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)

European shares kick off March lower as BNP Paribas slides

March 1 (Reuters) – A fall in the shares of the euro zone’s largest bank BNP Paribas weighed on Europe’s STOXX 600 on Wednesday, while China-exposed miners and luxury firms limited losses after strong data from the world’s second largest economy soothed fears of an economic slowdown.

The continent-wide STOXX 600 fell 0.7% by the close, after rising as much as 0.4% in early trading.

BNP Paribas (BNPP) slid 4.2% after the Belgian state participation agency SFPI said the country was preparing the sale of a third of its 7.8% equity stake in the bank.

The banking index dipped 1.6%, slipping from multi-year highs hit in the previous session.

European shares have had a robust start to the year as relaxation of China’s zero-COVID protocols breathed life into hopes of demand recovery. The STOXX 600 notched its fourth positive month in five in February, supported by sharp gains in rate-sensitive banking shares.

However, risky assets fell out of favor as fears of further monetary tightening by the European Central Bank to tackle sticky inflation weighed on the minds of investors.

Data on Wednesday showed regional inflation from Germany ticked up last month, with all eyes now on preliminary euro area wide consumer price inflation reading for February due on Thursday.

Also weighing on the benchmark European index, utilities declined 2.6%, with Spain’s Iberdola IBE.MC and London’s National Grid NG.L losing 2.3% and 3.0%, respectively.

Capping losses on the STOXX 600, China’s factory sector grew in February at the fastest pace in more than a decade, an outlier in Asia, where manufacturing growth stalled elsewhere.

Luxury giants such as LVMH (LVMH) and Kering (PRTP) which have big exposure to China, rose 0.4% and 1.2%, respectively.

Italian luxury group Moncler (MONC) climbed 3.3% after its sales jumped 25% at constant exchange rates to come in ahead of forecasts.

“The reopening of China post-COVID would have a positive effect on global growth. In general, you would say that for a lot of luxury names recovering Asian demand is an important driver,” said Richard Flax, chief investment officer at Moneyfarm.

The European basic resources index advanced 2.2% as metal prices jumped.

The China-exposed autos index added 0.9%.

French testing company Eurofins Scientific (EUFI) slumped 12.1% to its worst day in nearly 20 years after worse-than-expected earnings and weak 2023 outlook.

Euronext NV (ENX) rose 4.0% after the exchange operator withdrew from its 5.5-billion-euro (USD 5.82 billion) indicative offer to acquire fund distribution firm Allfunds (ALLFG). Allfunds fell more than 13.1% to the bottom of the STOXX 600.

Puma (PUMG) slipped 6.8% after the sportswear maker forecast 2023 operating profit around last year’s level weighed by currency effects and higher freight and raw material costs.

(Reporting by Johann M Cherian, Shreyashi Sanyal and Bansari Mayur Kamdar in Bengaluru; Editing by Nivedita Bhattacharjee and Alex Richardson)

Rebounding US dollar a growing headache for investors

NEW YORK, March 1 (Reuters) – Investors reeling from the recent volatility in global financial markets are eyeing another potential worry: a rebounding dollar.

The dollar has risen nearly 4% from its recent lows and stands near a seven-week high against a basket of other major currencies, driven by bets the Federal Reserve will need to raise rates higher than many investors had previously forecast to cool inflation.

The US currency remains some 8% below the twenty-year high it attained last year. Yet its rebound, along with a surge in Treasury yields, has already complicated the outlook for a range of trades that prospered as the dollar tumbled in the latter half of 2022.

MSCI’s index for emerging market stocks has slipped 8% from its January highs, while the MSCI Emerging Markets Currency Index is down 3% from its early February high.

A rally in European stocks has also stalled, with the Stoxx Europe 600 Index nearly flat for the last three weeks after having gained about 20% since late September. Gold, meanwhile, is trading flat on the year after having given up a 7% gain.

“A stronger dollar poses a problem for risk assets,” said Lauren Goodwin, economist, and portfolio strategist at New York Life Investments.

Because of the dollar’s central role in the global financial system, its fluctuations have widespread repercussions.

