Gold retreats to mark weekly loss on hawkish Fed

April 21 (Reuters) – Gold prices fell sharply on Friday and were headed for their worst week in eight as hawkish remarks by U.S. Federal Reserve officials through the week bolstered bets for at least one more interest rate hike and buoyed the dollar.

Spot gold dropped 1.2% to USD 1,979.63 per ounce by 2:35 p.m. EDT (1835 GMT). U.S. gold futures settled 1.4% lower to USD 1,990.50.

Bullion has shed about 1.2% so far this week, pressured by the dollar’s gains overall, which made bullion more expensive for overseas buyers.

Fed officials said on Thursday inflation remains “far above” the central bank’s 2% target. Fed Governor Michelle Bowman reiterated that more work needs to be done to tame inflation.

While a rate hike will initially dull gold’s appeal, an eventual pause will send gold to its recent all-time highs, said Bob Haberkorn, senior market strategist at RJO Futures, adding that “the Fed has a breaking point where they can’t go anymore on rates without doing significant damage to the economy.”

Gold was also pressured by an S&P Global survey that showed U.S. business activity accelerated to an 11-month high in April, which was at odds with growing signs that higher interest rates were cooling demand.

Markets now see an 85.4% chance of a 25-basis-point rate hike at the Fed’s May 2-3 meeting.

Rate hikes raise the opportunity cost of holding non-interest-bearing gold.

Silver fell 1.1% to USD 25.02 per ounce, headed for its first weekly decline in six.

Platinum and palladium, used in catalytic converters to curb emissions in cars, bucked the trend. Platinum surged 2.7% to an over one-year high at USD 1,122.80, while palladium gained 1.1% to USD 1,604.74, on track for its best week since November.

Supply concerns due to rampant power issues in key producer South Africa could be driving platinum, while palladium was additionally benefiting from short-covering, said Daniel Ghali, commodity strategist at TD Securities.

(Reporting by Deep Vakil in Bengaluru; Editing by Shounak Dasgupta, Sherry Jacob-Phillips and Krishna Chandra Eluri)

Investors cut cash holdings as market focus shifts to inflation

LONDON, April 21 (Reuters) – Investors cut their cash holdings for the first time in eight weeks in the week to Wednesday, while shedding equities and gold, according to a report from BofA Global Research on Friday.

Market focus has shifted to inflation and the outlook for monetary tightening in recent weeks as fears around banking stocks receded and a market measure of volatility fell to its lowest level since November 2021.

Cash funds saw outflows of USD 65.3 billion, BofA said, citing EPFR data. Bond funds recorded inflows of USD 4.6 billion, while investors sold USD 2.6 billion of global stocks and pulled USD 70 million out of gold funds.

Last week data showed US consumer prices rising in March, while data this week showed signs of the labor market cooling.

“Core inflation in big economies remains stubbornly high,” the BofA analysts said, adding that inflation is being aided by structurally low unemployment rates.

Almost all central banks are on hold or close to the end of the rate hike cycle, thus “locking in” high inflation, they said, “as is (the) trajectory of government spending, deficits and debt”.

Emerging market debt funds saw their first weekly inflow in 10 weeks, of USD 600 million. Investors put USD 2.3 billion into emerging markets equities, the biggest inflow in four weeks.

BofA said its bull and bear indicator – a measure of market sentiment that runs from 1 to 10, with a higher reading more bullish – jumped from 2.3 to 2.8 on “stronger bond inflows, EM stock inflows, (and) improving credit technicals”.

(Reporting by Lucy Raitano; Editing by Amanda Cooper and Jan Harvey)

Foreigners boost Chinese bond holdings in March, regulator sees more inflows

BEIJING, April 21 (Reuters) – Foreign investors increased their holdings of China’s onshore yuan bonds in March, the foreign exchange regulator said on Friday, expecting more capital inflows amid signs of economic recovery.

