Stock futures, bonds rally as US acts to stabilize banks

SYDNEY, March 13 (Reuters) – US stock futures rallied in Asian trade on Monday as authorities announced plans to limit the fallout from the collapse of Silicon Valley Bank (SVB), though investors were also still favoring the safety of sovereign debt.

In a joint statement, the US Treasury and Federal Reserve announced a range of measures to stabilize the banking system and said depositors at SVB (SIVB) would have access to their deposits on Monday.

The Fed said it would make additional funding available through a new Bank Term Funding Program, which would offer loans up to one year to depository institutions, backed by Treasuries and other assets these institutions hold.

The moves came as authorities took possession of New York-based Signature Bank (SBNY), the second bank failure in a matter of days.

Analysts noted that, importantly, the Fed would accept collateral at par rather than marking to market, allowing banks to borrow funds without having to sell assets at a loss.

“These are strong moves,” said Paul Ashworth, head of North American economics at Capital Economics.

“Rationally, this should be enough to stop any contagion from spreading and taking down more banks, which can happen in the blink of an eye in the digital age,” he added. “But contagion has always been more about irrational fear, so we would stress that there is no guarantee this will work.”

Investors reacted by sending US S&P 500 stock futures up 0.9%, while Nasdaq futures rose 1.1%.

Yet, such was the concern about financial stability, that investors speculated the Fed would now be reluctant to rock the boat by hiking interest rates by a super-sized 50 basis points this month.

Fed fund futures surged in early trading to imply only a 28% chance of a half-point hike, compared to around 70% before the SVB news broke last week.

The peak for rates came all the way back to 5.11%, from 5.69%, last Wednesday, and markets were even pricing in rate cuts by the end of the year.

That, combined with the shift to safety, saw yields on two-year Treasuries dive 47 basis points on Thursday and Friday to stand at 4.58%, a long way from last week’s 5.08% peak.

Treasury 10-year bond futures added another 6 ticks on Monday, having been up over 20 ticks at one stage in hectic early trade.

“Accelerating your pace of hikes in the face of a significant bank failure may not be the wisest play for the Fed, especially if subsequent problems emerge stemming from similar root causes – underwater rates portfolios,” said John Briggs, global head of economics at NatWest Markets.

Still, much will depend on what US consumer price figures reveal on Tuesday, with an obvious risk that a high reading will pile pressure on the Fed to hike aggressively even with the financial system under strain.

The European Central Bank meets on Thursday and is still widely expected to lift its rates by 50 basis points and to flag more tightening ahead, though it will now have to take financial stability into account.

In currency markets, the dollar dipped 0.6% on the safe-haven Japanese yen to 134.20 JPY=EBS, while easing 0.6% on the Swiss franc. The euro firmed 0.5% to USD 1.0698 as US yields dropped.

Gold climbed 0.8% to USD 1,882 an ounce, having jumped 2% on Friday.

Oil prices edged higher, with Brent up 10 cents at USD 82.88 a barrel, while US crude rose 26 cents to USD 76.94 per barrel.

(Reporting by Wayne Cole; editing by Diane Craft and Sam Holmes)

Australian shares log worst day in 4 months on rout in banks, miners

March 10 (Reuters) – Australian shares posted their sharpest daily loss in over four months on Friday, weighed down by financials and miners in a sell-off over prospects of further interest rate hikes.

The S&P/ASX 200 index fell 2.3% to 7,144.7 points. The benchmark lost about 2% over the week.

Investor sentiment remained subdued during the week after US Federal Reserve Chair Jerome Powell’s hawkish remarks, highlighting the need of a high interest rate environment to tame inflation.

Investors now await US non-farm payrolls data for February, due later in the day, which is expected to fuel inflationary woes.

Back in Sydney, banks led the losses with the sub-index closing 2.8% lower.

The Australian Securities and Investments Commission (ASIC) said that country’s six largest banking service providers have paid or offered AUD 4.7 billion (USD 3.09 billion) in compensation to customers charged with higher fees.

