Oil prices slump to pre-Ukraine crisis levels on economic jitters

NEW YORK, Dec 6 (Reuters) – US oil prices fell in frenzied trading on Tuesday to their lowest settlement levels this year, with Brent finishing below USD 80 per barrel for the second time in 2022, as investors fled the volatile market in an uncertain economy.

Brent crude futures fell USD 3.33, or 4%, to settle at USD 79.35 a barrel. WTI crude futures fell USD 2.68, or 3.5%, to settle at USD 74.25 a barrel, their lowest settlement this year.

Prices have dropped by more than 1% for three straight sessions, giving up most of their gains for the year. A string of bearish news has unnerved investors despite an ongoing war in Ukraine and one of the worst energy crises in recent decades.

“It’s been quite the three days – with OPEC+ deciding not to further cut production on Sunday, the toothless start of the Russian price cap and sanctions yesterday, and a rout in equity markets today, oil speculators are charging for the exits amid a flight from risk assets,” said Matt Smith, lead oil analyst at Kpler.

Service-sector activity in China has hit a six-month low, and European economies have slowed due to the high cost of energy and rising interest rates.

Wall Street benchmarks also tumbled on Tuesday on uncertainty around the direction of Federal Reserve rate hikes and further talk of a looming recession.

Tuesday’s slump was the largest daily decline in Brent prices since late September, which have traded in a USD 62 range this year – their widest swing in a single year since the 2008 financial meltdown.

“We could be looking at USD 60-a-barrel WTI the way that things are going,” Eli Tesfaye, senior market strategist at RJO Futures said. “I think USD 80s are going to be the new high, and I would be very surprised to see any higher than that.”

The oil market has also largely overlooked threats to supply, such as the one from a G7 price cap of USD 60 on Russian seaborne crude oil exports, which is likely to make the country cut its oil output.

Russia has said it will not sell oil to anyone who signs up to the price cap. Russia’s January-November oil and gas condensate production rose 2.2% from a year ago, according to Deputy Prime Minister Alexander Novak, who expects a slight output decline following the latest sanctions.

In China, more cities are easing COVID-19-related curbs, prompting expectations of increased demand in the world’s top oil importer, although that has not been enough to stop the bleed in oil futures.

“Oil markets will likely stay volatile in the near term, driven by COVID headlines in China and central bank policies in the US and Europe,” UBS analyst Giovanni Staunovo said.

US crude oil inventories fell by 6.4 million barrels last week, while gasoline and distillate stockpiles rose, according to market sources citing American Petroleum Institute figures on Tuesday.

(Reporting by Shariq Khan; Additional reporting by Rowena Edwards, Muyu Xu; Editing by Barbara Lewis, Mark Potter, David Gregorio and Deepa Babington)

Philippines’ November annual inflation at 8.0%

MANILA, Dec 6 (Reuters) – Philippine annual inflation was 8.0% in November, the statistics agency said on Tuesday, faster than the 7.7% rate in October.

Last month’s inflation was above the 7.8% forecast in Reuters poll, but within the central bank’s 7.4%-8.2% forecast for November.

(Reporting by Neil Jerome Morales and Enrico dela Cruz; Writing by Karen Lema
Editing by Ed Davies)

Gold flat after sharp declines on US data

Dec 6 (Reuters) – Gold prices were little changed in early Asian trade on Tuesday, after falling more than 1.5% in the previous session as the US dollar rebounded on bets that strong economic data may prompt bigger interest rate hikes by the Federal Reserve.

FUNDAMENTALS

* Spot gold was flat at USD 1,768.61 per ounce, as of 0011 GMT. Bullion hit a five-month high on Monday before closing 1.6% lower in its biggest daily drop since Sept. 23.

* US gold futures were little changed at USD 1,780.90.

* The dollar index rebounded on Monday after data showed US services industry activity unexpectedly picked up in November, prompting speculation the Fed may lift interest rates more than recently projected.

* Higher interest rates tend to weigh on gold’s appeal as they increase the opportunity cost of holding the non-yielding metal.

