Dollar dumped after first monthly US CPI fall since May 2020

Jan 12 (Reuters) – The dollar index fell 0.95% on Thursday led by USD/JPY’s 2.5% plunge on BoJ policy tightening speculation, but much more broadly after US overall CPI posted its firstly monthly decline since May 2020, encouraging trading based on the Fed nearing the end of its tightening cycle.

The dollar index pierced a trio of major technical supports in the 102.32-40 range, including the pandemic uptrend line off May 2021’s pivotal low and the 61.8% Fibo of last year’s rally, a close below which could be quite bearish.

There was a short-lived rebound in Treasury yields and the dollar from post-CPI reaction lows on profit-taking and acknowledgement that core inflation, particularly the services less rent of shelter gauge — closely watched by the Fed — trended higher and the claims data reinforced the view the labor market remains tight.

Regardless of those factors and St. Louis Fed President James Bullard reiterating why he, and virtually all Fed speakers of late, think higher rates will be around for a while, the market continues to price in a fed funds terminal rate in June further below 5% with 50bp of rate cuts by year-end.

In contrast, the ECB is expected to hike rates roughly 150bp further by July.

EUR/USD rose 0.84% to its highest since last April as 2-year bund-Treasury yields spreads hit their highest in 11 months and before the invasion of Ukraine hastened EUR/USD’s retreat. Prices are now well above the 61.8% Fibo of the post-invasion slide at 1.0736 and widely expected to rise substantially.

USD/JPY plunged from 132.435 to below the prior trend low at 129.51 in anticipation of the Jan. 18 BoJ meeting producing another 25bp rise in the current 0.5% cap on 10-year JGB, with discussions about further dismantling of its yen-bearish yield curve control policies.

Sterling rose 0.6% on the dollar’s risk-on response to the CPI report.

The Australian dollar and yuan rose 0.85% and 0.6%, respectively, as hopes for China’s COVID reopening remain high.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Listing hopefuls on Beijing bourse slash floor IPO prices

SHANGHAI, Jan 12 (Reuters) – A growing number of listing applicants on the Beijing Stock Exchange are slashing the floor prices of their planned initial public offerings (IPOs), as the pandemic-hit companies seek to lure investors in a sluggish corner of China’s reviving stock markets.

The move by nearly a score of IPO hopefuls – including green tech firm Polygree and wireless solution provider Lierda – to lower their minimum offer prices over the past month is being hailed by some investors who expect more market-oriented price-setting on the Beijing bourse.

Unlike the Shanghai and the Shenzhen stock exchanges, the Beijing Stock Exchange – set up about a year ago to fund small companies – require that IPO candidates set a floor price for their share sales to protect the interest of existing shareholders.

Despite a recent share price rally in China on the back of post-pandemic recovery hopes, trading on the Beijing Stock Exchange remains depressed, forcing companies to be practical in their IPO fundraising plans.

Polygree has slashed its minimum IPO offer price to its book value of 5.79 yuan a share, 64% lower than the floor set in June, according to its latest prospectus this week. The company said its net profit nearly halved during the first six months of 2022 due to the COVID pandemic.

Lierda, also slashed its IPO price floor close to its book value of 1.72 yuan per share, from 8 yuan previously, representing a nearly 80% fall. The company’s net profit fell 30.9% in 2022 from the previous year partly due to COVID-19.

Other companies that reduced IPO price expectations include Shandong Inov Polyurethane Co, Xinganjiang Pharma and Sichuan Kezhi Civial Defense Equipment Co.

The rush to slash floor prices is the result of the companies’ blind confidence previously, anaemic trading on the Beijing Stock Exchange, and a desire to woo investors, said Zhou Yunnan, founder of NS Capital Ltd.

Beijing Stock Exchange’s benchmark index the BSE 50 trades at 21 times earnings. In contrast, Shanghai’s tech-heavy STAR Market trades at a price/earnings ratio of 45, while Shenzhen’s start-up board ChiNext trades at an earnings multiple of 39.

“For investors on the Beijing bourse, this is really good news as … lower IPO prices create bigger room for profit” after the IPO shares begin trading, he said.

The view is echoed by SWS Research, which said in a note: “pricing power is given to the market. Superior companies would be selected, while the inferior would be eliminated.”

