UPDATE 9-Oil settles up on China demand hopes, posts weekly gain

Oil benchmarks settle at highest level in 3 weeks

Report that UAE may exit OPEC ‘far from the truth,’ sources say

Chinese data, record U.S. exports support oil prices

Dollar falls; analysts see more weakness in next 12 months

Updates with closing prices, analyst comment

By Shariq Khan

BENGALURU, March 3 (Reuters) – Oil prices recovered from a brief sell-off to gain by more $1 per barrel on Friday and ended the week higher, driven by renewed optimism around demand from top oil importer China.

Brent crude futures LCOc1 rose $1.08, or 1.3%, to settle at $85.83 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures settled at $79.68 a barrel, up by $1.52, or 1.9%. Both benchmarks posted their highest closing levels since Feb. 13.

Prices dropped early by more than $2 per barrel after a media report said the UAE had held internal debates on leaving OPEC and pumping more oil. Prices rebounded when two sources with direct knowledge told Reuters the report was “far from the truth”.

Brent and WTI notched their third biggest weekly percentage gains this year as strong Chinese economic data fed hopes for oil demand growth.

“Crude has been on a rollercoaster today, charging lower on rumors of UAE leaving OPEC+ before reversing sharply and rocketing higher as this rumor was disputed, and crude hopped on board the risk-on rally instead,” said Kpler analyst Matt Smith.

China‘s service sector activity in February expanded at the fastest pace in six months, and manufacturing activity there also grew. China’s seaborne imports of Russian oil are set to hit a record high this month.

China, the world’s top oil importer, is getting more ambitious with its 2023 growth target, aiming as high as 6%, sources told Reuters.

The oil market broadly shrugged off a 10th consecutive week of U.S. crude stock builds USOILC=ECI, and record exports of U.S. crude lent more support to prices, UBS analyst Giovanni Staunovo said.

The dollar weakened, and analysts polled by Reuters expect the greenback to be under pressure over the next 12 months, which would make dollar-denominated oil cheaper for holders of other currencies. .DXY, =USD

The European Central Bank was still sending hawkish signals, with ECB Governing Council member Pierre Wunsch saying its key interest rate could climb as high as 4% if inflation remains high.

(Reporting by Shariq Khan
Additional reporting by Shadia Nasralla, Sudarshan Varadhan and Muyu Xu;
Editing Kirsten Donovan, David Goodman, Louise Heavens, Paul Simao and David Gregorio)

((Shariq.khan@thomsonreuters.com; Twitter: @shariqrtrs))

Dollar gains on low claims but may need ISM beat for new 2023 highs

March 2 (Reuters) – The dollar index rose 0.5% on Thursday after US jobless claims were slightly below forecast and the euro failed to benefit from a fresh record high in euro zone core CPI, but to clear resistance by 2023’s highs the US currency may need Friday’s ISM report to further lift lofty Fed hike expectations.

While further USD/JPY gains, the second largest component of the index, look more likely due to the limited BoJ tightening expectations, the ECB has more than enough cause to continue hiking rates in 50-bp increments.

Core euro zone inflation hit 5.6% year-on-year in February from January’s 5.3%, bolstering market expectations of ECB rates peaking near 4%, as futures currently project.

With EUR 5-year-5-year inflation linkers soaring to new post-GFC highs at 2.56% on Thursday from 2.24% January lows, the market looks less sure the ECB will tame inflation with the current pace of tightening.

US linkers are at 2.47%, but well below 2022’s high just above 2.7%. That suggests EUR/USD may rise from ECB rate hike pricing outpacing Fed hikes, unless US data, such as Friday’s ISM non-manufacturing and next Friday’s payrolls, beat forecast.

(Randolph Donney is a Reuters market analyst. The views expressed are his own.)

US yields march higher as tight labor data fuels inflation scare

NEW YORK, March 2 (Reuters) – US Treasury yields continued to climb on Thursday after strong labor data reinforced concerns that the US Federal Reserve will need to raise interest rates more to cool the economy.