* Meanwhile, the European Central Bank is likely to raise interest rates by 50 basis points next week, governing council member Gabriel Makhlouf said on Monday.

* SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.2% to 903.46 tons on Monday.

* Top bullion consumer China is set to announce a further easing of some of the world’s toughest COVID curbs as early as Wednesday, sources said, as investors cheered the prospect of a policy shift that follows widespread protests and mounting economic damage.

* Spot silver inched 0.1% lower to USD 22.23, platinum was flat at USD 997.84 and palladium rose 0.2% to USD 1,878.93.

DATA/EVENTS (GMT)

0030 Australia Current Account Balance SA Q3

0030 Australia Net Exports Contribution Q3

0700 Germany Industrial Orders MM Oct

0700 Germany Manufacturing O/P Cur Price SA Oct

0700 Germany Consumer Goods SA Oct

1330 US International Trade Oct

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Subhranshu Sahu)

Wall Street slides as services data spooks investors about Fed rate hikes

Dec 5 (Reuters) – US markets ended Monday lower, as investors spooked by better-than-expected data from the services sector re-evaluated whether the Federal Reserve could hike interest rates for longer, while shares of Tesla slid on reports of a production cut in China.

The electric-vehicle maker Tesla slumped 6.4% on plans to cut December output of the Model Y at its Shanghai plant by more than 20% from the previous month.

This weighed on the Nasdaq, where Tesla was one of the biggest fallers, pulling the tech-heavy index to its second straight decline.

Broadly, indexes suffered as data showed US services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy.

The data came on the heels of a survey last week that showed stronger-than-expected job and wage growth in November, challenging hopes that the Fed might slow the pace and intensity of its rate hikes amid recent signs of ebbing inflation.

“Today is a bit of a response to Friday, because that jobs report, showing the economy was not slowing down that much, was contrary to the message which (Chair Jerome) Powell had delivered on Wednesday afternoon,” said Bernard Drury, CEO of Drury Capital, referencing comments made by the head of the Federal Reserve saying it was time to slow the pace of coming interest rate hikes.

“We’re back to inflation-fighting mode,” Drury added.

Investors see an 89% chance that the US central bank will increase interest rates by 50 basis points next week to 4.25%-4.50%, with the rates peaking at 4.984% in May 2023.

The rate-setting Federal Open Market Committee meets on Dec. 13-14, the final meeting in a volatile year, which saw the central bank attempt to arrest a multi-decade rise in inflation with record interest rate hikes.

The aggressive policy tightening has also triggered worries of an economic downturn, with JPMorgan, Citigroup and BlackRock among those that believe a recession is likely in 2023.

The Dow Jones Industrial Average fell 482.78 points, or 1.4%, to close at 33,947.1, the S&P 500 lost 72.86 points, or 1.79%, to end on 3,998.84, and the Nasdaq Composite dropped 221.56 points, or 1.93%, to finish on 11,239.94.

In other economic data this week, investors will also monitor weekly jobless claims, producer prices and the University of Michigan’s consumer sentiment survey for more clues on the health of the US economy.

Energy was among the biggest S&P sectoral losers, dropping 2.9%. It was weighed by US natural gas futures slumping more than 10% on Monday, as the outlook dimmed due to forecasts for milder weather and the delayed restart of the Freeport liquefied natural gas (LNG) export plant.

EQT Corp. (EQT), one of the largest US natural gas producers, was the steepest faller on the energy index, closing 7.2% lower.

Financials were also hit hard, slipping 2.5%. Although bank profits are typically boosted by rising interest rates, they are also sensitive to concerns about bad loans or slowing loan growth amid an economic downturn.

Meanwhile, apparel maker VF Corp. (VFC) dropped 11.2% – its largest one-day decline since March 2020 – after announcing the sudden retirement of CEO Steve Rendle. The firm, which owns names including outdoor wear brand The North Face and sneaker maker Vans, also cut its full-year sales and profit forecasts, blaming weaker-than-anticipated consumer demand.