(Reporting by Shanghai newsroom; Editing by Kim Coghill)

Oil up more than 1% on US inflation data, demand optimism

NEW YORK, Jan 12 (Reuters) – Oil prices gained about USD 1 a barrel on Thursday, supported by figures showing U.S consumer prices unexpectedly fell in December and by optimism over China’s demand outlook.

The US consumer price index dipped 0.1%, suggesting inflation was now on a sustained downward trend. Top oil importer China is reopening its economy after the end of strict COVID-19 curbs, boosting hopes of higher oil demand.

Brent crude settled at USD 84.03 a barrel, rising USD 1.36, or 1.7%. US West Texas Intermediate crude settled at USD 78.39 a barrel, gaining 98 cents, or 1.3%.

Also boosting oil, the US dollar tumbled to a nearly 9-month low against the euro after inflation data lifted expectations that the Federal Reserve will be less aggressive going forward with rate hikes.

“The market was looking forward to the CPI data and the strong possibility the number would spawn a slide in the dollar, with the reverse correlation super sizing the bid in crude oil,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude Oil is now feasting on the weak dollar.”

On Wednesday, both oil benchmarks jumped 3% on hopes the global economic outlook may not be as bleak as many feared.

“A softer landing for the US, and perhaps elsewhere, combined with a strong economic rebound in China following the current COVID wave could make for a much better year than feared and stimulate extra crude demand,” said Craig Erlam of brokerage OANDA before the CPI data was issued.

The market is also bracing for an additional curb on Russian oil supply due to sanctions over its invasion of Ukraine.

The US Energy Information Administration said the upcoming EU ban on seaborne imports of petroleum products from Russia on Feb. 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022.

Limiting oil’s gains was a hefty and unexpected jump in US crude oil inventories.

“Other than the China factor and recent lift in the equities amidst some weakening in the dollar, the complex doesn’t appear to possess much bullish impetus, especially when viewed within the context of transparent US crude and product balances,” said Jim Ritterbusch of consultancy Ritterbusch and Associates.

Crude inventories rose by 19 million barrels in the week ended Jan. 6 to 439.6 million barrels. Analysts polled by Reuters had expected a 2.2-million-barrel drop.

(Additional reporting by Alex Lawler, Laura Sanicola and Emily Chow; editing by Kirsten Donovan, David Evans and David Gregorio)

BSP hopes to cut rates in 2024, flags RRR reduction

MANILA, Jan 12 (Reuters) – The Philippines’ central bank governor said on Thursday he hoped benchmark interest rates could be cut in 2024, once inflation was under control, and flagged the prospect of lowering reserve requirements for banks in the first half of the this year.

While pent-up domestic demand will carry the economy this year, it will likely fade by 2024, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said in a speech at a Rotary Club event.

“By 2024, when pent-up demand is gone, then monetary policy hopefully at that time will be much looser than what we have now,” he said.

Central banks around the world, led by the US Federal Reserve, have since last year raced to contain elevated inflation through large increases in benchmark rates, dampening economic growth and fueling fears of recession.

Another easing measure could involve banks’ reserve requirement ratio, with a high probability of it being cut in the first half, Medalla told reporters.

“Cutting the RRR is very important to us”, he said.

Monetary authorities last cut the RRR, or the percentage of deposits and deposit substitutes banks must keep with the BSP, by 200 basis points to 12% in March 2020.

The BSP stands ready to take further monetary policy actions to bring inflation back to within a target-consistent path, Medalla said.

The consumer price index rose 8.1% to a 14-year high in December from a year earlier, mainly driven by food and energy costs. The figure brought the average full-year inflation rate to 5.8%, also a 14-year high and above the official 2%-4% target band.

“If the US is increasing policy rates, we need not match it but if it’s 50 (basis points), it’s hard not to respond, at least partially,” Medalla said.

(Reporting by Neil Jerome Morales; Editing by Ed Davies)

Australian shares rise on optimism ahead of US inflation data

Jan 12 (Reuters) – Australian shares rallied on Thursday, driven by broad-based gains across almost all sectors, supported by optimism that upcoming US December inflation data would point to a more resilient economy and a slower pace of interest rate hikes.