A stronger dollar tends to tighten global financial conditions while diminishing appetite for risk-taking and weakening global trade, the Bank for International Settlements said in a report in November. It also makes it more difficult for countries that borrowed in the US currency to service their debt, a problem often acutely felt by emerging market economies.

“The tailwind behind foreign currencies from a more dovish Fed is generally off the table,” said Eric Leve, chief investment officer at wealth and investment management firm Bailard.

A stronger dollar also makes crude oil, gold, and other dollar-denominated commodities more expensive to foreign buyers. Part of the 2% year-to-date decline in Brent crude can be traced to the dollar’s rebound, analysts at UBS Global Wealth Management wrote in late February. They expect China’s reopening and Russian supply disruptions to override the US currency’s influence and boost oil later in the year.

For the US, dollar strength makes exports less competitive while weighing on the bottom lines of multinational companies by making it more expensive for them to convert foreign earnings into their own currency.

Morgan Stanley analysts led by chief US equity strategist Michael Wilson on Monday wrote that the dollar’s directions could be a key factor for the near-term trajectory of US stocks, citing the currency’s relationship to global liquidity conditions. The S&P 500 index is down nearly 5% from its recent highs and holding onto a 3.6% year-to-date gain.

“If rates and the US dollar continue higher, we think these key support levels for stocks will quickly give way as the bear (market) resumes more forcefully,” they wrote.

Whether the dollar continues its rebound will depend in part on investors’ perceptions of how much higher the Fed will need to raise interest rates. Some insight into policymakers’ thinking and the economy’s strength could come next week as Fed Chairman Jerome Powell delivers his semiannual monetary policy testimony before the Senate Banking Committee and the US reports February employment data.

Colin Graham, head of multi-asset solutions at asset manager Robeco, believes the dollar is unlikely to rebound much further and said he would likely initiate bets against the US currency if the dollar index rose to 106 from its current level of 104.

A move to the 114 level, the highs from September, would prompt him to abandon his bullish view on emerging markets, he said.

Emily Leveille, portfolio manager at Thornburg Investment Management, is also skeptical the dollar’s bounce will last and views any weakness in emerging markets as a buying opportunity.

“Emerging market currency weakness can be a great time to step in and build positions in high-quality companies,” Leveille said.

Analysts at Capital Economics, on the other hand, believe an expected slowdown in global growth and souring risk appetite will send investors flocking to the dollar, a popular destination during uncertain times, and push the currency back to its highs later this year.

“We expect risk sentiment to deteriorate amid this weakening global backdrop and ‘safe-haven’ demand to push the dollar higher over the next couple of quarters,” they wrote.

(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Chris Reese)

Oil prices rise as China factory bounce boosts demand outlook

SINGAPORE, March 1 (Reuters) – Oil prices extended gains for a second session on Wednesday after a strong jump in manufacturing in China, the world’s top crude importer, boosted the outlook for global fuel demand.

Brent crude futures for May rose 46 cents, 0.6%, to USD 83.91 a barrel at 0445 GMT. US West Texas Intermediate (WTI) crude for April gained 42 cents, or 0.6%, to USD 77.47 a barrel.

Oil prices continue to be supported by expectations for a strong rebound in demand in China, the world’s second-largest crude consumer.

“Another round of upside surprise in China’s PMI further provides conviction of a stronger-than-expected recovery, which supports a more optimistic oil demand outlook,” said Yeap Jun Rong, market strategist at IG.

“That provided a much-needed catalyst for oil prices to tap on for some relief following (Monday’s) previous sell-off, with China’s recovery showing to be on track to cushion some of the global demand weakness from hawkish central banks,” Yeap added.

Data showed China’s factory activity rose for the first time in seven months in February, according to the purchasingmanager’s index (PMI) published by Caixin/S&P Global on Wednesday.

Official government PMI data also published on Wednesday showed the fastest expansion in manufacturing since 2012 occurred in February.

However, the strong demand signal was offset by signs of rising crude stockpiles in the United States, the world’s biggest oil consumer and producer.

US oil inventories rose by 6.2 million barrels in the week ended Feb. 24, according to market sources citing American Petroleum Institute (API) figures on Tuesday.