Volume on US exchanges was 10.78 billion shares, compared with the 11.04 billion average for the full session over the last 20 trading days.

The S&P 500 posted six new 52-week highs and four new lows; the Nasdaq Composite recorded 105 new highs and 133 new lows.

(Reporting by Shubham Batra, Ankika Biswas, Johann M Cherian and Devik Jain in Bengaluru and David French in New York; Editing by Anil D’Silva, Shounak Dasgupta and Lisa Shumaker)

Dollar gains broadly as upbeat US data muddles Fed rate hike views

NEW YORK, Dec 5 (Reuters) – The dollar gained against the yen, the euro and the pound on Monday after data showed that US services industry activity unexpectedly picked up in November, prompting speculation the Federal Reserve may lift interest rates more than recently projected.

The Institute for Supply Management (ISM) said its non-manufacturing PMI increased to 56.5 last month from 54.4 in October, indicating that the services sector, which accounts for more than two-thirds of US economic activity, remained resilient in the face of rising interest rates. Economists polled by Reuters had forecast the non-manufacturing PMI slipping to 53.1.

The survey followed on the heels of stronger-than-expected job and wage growth data for November released last Friday. Consumer spending also accelerated in October.

The upbeat reports have raised optimism the economy could avoid recession next year, with growth just slowing sharply, while also spurring speculation about how high rates will rise.

“The ISM services PMI data highlighted a US economy that’s still showing some strength, despite tighter financial conditions,” said Priscilla Thiagamoorthy, an economist at BMO Capital Markets. “While that’s good news for the growth outlook, it’s not so great for the Fed trying to dampen demand and ease inflation.”

Fed Chair Jerome Powell said last week the US central bank could scale back the pace of its rate increases “as soon as December.”

The dollar climbed 1.68% against the yen to 136.615 yen, bouncing from Friday’s three-and-a-half month low of 133.62, while sterling, which had risen to a more than five-month high of USD 1.2345 in Asian trade Monday, was down 0.94% at USD 1.2178 at 2:15 p.m. EST (1915 GMT).

The euro slid 0.42% to USD 1.0494, having earlier climbed to USD 1.0585, its highest level since June 28.

The dollar index, which tracks the greenback against six peers, fell 1.4% last week, and 5% in November, its worst month since 2010.

But now speculation is growing that the Fed ‘pivot’ narrative has run its course.

“I think this issue about ‘peak inflation, peak rates, peak dollar’ – I think – is slowly turning into a ‘persistence of inflation, a persistence of higher-for-longer interest rates,” said Jane Foley, senior FX strategist at Rabobank.

The dollar’s aggregate positioning against G10 currencies is now neutral, and at the lowest levels since August 2021, according to ING calculations based on CFTC data.

ING also believes that dollar softening may have run its course for now, given the possibility of the Fed maintaining its hawkish narrative for longer, that relaxing China’s COVID restrictions could prove complicated, and that oil and gas prices could rise again.

The other major factor for markets on Monday was China, where several cities have been easing their COVID restrictions. Official messaging about how dangerous the virus is also has changed following recent, unprecedented protests against the government’s uncompromising “dynamic zero-COVID” strategy.

This boosted China’s yuan, and the dollar fell below 7.0 yuan in offshore trade for the first time since mid September, and was last at 6.9767.

(Reporting by John McCrank in New York and Alun John in London; Editing by Chizu Nomiyama, Susan Fenton and Andrea Ricci)

European shares slip on recession fears, China optimism limits losses

Dec 5 (Reuters) – European shares slipped on Monday after data showing a decline in euro zone business activity fanned recession fears, while hopes of easing of stringent COVID-19 curbs in China boosted miners and other China-exposed equities.

The region wide STOXX 600 closed 0.4% down.

The index had notched gains for the seventh straight week on Friday, helped by China-led optimism and easing worries over aggressive interest rate hikes.

Data on Monday showed euro zone business activity declined for a fifth month in November, suggesting the economy was sliding into a mild recession.