A retreat in the US dollar, a shrinking yield gap between the world’s two largest economies and signs that China’s economy is improving all contributed to foreign capital inflows, the regulator said.

“China’s economy will continue to rebound and the opening up of the financial markets will be steadily promoted, and there is still room for foreign capital inflows,” said Wang Chunying, spokesperson of the State Administration of Foreign Exchange (SAFE).

Wang said that proportions of foreign investment in both bonds and stocks remained relatively low.

Global institutional investors increased their holdings of Chinese onshore bonds traded in the interbank market in March by 10 billion yuan (USD 1.45 billion) to 3.21 trillion yuan, official data from the central bank’s Shanghai head office showed on Friday, snapping two straight months of outflows.

China’s economy grew at a faster-than-expected pace in the first quarter, as the end of strict COVID curbs lifted businesses and consumers out of crippling pandemic disruptions, although headwinds from a global slowdown point to a bumpy ride ahead.

Separately, the FX regulator also pledged to fend off risks from external market shocks while “making every effort” to maintain prudent operations of the foreign exchange market and financial safety.

“We’ve seen there are still unstable and uncertain factors in the external environment,” Wang said, adding the regulator will continue to monitor and analyse impact from various factors, and improve its macro-prudential management and tool box.

It also said that the regulator will deepen FX reforms and push forward with opening up its capital account.

(USD 1 = 6.8944 Chinese yuan)

(Reporting by Beijing Newsroom and Tina Qiao; Editing by Muralikumar Anantharaman and Kim Coghill)

Russian rouble edges higher after slipping on oil price drop

April 20 (Reuters) – The Russian rouble firmed slightly against the dollar on Thursday, halting a slide sparked by falling oil prices in the previous session and set to gain support from a favourable upcoming tax period.

At 0727 GMT, the rouble was 0.1% stronger against the dollar at 81.80 and was unchanged at 89.60 versus the euro. It was steady at 11.86 against the yuan.

“On the oil negative, the rouble sank by more than half a percent against the dollar yesterday,” said Alexei Antonov of Alor Broker. “This morning, the Russian currency is trying to recoup part of the losses. Next week will be the peak of the tax period, so buying the dollar against the rouble is very risky.”

The rouble is expected to gain support from month-end tax payments that usually lead exporters to convert foreign currency revenues to meet local liabilities. Those taxes are due on April 28.

The Russian currency should also get a delayed boost from this month’s higher oil prices, which translate to higher export revenues.

Brent crude oil, a global benchmark for Russia’s main export, jumped to 2-1/2-month highs after OPEC announced surprise supply target cuts in early April. On Thursday, Brent was down 1.6% at USD 81.8 a barrel, its weakest mark since May 31.

Russian stock indexes were lower, dropping back from a more than one-year high hit in the previous session.

The dollar-denominated RTS index was down 0.6% to 998.4 points. The rouble-based MOEX Russian index was 0.6% lower at 2,592.3 points.

(Reporting by Alexander Marrow)

Japan’s Nikkei gains as retailers surge on tourism boost, chip stocks rebound

TOKYO, April 20 (Reuters) – Japan’s Nikkei share average rose on Thursday, clawing back losses from the previous day as retailers surged from an increase in foreign visitors and semiconductor shares rebounded from early declines.

The Nikkei added 0.18% to 28,657.57, finishing near the day’s high after starting out in the red, and putting it not far from Tuesday’s nearly six-week high of 28,698.22.

The broader Topix remained slightly in the red at the end of trading though, losing 0.03% to 2,039.73.

“Although the market is cautious after the Nikkei reached a high on Tuesday, there isn’t really any major negative news to drive a decline,” said Maki Sawada, a strategist at Nomura Securities.

Investors will be closely watching chip-making equipment maker Disco Corp earnings later in the day, she said.

Chip-making equipment giant Tokyo Electron Ltd rose 1.75% and chip-testing equipment maker Advantest Corp gained 2.2%, adding 27 and 27 index points respectively to the Nikkei’s tally to be the no. 2 and 3 supports. They began the day in the red, tracking declines in US peers.

