Archives: Reuters Articles

HOUSTON, March 21 (Reuters) – Oil prices rose more than 2% on Tuesday, extending a retreat from a 15-month low hit the previous day, as the rescue of Credit Suisse allayed concerns of a banking crisis that would hurt economic growth and cut fuel demand.

Measures to stabilize the banking sector, including a UBS takeover of Credit Suisse and pledges from major central banks to boost liquidity, have calmed fears about the financial system that roiled markets last week.

“Fears of a banking crisis and a recession have eased, brightening the oil demand outlook at least for now,” said Fiona Cincotta, Senior Financial Markets Analyst at City Index.

Brent crude settled up USD 1.53, or 2.1%, at USD 75.32 a barrel, while US West Texas Intermediate (WTI) closed up USD 1.69, or 2.5% to USD 69.33.

On Monday, both benchmarks ended about 1% higher after falling to their lowest since December 2021, with WTI sinking below USD 65 at one point. Last week, they shed more than 10% as the banking crisis deepened.

“A ‘risk back on’ sentiment seems to be coming back to crude, as the latest selloff may very well have been exaggerated liquidation,” said Dennis Kissler, senior vice president of trading at BOK Financial.

The US Federal Reserve started its monetary policy meeting on Tuesday. Markets expect a rate hike of 25 basis points, down from previous expectations of a 50-bp increase. Some top central bank watchers have said the Fed could pause further rate hikes or delay releasing new economic projections.

Wall Street indexes also closed sharply higher on Tuesday as fears over liquidity in the banking sector abated and market participants eyed the Fed.

Meanwhile, US crude oil inventories rose by about 3.3 million barrels last week, according to market sources citing American Petroleum Institute figures. That compared with Reuters estimates for a draw of 1.6 million barrels.

Figures from the US Energy Information Agency are due on Wednesday.

A meeting of ministers from OPEC+, which includes members of the Organization of Petroleum Exporting Countries plus Russia and other allies, is scheduled for April 3. OPEC+ sources told Reuters the drop in prices reflects banking fears rather than supply and demand.

Hedge fund manager Pierre Andurand agreed the latest price drop was speculative and not based on fundamentals. He predicted oil will hit USD 140 a barrel by year end.

The CEO of energy trader Gunvor, Torbjorn Tornqvist, said he expected oil prices to move higher toward year end as rising Chinese demand tightens the market further.

Money managers cut their net long US crude futures and options positions in the week to March 14, the US Commodity Futures Trading Commission (CFTC) said.

(Additional reporting by Alex Lawler in London, Muyu Xu in Singapore; Editing by Marguerita Choy and David Gregorio)

March 20 (Reuters) – A look at the day ahead in Asian markets from Stephen Culp.

Global market skittishness over whether contagion is afoot within the banking sector appears to be waning.

In fact, if European and US markets on Monday are a prologue to Asian markets on Tuesday, investors can look forward to a rebound.

On Monday, the Hang Seng tumbled 2.7% to a three-month low and the Nikkei 225 dropped 1.4%, but the risk-off fog began to lift as the earth rotated around to Europe.

European shares reversed an early sell-off to close up 1% as bank shares rallied, and all three US stock indexes ended higher, led by a 1.2% jump in the blue-chip Dow.

Safe-haven assets – gold and the greenback – were both down about 0.5% at the closing bell.

The S&P Banking index ended the session up 0.6%, but even with Monday’s advance, the index has plunged 21.3% this month.

Last week’s banking bloodbath culminated with the UBS buyout of Credit Suisse after financial heavy hitters in the US threw a USD 30 billion lifeline to First Republic Bank (FRC).

And on Monday, the Federal Deposit Insurance Corporation orchestrated an agreement for a subsidiary of New York Community Bancorp (NYCB) to buy deposits and loans from the freshly shuttered Signature Bank (SBNY).

All of which appears to have calmed fears and brought stability to the market, for now.