Governing council member Gabriel Makhlouf said the European Central Bank is likely to raise interest rates by 50 basis points (bps) next week on the way to potentially moving beyond a deposit rate of 3% amid ongoing inflationary concerns.

Most of the STOXX 600 sectors were in the red, with rate-sensitive technology stocks and consumer staples such as Nestle (NESN) and L’Oreal (OREP) being the biggest drag on the index.

“The ECB still has to be pretty strong, despite the fact that clearly activity in the euro zone is contracting a bit and it does look like Europe is on the cusp of a shallow recession,” said Danni Hewson, financial analyst at AJ Bell.

UK’s resource-heavy FTSE 100 was the only regional index in green, up 0.2%, helped by a jump in miners and China-exposed financials like Prudential.

“FTSE 100 is outperforming because of its make -,” added Hewson. “On balance, the expectation is that China will relax restrictions.”

Miners gained 0.6% as prices of base and precious metals rose with investors cheering the prospects of a broader policy shift in top consumer China in the wake of historic protests last month over COVID restrictions.

In company news, shares of Vodafone Group (VOD) slipped after the British mobile operator said Chief Executive Officer Nick Read would step down at the end of this year.

Credit Suisse (CSGN) gained 2.9%. Investors including Saudi Arabia’s crown prince and a US private-equity firm run by a former Barclays chief executive have shown interest in investing USD 1 billion or more in Credit Suisse’s new investment banking unit, the Wall Street Journal reported on Sunday.

(Reporting by Amruta Khandekar and Bansari Mayur Kamdar in Bengaluru; Editing by Vinay Dwivedi, Sherry Jacob-Phillips and Jonathan Oatis)

Philippines trims 2023 GDP growth target due to global risks

MANILA, Dec 5 (Reuters) – The Philippines on Monday lowered its economic growth target for 2023, taking into account an anticipated weakening in global activity, but retained its expansion goals for the succeeding five years.

The Southeast Asian nation’s economy is now expected to grow 6.0%-7.0% next year, a lower and narrower range compared with the previous official goal of 6.5%-8.0%, the inter-agency Development Budget Coordination Committee (DBCC) announced in a media briefing.

“It is the global slowdown that is affecting the adjustment,” Finance Secretary Benjamin Diokno said.

Last week, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said the chance of
global growth falling below 2% next year was increasing due to the effects of the war in Ukraine and simultaneous slowdowns in Europe, China and the United States.

The DBCC, however, kept the growth target for 2024-2028 at 6.5%-8.0%.

For 2022, officials said the economy was on track to meet the growth goal of 6.5%-7.5%, faster than the 5.6% expansion in 2021, after the government removed nearly all COVID-19 restrictions and allowed more business activities to resume.

The government also revised its foreign exchange rate assumptions.

It expects the peso to trade against the U.S. dollar at 54-55 in 2022 compared with the previous assumption of 51-53, at 55-59 in 2023, and at 53-57 in 2024, compared with the previous forecast of 51-55 for 2023 onwards.

Trading around the 55 territory on Monday after plunging to a record low of 59 in recent weeks, the peso PHP= has recovered against the dollar thanks to a series of interest rate hikes by the Bangko Sentral ng Pilipinas (BSP) to match U.S. Federal Reserve’s aggressive tightening.

The BSP will likely hike rates at its Dec. 15 meeting by either 25 or 50 basis points, Governor Felipe Medalla said last week.

Meanwhile, economic officials, during the same briefing, supported the establishment of a
sovereign wealth fund, even as Medalla has voiced caution over the proposal, stressing the importance of transparency.

The Philippines’ bicameral legislature on Monday approved a record 5.268 trillion pesos (USD 94.4 billion) for the 2023 national budget, the first full-year spending plan under President Ferdinand Marcos Jr.

(USD 1 = 55.8050 Philippine pesos)

(Reporting by Neil Jerome Morales and Karen Lema; writing by Enrico Dela Cruz; Editing by Kanupriya Kapoor)

Bargains begin luring big banks back to China bets for 2023

HONG KONG, Dec 5 (Reuters) – As Chinese assets whipsaw around hopes and fears over the country’s path out of the pandemic, big offshore investors are slowly leaving the sidelines as they plot a cautious return to one of the year’s worst-performing equity markets.

