and technical buying outweighed fears that further interest rate hikes could slow economic growth and reduce demand for oil.

Brent futures rose USD 1.95, or 2.6%, to settle at USD 78.47 a barrel, while US West Texas Intermediate crude (WTI) rose USD 2.06, or 2.9%, to settle at USD 73.86.

That was the highest close for Brent since May 1 and WTI since May 24. Both benchmarks ended up about 5% for the week.

“We’re knocking on the door of a major breakout to the upside. I think you’re seeing some short covering here today … because a lot of people have been betting on the short side, said Phil Flynn, an analyst at Price Futures Group.

After two months of price consolidation between roughly USD 73-77, Brent moved into technically overbought territory for the first time since mid-April.

“The rally over the last week or so … has been quite strong and backed by momentum – as well as fresh cuts from Saudi Arabia and Russia,” said Craig Erlam, a senior market analyst at OANDA.

Top oil exporters Saudi Arabia and Russia announced fresh output cuts this week bringing total reductions by OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, to around 5 million barrels per day (bpd), or about 5% of global oil demand.

“OPEC+ production cuts are expected to tighten the market, driving supply deficits in the second half of 2023, supporting higher oil prices,” analysts at US financial services company Morningstar said in a note.

OPEC will likely maintain an upbeat view on oil demand growth for next year, sources close to OPEC said.

Russia’s latest pledge to reduce oil exports will not require a similar cut in production, a government source told Reuters.

Oil analytics firm Vortexa said there are currently 10.5 million barrels of Saudi crude in floating storage off the Egyptian Red Sea port of Ain Sukhna, down by almost half from mid-June.

In the US, energy firms this week added oil and natural gas rigs for the first time in 10 weeks, due to the biggest weekly increase in gas rigs since October 2016, according to energy services firm Baker Hughes Co (BKR).

In Norway, Equinor ASA (EQNR) paused production at its Oseberg East oil field in the North Sea due to staffing shortages.

In Mexico, six people were injured after a fire broke out on Friday morning at an offshore platform run by state oil company Pemex in the Gulf of Mexico.

Also supporting crude prices, the US dollar, fell to a two-week low after data showed US job growth was lower than expected but still strong enough to likely lead the US Federal Reserve (Fed) to resume raising interest rates later this month as it has signaled.

A weaker dollar makes crude cheaper for holders of other currencies, which could boost oil demand.

According to the CME Group Inc’s (CME) FedWatch Tool, the probability that the Fed increases interest rates by 25 basis points at its July 25-26 meeting is now around 95%, up from 92% just prior to the data coming out.

Higher borrowing costs could slow economic growth and reduce oil demand.

In Europe, decades-high inflation and the impact of war in Ukraine have forced companies to impose hiring freezes and lay-offs.

In Germany, a swift economic recovery appeared less likely as data showed a surprise fall in industrial production.

(Additional reporting by Shadia Nasralla in London and Sudarshan Varadhan in Singapore; editing by David Gregorio and Marguerita Choy)

Wall Street logs sharp losses as labor market strength stokes rate-hike fears

July 6 (Reuters) – Wall Street’s main indexes ended sharply lower on Thursday in a broad sell-off after data showing a strong labor market boosted bond yields and fanned fears the Federal Reserve will be aggressive in raising US interest rates.

The S&P 500 posted its biggest daily percentage drop since May 23. The Dow logged its biggest single-day fall since May 2.

Private payrolls surged far more than expected in June, data showed, suggesting the labor market remained solid despite growing risks of a recession. A separate report showed US job openings dropped in May, but remained at elevated levels.

A day before the monthly U.S employment report, evidence of a solid labor market spurred expectations the Fed will keep interest rates higher for longer to tame stubborn inflation.

“We don’t see any softening in the labor market,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “The Fed doesn’t have to worry about the jobs market. When you look at their mandate, they have no reason not to keep hiking and to keep hiking for a while.”

The Dow Jones Industrial Average fell 366.38 points, or 1.07%, to 33,922.26, the S&P 500 lost 35.23 points, or 0.79%, to 4,411.59 and the Nasdaq Composite dropped 112.61 points, or 0.82%, to 13,679.04.