All of the “Big Four” lenders fell, with ANZ Group Holdings Ltd down 2.8%. Financial conglomerate Macquarie Group Ltd and asset manager AMP Ltd also fell.

“The bank sell-off is clearly driving the rest of the market lower as lenders face their own set of challenges, which include a slowing property market and greater competition for few loans as the economy slows,” said Carl Capolingua, Market Analyst at ThinkMarkets Australia.

Local lithium miners emerged as one of the top laggards on the benchmark, with seven of top ten losers on ASX-200 being lithium producers.

Shares tanked as spodumene prices hit one-year low. Heavyweights Mineral Resources Ltd and Pilbara Minerals Ltd lost 6.6% and 7.1% respectively.

Energy shares and miners tracked the broader market despite higher or unchanged underlying commodity prices. The sub-indexes closed down around 3.3% each.

Mining stocks BHP Group Ltd, Rio Tinto Ltd, Fortescue Metals Group Ltd, and oil and energy majors Woodside Energy Group Ltd and Santos Ltd all traded in the red.

New Zealand’s benchmark S&P/NZX 50 index fell 0.8% to end the day at 11,727 points.

(Reporting by Rishav Chatterjee in Bengaluru; Editing by Varun H K)

UK Stocks-Factors to watch on March 10

March 10 (Reuters) – Britain’s FTSE 100 .FTSE index is seen opening lower on Friday, with futures FFIc1 down 1.4%.

* SHELL: Brazilian state-run company Petrobras PETR4.SA and international oil major Shell SHEL.L will work together to identify potential opportunities to explore for and produce crude and natural gas, Petrobras said.

* ASDA: British supermarket groups Asda and Morrisons have started to remove some of their customer purchase limits on salad vegetables and fruit after weeks of shortages and empty shelves.

* LENDERS: Britain’s financial watchdog said it expects the number of mortgage borrowers struggling to keep up with payments to rise at a much slower pace in the next 12 months than previously forecast because interest rate hikes will be more modest.

* OIL: Oil fell for a fourth session, heading for its biggest weekly loss in five weeks on worries about the prospect of steep interest rate hikes in the United States slowing growth and hitting fuel demand.

* GOLD: Gold prices eased as investors keenly look forward to the U.S. non-farm payrolls report due later in the day to assess the likely path of the Federal Reserve’s rate-tightening cycle.

* METALS: Copper prices slid, heading for weekly losses as fears over persistent interest rate hikes by the U.S. Federal Reserve weighed on investor sentiment, while improving supply prospects added downward pressure on the market.

* FTSE: London’s FTSE 100 closed lower on Thursday amid investor caution over higher U.S. interest rates, with mining stocks leading the falls as metal prices dropped due to a stronger dollar.

* UK CORPORATE DIARY:

Berkeley Group	BKGH.L	Trading update
Robert Walters Plc	RWA.L	FY Results

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

TODAY’S UK PAPERS
> Financial Times PRESS/FT
> Other business headlines PRESS/GB

(Reporting by Prerna Bedi in Bengaluru)

((Prerna.Bedi@thomsonreuters.com; +91 98052 24616;))

Oil market has fully absorbed impact of Russia’s invasion of Ukraine: Kemp

LONDON, March 9 (Reuters) – What a difference a year makes.

In the past twelve months, the oil market has absorbed the impact of Russia’s invasion of Ukraine and the sanctions imposed in response by the United States, the European Union and their allies in Asia.

Russia’s crude and fuel exports have been redirected to South and East Asia, while former markets in Europe have been backfilled with crude and products from the Middle East and Asia.

The United States and EU have imposed broad sanctions on Russia’s exports, including ancillary financial and shipping services, but softened them with significant exceptions and a relaxed approach to enforcement.

And a global slowdown in manufacturing and freight activity has trimmed consumption of diesel and other middle distillates, easing the introduction of sanctions while avoiding any physical shortages.

As a result, benchmark oil prices have retreated by nearly 40% from their post-invasion high on March 8, 2022, after adjusting them for core inflation.