The S&P/ASX 200 index jumped 0.6% to 7,240.70 by 2323 GMT. The benchmark finished 0.9% higher on Wednesday.

The US consumer price index for December, crucial for investors placing bets on the Federal Reserve’s next steps, is expected to show annual inflation at 6.5%, down from 7.1% in November. Data is due later in the day.

Investors are expecting a 25 basis points (bps) interest rate increase at the Fed’s February meeting after a 50 bps increase in December.

Back in Australia, miners rose 0.5% as concerns over supply added support to iron ore prices already boosted by brightening demand prospects in top steelmaker China.

Shares of heavyweights Rio Tinto, BHP Group and Fortescue Metals Group added between 0.5% and 1.1%.

Financials gained about 0.6%, with the “Big Four” lenders advancing between 0.3% and 0.7%.

Tech stocks jumped 0.8%, tracking overnight Wall Street gains. ASX-listed shares of Block Inc and shares of accounting software provider Xero Ltd advanced 1.3% and 1.5%, respectively.

Energy stocks jumped 0.5%, as oil prices touched a one-week high on hopes of an improved global economic outlook.

Santos and Woodside Energy rose 0.7% and 0.8%, respectively.

On the other hand, a fall in bullion prices dragged gold stocks 0.6% lower, with sector majors Newcrest Mining and Northern Star Resources falling 0.4% and 0.3%, respectively.

Across the Tasman Sea, New Zealand’s benchmark S&P/NZX 50 index jumped 0.2%to 11,662.93.

(Reporting by Echha Jain in Bengaluru; Editing by Rashmi Aich)

Gold off 8-month highs as markets brace for US inflation data

Jan 11 (Reuters) – Gold prices held steady after touching an eight-month peak on Wednesday as investors positioned themselves ahead of US inflation data that could influence the Federal Reserve’s policy path.

Spot gold was steady at USD 1,877.51 per ounce by 1:40 p.m. ET (1840 GMT). US gold futures settled up 0.1% at USD 1,878.9.

Prices were trending lower on some “profit-taking from the shorter-term futures traders ahead of the CPI report tomorrow,” said Jim Wyckoff, senior analyst at Kitco Metals, adding that the market could continue to trade sideways ahead of the data.

The US consumer price report will be closely watched, after the Fed slowed its pace of rate hikes to 50 basis points in December after four consecutive 75 bps increases.

Traders see a 77% chance the Fed will raise the benchmark rate by 25 bps to 4.50%-4.75% in February and see rates peaking at 4.92% by June.

Susan M. Collins, the president of the Federal Reserve Bank of Boston, said she was leaning toward a quarter-point interest rate increase at the central bank’s next meeting, the New York Times reported on Wednesday.

Gold is considered an inflation hedge, but is highly sensitive to rising interest rates, which increase the opportunity cost of holding non-yielding bullion.

“This could be a big report if we get another good reading that shows inflation falling faster than anticipated,” said Craig Erlam, a senior market analyst at OANDA.

While worries linger over the scale and impact of the COVID outbreak in top gold consumer China, “over the longer term, China is expected to bounce back strongly, which could stimulate additional demand”, Erlam said.

Spot silver fell 0.9% to USD 23.40 per ounce, platinum was down 0.5% to USD 1,075.63 while palladium was unchanged at USD 1,780.66.

Despite palladium lagging, platinum, gold and silver have been seeing bullish attitudes based upon China’s reopening, Wyckoff said.

(Reporting by Seher Dareen in Bengaluru, additional reporting by Swati Verma; Editing by Tomasz Janowski and Shailesh Kuber)

European shares rise on bets of easing rate hikes

Jan 11 (Reuters) – European shares advanced on Wednesday, buoyed by hopes of less aggressive interest rate hikes, while insurer Direct Line fell sharply after scrapping its full-year dividend.

The pan-regional STOXX 600 climbed 0.4%, with market participants awaiting US inflation data on Thursday for clues on the Federal Reserve’s interest rate policy.

“Investors remain in an upbeat mood going into tomorrow’s US inflation report, buoyed still by the December jobs report and the prospect of the economy being less squeezed by interest rates,” said Craig Erlam, senior market analyst at OANDA.

