Oil falls 2% as rate hikes loom and Russian flows stay strong

HOUSTON, Jan 30 (Reuters) – Oil prices dipped 2% on Monday, extending losses as looming increases to interest rates by major central banks weighed on demand and Russian exports remained strong.

Investors expect the US Federal Reserve to raise rates by 25 basis points on Wednesday, followed the day after by half-point increases by the Bank of England and European Central Bank. Any deviation from that script would be a shock.

“We’re seeing a ‘risk back off’ sentiment from the past two weeks’ rally on ideas that higher interest rates may slow demand more quickly,” said Dennis Kissler, senior vice president of trading at BOK Financial.

Brent futures for March delivery fell USD 1.76, or 2.03%, to USD 84.90 a barrel. US crude fell USD 1.78 to USD 77.90 per barrel, a decline of 2.23% – its steepest decline in nearly four weeks.

The market also came under pressure from indications of strong Russian supply despite a European Union ban and G7 price cap imposed over its invasion of Ukraine. Both oil benchmarks last week registered their first weekly loss in three.

Besides the central bank meetings, a gathering on Wednesday of key ministers from the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia will also be in focus.

The OPEC+ panel meeting is unlikely to tweak output policy, three OPEC+ delegates told Reuters on Monday.

“The boat is not really in stormy seas right now. So why rock something that’s not moving about as it is,” said Ole Hansen, head of commodity strategy at Saxo Bank.

OPEC+ could “surprise markets with a small cut”, oil broker PVM said, adding it was unlikely to tweak policy.

Earlier on Monday, oil prices rose on tensions in the Middle East after a drone attack in Iran and hopes for higher Chinese demand.

While it is not clear yet what’s happening in Iran, any escalation there has the potential to disrupt crude flow, said Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore.

Hopes for a rise in Chinese demand have boosted oil in 2023. The world’s biggest crude importer pledged over the weekend to promote a consumption recovery that would support demand.

“Markets have priced-in rising demand mostly from China so traders are taking a wait and see attitude for clear signs of a demand pull,” Kissler added.

Traders also remained cautious on a hit to oil production and transportation in Texas after the state oil regulator advised pipeline operators to secure equipment and facilities after forecasts for severe weather over the next several days.

US crude oil inventories are expected to have dipped by about 1 million barrels in the week to Jan. 27, a preliminary Reuters poll showed, while gasoline inventories were expected to have gone up.

(Reporting by Alex Lawler; Additional reporting by Swati Verma, Florence Tan and Emily Chow; Editing by Emelia Sithole-Matarise, Bernadette Baum, Philippa Fletcher)

Gold steady, spotlight on Fed rate-hike meeting outcome

Jan 30 (Reuters) – Gold prices held steady in early Asian hours on Monday, with investors awaiting the US Federal Reserve’s rate-hike verdict due this week.

FUNDAMENTALS

* Spot gold was little changed at USD 1,928.32 per ounce, as of 0013 GMT. US gold futures were down 0.1% at USD 1,928.70.

* Traders are eyeing the Fed’s policy meeting scheduled on Jan. 31-Feb. 1. The market broadly expects the US central bank to scale back rate hikes to 25 basis points (bps) from 50 bps announced in December.

* Gold, which pays no interest, tends to benefit when interest rates are low as it reduces the opportunity cost of holding bullion.

* On Friday, data showed that US consumer spending fell in December, while inflation continued to subside, which could give the Fed room to further slow the pace of its rate hikes.

* Physical gold dealers in India offered the steepest discounts in 10 months last week to lure customers, as a sharp rally in local prices squeezed demand in the world’s second-biggest bullion consumer.

* Spot silver gained 0.3% to USD 23.63 per ounce, platinum rose 0.2% to USD 1,014.08, and palladium climbed 0.8% to USD 1,631.64.

(Reporting by Ashitha Shivaprasad in Bengaluru; editing by Uttaresh.V)

Philippines to offer value-added tax refund to foreign tourists by 2024

MANILA, Jan 29 (Reuters) – Philippines President Ferdinand Marcos has approved a value-added tax refund programme for foreign tourists by 2024 to attract more visitors, the Presidential Communications Office (PCO) said on Sunday.

The government collects a 12% VAT on goods consumed within the Southeast Asian country. The plan is to allow foreigners to get a VAT refund on items they are taking out of the Philippines, similar to what many other countries offer.