The drumbeat of bullish outlooks has grown a bit louder over recent weeks as analysts at Citi, Bank of America, and J.P. Morgan upgraded recommendations, and said re-opening can lift consumer-exposed stocks that have fallen to attractive prices.

Goldman Sachs forecasts 16% index returns for MSCI China and CSI300 next year and recommends an overweight allocation to China, while J.P.Morgan expects a 10% potential upside in MSCI China in 2023.

Morgan Stanley upgraded its recommendation to overweight on Monday with an increase in exposure to consumer stocks as reopening prospects improve. Bank of America Securities turned bullish in November, with its China equity strategist, Winnie Wu picking internet and financial stocks to lead the short-term rebound.

Overall, however, while consensus is building around economic recovery, there is hesitation over timing and weight of capital to allocate to China as the regulatory and political risks that have stalked its equity markets for the past couple of years remain.

“We would rather miss the first 10% gains, and wait until when we can see clearer, ongoing signs of policy pivot,” said Eva Lee, head of Greater China equities at UBS Global Wealth Management, the world’s biggest wealth manager by assets.

“We have experienced several rounds of policy back and forth in 2022,” she added, referring to both COVID and property policies. UBS Global Wealth Management recommends a market-neutral allocation to Chinese stocks.

There is some evidence that the first leg of an early recovery happened last week, with the Hang Seng .HSI up 6% and closing out its best month since 1998 with a 27% rise through November. The yuan posted its best week since 2005 on Friday.

Market participants say the asset moves so far – coming with COVID cases at record highs and only hints of a shift in authorities’ response – suggest light positioning in China that could lift markets if it were to solidify into steady inflows.

US institutional investors continue to reduce US-listed Chinese American Depositary Receipts (ADRs) so far in the fourth quarter with estimated outflows of USD 2.9 billion.

Short interest in ADRs was also up by 11% last month, Morgan Stanley data as of Nov. 29 shows. Societe Generale analysts downgraded their recommended China allocation from overweight to neutral.

ACCUMULATE ON WEAKNESS

China’s market weathered a perfect storm this year, with US-China tension threatening the US listings of Chinese companies, a credit crisis crunching the once-mighty real estate sector and COVID restrictions curtailing growth.

The CSI300 has lost 22% and the Hang Seng 20% so far this year, compared with a 16% loss for world stocks.

The policy response has been monetary easing, steadily increasing support for the property sector and the easing of some of the strict COVID rules. It is yet to win investors’ full approval, since unpredictable regulation and politics still hang over profitability, and domestic confidence remains fragile.

“Monetary easing has become ineffective, just like pushing a string,” said Chi Lo, senior strategist at BNP Paribas Asset Management. He is sticking with a preference for sectors that are likely to receive policy tailwinds.

“We continue to focus on the three key themes which are in line with China’s long-term growth target: technology and innovation, consumption upgrading and industry consolidation,” he said.

Goldman Sachs also recommends policy-aligned bets on sectors such as technology hardware and profitable state-owned businesses.

Politics aside, price and the prospect that rate hikes put a lid on US equities next year has also got money managers starting to weigh up the risk of missing out.

A 27% drop for the MSCI China index this year has left its price-to-earnings ratio at 9.55 against a 10-year average of 11.29.

“It’s now getting risky to be really underweight or short China as many of the hedge funds were,” said Sean Taylor, Asia-Pacific chief investment officer at asset manager DWS, which thinks there is scope for a 15-20% rally in China next year.

“Our view is to accumulate, on weakness, reopening beneficiaries, and particularly those driven by the consumer,” said Taylor.

(Reporting by Summer Zhen; Editing by Shri Navaratnam)

Oil falls over 3% after data raises Fed interest rate worries

NEW YORK, Dec 5 (Reuters) – Oil prices fell over 3% on Monday, following US stock markets lower, after US service sector data raised worries that the Federal Reserve could continue its aggressive policy tightening path.

