BOJ’s policy tweak hasn’t led to lending windfall, Mizuho head says

TOKYO, Jan 5 (Reuters) – The Bank of Japan’s decision to let long-term rates rise more has not sparked a boom in revenue from lending as the central bank has yet to end its policy of negative interest rates, the head of the country’s third-largest lender said on Thursday.

The comments from Masahiro Kihara, the president and CEO of Mizuho Financial Group, highlight the challenges Japanese banks still face even as the central bank’s surprise move last month sparked hopes of a windfall for lenders after years of being squeezed by rock-bottom rates.

Kihara also told Reuters that Mizuho, which is looking to expand its capital markets and digital finance capabilities in Asia, was considering a potential deal but he did not elaborate.

The Bank of Japan tweaked its bond yield control mechanism last month, presaging a potential end to years of massive stimulus and negative interest rates. Tokyo’s index of bank stocks has jumped 12% since, as investors bet that financial firms would benefit.

“Frankly, it has had very little impact because it is not an ending of negative interest rates,” Kihara said. “If we see an end to negative rates, then of course the spread between deposits and loans will widen and that’s absolutely positive. But that’s not what’s happening now.”

For the moment, Mizuho is sitting tight when it comes to Japanese Government Bonds (JGBs), waiting to see what will happen in the market and with the appointment of the next central bank governor, Kihara said. Governor Haruhiko Kuroda is due to retire in April.

DIGITAL FOCUS

Mizuho closed almost all of its positions in its JGB portfolio from September, assuming the central bank would eventually move and as a result it was “unharmed” by the BOJ’s tweak, Kihara said, even as the policy shift sent bond yields higher.

Still, Mizuho remains cautious when it comes to bonds, he said, adding it will be “looking at what to do next”.

Mizuho, which has fallen behind rivals Mitsubishi UJF Financial Group and Sumitomo Mitsui Financial Group in terms of its international expansion, was working to build up its capabilities in Asian capital markets and looking for digital finance opportunities in the region.

It has already invested in Vietnamese payment app M-Service and Philippine digital bank Tonik Financial.

“It’s best to invest in digital companies that have local roots,” Kihara said, adding there was an investment the bank was “considering” at the moment.

He said any investment would likely be around 20-30% of a target company rather than a full acquisition.

Reuters interviewed Kihara as part of a series on Japanese banks’ outlooks for the new year. Rival Sumitomo Mitsui recently told Reuters it plans to extend its alliance with Jefferies Financial Group Inc to Europe and Asia.

(Reporting by Ritsuko Shimizu; Writing by David Dolan; Editing by Jacqueline Wong)

Oil rebounds on weaker dollar; economy concerns cap upside

SINGAPORE, Jan 5 (Reuters) – Oil prices rebounded on Thursday amid dollar weakness and as investors emerged to buy dips after two sessions of steep losses, though economic concerns capped recovery.

Brent crude futures had climbed 89 cents, or 1.1%, to USD 78.73 a barrel by 0740 GMT, while US West Texas Intermediate crude futures rose 87 cents, or 1.2%, to USD 73.71 a barrel.

Big declines in the previous two days were driven by worries about a potential global recession, especially since short-term economic signs in the world’s two biggest oil consumers, the United States and China, appeared shaky.

“Coming after the heavy sell-off since the start of the week, it seems that oil prices are attempting to tap on some weakness in the US dollar this morning for some reprieve,” said Jun Rong Yeap, market strategist at IG.

“The second month of contraction in US manufacturing PMI continues to reflect ongoing slowdown in economic activities, which may leave buyers shunning” the market, he said.

Brent’s and WTI’s cumulative declines of more than 9% on Tuesday and Wednesday were the biggest two-day losses at the start of a year since 1991, according to Refinitiv Eikon data.

Reflecting near-term bearishness, the benchmark oil contracts slipped back into contango in Asia trade on Thursday, meaning spot prices were lower than those for delivery months later.

Economic data from the United States weighed on prices as US manufacturing contracted further in December. The ISM purchasing managers’ index (PMI) for manufacturing dropped for a second straight month in November, to 48.4 from 49.0. It was the weakest reading since May 2020, the Institute for Supply Management (ISM) said.

At the same time, a survey from the US Labor Department showed job openings had fallen less than expected, raising concerns that the Federal Reserve would use the tight labour market as a reason to keep interest rates higher for longer.

Concerns about economic disruption as COVID-19 works its way through China, the world’s biggest oil importer, have added to the pessimism around crude prices.

The Chinese government increased export quotas for refined oil products in the first batch for 2023, signalling expectations of poor domestic demand.