The measure is among the proposals a private sector advisory council presented to Marcos recently to boost the tourism industry, including improving airport infrastructure and operations and promoting tourism investment, the PCO said in a statement.

Marcos has also approved the launch of an online visa this year for Chinese, Indian, South Korean and Japanese tourists, it said.

The Philippines recorded 2.65 million international visitors last year, who brought in an estimated $3.68 billion in revenue, exceeding its 2022 target of 1.7 million tourists, according to the Department of Tourism.

Last year’s total comprised of 2.02 million foreign nationals and 628,445 Filipinos based abroad, which compared with only 163,879 tourists recorded in 2021 and was still significantly lower than the pre-pandemic annual level of 8.26 million.

The government aims to boost visitor arrivals this year to 4.8 million tourists.

(Reporting by Enrico Dela Cruz; Editing by Robert Birsel)

US Senate Republicans put Biden on notice over debt ceiling

WASHINGTON, Jan 27 (Reuters) – Two dozen US Senate Republicans warned Democratic President Joe Biden on Friday that they would not support increasing the federal debt ceiling without at least an equal amount of spending cuts to government programs or structural reform.

In a Jan. 27 letter, lawmakers supported legislation to require the US Treasury to prioritize payments for the public debt, Social Security, Medicare, veterans benefits and military pay, if the government were to breach the current USD 31.4 trillion borrowing limit in coming months.

The lawmakers represent nearly half of the Senate’s 49 Republicans. A debt ceiling increase would require support from nine Republicans, 48 Democrats and three independents who caucus with Democrats to meet the Senate’s 60-vote filibuster rule for most legislation.

The one-page letter surfaced a day after Biden characterized Republicans as a party of “chaos and catastrophe” while criticizing their refusal to approve a debt ceiling increase without spending cuts.

The White House, which has repeatedly voiced opposition to debt ceiling negotiations, was not immediately available for comment.

The federal government neared its congressionally imposed USD 31.4 trillion borrowing limit on Jan. 19, and the Treasury Department warned it may not be able to pay bills past early June, at which point the world’s biggest economy could be at risk for default.

“It is the policy of the Senate Republican conference that any increase in the debt ceiling must be accompanied by cuts in federal spending of an equal or greater amount as the debt ceiling increase, or meaningful structural reform,” said the letter led by staunch conservative Senator Mike Lee of Utah.

“We do not intend to vote for a debt-ceiling increase without structural reforms,” added the lawmakers, who included Senate Republican Conference Chairman John Barrasso.

Lawmakers often use the term structural reform to refer to changes in Social Security and Medicare, respectively the US retirement and healthcare programs for the elderly.

But the senators cited debt prioritization legislation as an acceptable reform. Such legislation, which hardline Republicans in the House of Representatives support, would direct the Treasury to make debt payments to avoid default and maintain benefits for the elderly, veterans, and the military. Other federal programs could shut down.

The policy language used in the letter was part of a Senate Republican rules package adopted during the last Congress, according to a party conference spokesperson.

Brinkmanship could panic investors, potentially sending markets slumping and shaking the global economy. In 2011, a protracted debt-ceiling battle led to a downgrading of US creditworthiness and years of forced domestic and military spending cuts.

On Tuesday, Senate Republican leader Mitch McConnell said any solution to the debt ceiling debate would have to come from talks between Biden and House of Representatives Speaker Kevin McCarthy. Republicans control the House by a narrow margin, while the Senate is led by Democrats.

Biden and McCarthy have agreed to meet but nothing has been scheduled.

It was not clear whether the Senate Republicans notified McCarthy about their letter ahead of time. Neither McCarthy’s office nor Lee’s was immediately available for comment.

(Reporting by David Morgan; Editing by Josie Kao)

Dollar higher as strong US data backs a hawkish Fed

NEW YORK, Jan 26 (Reuters) – The dollar edged higher against the euro on Thursday after data showed the US economy maintained a strong pace of growth in the fourth quarter, backing the case for the US Federal Reserve to maintain its hawkish stance for longer.

Gross domestic product increased at a 2.9% annualised rate last quarter, the Commerce Department said in its advance fourth-quarter GDP growth estimate. The economy grew at a 3.2% pace in the third quarter. Economists polled by Reuters had forecast GDP rising at a 2.6% rate.