On Tuesday, Wall Street ended higher and European stocks cut their losses as risk appetite improved on the expectation of softer inflation data and after Fed Chair Jerome Powell refrained from commenting on the US rate policy.

Europe’s STOXX 600 has risen 5.4% so far in the year, helped by a sharp decline in natural gas prices due to warmer weather, and as data pointed to a milder-than-expected recession in the euro zone.

Signs of slowing wage inflation last week also boosted bets of a less aggressive tightening by the Fed and the European Central Bank.

“The real driver of everything this week is the US CPI data due tomorrow and expectations are that it is going to be mildly weaker than expected,” said Mark Taylor, a trader at Mirabaud Securities.

“There is actually maybe a chance that a positive or an inline shock from the CPI may trigger a little bit of profit-taking.”

On Wednesday, rate-sensitive tech stocks rose 1.3%. Energy stocks advanced 0.9%, while miners jumped 0.1% as commodity prices rose on optimism over top consumer China’s reopening of its borders.

Among individual stocks, Direct Line Insurance Group Plc dropped to the bottom of STOXX 600, plunging 23.5% after the British motor and home insurer unexpectedly scrapped its 2022 final dividend.

Rivals Admiral and Aviva fell 6.8% and 2.1%, respectively.

Sainsbury’s, Britain’s second-biggest supermarket group, fell 1.6% after Chief Executive Simon Roberts said he was cautious on the consumer backdrop.

Nevertheless, Britain’s commodity-heavy FTSE 100 hit its highest in more than four years as oil majors and mining giants advanced.

Bayer rose 3.6% as a source told Reuters that activist investor Bluebell was pushing for a break-up of the German pharmaceutical company. Bluebell’s move was first reported by Bloomberg late on Tuesday.

LVMH gained 2.1% after Chairman and Chief Executive Bernard Arnault tightened his family’s grip on the luxury goods empire, putting his daughter Delphine in charge of one of its leading labels, Christian Dior.

Denmark’s Jyske Bank hit an all-time high after hiking its full-year outlook. Peers Danske Bank and Sydbank added 1.0% and 0.9%, respectively.

(Reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in Bengaluru; Editing by Uttaresh.V, Subhranshu Sahu and Alison Williams)

BSP chief: too early to say if rate hikes may be paused

MANILA, Jan 11 (Reuters) – The Philippine central bank chief said on Wednesday it was too early to say whether monetary authorities will pause raising interest rates this year, though he said upcoming hikes will not be as large as they were previously.

In comments to reporters, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla at the same time ruled out rate cuts in the near term.

“Monetary policy is responding to inflation. It is not causing inflation,” Medalla said, speaking on the sidelines of a business forum.

“I am ruling out (rate) cuts in the very short run. But I am not ruling out the increases. But maybe the increases will not be as large as it used to,” he said.

He also said the likelihood of the BSP not doing anything on monetary policy in its next two policy meetings was “quite low”.

On Tuesday, he confirmed rates would likely need to rise a further 25 or 50 basis points at next month’s policy meeting, though said pressure to match hikes by the US Federal Reserve was waning.

The BSP, which raised its benchmark interest rate by a total of 350 basis points last year, as inflation hit a 14-year high, will hold its first policy meeting of the year on Feb. 16.

(Reporting by Neil Jerome Morales; Editing by Ed Davies)

Oil gains 3% on global economic optimism, despite surprise US crude build

NEW YORK, Jan 11 (Reuters) – Oil prices rose 3% to a one-week high on Wednesday as hopes for an improved global economic outlook and concern over the impact of sanctions on Russian crude output outweighed a massive surprise build in US crude stocks.

Brent futures rose USD 2.57, or 3.2%, to settle at USD 82.67 a barrel. US West Texas Intermediate (WTI) crude rose USD 2.29, or 3.1%, to settle at USD 77.41.

Both benchmarks settled at their highest since Dec. 30, with WTI up for a fifth day in a row for the first time since October and Brent up for a third day in a row for the first time since December.

Global equities were up on hopes that US inflation and earnings figures due on Thursday will indicate a resilient economy and result in a slower pace of interest rate hikes.

If inflation comes in below expectations, that will drive the dollar lower, analysts said, which could boost oil demand because it makes crude cheaper for buyers holding other currencies.