Meanwhile, dollar weakness helped support oil prices, since it typically boosts demand as dollar-denominated commodities become cheaper for holders of other currencies

(Reporting by Stephanie Kelly in New York and Jeslyn Lerh in Singapore; Editing by Christian Schmollinger and Bradley Perrett)

Oil rises after US fuel stocks draw down; economic concerns loom

NEW YORK, Jan 5 (Reuters) – Oil prices rose around 1% on Thursday after posting the biggest two-day loss for the start of a year in three decades with US data showing lower fuel inventories providing support and economic concerns capping gains.

Big declines in the previous two days were driven by worries about a global recession, especially following weak short-term economic signs in the world’s two biggest oil consumers, the United States and China.

US distillate inventories fell more than expected as a winter storm gripped the United States at the end of December, data from the US Energy Information Administration showed on Thursday.

US gasoline stocks fell 346,000 barrels last week, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 486,000-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell 1.4 million barrels in the week, versus expectations for a 396,000-barrel drop, the EIA data showed.

“The impact of the storm during that time period is on full display here,” said John Kilduff, partner at Again Capital LLC in New York.

Brent crude futures settled higher at 85 cents, or 1.1%, at USD 78.69 a barrel. US West Texas Intermediate crude settled up 83 cents, or 1.2%, at USD 73.67 a barrel.

Both benchmarks’ cumulative declines of more than 9% on Tuesday and Wednesday were the biggest two-day losses at the start of a year since 1991, according to Refinitiv Eikon data.

Supporting prices earlier in the session was a statement from top US pipeline operator Colonial Pipeline, which said its Line 3 had been shut for unscheduled maintenance with a restart expected for the products line on Jan. 7.

Tamas Varga of oil broker PVM said the price rebound early in the session was due to the pipeline shutdown and added: “There is no doubt that the prevailing trend is down; it is a bear market.”

Reflecting near-term bearishness, the nearby contracts of the two benchmarks traded at a discount to the next month, a structure known as contango.

On Wednesday, figures showing US manufacturing contracted further in December pressured prices, as did concerns about economic disruption as COVID-19 works its way through China, which has abruptly dropped strict curbs on travel and activity.

(Reporting by Stephanie Kelly; Additional reporting by Alex Lawler and Jeslyn Lerh; Editing by Marguerita Choy, David Evans, Diane Craft and David Gregorio)

Philippine Dec inflation at 14-year high as food prices jump

MANILA, Jan 5 (Reuters) – Philippine annual inflation in December accelerated to the fastest pace since 2008 on higher food and energy prices, data showed on Thursday, supporting expectations of more interest rate hikes by the central bank this year.

Last month’s inflation figure was slightly below the 8.2% median forecast in a Reuters poll, but within the central bank’s 7.8% to 8.6% forecast for December.

The number brought the full-year average inflation rate to 5.8%, also a 14-year high and above the official 2%-4% target band.

While prices may have peaked last month, “pressures are broad based and should result in only a slow grind lower for inflation in 2023,” said Nicholas Mapa, a senior economist at ING.

“We could see inflation back below 8% as early as 1Q 2023. The Philippine peso is likely to gain support on expectations for sustained rate hikes by BSP (central bank) until inflation heads convincingly lower,” he said.

Core inflation, which strips out volatile food and energy components, rose to 6.9% in December from 6.5% in November.

Food inflation increased further to 10.6% in December from the prior month’s 10.3%, largely driven by soaring prices of items such as vegetables.

High prices of sugar and rice due to weather disturbances and increased demand during the holiday season also added pressure, the statistics agency said.

Dennis Mapa, chief of the Philippine Statistics Authority, said there had been a slowdown in price increases on a monthly basis, although broad-based pressures remained, particularly for food items.

The Bangko Sentral ng Pilipinas (BSP) has not ruled out further interest rate hikes in 2023, after raising the benchmark by a total of 350 basis points last year to curb inflation and support a weak peso.

The BSP holds its first policy meeting of the year on Feb. 16.

(Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Ed Davies)

Australian shares cheer US Fed minutes favoring slower rate-hike pace

Jan 5 (Reuters) – Australian shares rose on Thursday after minutes from the US Federal Reserve’s latest policy meeting showed that policymakers agreed over slowing down the pace of interest rate hikes, while weaker energy stocks on subdued oil prices capped gains.

The S&P/ASX 200 index rose 0.6% to 7098.7 by 2315 GMT. The benchmark ended up 1.6% on Wednesday.