Uniqlo store operator Fast Retailing Co Ltd delivered about 46 points with a 1.4% advance.

Fellow retailer Takashimaya Co Ltd was the biggest percentage gainer, jumping 3.71%.

Among Tokyo Stock Exchange industry sectors, banking and insurance were among the best performers, rising around 0.4% each.

Paper & pulp was the top performer, up 1%, while mining led losers with a 0.85% slide.

Startup investor SoftBank Group Corp was the Nikkei’s biggest drag, shaving off 17 index points with a 1.64% retreat.

On the Nikkei, 128 stocks advanced and 88 fell, with nine flat.

(Reporting by Kevin Buckland; Editing by Varun H K)

European shares slip as investors eye more corporate earnings

For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window

April 20 (Reuters) – European shares edged lower on Thursday following a mixed bag of earnings on Wall Street, while investors awaited more economic data from the euro zone and corporate results to assess the strength of the region.

The pan-European STOXX 600 index .STOXX was down 0.2%, with utilities .SXPP and automobile shares .SXAP dragging the index, falling 1.2% and 2.1%, respectively.

However, bank shares .SX7P rose 1.0%, limiting losses.

Investors will keep a close eye on consumer confidence data, due at 1400 GMT, which is expected to show a slight improvement in consumers’ expectations of the economic conditions in the region in April compared to a month ago.

On earnings front, Sartorius AG SATG.DE dropped 11.0% after the Franco-German lab equipment maker reported a decline in Q1 2023 sales revenue and earnings.

Sweden’s AB Volvo VOLVb.ST rose 1% as the truck maker lifted its outlook for key heavy-duty truck markets in Europe and North America this year on Thursday.

German producer prices rose less than expected in March. Producer prices of industrial products were up 7.5% year-on-year, compared to a Reuters poll that had indicated a rise of 9.8%.

(Reporting by Shubham Batra in Bengaluru; Editing by Varun H K)

((Shubham.Batra@thomsonreuters.com;))

South Korean shares end lower as auto, battery sectors drag

KOSPI falls, foreigners net buyers

Korean won strengthens against dollar

South Korea benchmark bond yield rises

For the midday report, please click nL1N36N03V

SEOUL, April 20 (Reuters) – Round-up of South Korean financial markets:

** South Korean shares closed lower on Thursday, as market heavyweights automakers and battery manufacturers dropped after U.S. electric-vehicle giant Tesla’s first-quarter results came in below expectations.

** The Korean won strengthened, while the benchmark bond yield rose.

** The benchmark KOSPI .KS11 ended down 11.97 points, or 0.46%, at 2,563.11, marking its second day of fall in last 10 sessions after Tuesday’s 0.19% drop.

** “Each sector traded on its own issues, with the rechargeable battery sector weighed down by profit-taking pressure from continuous gains,” said analyst Lee Kyoung-min at Daishin Securities.

** Tesla Inc TSLA.O boss Elon Musk on Wednesday doubled down on the price war he started at the end of last year, after the company reported a quarterly gross margin that was the lowest in two years and below analysts’ estimates.

** Battery maker LG Energy Solution 373220.KS fell 0.34%, while peers Samsung SDI 006400.KS and SK Innovation 096770.KS dropped 1.19% and 1.12%, respectively.

** Hyundai Motor 005380.KS lost 0.57%, and its sister automaker Kia Corp 000270.KS fell 1.52%.

** Of the total 932 issues traded, 233 shares rose.

** Foreigners were net buyers of shares worth 156.1 billion won ($118.10 million).

** The won ended onshore trade KRW=KFTC at 1,322.8 per dollar, 0.22% higher than its previous close.

** It rose towards the end of the session, after falling as much as 0.50% earlier to hit a near five-month low of 1,332.3.