Following the initial shock, crude prices have traded in a tight range since late November, with spot prices, calendar spreads and volatility all converging towards long-term averages:

Brent’s front-month futures contract finished trading below USD 83 per barrel on March 8, 2023, in the 43rd percentile for all months since the turn of the century, after adjusting for inflation.
Front-month prices have settled back from an inflation-adjusted post-invasion high of USD 134 a year ago (76th percentile), when traders were concerned about a possible cessation of Russian exports.
Brent’s six-month calendar spread closed in a backwardation of USD 2.50 per barrel on March 8 (75th percentile), reflecting the low level of inventories, but still down from a record high of USD 22 a year ago.
Realised price volatility in the front-month contract has fallen to an annualised rate of less than 25% (34th percentile) down from a peak of 88% (98th percentile) a month after the invasion.
In the physical market, dated Brent’s five-week spread is in a backwardation of just 9 cents (50th percentile), down from USD 7 (99th percentile) a year ago.

Chartbook: Brent prices, spreads and volatility

Traders have found a temporary equilibrium, with prices bounded above by fears about a business cycle slowdown and rising interest rates, and below by expectations for a rebound in China and the low level of inventories.

Reflecting that balance, fund managers held a fairly average combined position across the six major futures and options contracts of 576 million barrels (47th percentile) on February 14, the most recent data available.

Like all equilibria in the oil market, this one is likely to prove temporary and fragile – lasting until one or more of the risks around recession, inflation and China’s post-pandemic rebound materialise or fade away.

Global petroleum inventories remain well below the prior ten-year seasonal average and there is little (unsanctioned) spare capacity in either the crude production or refining systems.

If the global economy and petroleum consumption growth accelerate again, inventories and spare capacity will become critically low rapidly, contributing to the next price cycle.

Conversely, if the global economy slides into a full-blown recession, inventories will rise and prices and spreads are likely to soften further.

For the moment, however, the oil market has returned to balance less than twelve months after one of the largest shocks since the World War Two.

Related columns:

– Oil prices slump as receding price-cap threat unmasks worsening demand (December 8, 2022)

– Oil prices fall on relaxed Russia price cap (December 6, 2022)

– Global recession a bigger risk to Russia’s oil revenue than price cap (November 11, 2022)

– Recession would make tough oil sanctions on Russia more likely (July 14, 2022)

John Kemp is a Reuters market analyst. The views expressed are his own

(Editing by Paul Simao)

((john.kemp@thomsonreuters.com; +44 207 542 9726 on twitter @JKempEnergy; Reuters Messaging: john.kemp.thomsonreuters.com@reuters.net))

Australian shares post biggest drop in over 2 months as banks slump

March 10 (Reuters) – Australian shares posted their biggest drop in more than two months on Friday, weighed by banking stocks, as investors feared prospects of further aggressive interest rate hikes by the US Federal Reserve ahead of the jobs report due later in the day.

The S&P/ASX 200 slipped 1.7% to 7,187.7 by 0020 GMT, set for its worst session since January 3. The benchmark was on track for a 1.3% slump for the week, clocking a fifth straight week of losses.

Investors were cautious before the US non-farm payrolls report for February, with expectations for large wage increases fuelling inflation worries.

Hawkish comments by Fed Chair Jerome Powell this week also heightened concerns about upcoming rate hikes aimed at reining in stubbornly high inflation.

Back in Sydney, financials slid 2.5%, set for their worst session in more than three weeks. The sub-index was on track for a 0.5% decline this week.

The country’s four largest banks fell between 2.5% and 2.9%.

Weak oil prices dragged energy stocks down 2.3% and the sub-index was set to record its worst week since last September. Sector majors Woodside Energy and Santos lost 2.2% and 1.8%, respectively.

Miners dropped 1.7%, in its fifth straight session of losses, with heavyweights BHP Group and Rio Tinto retreating 1.7% and 1.8%, respectively.

Tech stocks slipped 1.6%, tracking a fall in their Wall Street peers overnight.