Minutes from the Fed’s December policy meeting showed all officials to be in favor of slowing the pace of its hawkish rate hikes in its battle against soaring inflation, while also limiting the risks to economic growth.

Traders now see a 68.8% chance of a 25-basis point rate hike from the Fed in February, but they still see rates peaking just below 5% by June.

Reacting to the Fed minutes, bullion prices held near seven-month highs overnight, boosting Aussie gold stocks up more than 2.5% and becoming the top gainers on the benchmark.

Sector majors Newcrest Mining rose 3%, while Northern Star Resources gained 1.9%.

Financials added 1.1%, with all the “Big Four” banks trading in the positive territory.

Heavyweight banks National Australia Bank and Commonwealth Bank of Australia gained 1.5% and 0.9%, respectively.

Domestic technology stocks rose 0.8% tracking their overseas peers higher, with sector dominant ASX-listed shares of Block Inc. adding 0.5%.

Bucking the upbeat sentiment, oil stocks fell 1.7%, on track for the sub-index’s third straight session of losses, after oil prices posted their steepest loss in the first two trading days of any year for over three decades.

Sector majors Woodside Energy and Santos slid 2.3% and 1.3%, respectively.

Across the Tasman Sea, New Zealand’s benchmark S&P/NZX 50 index rose 0.7% to 11,667.22.

(Reporting by Jaskiran Singh in Bengaluru; Editing by Rashmi Aich)

S&P closes higher after Fed minutes confirm inflation focus

Jan 4 (Reuters) – The S&P 500 finished higher on Wednesday but below its session peak after volatile trading following the release of minutes from the Federal Reserve’s last meeting, which showed officials laser-focused on controlling inflation even as they agreed to slow their interest rate hiking pace.

Officials at the Fed’s Dec. 13-14 policy meeting agreed the US central bank should continue increasing the cost of credit to control the pace of price increases, but in a gradual way intended to limit the risks to economic growth.

Investors were poring over the Fed’s internal deliberations for clues about its future path. After the meeting, Fed Chair Jerome Powell had said more hikes were needed, and took a more hawkish tone than investors had expected back then.

While some money managers said the minutes included no surprises, the market appeared to have been holding onto hopes for some sign that the Fed was at least considering easing its policy tightening.

“The market is like a kid asking for ice cream. The parents say ‘no,’ but the market keeps asking because the parents have caved in the past,” said Burns McKinney, portfolio manager at NFJ Investment Group LLC in Dallas. “The market still thinks it’s going to get ice cream, just not as soon as they thought before.”

McKinney pointed to the minutes for evidence of Fed officials’ concern that an unwarranted easing of financial conditions would complicate their efforts to fight inflation.

The Dow Jones Industrial Average rose 133.4 points, or 0.4%, to 33,269.77; the S&P 500 gained 28.83 points, or 0.75%, to 3,852.97; and the Nasdaq Composite added 71.78 points, or 0.69%, to 10,458.76.

The S&P’s rate-sensitive technology index lost some ground after the minutes before finishing up 0.26%. Even the bank sector, which benefits from higher rates, pared gains but still finished up 1.9%.

Energy was the weakest of the S&P’s 11 major industry sectors, closing up 0.06%, while real estate was the strongest, closed up 2.3%, followed by a 1.7% gain in materials.

Also on Wednesday, Minneapolis Fed President Neel Kashkari also stressed the need for continued rate hikes, setting out his own forecast that the policy rate should initially pause at 5.4%.

“The Fed minutes are a good reminder for investors to expect rates to remain high throughout all of 2023. Amid a persistently strong job market, it makes sense that fighting inflation remains the name of the game for the Fed,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office in New York.

“Bottom line is that, even though we flipped the calendar, the market headwinds from last year remain.”

Market participants now see a 68.8% chance of a 25-basis points rate hike from the Fed in February, but still see rates peaking just below 5% by June.

Earlier in the day, data showed US job openings in November indicating a tight labor market, giving the Fed cover to stick to its monetary tightening campaign for longer, while other data showed manufacturing contracted further in December.

US equities were pummeled in 2022 on worries of a recession due to aggressive monetary policy tightening, with the three main stock indexes logging their steepest annual losses since 2008.

On the Nasdaq 100 the largest gainer was US shares of JD.Com Inc. (JD), which rose 14.7% on hopes for a post-COVID-19 recovery in China. The largest decliner was Microsoft (MSFT), down 4.4% after a UBS analyst downgraded the stock to “neutral” from a “buy” rating.

Advancing issues outnumbered declining ones on the NYSE by a 4.30-to-1 ratio; on Nasdaq, a 2.74-to-1 ratio favored advancers.