All 11 S&P 500 sectors ended down. Energy led declines among the sectors, dropping about 2.5%, while consumer discretionary slumped nearly 1.7%.

Gains in megacap stocks mitigated declines for the major indexes, which ended above their session lows. Microsoft (MSFT) rose 0.9% while Apple (AAPL) was up 0.3%.

Treasury yields jumped following the labor market data. The benchmark 10-year yield burst above 4% while the two-year Treasury yield, which typically moves in step with interest rate expectations, hit a 16-year high.

US interest rate futures saw an increased probability of another rate hike by the Federal Reserve in November, according to CME’s FedWatch.

The Fed did not hike rates in June but is widely expected to resume increases at its July meeting. Dallas Fed President Lorie Logan said there was a case for a rate rise at the June policy meeting.

In company news, Exxon Mobil Corp. (XOM) shares fell 3.7% after the oil major signaled a sharp fall in second-quarter operating profits on lower natural gas prices and weaker oil refining margins.

Second-quarter corporate reports will arrive in coming weeks with S&P 500 earnings expected to fall 5.7% from a year-ago, according to Refinitiv data.

“You have a situation where rates are going higher, profits are not really moving,” said King Lip, chief strategist at Baker Avenue Wealth Management. “That’s usually not a good combination for stocks.”

JetBlue Airways (JBLU) shares dropped 7.2% a day after the company said it would follow a US judge’s May order to end its alliance with American Airlines (AAL) to protect a planned purchase of Spirit Airlines.

Declining issues outnumbered advancing ones on the NYSE by a 6.01-to-1 ratio; on Nasdaq, a 3.25-to-1 ratio favored decliners.

The S&P 500 posted 4 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 27 new highs and 118 new lows.

About 11.7 billion shares changed hands in US exchanges, compared with the 11.1 billion daily average over the last 20 sessions.

(Reporting by Lewis Krauskopf in New York, Bansari Mayur Kamdar, and Johann M Cherian in Bengaluru; Editing by Vinay Dwivedi, Shinjini Ganguli, and David Gregorio)

Data lifts yields as 2-yr hits highest since 2007

NEW YORK, July 6 (Reuters) – US Treasury yields climbed on Thursday after data on the labor market further fueled expectations the Federal Reserve will be aggressive in raising interest rates as it tries to rein in persistently high inflation down towards its 2% target rate.

Private payrolls jumped by 497,000 jobs last month, the ADP National Employment report showed, well above the 228,000 forecast and indicating the labor market remains resilient despite the Fed’s efforts to slow the economy.

Other labor market data showed initial jobless claims increased slightly for the week ended July 1 to 248,000, just above the 245,000 estimate, but still below the 280,000 economists believe would indicate a significant slowing in job growth. In addition, a report from Challenger, Gray & Christmas announced the lowest number of layoffs by US-based employers since October 2022.

“This data has been unbelievable strong, especially the jobs data just for some reason continues to surprise to the upside,” said Tom di Galoma, co-head of global rates trading at BTIG in New York.

“I’m not sure where it is all coming from. I think we are headed into a slowdown but businesses are still looking for employees.”

The data comes ahead of Friday’s key payrolls report from the Labor Department, although the ADP report and the government’s jobs data have not historically been very tightly correlated.

The yield on 10-year Treasury notes was up 9.4 basis points to 4.039% after hitting 4.083%, its highest since March 2. The 10-year yield is on track for its third straight session of gains.

Interest rate futures were pricing in a 92.4% chance of a 25-basis-point rate hike at the Fed’s July 25-26 meeting, up from 90.5% a day prior, with expectations for a second hike at the November meeting also increasing.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 5.1 basis points at 5.002% after rising to 5.120%, the highest since June 2007.

Federal Reserve Bank of Dallas President Lorie Logan said Thursday that there was a case for a rate rise at the June policy meeting, when the central bank paused after 10 straight increases, and said more rate hikes are needed. Recent comments from other Fed officials, including Chair Jerome Powell, have supported additional hikes this year.

The yield on the 30-year Treasury bond was up 5.9 basis points to 4.003%. Analysts at Citi have pointed to 4% as the main resistance level, as yields “came off aggressively” in three prior instances. Citi would target 4.34% should the 30-year close above 4%.