Still, gasoline inventories declined by 1.8 million barrels and distillate fuels, including diesel and jet fuel, dropped by 340,000 barrels, according to the API data.

Official US government data on stockpiles is due later on Wednesday.

That data is forecast to show a 10th consecutive week of builds, with analysts in a Reuters poll expecting that a rise of nearly half a million barrels occurred last week.

Other signs of rising supply were seen from data on the Organization of the Petroleum Exporting Countries (OPEC).

In February, OPEC pumped 28.97 million barrels per day (bpd), a Reuters survey found, up by 150,000 bpd from January. Output is still down more than 700,000 bpd from September.

(Reporting by Erwin Seba and Jeslyn Lerh; Editing by Christian Schmollinger)

Gold prices extend gains on softer dollar; rate-hike fears linger

March 1 (Reuters) – Gold rose for a third session on Wednesday as the dollar pulled back, although fears of further US interest rate hikes on the back of stubbornly high inflation worldwide kept a lid on prices.

Spot gold was up 0.2% at USD 1,831.43 per ounce, as of 0536 GMT. US gold futures edged up 0.1% to USD 1,838.90.

“Gold is oversold over the near-term, having found support at its 200-day exponential moving average and the US dollar is due a pullback against February’s gains,” said Matt Simpson, a senior market analyst at City Index.

“Next stop for gold could be the USD 1,850-USD 1,860 area, at which point we’ll be on the lookout for another top.”

The yellow metal marked its worst month since June 2021 in February after a string of US data pointed to a resilient economy and a tight labour market, stoking fears that the US Federal Reserve would deliver more interest rate hikes to curb inflation.

High interest rates dampen gold’s appeal as an inflation hedge while raising the opportunity cost of holding the non-yielding asset.

Money markets expect the US central bank’s target rate to peak at 5.413% by July, from a current range of 4.50% to 4.75%. Chances of rate cuts this year have been largely priced out.

US consumer confidence unexpectedly fell in February, with the decrease concentrated among lower-middle-income households, a survey showed on Tuesday.

The dollar index ticked 0.1% lower, making bullion more affordable for buyers holding other currencies.

Meanwhile, data on Wednesday showed top bullion consumer China’s manufacturing activity had expanded as the fastest pace in more than a decade in February, smashing expectations as production zoomed after the lifting of COVID-19 restrictions late last year.

Spot silver added 0.8% to USD 21.09 per ounce, platinum rose 0.4% to USD 955.89 and palladium gained 2% to USD 1,445.03.

(Reporting by Kavya Guduru in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)

USD/JPY on course towards 140? Depends on US yields

March 1 (Reuters) – USD/JPY appears on course to head back towards 140 if not higher. Any further rises are likely to be dependent on higher US yields. A break above 4.0% in 10-year Treasury yields could be particularly pivotal.

USD/JPY traded to a fresh 2023 high of 136.92 Tuesday before easing back. Higher US yields helped fuel the move with 10-year yields hitting 3.983% before easing back.

A decisive break above 4.0% in the benchmark yield and towards the 4.337% trend high on Oct 21, 2022 could help USD/JPY higher still. This would require perhaps another strong US jobs report on March 10, and continuing expectations of a 50 basis-point hike by the Fed on March 22 after recent strong US economic data.

Technically, USD/JPY is holding below its descending 100-day moving average at 136.88 and 200-DMA at 137.23. Support is eyed from the ascending hourly Ichimoku cloud currently between 135.31-136.22 and especially towards the 100-HMA in the cloud at 135.77.

Japanese importers have been good buyers on recent dips, and this will continue to be the case. Institutional investor appetite for US assets also looks to have risen with yields and returns higher than before, and could be further whetted if 10-year yields return above 4%.

Likely upside USD/JPY targets include 139.57, 50% retracement of 151.94-127.21, 140.00, a good round number, and 142.49, 61.8% Fibonacci retracement of the same move.

Dollar eases, upbeat China PMI revives risk sentiment

SINGAPORE, March 1 (Reuters) – The dollar wobbled on Wednesday after China’s manufacturing activity expanded at its fastest pace since April 2012 and exceeded forecasts, sparking some risk-on appetite that sent the safe-haven dollar lower.