** In money and debt markets, June futures on three-year treasury bonds KTBc1 rose 0.06 point to 104.76.

** The most liquid three-year Korean treasury bond yield was flat at 3.333%, while the benchmark 10-year yield rose by 3.1 basis points to 3.401%.

($1 = 1,321.8100 won)

(Reporting by Jihoon Lee; Editing by Subhranshu Sahu)

((jihoon.lee@thomsonreuters.com;))

Gold up on softer dollar with cenbank rate moves in focus

April 20 (Reuters) – Gold prices edged up on Thursday, after hitting a more than two-week low in the previous session, as the dollar eased while investors grappled with the likelihood of more interest rate hikes by central banks to contain inflationary pressures.

Spot gold was up 0.2% at USD 1,997.68 per ounce, as of 0718 GMT. U.S. gold futures rose 0.1% to USD 2,009.20.

The dollar index was down 0.1%. A weaker dollar makes gold less expensive for buyers holding other currencies.

“Despite gold’s break below USD 1,980 yesterday, investors were quick to snap up the quick discount and drive spot prices back above this key support level… But we’re also on guard for the U.S. Federal Reserve members to remain hawkish into Saturday’s blackout period ahead of the Fed’s next meeting,” said Matt Simpson, a senior market analyst at City Index.

New York Fed President John Williams said on Wednesday that inflation is still at problematic levels and the Fed will act to lower it.

The CME FedWatch tool shows markets pricing in an 83.4% chance of a 25 basis-point hike in May.

Rate hikes raise the opportunity cost of holding non-interest-bearing gold.

The Fed will deliver a final 25-basis-point rate increase in May and then hold rates steady for the rest of 2023, a Reuters poll showed.

“A slew of hawkish comments from the Fed, European Central Bank and Swiss National Bank combined with stubbornly high UK inflation have investors second-guessing their calls for rate cuts this year,” Simpson added.

Britain’s consumer price inflation stayed in the double-digit territory in March, while Euro zone inflation eased last month but underlying readings remained stubbornly high, bolstering expectations for more rate hikes from the Bank of England and the ECB.

Spot silver lost 0.3% to USD 25.18 per ounce, platinum slipped 1% to USD 1,079.55 and palladium dipped 1.7% to USD 1,588.68.

(Reporting by Kavya Guduru in Bengaluru; Editing by Rashmi Aich, Eileen Soreng and Christina Fincher)

Australia’s central bank to get new rate-setting board under review shake up

SYDNEY, April 20 (Reuters) – Australia’s central bank is expected to get a new specialist board to manage monetary policy that will give independent expert members more responsibility for setting interest rates, a dilution of the bank’s traditional power over policy.

A 272-page review of the Reserve Bank of Australia (RBA) released on Thursday outlined a range of reforms from a more focused policy mandate, to fewer policy meetings and a separate board for the bank’s day-to-day operations.

Importantly for market confidence, the RBA’s new Monetary Policy Board (MPB) would retain its independence from government and its flexible inflation target of 2% to 3%.

It would have a simpler dual mandate of price stability and full employment, bringing it in line with most other major central banks, and aim to be more transparent on policy.

The current mandate is unusual among central banks in having a broad remit for the economic prosperity and welfare of the Australian people.

Treasurer Jim Chalmers indicated in-principle agreement to all 51 of the recommendations made by the review which he set up last July with an eye to making the RBA “fit for the future”.

“The recommendations in the report are about bolstering the independence of the Reserve Bank, not undermining that independence,” Chalmers said in a media conference.

The proposals follow intense scrutiny on the RBA and its chief for sharply hiking rates to fight runaway inflation. Similar criticisms have been levelled against many central banks over the effectiveness of policy communication to markets and the wider public.

RBA Governor Philip Lowe welcomed the review and said the current board would now consider how to implement some of the proposals. The full recommendations are due to be introduced by July next year.

Chief among these was that the RBA’s board be split into one for monetary policy and one for governance, which would have an external chair to oversee operations such as human resources, finance and technology.