A separate report from the Labor Department showed initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 186,000 for the week ended Jan. 21.

“A somewhat mixed picture painted by the US data,” said Stuart Cole, head macro economist at Equiti Capital in London.

The data point to an economy that is continuing to show resilience in the face of the rapid monetary tightening so far delivered by the Fed, Cole said.

“But a big contributor to this growth story was inventories, a component that is almost certain to weaken as we go through 2023,” he said.

“I think it reinforces the expectation of the Fed moving to 25 basis points moves now,” Cole said.

The euro was 0.23% lower at USD 1.08895, but not far from the nine-month high of USD 1.09295 touched on Monday.

Against the yen, the dollar was up 0.54% at 130.275 yen.

Attention now turns to next week’s central bank meetings, including the Federal Reserve and the European Central Bank.

Traders broadly expect the Fed to increase rates by 25 basis points (bps) next Wednesday, a step down from a 50 bps increase in December. Meanwhile, the ECB has all but committed to raising its key rate by half a percentage point next week.

Sterling was about flat on the day against the US dollar, on pace to log a narrow gain for the week, its third straight weekly rise, even as traders remained concerned about the task facing the Bank of England in controlling inflation without damaging an economy already in recession.

The Aussie touched a new 7-month high of USD 0.71425 on growing expectations that more Reserve Bank of Australia interest rate hikes are due after data showed Australian inflation surged to a 33-year high last quarter.

The Canadian dollar rose to a two-month high against its US counterpart on Thursday, a day after the Bank of Canada raised interest rates as expected in a move that could mark the end of the central bank’s aggressive tightening campaign.

Meanwhile, bitcoin was little changed on the day at USD 23,123, continuing to tread water after having jumped by about a third in value since early January, following big losses spurred by the high-profile collapse of the FTX crypto exchange.

(Reporting by Saqib Iqbal Ahmed; Editing by Mark Potter and Andrew Heavens)

Oil settles up 2% on strong US data, China reopening

NEW YORK, Jan 26 (Reuters) – Oil prices rose about 2% on Thursday on expectations that global demand will strengthen as top oil importer China reopens its economy and on positive US economic data.

Brent futures rose USD 1.35, or 1.6%, to settle at USD 87.47 a barrel, while US West Texas Intermediate (WTI) crude rose 86 cents, or 1.1%, to settle at USD 81.01.

The US economy grew faster than expected in the fourth quarter, but a measure of domestic demand rose at its slowest pace in 2-1/2 years, reflecting higher borrowing costs.

“Crude prices got an unexpected boost from a US economy that doesn’t want to break,” said Edward Moya, senior market analyst at data and analytics firm OANDA.

US crude inventories edged up by 533,000 barrels to 448.5 million barrels in the week ending Jan. 20, the Energy Information Administration (EIA) said.

That was short of forecasts for a 1 million barrel rise, though the EIA says crude stocks are at their highest since June 2021.

China has been easing stringent COVID-19 restrictions this month, with Beijing reopening borders for the first time in three years.

“China’s reopening is supporting demand prospects,” said UBS analyst Giovanni Staunovo.

“Also, market participants are closely tracking the upcoming OPEC+ JMMC (Joint Ministerial Monitoring Committee) meeting and the EU (European Union) embargo on refined products,” Staunovo said.

The Organization of the Petroleum Exporting Countries (OPEC) and their allies, including Russia, are collectively known as OPEC+.

The OPEC+ ministerial panel meeting on Feb. 1 is likely to endorse the oil producer group’s current output levels, OPEC+ sources said.

Global economic growth is forecast to barely move above 2% this year, a Reuters poll of economists showed, suggesting a further downgrade is possible. That was at odds with widespread optimism in markets since the beginning of the year.

(Additional reporting by Ahmad Ghaddar in London and Jeslyn Lerh in Singapore; Editing by David Goodman, Kirsten Donovan, Jane Merriman and David Gregorio)

Asian shares scale fresh 7-month high as Hong Kong trade resumes

SINGAPORE, Jan 26 (Reuters) – Asian equities rose to a fresh seven-month high on Thursday, with Hong Kong shares playing catch-up to other markets’ gains as trade resumed after its three-day Lunar New Holiday.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.56% to 555.81. Hong Kong’s Hang Seng index was 1.6% higher.