ASX-listed shares of Block Inc dropped 4.9%.

Gold stocks were the only bright spot on the local bourse, advancing 2.0%, following strong bullion prices.

Sub-index majors Newcrest Mining and Northern Star Resources slid 1.3% and 3.2%, respectively.

New Zealand’s benchmark S&P/NZX 50 dropped 0.9% to 11,722.59, its lowest since February 27.

The country’s manufacturing sector expanded in February but remains below the long-term average, a survey showed.

(Reporting by John Biju in Bengaluru; Editing by Rashmi Aich)

BOJ set to keep ultra-low rates at Kuroda’s final policy meeting

TOKYO, March 10 (Reuters) – The Bank of Japan (BOJ) is set to maintain ultra-low interest rates on Friday and hold off on making major changes to its controversial bond yield control policy, leaving options open ahead of a leadership transition in April.

The meeting will be the last one to be chaired by Governor Haruhiko Kuroda, who leaves behind a mixed legacy with his massive stimulus praised for pulling the economy out of deflation – but straining bank profits and distorting market function with prolonged low interest rates.

With inflation exceeding its 2% target, the BOJ has been forced to ramp up bond buying to defend a 0.5% cap set for the 10-year bond yield – at the cost of distorting the shape of the yield curve and causing dysfunction in the bond market.

US Federal Reserve Chair Jerome Powell’s comments on Tuesday signaling the need for bigger-than-expected rate hikes also point to the likelihood Japanese yields will remain under upward pressure.

Many analysts thus see the days of yield curve control (YCC) numbered, though recent BOJ policymakers’ speeches underscore their preference to hold off on big policy changes at least until Kuroda’s successor, Kazuo Ueda, takes the helm in April.

“Under Ueda’s new leadership team, the BOJ will keep monetary conditions accommodative but tweak (YCC) to mitigate its side-effects,” said Mari Iwashita, chief market economist at Daiwa Securities.

“After conducting an examination of its policy framework, the BOJ will either abandon the 10-year yield target or shift to one targeting a shorter duration,” she said.

At the two-day meeting ending on Friday, the BOJ is set to maintain its short-term interest rate target at -0.1% and that for the 10-year bond yield around 0%.

Some market players bet the BOJ could widen the band set around the 10-year yield target, allowing the yield to rise up to 0.75%, from the current 0.5%, as early as Friday.

But many analysts polled by Reuters expect any tweak in YCC to happen after Ueda takes over as new governor.

Kuroda has repeatedly said consumer inflation, now running at double the pace of the BOJ’s 2% target, will begin to slow as the effect of past spikes in fuel and raw material prices fades.

Data released on Friday showed Japan’s wholesale prices rose 8.2% in February from a year earlier to mark the second straight month of year-on-year slowdown, heightening the chance the rise in consumer inflation will start to moderate in coming months.

The lower house of parliament on Thursday approved the government’s appointment of Ueda and his two new deputies, Shinichi Uchida and Ryozo Himino.

A lower house vote is expected later on Friday, with approval seen as a done deal due to the ruling coalition’s majority in both chambers of Diet.

Ueda will chair his first policy meeting on April 27-28, when the board will produce closely watched, fresh quarterly growth and price forecasts extending through fiscal 2025.

(Reporting by Leika Kihara; Editing by Sam Holmes)

Oil flat as China hopes, US stock draw offset recession fears

SINGAPORE, March 9 (Reuters) – Oil prices were in a holding pattern on Thursday, as a larger-than-expected draw in US crude stocks and hopes for China demand contended with worries that more aggressive US interest rate rises would slow economic growth and dent oil consumption.

Brent crude futures edged up by 1 cent to USD 82.67 per barrel by 0645 GMT, while US West Texas Intermediate (WTI) crude futures were flat at USD 76.66 a barrel.

Both benchmarks declined between 4% and 5% over the previous two days.

They posted their largest daily fall since early January on Tuesday after comments by US Federal Reserve Chair Jerome Powell that the central bank would likely need to raise interest rates more than expected in response to recent strong data.