POWER SHIFT

The MPB would comprise the governor and deputy governor of the RBA, the Treasury Secretary and six external members with expertise of macroeconomics, the financial system, labour markets and the supply side of the economy.

The current board also has six external members but they tend to be drawn from the business community and the review questioned whether they had enough expertise in economics.

The review recommended the MPB meet eight times a year, instead of the current 11, again more in line with international practice. An unattributable record of voting would be published for the first time, including any points of disagreement.

External members of the current board rarely speak in public and policy communication is the sole purview of the governor and deputy governor.

“It takes some power away from the governor, I think that’s probably the biggest change,” said Sean Callow, a senior currency strategist at Westpac. “It’s essentially been the governor who will tell us what the RBA’s view is.”

“So it would be very interesting if we have some external members who come in and make comments that are not so much in line with what the governor is saying.”

Lowe has come in for much criticism after telling borrowers in 2021 that interest rates were unlikely to rise until 2024.

Instead, inflation surged past expectations and forced the bank to start an aggressive tightening cycle in May last year, lifting rates by a total 350 basis points to 3.6%.

Lowe’s seven-year term ends in September and there is speculation it will not be extended as it was with his two predecessors.

Chalmers said a decision on Lowe’s appointment would be made in the middle of the year. Lowe himself told reporters he would accept another term if offered, but would understand if the government wanted someone else for the job.

(Reporting by Wayne Cole; Editing by Sam Holmes and Shri Navaratnam)

Low volatility propping up risk appetite

April 20 (Reuters) – Stocks may be treading water as investors digest a mixed flow of US earnings and red hot UK inflation is pushing up global bond yields, but investors in Asia with a glass half full outlook on Thursday might want to latch on Wall Street’s volatility.

Or rather, lack of it.

The VIX index, also known as Wall Street’s fear gauge, fell on Wednesday to its lowest point since November 2021, and is below the average of the last 5, 10, 15 and 20 years.

Indeed, at 16.41 when the market closed on Wednesday, the VIX is comfortably below the average of 19.7 since the index’s inception in 1990.

Maybe investors are so underweight and short equity they don’t need downside protection, or the market’s resilience – still up 8% this year and up 10% from last month’s banking shock low – has calmed the horses.

Either way, extremely low US volatility generally bodes well for other stock markets. Asian stocks ex-Japan and Hong Kong tech on Wednesday had their worst day in three weeks – could they be poised for a rebound Thursday?

On the other hand, Tesla shares slid after the bell on Wednesday after the company missed market estimates for first-quarter margin.

And worrying UK inflation figures may extend a dark shadow over Asia. Figures on Wednesday showed that Britain was the only country in western Europe with double-digit inflation in March, prompting several banks to raise their UK rate outlook.

UK money markets are pricing in a further 75 basis points of tightening this year, taking the base rate up to 5%. Former BoE policymaker Andrew Sentence told BBC radio rates might have get closer to 6% to defeat inflation.

This matters for the rest of the world because it is a stark reminder of how sticky inflation can be and a warning to central banks that have paused their hiking cycles – of which there are several in Asia – to guard against complacency.

The inflation focus turns to New Zealand and Malaysia on Thursday, and forecasts for both are not all that encouraging. Malaysia’s annual CPI inflation is only expected to slow a tenth of one percent to 3.6%, and New Zealand inflation in Q1 is expected to rise.

Meanwhile, Australia’s central bank governor Philip Lowe addresses the media on Thursday and India’s central bank releases the minutes of its last policy meeting.

China’s central bank announces its latest decision on one- and five-year loan prime rates, and figures from Japan are expected to show the trade deficit widened in March.

Here are three key developments that could provide more direction to markets on Thursday:

– Australia – RBA Governor Philip Lowe speaks

– India – RBI publishes meeting minutes

– China loan rate decision

(By Jamie McGeever)

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