The Federal Reserve will likely hike its target interest rate for the last time at its Jan. 31-Feb. 1 monetary policy meeting, raising it by 50 basis points (bps) to a range of 4.75%-5.00%, HSBC said in a research note.

Much of the market’s optimism was pinned on top oil importer China’s reopening of its economy after the end of strict COVID-19 curbs.

“Energy traders should get used to seeing oil prices head higher. Oil demand is coming back and expectations are high that China’s demand is about to skyrocket,” said Edward Moya, senior market analyst at data and analytics firm OANDA.

China’s overall passenger vehicle sales are estimated to rise 5% in 2023, Volkswagen AG’s China President Ralf Brandstaetter told Chinese media.

China’s industrial output is expected to have grown 3.6% in 2022 from the previous year, the Ministry of Industry and Information Technology (MIIT) said, despite production and logistics disruptions from COVID-19 curbs.

The US Energy Information Administration (EIA) said crude inventories jumped by 19.0 million barrels last week, the third biggest weekly gain ever and the most since stocks rose by a record 21.6 million barrels in Feb 2021. Last week’s increase came as refiners were slow to restore production after a cold freeze shut operations in late 2022.

Analysts polled by Reuters had forecast a 2.2-million-barrel decline in crude stocks, and industry data from the American Petroleum Institute (API) showing a 14.9 million-barrel build.

EIA this week forecast US crude production will reach all-time highs in 2023 and 2024.

An international price cap imposed on sales of Russian crude took effect on Dec. 5 and more curbs aimed at products sales are set to come into force next month as the European Union (EU) keeps working on more sanctions against Moscow over the invasion of Ukraine.

EIA said the upcoming EU ban on seaborne imports of petroleum products from Russia on Feb. 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022.

Russian Deputy Prime Minister Alexander Novak said the country’s oil producers have had no difficulties in securing export deals despite Western sanctions and price caps.

(Additional reporting by Noah Browning in London, Sonali Paul in Melbourne, Trixie Yap in Singapore and Laila Kearney in New York; Editing by Marguerita Choy, David Goodman and David Gregorio)

REFILE-PRECIOUS-Gold climbs 8-month high ahead of U.S. inflation test

Corrects typo in analyst’s organisation name in paragraph four

U.S. CPI data due at 1330 GMT on Thursday

Fed’s Bowman: more rate hikes needed to fight inflation

Soft inflation numbers could push gold above $1,900- analyst

By Ashitha Shivaprasad

Jan 11 (Reuters) – Gold prices scaled an eight-month peak on Wednesday, underpinned by a subdued dollar, although they traded in a tight range as traders positioned themselves for inflation data that could influence the U.S. Federal Reserve’s rate-hike stance.

Spot gold XAU= was up 0.3% at $1,883.48 per ounce, as of 0727 GMT, its highest level since early-May. U.S. gold futures GCv1 rose 0.5% to $1,885.90.

The dollar index =USD slipped 0.1%, making greenback-priced bullion cheaper for overseas buyers. Benchmark U.S. 10-year Treasury yields also edged lower. USD/ USD/

Overall, it looks like gold is currently consolidating into a range as the focus turns to the U.S. consumer price index (CPI) data on Thursday, said Ilya Spivak, head of global macro at Tastylive.

“If the data shows that inflation is softer, then gold might go north of the $1,900 level. However, it would be interesting to see if gold can get much traction beyond that.”

Gold is considered an inflation hedge, but is highly sensitive to rising interest rates, which increase the opportunity cost of holding the non-yielding bullion.

Fed Governor Michelle Bowman said on Tuesday that the U.S. central bank will have to raise rates further to combat high inflation and that will likely lead to softer job market conditions.

Spot silver XAG= rose 1.1% to $23.88 and platinum XPT= gained 0.7% to $1,088.08.

Palladium XPD= was up 0.5% at $1,789.57. Automakers embed palladium in exhaust pipes to neutralise harmful emissions, but the metal is not required for that function in electric vehicles (EVs).

The expansion of EVs is expected to continue in 2023, leading to a small overall decline in palladium’s demand for cars, despite an expected increase in overall new cars across markets, analysts at Heraeus Precious Metals said in a note.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)

((Ashitha.Shivaprasad@thomsonreuters.com;))

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