“Oil prices are still under the influence of Powell’s hawkish tone recently, and the increasing possibility of another 50 basis points hike rather than a 25 basis points one,” said Suvro Sarkar, lead energy analyst at DBS Bank.

“Oil prices will be caught in the tug of war between sentiment surrounding rate hikes and inflation targeting on the one hand, and China reopening on the other for much of the year, at least the first half.”

While China’s crude oil imports fell 1.3% in the first two months of 2023 from a year earlier, analysts pointed to accelerating imports in February as a sign that fuel demand was rebounding after Beijing scrapped COVID-19 controls.

At a conference in Houston on Tuesday, the secretary general of the Organization of the Petroleum Exporting Countries said China’s oil demand would grow 500,000 to 600,000 barrels per day in 2023, and the organization was “quite optimistic, cautiously.”

Meanwhile, data from the US Energy Information Administration (EIA) showed on Wednesday that US crude stocks fell 1.7 million barrels last week, defying analysts’ expectations for a build of 395,000 barrels and ending a 10-week streak of inventory builds.

Adding to demand concerns, however, US gasoline stocks fell by 1.1 million barrels, according to official data, less than the 1.9 million barrel drawdown analysts had forecast, and distillate inventory grew by 138,000 barrels, compared with expectations for a 1-million-barrel drawdown.

Despite the EIA inventory report showing the first crude draw of the year, crude demand uncertainty over the short term is “keeping oil prices heavy,” said OANDA senior analyst Edward Moya in a note.

“Until we see clear signs of China’s recovery gaining steam, oil prices look like they want to stay heavy.”

(Reporting by Stephanie Kelly and Emily Chow in Singapore; Editing by Bradley Perrett and Sonali Paul)

Gold prices move in narrow range as investors await US jobs data

March 9 (Reuters) – Gold prices traded in a tight range on Thursday as some investors stayed on the sidelines ahead of US jobs data that could influence the Federal Reserve’s monetary policy path.

Spot gold was flat at USD 1,813.20 per ounce, as of 0716 GMT, trading in a USD 5 range, after hitting its lowest since February 28 on Wednesday. US gold futures eased 0.1% to USD 1,816.70.

Gold is considered a hedge against inflation, but interest rate hikes to control rising prices make non-yielding bullion less attractive.

“The (gold) market has been muted … the market is still trying to digest where the Fed will go after Powell mentioned the final interest rates might be higher than initially expected,” said Brian Lan, managing director at Singapore-based dealer GoldSilver Central.

Fed Chair Powell on Wednesday reaffirmed his message of higher and potentially faster interest rate hikes, but emphasized that debate was still underway with a decision hinging on data to be issued before the US central bank’s policy meeting in two weeks.

Markets are now pricing in a 50-basis point hike at the Fed’s March 21-22 policy meeting.

“Gold traders are waiting for the non-farm payroll report on Friday before we see any major repositioning,” Edward Moya, senior market analyst at OANDA, said in a note.

The US jobs report is expected to show non-farm payrolls increased by 205,000 in February, according to economists polled by Reuters.

Private employment increased by 242,000 jobs last month, according to the ADP National Employment report, while separate data on Wednesday showed US job openings fell less than expected in January.

The dollar index was near a three-month high, making bullion less affordable for overseas buyers.

Gold may bounce again to USD 1,825 per ounce before turning around and falling towards its February 28 low of USD 1,804.02, Reuters technical analyst Wang Tao said.

Spot silver was flat at USD 20.00 per ounce, platinum was unchanged at USD 937.43, while palladium lost 0.9% to USD 1,361.13.

(Reporting by Kavya Guduru in Bengaluru; Editing by Sherry Jacob-Phillips and Sonia Cheema)

Dollar towers on lingering effects of Powell’s testimony

SINGAPORE, March 9 (Reuters) – The dollar was perched near a three-month high on Thursday as Federal Reserve Chair Jerome Powell’s message that interest rates would have to go higher and possibly faster to tame inflation dominated sentiment and kept the US currency in bid.