The yuan and the Australian dollar got a leg up from the upbeat Chinese economic data, which showed that the officialmanufacturing purchasing managers’ index (PMI) stood at 52.6 last month against 50.1 in January.

Similarly, China’s non-manufacturing activity grew at a faster pace in February, official data showed, while the Caixin/S&P Global manufacturing PMI reading for last month likewise surpassed market expectations.

The onshore yuan rose and was last roughly 0.1% higher at 6.9250 per dollar, while the offshore yuan gained a larger 0.26% to 6.9371 per dollar.

“The strong set of China PMIs breathed some life into the China reopening trade,” said Christopher Wong, a currency strategist at OCBC.

The Aussie, which slid to a two-month low earlier on Wednesday following soft domestic economic data, also reversed its losses following the Chinese surveys, and was last 0.07% higher at USD 0.6733.

The Australian dollar is often used as a liquid proxy for the yuan.

Australia’s economy grew at the weakest pace in a year last quarter while the country’s monthly consumer prices rose less than expected in January, separate data showed on Wednesday, which could make the case for a slower pace of rate hikes by the Reserve Bank of Australia.

“I think market participants will pay a close look to the January CPI indicator in order to gauge the near-term outlook for RBA policy,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA).

“But given what the RBA said at the last meeting, they seem to have already made up their minds and want to further raise interest rates.”

Across the board, the US dollar edged lower on Wednesday as markets cheered the revival of activity in the world’s second-largest economy following China’s exit from its stringent COVID policies late last year.

That raised hopes of a more subdued downturn in the global economy in the wake of aggressive interest rate hikes by major central banks.

The euro rose 0.09% to USD 1.0586, recouping some of its losses from the previous session.

Inflation in two of the euro zone’s biggest economies rose unexpectedly in February, data showed on Tuesday, pushing up rate hike expectations by the European Central Bank (ECB).

“While still-high US inflation augurs more Fed tightening, euro area inflation is higher and stickier in 2023, and the ECB has more tightening to do than the Fed,” said Thierry Wizman, Macquarie’s global FX and rates strategist.

Sterling edged 0.12% higher to USD 1.2032, having surged 1% at the start of the week after Britain struck a post-Brexit Northern Ireland trade deal with the European Union.

British Prime Minister Rishi Sunak was in Northern Ireland and then met with his own lawmakers on Tuesday to sell the new deal.

Against a basket of currencies, the US dollar index fell 0.07% to 104.91.

It had risen nearly 3% in February, its first monthly gain after a four-month losing streak, as a slew of strong US economic data in recent weeks raised market expectations that the Federal Reserve has further to go in hiking rates.

Futures pricing currently suggests a peak of around 5.4% in the Fed funds rate by September.

“We see the Fed going to 5.5%, with a growing risk of 6%,” said Michael Every, global strategist at Rabobank. “The Fed is hiking. Others can’t follow or match. The dollar will soar.”

Elsewhere, the dollar rose 0.06% against the Japanese yen to 136.31, after having spiked close to 5% against the yen in February, its largest monthly gain since last June.

The kiwi gained 0.17% to USD 0.6195.

China manufacturing PMI, Aussie GDP top data deluge

March 1 (Reuters) – A bumper data dump on Wednesday kicks off the new trading month in Asia, with China’s manufacturing PMI report for February and fourth quarter Australian GDP among the most important releases for investors.

Market sentiment going into these and a host of other numbers from across the continent is likely to be fairly neutral after Wall Street closed February with a lackluster performance on Tuesday.

To recap, the S&P 500 closed February down 2.6% and the Nasdaq lost 1%, but that wasn’t bad – the MSCI World Index fell 3% and MSCI Asia ex-Japan lost 7%, erasing almost all of January’s gains. Asian stocks have only risen two months out of the last 14.

Traders in Asia will be hoping for some encouraging signs in the economic data to get markets off to a positive start for the month. Assuming ‘good news is good news’, that is.

How is China’s economic reopening from zero-COVID policies progressing? Purchasing managers index figures will give the most up-to-date snapshot of the huge manufacturing sector, and economists polled by Reuters reckon growth is picking up pace.