Brent crude futures settled down USD 2.89, or 3.4%%, at USD 82.68 a barrel. West Texas Intermediate crude (WTI) fell USD 3.05, or 3.8%, to USD 76.93 a barrel. Both benchmarks had earlier risen more than USD 2, before reversing direction.

During the session, WTI’s front-month contract began trading lower than prices in half a year, a market structure called contango, which implies oversupply.

US services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy as it braces for an anticipated recession next year.

The news caused oil and stock markets to pare gains.

The data challenges hopes that the Fed might slow the pace and intensity of its rate hikes amid recent signs of ebbing inflation.

“Macro-economic jitters about the Fed and what they’re going to do on interest rates are taking over the market,” said Phil Flynn, an analyst at Price Futures group.

Supporting the market earlier, the Organization of the Petroleum Exporting Countries and allies including Russia, together called OPEC+, agreed on Sunday to stick to their October plan to cut output by 2 million barrels per day (bpd) from November through 2023.

“The decision … is not a surprise, given the uncertainty in the market over the impact of the Dec. 5 EU Russia crude oil import ban and the G7 price cap,” said Ann-Louise Hittle, vice president of consultancy Wood Mackenzie.

“In addition, the producers’ group faces downside risk from the potential for weakening global economic growth and China’s zero COVID policy.”

The Group of Seven (G7) countries and Australia last week agreed on a USD 60 a barrel price cap on seaborne Russian oil.

However, the price cap’s effect on the futures market during Monday’s session ran out of steam by the end of the day, said Andrew Lipow, president of Lipow Oil Associates in Houston.

“The market has realized that the EU is already banning the purchase of Russian oil with a few limited exemptions, and China and India are going to continue and purchase Russian crude oil, so the impact of the price cap will be mitigated,” Lipow said.

At the same time, in a positive sign for fuel demand in the world’s top oil importer, more Chinese cities eased COVID curbs over the weekend.

Business and manufacturing activity in China, the world’s second-largest economy, have been hit this year by strict measures to curb the spread of the coronavirus.

(Reporting by Stephanie Kelly in New York; Additional reporting by Noah Browning in London, Sonali Paul in Melbourne and Emily Chow in Singapore; Editing by Marguerita Choy and Matthew Lewis)

Gold retreats from near 4-month peak on positive US jobs data

Dec 2 (Reuters) – Gold prices slipped on Friday, retreating from a near-four month high, after robust US jobs data fanned concerns that the Federal Reserve might stick with its aggressive monetary policy tightening.

Spot gold fell 0.4% to USD 1,794.96 per ounce by 2:21 p.m. ET (1921 GMT), after earlier hitting its highest since Aug. 10 at USD 1,804.46. US gold futures GCv1 settled down 0.3% at USD 1,809.6.

Data showed US employers hired more workers than expected in November and raised wages despite mounting worries of a recession.

“With the US jobs number coming in much stronger than expected… what we’re seeing is the concern that the Fed may need to go further with their expected interest rate hikes,” said David Meger, director of metals trading at High Ridge Future.

“You’re going to see pressure on most asset classes today, not just the precious metals complex.”

The dollar edged 0.1% higher against its rivals, while benchmark US Treasury yield rose.

Additionally, Chicago Fed President Charles Evans stated at an event that there could be “a slightly higher peak rate of the funds rate, even as we likely will step down” the pace of rate hikes from 75 bps.

Fed funds futures prices still implied a 75% chance of the central bank raising its policy rate by 50 basis points to a 4.25%-4.5% range in mid-December.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.

Gold prices were still set for their second straight weekly rise, up 2.2% so far this week, as the dollar dipped after Fed Chair Jerome Powell’s dovish speech this week.

Other precious metals were set for weekly gains as well. Spot silver XAG= rose 1.5% to USD 23.11 per ounce, having hit its highest since May 5. Platinum dropped 2.6% to USD 1,014.25 and palladium was down 2.1% to USD 1,901.25.

(Reporting by Seher Dareen and Brijesh Patel in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)

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