In the second day of his testimony to Congress on Wednesday, Powell reaffirmed his hawkish message, though struck a cautious note that debate on the scale and path of future rate hikes was still underway and would be data-dependent.

That caused the US dollar to pause its towering rally from earlier in the week, retreating from close to a three-month top against the Japanese yen to last stand at 136.86.

The euro and sterling similarly edged away from their multi-month lows, rising 0.02% to USD 1.0546 and 0.09% to USD 1.1854, respectively.

As a result, the US dollar index, which measures the greenback against a basket of six peers, slipped 0.02% to 105.61.

The index, however, remained near a three-month peak of 105.88 hit in the previous session, having extended Tuesday’s 1.3% surge, its biggest daily jump since last September.

“Powell conceded that the March decision is data-dependent,” said Thierry Wizman, Macquarie’s global FX and rates strategist. “The question facing us, therefore, is whether January’s economic reacceleration was a blip or a trend.”

A slew of strong economic data out of the United States in previous weeks, pointing to persistent inflationary pressures, led to Powell saying on Tuesday that the Fed will likely need to raise interest rates more than expected, and was prepared to move in larger steps.

Traders scrambled to reprice a more aggressive pace of interest rate hikes in the wake of Powell’s comments, with Fed funds futures now implying a 70% chance the Fed will raise rates by 50 basis points this month, up from just about 9% a month ago.

US rates are also seen holding above 5.5% through to the end of the year.

Conversely, the Bank of Canada on Wednesday left its key overnight interest rate on hold at 4.50%, becoming the first major central bank to suspend its monetary tightening campaign.

The Canadian dollar stood at 1.3808 per US dollar on Thursday, after having weakened to a more than four-month low in the previous session following the decision.

The Australian dollar was likewise kept under pressure for a similar reason, falling 0.06% to USD 0.6586 in Asia trade, after Reserve Bank of Australia Governor Philip Lowe on Wednesday said the central bank was closer to pausing on rate hikes and suggested a halt could come as soon as April.

“Lowe seemed open to a growing divergence in the path of monetary policy between Australia and the US,” said Belinda Allen, senior economist at Commonwealth Bank of Australia.

Elsewhere, the kiwi rose 0.03% to USD 0.6107, having slumped to a near four-month low in the previous session.

The Chinese offshore yuan languished near the key psychological level of 7 per dollar, and was last at 6.9657, ahead of Chinese inflation data due later on Thursday.

(Reporting by Rae Wee; Editing by Sonali Paul)

Oil near flat as US crude stock draw contends with economic concerns

March 9 (Reuters) – Oil prices were near flat on Thursday, as a larger-than-expected draw in US crude stocks contended with worries that more aggressive US interest rate rises would strain economic growth and therefore dent oil consumption.

Brent crude futures LCOc1 had edged higher by 5 cents to USD 82.71 per barrel by 0103 GMT, while US West Texas Intermediate (WTI) crude futures gained 5 cents to USD 76.71 a barrel.

On Tuesday, oil futures fell more than 3% and posted their largest daily fall since early January after comments by US Federal Reserve Chair Jerome Powell that the central bank would likely need to raise interest rates more than expected in response to recent strong data.

US crude stocks fell 1.7 million barrels last week, government data showed, compared with analyst estimates for a build of 395,000. Industry data late Tuesday showed a decline in crude inventories for the first time after a 10-week build.

US gasoline stocks drew down by 1.1 million barrels, according to official data, less than the 1.8 million forecast, adding to demand concerns. Distillate inventory grew by 138,000 barrels, compared with expectations for a 1-million-barrel drawdown.

Oil ministers and executives continued to debate supply tightness at a conference in Houston on Wednesday, with Angola’s secretary of state for oil and gas saying there was no need for the Organization of the Petroleum Exporting Countries to increase output to make up for Russia’s 500,000 barrel per day cut.

(Reporting by Stephanie Kelly; Editing by Bradley Perrett)

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