The S&P 500 posted five new 52-week highs and no new lows; the Nasdaq Composite recorded 84 new highs and 51 new lows.

On US exchanges 11.35 billion shares changed hands, compared with the 10.83 billion-share average for the last 20 trading days, which included some volume weakness due to the holidays.

(Reporting by Sinéad Carew and Chuck Mikolajczak in New York, Shubham Batra, Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta and Jonathan Oatis)

US yields lower after Fed minutes

NEW YORK, Jan 4 (Reuters) – The benchmark US 10-year Treasury yield fell on Wednesday, putting it on track for its longest streak of declines in more than five months after the release of the minutes from the most recent meeting of the Federal Reserve.

At the Fed’s December policy meeting which resulted in a rate hike of 50 basis points (bps) after four straight hikes of 75 bps, all officials agreed with the slower pace, but were concerned with any “misperception” in financial markets that their commitment to fight stubbornly high inflation was in any way starting to ebb.

“The market thinks the Fed is going to blink and the Fed is going out of their way to say we are bringing inflation down to 2% and there is going to be some pain,” said Christopher Lanouette, managing director and fixed income manager of taxable and tax-exempt bond portfolios at CIBC Private Wealth US in Boston.

“It seems like the market still hasn’t come to terms with that,” he added.

Earlier, economic data showed the labor market remained tight in November, which bolsters the case for the Fed to continue to hike interest rates more than is currently expected, although a separate report showed manufacturing contracted in December for a second straight month.

However, the same report showed a measure of prices paid by manufacturers tumbled to its lowest level since February 2016, excluding the drop during the early stages of the COVID-19 pandemic.

The yield on 10-year Treasury notes was down 9.2 basis points to 3.700%, on track for its biggest one-day drop since Dec. 13. The yield was poised to fall for a fourth straight session, it’s longest streak of declines since a five-session run that began on July 26.

Yields briefly moved higher after Minneapolis Fed President Neel Kashkari said the Fed should continue to raise rates at its next few meetings until it is confident that inflation has peaked, and laid out his own view that the policy rate should first pause at 5.4%, which is more aggressive than the majority of policymakers.

The yield on the 30-year Treasury bond was down 7.7 basis points to 3.814%.

Investors will get a look at several pieces of data on the labor market this week, culminating in the employment report on Friday. A weakening labor market is seen as one of the key pieces needed to convince the Fed to begin slowing its monetary tightening path.

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 a negative 67.4 basis points. Such an inversion is seen by many as a signal of an impending recession.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 3.3 basis points at 4.372%.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.258%, after closing at 2.306% on Tuesday.

The 10-year TIPS breakeven rate was last at 2.226%, indicating the market sees inflation averaging 2.2% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Paul Simao and Elaine Hardcastle)

Gold hovers near mid-June highs after Fed minutes

Jan 4 (Reuters) – Gold held near seven-month highs reached on Wednesday after the minutes of the Federal Reserve’s last meeting showed all its policymakers remained committed to fighting inflation but agreed on the need to slow rate hikes in 2023.

Spot gold rose 0.7% to USD 1,851.41 per ounce by 2:48 p.m. ET (1948 GMT), having risen as much as 1.4% earlier to its highest price since June 13.

US gold futures settled up 0.7% at USD 1,859.

Officials at the Federal Reserve’s Dec. 13-14 policy meeting acknowledged they had made “significant progress” over the past year in raising rates enough to bring inflation down, the minutes showed.

“Gold is holding remarkably steady despite Fed minutes that state clearly that rates will continue to rise and there would be no rate cuts in 2023 contrary to what the market has priced,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York.

The dollar index was down 0.2%, making gold less expensive for overseas investors, while benchmark 10-year yields were slightly higher for the day.

Higher rates tend to weigh on non-yielding gold.

The minutes indicated that officials “emphasized the need to retain flexibility and optionality when moving policy to a more restrictive stance,” with a scale back to quarter-percentage-point increases as of the Jan. 31-Feb. 1 meeting possible, but open to an even higher “terminal” rate if inflation persists.

Fed fund futures kept bets that the central bank would raise rates another half of a percentage point in coming months before pausing just shy of 5%.

Gold prices could, however, ease if recent aggressive buying in Asia and Europe fades, Wong added, while expecting that gold could move between USD 1,800-USD 1,900 in the short term.

Silver fell 1% to USD 23.74 per ounce, platinum was down 0.6%, to USD 1,077.03, while palladium jumped 5.4% to USD 1,802.13.