The latest manufacturing PMI data from Japan, India, Australia, and several other countries across the region will also be released on Wednesday.

Another Reuters poll suggests the quarterly pace of GDP growth in Australia accelerated to 0.8% in the October-December period last year, but the annual pace more than halved to 2.7%. International trade is expected to have been a major driver thanks to a boom in resource exports.

Australian and Indonesian inflation figures for January are expected to be a mixed bag. In the current climate of markets repricing the global rate outlook significantly higher, mixed, or forecast-matching numbers may not be enough to keep the hawks at bay.

The annual rate of Australian consumer inflation is expected to slow, but tick higher in Indonesia. Current rates pricing points to the Reserve Bank of Australia raising interest rates by another 100 bps this year, while Bank Indonesia policymakers indicated in February that their hiking cycle is over.

(By Jamie McGeever; Editing by Josie Kao)

Wall Street closes out weak February as Fed concerns remain

NEW YORK, Feb 28 (Reuters) – U.S. stocks closed out February in subdued fashion and each of the three major indexes ended with monthly declines, as investors continue to assess whether interest rates will remain high for an extended period.

After a strong performance in January, stocks retreated in February as economic data and comments from U.S. Federal Reserve officials prompted market participants to reconsider the odds the central bank would hike rates to a higher level than market forecasts and keep them elevated for longer than was initially expected.

“The market in many ways expected things to go south more quickly, forcing the Fed to pivot, or pause, or cut rates sooner than the Fed was saying,” said Johan Grahn, head ETF market strategist at Allianz Investment Management in Minneapolis.

“The staying power of the Fed is much more determined and steadfast than the staying power of investors so it’s back to the old mantra of do you really want to fight the Fed on this and in this case, it is still a mistake to try and do that.”

The Dow Jones Industrial Average fell 232.39 points, or 0.71%, to 32,656.7, the S&P 500 lost 12.09 points, or 0.30%, to 3,970.15 and the Nasdaq Composite dropped 11.44 points, or 0.1%, to 11,455.54.

For the month, the S&P 500 fell 2.61%, the Dow slid 4.19% and the Nasdaq shed 1.11%

Traders have started to price in the chances of a bigger 50 basis-point rate hike in March, although the odds remain low at about 23%, according to Fed fund futures, which suggest rates peaking at 5.4% by September, up from 4.57% now.

BofA Global Research cautioned the Fed could even hike interest rates to nearly 6%.

Economic data on Tuesday, however showed a reading of consumer confidence unexpectedly fell in February, while a gauge of home prices slowed further in December.

The blue-chip Dow dipped, weighed down by a 3.80% drop in Goldman Sachs GS.N after Chief Executive David Solomon said the bank is considering “strategic alternatives” for its consumer business.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 2.3 basis points at 4.816%. A pullback in yields following the economic data helped boost the S&P 500 and Nasdaq, but the two indexes faded late in the session to close lower.

Volatility has been common since the Fed began its rate hiking cycle last year. The S&P 500 has seen 18 sessions with gains or losses of at least 1% this year, equal to the first two months of 2022, which eventually saw 122 such trading days on the year.

Chicago Fed President Austan Goolsbee said the Fed must supplement traditional government data and readings from financial markets with real-time, on-the-ground observations of economic conditions if it is to make good policy, and not rely on market reactions.

Meta Platforms (META) rose 3.19% after the Facebook parent said it was creating a new top-level product group focused on generative artificial intelligence.

Target Corp. (TGT) gained 1.01% after the big-box retailer reported a surprise rise in holiday-quarter sales but cautioned on 2023 earnings due to an uncertain U.S. economy.

Norwegian Cruise Line Holdings Ltd. (NCLH) plunged 10.18% after the cruise operator’s full-year profit forecast fell short of estimates. It attributes the squeeze to soaring fuel and labor costs.

Volume on U.S. exchanges was 11.63 billion shares, compared with the 11.46 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 1.13-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored advancers.

The S&P 500 posted 9 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 85 new highs and 91 new lows.

(Reporting by Chuck Mikolajczak; Editing by Aurora Ellis)

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