As central banks around the world juggle financial sector liquidity needs with their ongoing effort to curb inflation while avoiding recession, with the Federal Reserve due to convene for its two-day monetary policy meeting on Tuesday.

Market expectations regarding the size of the Fed’s next rate hike to be announced on Wednesday – and indeed whether it will raise interest rates at all – are in constant flux.

At last glance, financial markets have priced in a 73.1% likelihood of a 25-basis point increase to the Fed funds target rate and a 26.9% probability of no hike at all, according to CME’s FedWatch tool.

European Central Bank president Christine Lagarde insisted on Monday that the ECB has the tools to contend with financial market turbulence while fighting inflation, just days after announcing a hawkish a 50-basis point policy rate hike.

Here are a few things to watch for on Tuesday:

– Chinese President Xi Jinping and Russian President Vladimir Putin are slated to engage in formal talks regarding Beijing’s proposals for a war resolution

– South Korea releases its February PPI report

– The Federal Reserve convenes for its two-day monetary policy meeting

(Reporting by Stephen Culp; Editing by Josie Kao)

March 20 (Reuters) – Fears of a global banking crisis are continuing to swirl, with investors keeping a close eye on a dashboard of indicators that show how stress is rippling through markets and the banking system.

Many of these are continuing to flash warnings, though they have not surpassed levels seen during the COVID-19-fueled market turbulence of 2020. Despite a state-backed takeover of Credit Suisse by UBS AG, a wipeout of some Credit Suisse bondholders has added to concerns over broader bank capital.

Uncertainty around US banks remains high as well. Shares of embattled regional lender First Republic Bank were down 34% Monday afternoon following a downgrade by S&P Global and continuing worries over the bank’s liquidity despite a $30-billion rescue last week.

Here are some of the indicators investors are watching, and what they are showing:

• An indicator of credit-risk in the euro zone banking system, the so-called FRA-OIS spread, hit its highest levels since mid-July last week but has pulled back from those highs. But the spread, measuring the gap between the euro zone three-month forward rate agreement and the overnight index swap rate, is still relatively elevated at around -1 basis point in a sign of lingering concern about financial market stress.

• The cost of insuring exposure to European junk bonds rose to the highest since mid-November on Monday at over 516 basis points. This has risen over 130 basis points since March 7 as riskier assets have borne the brunt of bank turmoil on both sides of the Atlantic.

• Junk spreads – the premium investors demand to hold the riskier debt over US Treasuries – rose to 520 basis points last week, the highest since October last year, according to the ICE BofA US High Yield Index. Investment grade credit spreads, which indicate the premium investors demand to hold highly rated corporate bonds over safer US Treasuries – rose to 164 basis points last week, the highest since October, according to the ICE BofA US Corporate Index.

Meanwhile, last week’s wild swings in the Treasury market have whipsawed investors and contributed to unease. The ICE BofAML MOVE Index, a measure of expected volatility in US Treasuries, surged to its highest level since the financial crisis last week as troubles in the banking sector forced investors to pull back on their views of how aggressively the Federal Reserve will raise rates in coming months.

With little certainty on what signal the central bank will send on the future trajectory of monetary policy at the conclusion of its meeting on Tuesday and Wednesday, many believe volatility in Treasuries is unlikely to die down anytime soon.

(Reporting by Davide Barbuscia, Yoruk Bahceli, Dhara Ranasinghe and Amanda Cooper; Graphics by Vincent Flasseur; Editing by Ira Iosebashvili and Cynthia Osterman)

March 20 (Reuters) – Gold prices retreated from their highest level in a year in volatile trading on Monday, as share markets and Treasury yields bounced back on central banks’ efforts to shore up confidence in the financial sector.

Spot gold dipped 0.5% to USD 1,977.18 per ounce by 1:57 p.m. EDT (1757 GMT), after sliding over 1%, while US gold futures rose 0.5% to settle at USD 1,982.80.

Earlier in the session, prices of the yellow metal had climbed 1% to their highest since March 2022 at USD 2,009.59, just shy of a record set during the onset of the COVID-19 pandemic.