Data from Europe had already pushed US government bond yields higher as stickier-than expected euro zone inflation numbers supported expectations that interest rates would go higher and stay there for longer.

Strong jobless claims data in the US, where the number of Americans filing new claims for unemployment benefits fell again last week, reinforced that narrative on Thursday, as well as data showing that US labor costs grew faster than initially thought in the fourth quarter.

Yields, which move inversely to bond prices, had already touched new highs on Wednesday and they climbed further on Thursday.

“The march higher has been relentless, and each incremental data point is just helping the momentum continue,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

“In addition to the very tight labor data … we also have unit labor costs coming in hotter than expected, so if wage inflation is also ticking back up, combined with broader inflation ticking back up, that is in essence spooking the bond market that inflation is getting more entrenched,” he said.

Benchmark 10-year yields were trading above 4% on Thursday and were last seen at 4.057%, their highest since November. Two-year yields, which are more closely linked to monetary policy expectations, were last seen at 4.928% – an over 15-year high.

On the long end, 30-year bond yields also broke above 4% for the first time since mid-November last year and were last seen at 4.009%.

Expectations that the US central bank may need to raise rates by 50 basis points at its next meeting this month increased marginally on Thursday, according to CME Group data, though the consensus remained for a 25-bp hike.

The probability that the Fed’s policy rate, currently set in the 4.5% to 4.75% range, could go up to a 5%-5.25% range this month stood at about 34%, up from about 30% on Wednesday.

“The economy is still looking robust and that should keep the Fed’s hawkish speak going. Rates will undoubtedly be higher for longer, but the risks of larger than quarter-point rises may be back on the table,” Edward Moya, senior market analyst at OANDA, said in a note.

(Reporting by Davide Barbuscia; Editing by Andrea Ricci)

Gold eases as stronger US dollar, yields dent appeal

March 2 (Reuters) – Gold prices edged lower on Thursday as the U.S. weekly jobs data hinted at a tight labor market that could keep the Federal Reserve on its rate-hiking cycle, underpinning the dollar and Treasury yields.

Spot gold was down 0.1% at $1,835.03 per ounce by 01:48 p.m. ET (1848 GMT), after rising in the previous three sessions.

U.S. gold futures settled 0.3% lower at $1,840.50.

Data earlier showed the number of Americans filing new claims for unemployment fell again last week.

With a tight labor market largely priced in, the higher dollar and yields were weighing on gold, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

The dollar index gained 0.6%, making gold more expensive for holders of other currency buyers.

Benchmark U.S. 10-year Treasury yields hovered near their highest level since early November 2022, weighing on the bullion since it yields no interest.

The consumer price data next week could offer investors more clues on the path of rates heading into the Fed’s March 21-22 meeting, where it is expected to raise rates by 25 basis points.

“I think the market will have a relief rally after that – every time we get another interest rate behind us, we’re close to the end (of rate hikes),” Streible said.

U.S. central bank officials are divided over whether more restrictive interest rates are needed or just maintain a tight monetary policy for a longer period to tame inflation that was much higher than the Fed’s 2% target.

Elsewhere, data from Spain, France, and Germany earlier in the week indicated that inflation remained sticky, with the European Central Bank leaning towards remaining hawkish.

Spot silver fell 0.8% to $20.83 per ounce, platinum was up 0.7% at $961.43, while palladium edged 0.1% higher to $1,442.05.

(Reporting by Seher Dareen in Bengaluru; Editing by Shilpi Majumdar and Krishna Chandra Eluri)

European shares rise but stubborn inflation data caps gains

March 2 (Reuters) – European shares rose on Thursday boosted by consumer staples and energy stocks, but data suggesting euro zone inflation remained stubbornly high bolstered fears of more European Central Bank rate rises.

The continent-wide STOXX 600 reversed early losses and closed 0.5% higher.

Energy stocks rose 1.4% supported by firm crude prices on signs of a strong economic rebound in top crude importer China.

A sharp weakness in sterling lifted UK’s exporter-heavy FTSE 100 index up 0.4%.