(Reporting by Seher Dareen in Bengaluru; Editing by Paul Simao and Shailesh Kuber)

Asian stocks in 2022 suffer biggest foreign outflows since 2008 global crisis

Jan 4 (Reuters) – Foreign investors withdrew more money from emerging Asian equities in 2022 than they had done in any year since the global financial crisis in 2008, as rising US interest rates pulled funds towards dollar assets.

Data from stock exchanges in Taiwan, India, the Philippines, Vietnam, Thailand, Indonesia, and South Korea showed foreigners sold equities worth USD 57 billion last year, the biggest outflow since 2008.

After four straight 75-basis point hikes earlier in 2022, the US Federal Reserve raised its overnight borrowing rate by another 50 basis points in December.

Due to the hikes, the yield on safer 10-year US Treasuries climbed about 230 basis points to 3.83% last year, which hit the foreign demand for riskier regional equities.

Taiwanese equities faced outflows worth USD 41.6 billion last year, leading the regional sales, while India and South Korea witnessed an outgo of USD 15.4 billion and USD 9.6 billion, respectively.

Hit by falling foreign demand and a worsening economic outlook, the MSCI’s Asia Pacific index plunged 19.4% last year – the biggest fall since dropping 43.3% in 2008.

Some analysts expect more outflows, at least in the first half of the year, as US interest rates are expected to rise further this year.

“The first half of the new trading year could continue to bring a cautious tone in the region, as market participants brace for further economic impact from tighter global central banks’ policies, along with risks of China’s reopening triggering cross-border virus spreads,” said Yeap Jun Rong, a market strategist at IG.

In December, emerging Asian equities, excluding Japan and China, witnessed net sales worth USD 3 billion, with Taiwanese, Indonesian and South Korean equities facing outflow of USD 2.55 billion, USD 1.34 billion, and USD 1.31 billion, respectively.

On the flip side, India, Vietnam, and Thailand received net inflows of USD 1.36 billion, USD 559 million and USD 372 million, respectively, in December.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Simon Cameron-Moore)

Oil falls more than 5% on global economy worry, China COVID cases

NEW YORK, Jan 4 (Reuters) – Oil fell by more than USD 4 a barrel on Wednesday, posting the steepest percentage loss in the first two trading days of any year for over 3 decades, as investors worried about fuel demand as the global economy slows and COVID-19 cases grow in China.

Brent futures settled at USD 77.84 a barrel, falling USD 4.26, or 5.2%. US crude settled at USD 72.84 a barrel, shedding USD 4.09, or 5.3%.

Brent has fallen by about 9.4% this week, its steepest two-day loss at the start of the year since January 1991, according to Refinitiv Eikon data.

“Crude oil is trading lower on concerns around China COVID-19 and the Fed forcing a global recession… both demand destruction events,” said Bob Yawger, director of energy futures at Mizuho in New York.

Data from China showed that while no new coronavirus variant has been found there, the country has under-represented how many people have died in its recent, rapidly spreading outbreak, World Health Organization officials said.

The state of the global economy and central bank rate hikes also weighed on crude prices.

US manufacturing contracted further in December, dropping for a second straight month to 48.4 from 49.0 in November, in the weakest reading since May 2020, the Institute for Supply Management (ISM) said.

At the same time, a survey from the US Labor Department showed job openings fell less than expected, raising concerns that the Federal Reserve would use the tight labor market as a reason to keep rates higher for longer.

The Chinese government increased export quotas for refined oil products in the first batch for 2023, signaling expectations of poor domestic demand.

Top oil exporter Saudi Arabia could cut prices for its flagship Arab Light crude grade to Asia in February, having been set at a 10-month low for this month, as concern about oversupply continued to cloud the market.

OPEC oil output rose in December, a Reuters survey found on Wednesday, despite an agreement by the wider OPEC+ alliance to cut production targets to support the market.

The Organization of the Petroleum Exporting Countries (OPEC)pumped 29 million barrels per day (bpd) last month, the survey found, up 120,000 bpd from November.

US crude oil stockpiles are likely to have risen by 1.2 million barrels last week, with distillate inventories expected to have fallen, a revised Reuters poll showed.

US crude oil inventories likely rose by 3.3 million barrels last week along with gasoline stocks jumping 1.2 million barrels, while distillate stocks fell, according to market sources citing American Petroleum Institute figures.

The Energy Information Administration will release its figures on Thursday morning.

(Reporting by Laila Kearney in New York; Additional reporting by Ahmad Ghaddar, Muyu Xu and Stephanie Kelly; Editing by Bernadette Baum, Matthew Lewis and David Gregorio)

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