Japan’s Nikkei was, however, 0.25% lower.

Trading was thin on Thursday with Australia closed for a holiday and certain parts of Asia, including China, still away for the Lunar New Year.

Traders betting that the US Federal will soon tone down its aggressive rate hike policy got a lift after the Bank of Canada on Wednesday became the first major central bank to say it would likely hold off on further increases for now.

After a series of super-sized rate hikes last year, the US central bank is now largely expected to raise rates by a smaller 25 basis points next week on signs that inflation is cooling.

“The US GDP release today will be of key interest to gauge whether the market expectations shifting in favor of a soft landing rather than a recession can continue to hold,” Saxo strategists said in a note to clients.

The prospect of a less aggressive pace in monetary tightening has stoked expectations of a so-called soft landing – a scenario in which inflation eases against a backdrop of weakening but resilient economic growth.

But weak corporate earnings so far have revived worries over the economic impact of the Fed’s restrictive policy and the S&P 500 ended lower overnight.

Boeing Co (BA) on Wednesday reported a wider loss for 2022 on weakness in its defense unit as it warned of further supply chain issues, with the US planemaker missing Wall Street expectations on revenue and earnings per share in the final quarter of the year.

Investor attention will also be on the Bank of England and European Central Bank meetings due next week, with traders looking for clues as to when the central banks are likely to turn dovish.

In the currency market, the dollar index, which measures the US currency against six major rivals, was at 101.57, not far off the eight-month low of 101.51 it touched last week.

The Japanese yen strengthened 0.32% to 129.19 per dollar, while sterling was last trading at USD 1.2407, up 0.06% on the day.

The yield on 10-year Treasury notes was down 1.7 basis points at 3.445%, while the yield on the 30-year Treasury bond was down 2.2 basis points at 3.602%.

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 -68.8 basis points. The inversion of this curve has predicted eight of the last nine recessions, analysts have said.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 0.6 basis points at 4.131%.

Oil prices were up as US crude stocks rose less than expected, with US West Texas Intermediate (WTI) crude rising 0.42% to USD 80.49 per barrel and Brent at USD 86.24, up 0.14% on the day.

Gold prices hit a nine-month high on Thursday, with spot gold flat at USD 1,946.73 per ounce after hitting its highest level since April 2022.

(Reporting by Ankur Banerjee; Editing by Edwina Gibbs)

Oil edges up as U.S. crude inventories rise less than expected

EIA shows U.S. crude stocks up less than expected

U.S. dollar eases

Global 2023 economic view downgraded, at odds with market

By Laila Kearney

Jan 26 (Reuters) – Oil prices were up in early Asian trade on Thursday as U.S. crude stocks rose less than expected, while a weaker dollar made oil cheaper for non-American buyers.

Brent crude futures LCOc1 had risen 12 cents to $86.24 per barrel by 0119 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 futures gained 30 cents to $80.45.

Crude inventories rose by 533,000 barrels to 448.5 million barrels in the week ending Jan. 20, the Energy Information Administration (EIA) said. That was substantially short of forecasts for a 1 million barrel rise.

Despite the smaller-than-expected crude build, crude stocks reached the highest level since June 2021, the EIA said. nL1N34A1F4

Also helping to boost oil was the U.S. dollar, which weakened against the euro on Wednesday as investors largely paused any big bets ahead of next week’s central bank meetings, including those of the Federal Reserve and the European Central Bank. nL1N34A0ZW

A factor that kept oil from moving higher was concern about a slowing global economy hampering fuel demand.

Global economic growth is forecast to barely move above 2% this year, according to a Reuters poll of economists, who said the greater risk was a further downgrade to their view. That was at odds with widespread optimism in markets since the beginning of the year. nW1N33O00T

(Reporting by Laila Kearney in New York; Editing by Bradley Perrett)

((Laila.kearney@thomsonreuters.com; (917) 809-0054))

Gloomy economic signals

Jan 26 (Reuters) – South Korea and the Philippines’ GDP data are on the Asian data docket for investors on Thursday, as the upbeat mood that has propelled global stocks and risk assets higher this year shows signs of fading.

Some gloomy signals from the latest US earnings reports, a stream of tech sector layoffs and worries over global growth are overshadowing hopes that the Fed and other central banks will take their foot off the monetary tightening pedal.