London’s internationally focussed consumer staples stocks such as Diageo (DGE) and Unilever (ULVR) rose over 1% each, while the European food and beverage index added 1.8%.

“There’s certainly the assumption that there is still mileage in the tank when it comes to price increases, that margins can be protected, the consumer is going to be resilient to a degree and these companies are still going be able to make money,” said Danni Hewson, financial analyst at AJ Bell.

Meanwhile, consumer price inflation in the 20 countries sharing the euro currency rose 8.5% in February, compared with an increase of 8.6% a month earlier on lower energy prices, but the reading was still above 8.2% projected in a Reuters poll of economists.

While inflation was also lower than a double-digit peak hit in October, fears lingered that the earlier surge in energy prices has seeped into the economy via so-called second-round effects, making price growth even more difficult to root out.

“High inflation means more aggressive ECB rates, which means less conducive business conditions for European companies,” said Giles Coghlan, chief market analyst at HYCM.

Earlier in the week, data from Spain, France and Germany indicated that inflation remained sticky and fed into fears that the ECB would remain hawkish for longer.

ECB Chief Christine Lagarde said price declines have not been stable and that rates will have to rise higher and stay higher for some time.

European markets ended the first two months of this year in gains — a first in four years — with banks adding 18% as lenders benefit from higher net interest income, a consequence of elevated borrowing costs.

Still, the global equity market momentum has stalled of late as investors price in steep prices and higher rates.

Irish stocks led gains among regional peers, up 2.1% after CRH (CRH) surged 7.9% on posting better-than-expected results.

Europe’s biggest lender, HSBC Holdings Plc (HSBA) slid 3.3% as it traded without the entitlement of a dividend. The bank sector index fell by 0.8%.

Credit Suisse (CSGN) tumbled 7.0% and hit a fresh record low following reports this week about talent leaving the beleaguered Swiss bank.

Flutter’s (FLTRF) 0.9% fell as it reported full-year core profit at the lower end of its guidance range.

(Reporting by Johann M Cherian and Shreyashi Sanyal in Bengaluru; editing by Eileen Soreng, Uttaresh Venkateshwaran, William Maclean)

Euro rally pauses ahead of Europe inflation data

LONDON/SINGAPORE, March 2 (Reuters) – The euro fell against a strengthening dollar on Thursday, after having posted its largest one-day gain in a month, ahead of euro zone inflation data that could renew the rally in the currency.

The euro rose 0.9% on the dollar on Wednesday, marking its biggest daily jump in a month, following hotter-than-expected German inflation in February that added to pressure on the European Central Bank to raise rates after unexpectedly strong readings in France and Spain. It was 0.35% lower at USD 1.0633 ahead of inflation data due at 1000 GMT.

But investors are taking the view that the euro is poised to rise as markets are bracing for another high reading.

“Contrary to expectations the data for the euro zone due today might not show a small fall but instead also record a further rise. The same applies for core inflation,” said Antje Praefcke, a foreign exchange analyst at Commerzbank.

“As a result the ECB rate expectations might be adjusted to the upside again.” That would likely send the euro higher, she added.

Sterling was held back by remarks from Bank of England Governor Andrew Bailey, who said “nothing is decided” on future rate increases which had traders trimming back bets on higher rates. Sterling was down 0.5% to USD 1.1964.

The dollar index, which measures the US currency against six others – rose 0.39% to 104.79, boosted by a rise in US Treasury yields and after Federal Reserve official Neel Kashkari left the door open to a 50-basis point rate hike at the Fed’s next meeting in March.

Elsewhere the yen fell 0.37% to 136.72 to the dollar, while the Australian and New Zealand dollars and the Chinese yuan wavered slightly after strong gains on Wednesday that were supported by roaring Chinese manufacturing data.

The Aussie dollar was last 0.44% softer at USD 0.6729. The New Zealand dollar, which rose 1.2% on Wednesday, fell 0.7% on Thursday to USD 0.6214.

China’s yuan settled back to 6.9125 to the dollar after logging its biggest jump of 2023 on Wednesday.