Other data showed the services sector remains strong, growing faster than expected in June, although a measure of prices paid fell to its lowest in more than three years, hinting at further cooling of services inflation.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a negative 96.5 basis points after seeing its deepest inversion since 1981 on Monday.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.243%, after closing at 2.233% on Wednesday.

The 10-year TIPS breakeven rate was last at 2.272%, indicating the market sees inflation averaging 2.3% a year for the next decade.

(Reporting by Chuck Mikolajczak, additional reporting by Karen Brettell; Editing by Mark Potter and Nick Zieminski)

Retail traders pile into US stocks; focus shifts to EVs from AI

July 6 (Reuters) – Retail traders raised their exposure to US stocks in June encouraged by healthy returns, with their focus shifting to electric-vehicle firms from artificial intelligence stocks earlier in the year.

They poured in USD 1.4 billion per day on average in US equities in the month, closing in the all-time record of USD 1.5 billion a day in March, Vanda Research said.

Broadly US stocks in June enjoyed their strongest monthly performance in eight months, as signs of cooling inflation fueled bets the Federal Reserve could be near the end of its rate-hiking cycle.

“While it may be difficult to see a further increase in the pace of cash equity purchases from these levels, there is still room for more speculative buying in the options space,” said Marco Iachini, senior vice president at Vanda Research which tracks retail flows.

Retail trading activity as a percentage of total market volume jumped to 21.9% as of July 5, the highest since Jan. 24, and up sharply from 14% on May 31, according to J.P.Morgan data.

Record vehicle deliveries by Tesla (TSLA), consistently a favorite among the retail crowd, have helped spark small-time investors’ interest in EV stocks, including Rivian (RIVN), Iachini said.

EVs have garnered increased demand on incentives under the Inflation Reduction Act and a competitive pricing environment.

In contrast, demand for AI stocks, including C3.ai, from retail investors has somewhat slowed from earlier this year after they rallied for weeks, Iachini added.

Meanwhile, Joby Aviation’s (JOBY) 67% surge since last week was driven by strong retail buying after a green light from US aviation regulator for flight testing of its electric air taxi.

About 11.61% of Joby shares are under short position and there could be more short covering if the stock price continues to climb, said Peter Hillerberg, co-founder at analytics firm Ortex.

(Reporting by Medha Singh in Bengaluru; Editing by Shinjini Ganguli and David Gregorio)

Venture capital funding plunges globally in first half despite AI frenzy

July 6 (Reuters) – Venture capital funding globally almost halved in the first six months of 2023, data from research firm PitchBook showed, highlighting a lack of enthusiasm on the part of investors as well as less demand amid sharply higher interest rates.

The 48% decline in investment to USD 173.9 billion and the 19% drop-off in deal numbers come despite huge interest in artificial intelligence startups sparked by the success of OpenAI’s ChatGPT.

Investors poured more than USD 40 billion into AI startups in the past six months, the data showed. That includes a USD 10 billion investment by Microsoft MSFT.O in OpenAI and USD 1.3 billion in funding for rival Inflection AI.

By region, Latin America had the biggest drop with an 86% slump while the US and Europe fell 65% and 69% respectively.

Investors say that not only have higher interest rates caused a rethink of valuations, the current IPO drought and lack of other exit opportunities have made them more selective.

“I haven’t written any checks in the past 18 months,” said Kevin Colleran, a co-founder at early-stage firm Slow Ventures. “I have 30 portfolio companies that I need to help figure out how to survive. There is no point for me to add to the misery.”

PitchBook said large investors weren’t actively participating in venture funding and outsized deals that had pushed deal values to records were no longer happening. Venture capital funding globally hit an annual record of USD 745.1 billion in 2021.

Funding activity has fallen across all stages, with the first seed round logging the biggest drop with a 44% decline in the number of deals in the US

Many firms that secured funds in 2021 are still sitting on a considerable amount of money and feel little need to come back to a market that expects much lower valuations, investors said. But they added that a moderate pickup in demand could emerge in the second half.

“More companies will have run low on cash and will need to come to market to fully finance their plans,” said Mary D’Onofrio, a partner at Bessemer Venture Partners.

(Reporting by Krystal Hu in New York; Editing by Edwina Gibbs)

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