The Bank of Canada was the latest to signal a pause, indicating on Wednesday it would likely halt further hikes after lifting its key interest rate to 4.5%. Some Asian central banks have done likewise in recent weeks.

Of course, the end of the tightening cycle could be in sight for many central banks because the lagged effects of previous rate hikes have not yet been fully felt and policymakers expect growth to slow.

Investors on Thursday will get the latest snapshot on the health of two Asian economies – the Philippines and South Korea – before world markets get the first estimate of US growth in the October to December period later in the day.

South Korea’s economy is expected to have shrunk 0.3% in the fourth quarter of last year, the first quarterly contraction since the onset of COVID-19 in early 2020.

South Korea’s fortunes are closely tied to the global tech sector and its largest trading partner, China. Both are navigating choppy waters.

Still, Asian stocks are flying. MSCI’s broadest index of Asia-Pacific shares ex-Japan hit a seven-month high on Wednesday. Remarkably, the index is up 30% from an October low struck exactly three months ago, and it has risen 11 out of the last 13 weeks.

It may be due a correction, and if that comes on Thursday, it will be on greater volume than the three days of gains this week as some Asian markets re-open after the Lunar New Year holidays.

China, however, is still closed.

(Reporting by Jamie McGeever in Orlando, Fla.; Editing by Josie Kao)

Dollar edges down as traders look to central banks for cues

NEW YORK, Jan 25 (Reuters) – The dollar edged down against the euro on Wednesday in subdued trading as investors were hesitant to make any big bets ahead of next week’s central bank meetings, including the Federal Reserve and the European Central Bank.

In addition, much of Asia is observing Lunar New Year holidays. As a result, most major currencies clung to familiar ranges.

“Trading ranges remain remarkably compressed ahead of next week’s central bank meetings,” said Karl Schamotta, chief market strategist at Corpay.

“With global demand conditions holding up, inflation subsiding, and terminal rate expectations well below their peaks, last year’s big directional trades have given way to a more nuanced landscape,” Schamotta said.

Lack of any big US data releases on Wednesday contributed to sluggish trading conditions.

Still, with the US Commerce Department set to release its initial advance fourth-quarter gross domestic product estimates on Thursday, there was potential for market moves picking up later this week, Schamotta said.

“Surprises are possible in the gross domestic product and personal consumption numbers due tomorrow and the next day. If the post-pandemic era has taught us anything, it’s that ‘bullwhip effects’ can have deeply unpredictable consequences for the real economy,” he said.

The euro was 0.06% higher at USD 1.0895, not far from the nine-month high of USD 1.0927 touched on Monday.

Data on Tuesday showed euro zone business activity made a surprise return to modest growth in January. Expectations of further rate increases by the European Central Bank have also supported the euro.

German business morale improved in January, according to Ifo Institute survey data released Wednesday, as inflation eased and the outlook brightened.

In contrast, US business activity contracted for the seventh-straight month in January, data showed on Tuesday, though the downturn moderated across manufacturing and services for the first time since September.

The dollar was down 0.45% against the yen , at 129.575 yen per dollar, having hit a near 8-month low of 127.215 on Jan. 16.

Elsewhere, the Australian dollar surged to a more than five-month high on Wednesday after inflation data came in hotter than expected, bolstering the case for further rate increases from the Reserve Bank of Australia.

The Australian dollar was last up 0.28% to USD 0.7065.

Meanwhile, the New Zealand dollar was down 0.81% to USD 0.6455, after the country’s annual inflation of 7.2% in the fourth quarter came in below its central bank’s 7.5% forecast.

Sterling was -0.1% lower against the dollar after data showed British manufacturers unexpectedly lowered their prices in December, which suggested inflation may be easing, ahead of next week’s Bank of England policy meeting.

The dollar rose against its Canadian counterpart after the Bank of Canada on Wednesday hiked its benchmark overnight interest rate by 25 basis points to 4.5%, its highest level in 15 years, and said it would likely pause to measure the cumulative effect of previous increases.

Meanwhile, bitcoin was little changed on the day at USD 22,520, continuing to tread water after having jumped by about a third in value since early January, following steep losses after the high-profile collapse of the FTX crypto exchange.

(Reporting by Saqib Iqbal Ahmed and editing by Sharon Singleton)

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