Investors are looking ahead to China’s National People’s Congress meeting, which begins on Sunday, watching for guidance on policy support for the post-COVID recovery.

“Yesterday’s positive surprise in the PMIs for China in February are a positive for mining commodity prices and the currencies of countries that export them,” said Commonwealth Bank of Australia’s head of international economics, Joe Capurso.

“The yuan and commodity currencies such as the Australian and New Zealand dollars can rise materially if the meeting sends a pro‑growth signal, as we expect,” he said.

Bitcoin slipped 1% to USD 23,395 as trouble at crypto lender Silvergate weighed on the mood.

Besides European inflation, euro zone employment and central bank minutes are due later in the day, as are US jobless claims data.

(Reporting by Joice Alves in London and Tom Westbrook in Singapore; Editing by Shri Navaratnam and Emelia Sithole-Matarise)

China, Hong Kong stocks edge lower as Sino-U.S. tensions weigh

SHANGHAI, March 2 (Reuters) – Hong Kong stocks slipped on Thursday after posting their biggest daily gain in nearly three months in the previous session, with Sino-US tensions weighing on investor sentiment, while China shares dropped in the afternoon session ahead of a key parliamentary meeting.

** China’s blue-chip CSI300 Index closed down 0.2%, and the Shanghai Composite Index lost 0.1%.

** Hong Kong’s Hang Seng benchmark lost 0.9%, while the China Enterprises Index slid 0.8%.

** The United States is seeking out allies about the possibility of imposing new sanctions on China if Beijing provides military support to Russia for its war in Ukraine, according to four US officials and other sources.

** China and Belarus agreed to a joint statement calling for peace in Ukraine, after Chinese President Xi Jinping met on Wednesday with Belarusian counterpart Alexander Lukashenko, a close ally of Putin.

** Hong Kong shares also tracked weakness in Asian markets, pressured by higher US yields amid fears that global central banks would keep raising interest rates to combat sticky inflation.

** Meanwhile, investors in China were waiting for more stimulus clues from the annual meeting of the National Party Congress, which kicks off this weekend and will set economic targets and elect a new leadership team.

** The CSI utilities index added 1.1% and the telecom index rose 1.4%, while the healthcare index lost 1.0%.

** The Hang Seng finance index was down 0.6%, commerce and industry slid 1.2%, while energy index climbed 1.0%.

** Tech giants listed in Hong Kong dropped 1.4%, with Alibaba down 4.7% and JD shedding 2.3%.

** Chinese EV maker Nio tumbled 13.2% after it reported fourth-quarter earnings below market expectations

(Reporting by Shanghai Newsroom; Editing by Subhranshu Sahu and Gareth Jones)

European shares open lower ahead of inflation data

March 2 (Reuters) – European shares opened lower on Thursday bogged down by declines in travel and rate-sensitive technology stocks, as investors were cautious ahead of a key inflation reading later in the day.

Inflation across the 20 countries that use the euro is seen at 8.2% in the 12 months leading to February, a Reuters poll showed, from an 8.6% rise in the prior month. The data is expected at 1000 GMT.

The continent-wide STOXX 600 0.7% by 0810 GMT.

Earlier in the week, data from Spain, France and Germany indicated that inflation remained sticky and fed into fears that the European Central Bank would remain hawkish for longer.

Euro zone government bond yields hit fresh multi-year highs on Thursday, pressuring interest rate-sensitive technology stocks, which fell 1.7%.

Flutter fell 6.4%, pulling down the European travel & leisure sector index by 2.2%, after reporting full-year core profit at the lower end of its guidance range.

(Reporting by Johann M Cherian in Bengaluru; editing by Eileen Soreng)

Oil rises on easing US rate hike fears, China demand hopes

NEW YORK, March 2 (Reuters) – Oil prices rose on Thursday, boosted by signs of a strong economic rebound in top crude importer China and easing worries of aggressive US rate hikes.