“While emergency efforts are being done… now you’re seeing that this is far from over. Safe-haven flows are fairly going to be the key trade,” Edward Moya, senior market analyst at OANDA, said.

In an effort to help the banking sector, top central banks moved on Sunday to bolster the flow of cash around the world.

Benchmark Treasury yields rose close to their session highs, while equities bounced back on the rescue of Credit Suisse which helped calm some jitters around a bigger banking crisis.

Gold prices have rallied more than USD 100 after the collapse of US-based Silicon Valley Bank earlier this month.

“Today’s rejection above USD 2,000 may trigger some profit-taking, but in our opinion not a change in direction,” Ole Hansen, head of commodity strategy at Saxo Bank, said in a note, adding he maintains a bullish outlook on gold.

Bullion is considered a safe-haven asset during financial uncertainty, and lower interest rates reduce the opportunity cost of holding the non-yielding bullion, making it more attractive.

A key US central bank policy announcement is due on Wednesday. Market participants are mixed on the Federal Reserve’s decision, while bets for a rate-hike pause have increased.

Spot silver fell 0.4% to USD 22.50 per ounce, platinum firmed 1.1% at USD 986.27, and palladium dipped 0.5% to USD 1,413.08.

(Reporting by Seher Dareen and Swati Verma in Bengaluru; Additional reporting by Bharat Govind Gautam; Editing by Shilpi Majumdar)

NEW YORK, March 20 (Reuters) – Oil prices rebounded and rose over 1% on Monday after diving to their lowest levels in 15 months as the market worried that risks in the global banking sector could spark a recession that would sap fuel demand.

In volatile trade, Brent crude futures for May rose 82 cents, or 1.1% to USD 73.79 a barrel. US West Texas Intermediate crude futures for April gained 90 cents, or 1.4%, at USD 67.64 on the eve of the contract’s expiry. The more actively traded May futures rose 89 cents, or 1.3%, at USD 67.82 a barrel.

Oil prices rebounded as Wall Street posted gains. Earlier, Brent and WTI fell about USD 3 a barrel to the lowest since December 2021, with WTI sinking below USD 65 a barrel at one point. Last week, both benchmarks shed more than 10% as the banking crisis deepened.

Oil’s early slide occurred despite an historic deal in which UBS, Switzerland’s largest bank, agreed to buy Credit Suisse (CSGN) in an attempt to rescue the country’s second-biggest bank.

After the deal was announced, the US Federal Reserve, European Central Bank and other major central banks pledged to enhance market liquidity and support other banks.

“There’s a lot of fear-based movement (in oil prices),” Price Futures Group analyst Phil Flynn said. “We’re not moving at all on supply and demand fundamentals, we’re just moving on the banking concerns.”

The S&P 500 and the Dow Jones gained, helping lift oil prices off session lows on bets the Fed will probably pause on rate hikes on Wednesday to ensure bank sector troubles do not snowball. Traders and economists remain split on whether the Fed will raise its benchmark policy rate.

Some executives are calling on the central bank to pause its monetary policy tightening but be ready to resume raising rates later.

“Volatility is likely to linger this week, with broader financial market concerns likely to remain at the forefront,” ING Bank analysts said in a note, adding the looming Fed decision adds to uncertainty in markets.

Meanwhile, Group of Seven Nations are not likely to revise a USD 60-per-barrel price cap on Russian oil this week, two European Union officials and one official from a coalition member told Reuters on Monday.

The G7 was due in mid-March to revise the price cap put in place in December, but the officials said EU countries’ ambassadors were told by the European Commission over the weekend there is no appetite among the G7 for an imminent review.

A ministerial committee of OPEC and producer allies including Russia, together known as OPEC+, is set for a meeting April 3. The group agreed in October to cut oil production targets by 2 million barrels per day until the end of 2023.

(Reporting by Stephanie Kelly in New York; additional reporting by Noah Browning in London, Florence Tan and Emily Chow in Singapore; Editing by Paul Simao, Chris Reese and David Gregorio)