Brent crude futures settled at USD 84.75 a barrel, gaining 44 cents, or 0.5%. US West Texas Intermediate (WTI) crude futures settled at USD 78.16 a barrel, rising 47 cents, or 0.6%.

Manufacturing activity in China grew last month at the fastest pace in more than a decade, data showed on Wednesday, adding to evidence of a rebound in the world’s second-largest economy after removal of strict COVID-19 curbs.

China’s seaborne imports of Russian oil are set to hit a record high this month as refiners take advantage of cheap prices.

Also helping prices were comments by Atlanta Federal Reserve President Raphael Bostic, who said the Fed should stick with “steady” quarter-point rate increases for now to avoid an economic downturn.

“We’re getting battered about by the Fed speak, but the Bostic comments seemed to help oil,” said John Kilduff, partner at Again Capital LLC in New York.

The remarks eased concerns sparked earlier when strong US unemployment data had investors worried about the possibility of faster and bigger interest rate increases.

Growing expectations of rate increases by the European Central Bank (ECB) after a faster than expected acceleration in consumer prices in France, Spain, and Germany, kept oil from moving higher.

“Resurfacing inflation worries contributed to the souring mood,” said PVM Oil analyst Tamas Varga. “Persistent inflation anxiety will act as a break on a prolonged rally in the immediate future.”

Euro zone inflation rose in February to a higher-than-expected annual rate of 8.5%, according to a first estimate from the EU’s statistics agency.

ECB minutes on Thursday suggested the central bank may keep raising interest rates beyond the March meeting in two weeks, ING Economics said.

In the United States, a 10th consecutive week of crude stock builds also weighed on the market.

Oil was also pressured by a strengthening dollar, after US unemployment claims pointed to a strong jobs market. With other data showing growing labor costs, investors expect the Federal Reserve will keep interest rates higher for longer.

The number of Americans filing new claims for unemployment benefits fell again last week.

“(The) prospect of further US rate hikes (is) likely to maintain US dollar strength in providing a major upside limiter on oil pricing,” said Jim Ritterbusch of consultancy Ritterbusch and Associates.

(Additional reporting by Rowena Edwards and Emily Chow in Singapore; Editing by Emelia Sithole-Matarise, David Gregorio and Susan Fenton)

Gold scales 1-week peak as dollar slides on robust China data

March 2 (Reuters) – Gold prices gained 1% on Wednesday as strong Chinese economic data dented the dollar and drove some bets for better physical demand from the top bullion consumer, although the risk of rising US interest rates capped gains.

Spot gold was up 0.6% at USD 1,838.20 per ounce by 02:05 p.m. ET (1906 GMT), rising up to USD 1,844.5 earlier, their highest in a week.

US gold futures settled up 0.5% at USD 1,845.40.

With strong data out of China and some countries looking to continue with rate hikes, the dollar was weakening against other currencies, providing some support to the gold market, said David Meger, director of metals trading at High Ridge Futures.

The dollar hit a one-week low earlier today after China’s yuan gained as the country’s manufacturing activity expanded at its fastest pace since April 2012.

Since gold is priced in US dollars, a weaker currency makes it more affordable for foreign buyers.

The day’s gains in prices come after bullion posted its worst month since June 2021 in February after strong US data pointed to a resilient economy, suggesting that the Federal Reserve could deliver more rate hikes to curb inflation.

Higher interest rates to rein in consumer prices dim the appetite for bullion since it pays no interest against bond yields.

US employment and consumer prices reports in the next two weeks would help investors to gauge the path of interest rates.

Spot silver gained 0.5% to USD 21.01 per ounce.

Among the platinum-group metals, palladium jumped 1.2% to USD 1,434, while platinum rose 0.3% to USD 955.36, earlier scaling an over two-week high of USD 966.46.

“We’re vacillating between an expected increased demand coming from China, along with the concerns of recessionary fears here in the US and elsewhere,” Meger said on the recent volatility in platinum and palladium markets.

(Reporting by Seher Dareen in Bengaluru; Editing by Shilpi Majumdar and Krishna Chandra Eluri)

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