Oil rebounds from early plunge after Saudis deny OPEC+ output report

NEW YORK, Nov 21 (Reuters) – Oil prices rebounded from early losses on Monday after Saudi Arabia denied a report it was discussing an increase in oil supply with OPEC and its allies.

Brent crude futures for January settled at USD 87.45, shedding 17 cents. US West Texas Intermediate (WTI) crude futures for December settled at USD 79.73 a barrel, falling 35 cents ahead of the contract’s expiry later on Monday.

The more active January contract was down 7 cents at USD 80.04 a barrel.

Both benchmarks had plunged by more than USD 5 a barrel early, hitting 10-month lows, after the Wall Street Journal reported an increase of up to 500,000 barrels per day will be considered at the OPEC+ meeting on Dec. 4.

Oil then retraced its losses after Saudi Arabian energy minister Prince Abdulaziz bin Salman said the kingdom is sticking with output cuts and not discussing a potential oil output increase with other OPEC oil producers, state news agency SPA reported, denying the Journal report.

“It turned the whole situation upside down in a matter of minutes,” said John Kilduff, partner at Again Capital LLC in New York. “The Saudis giveth and then they taketh away.”

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, recently cut production targets and the energy minister of de facto leader Saudi Arabia was quoted this month as saying the group will remain cautious.

Releasing more oil amid weak Chinese fuel demand and US dollar strength would have moved the market deeper into contango, encouraging more oil to go into storage and pushing prices still lower, said Bob Yawger, director of energy futures at Mizuho in New York. “That’s playing with fire.”

Expectations of further increases to interest rates have buoyed the greenback, making dollar-denominated commodities like crude more expensive for investors.

The dollar rose 0.9% against the Japanese yen to 141.665 yen, on pace for its largest one-day gain since Oct. 14.

“Apart from the weakened demand outlook due to China’s COVID curbs, a rebound in the US dollar today is also a bearish factor for oil prices,” said CMC Markets analyst Tina Teng.

“Risk sentiment becomes fragile as all the recent major countries’ economic data point to a recessionary scenario, especially in the UK and euro zone,” she said, adding that hawkish comments from the US Federal Reserve last week also sparked concerns over the US economic outlook.

New COVID case numbers in China remained close to April peaks as the country battles outbreaks nationwide.

The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into contango, reflecting dwindling supply concerns.

(Reporting by Laila Kearney in New York; Additional reporting by Noah Browning, Florence Tan and Emily Chow; Editing by Chris Reese and Matthew Lewis)

With Black Friday ahead, investors look to US consumer stocks

NEW YORK, Nov 18 (Reuters) – As the most important shopping period of the year approaches, some investors are betting shares of beaten-down consumer stocks will benefit if inflation keeps falling and retail sales stay strong.

Consumer discretionary stocks, a group whose members run the gamut from Amazon.com Inc. (AMZN) and automaker Tesla Inc. (TSLA) to retailer Target Corp. (TGT), have been walloped by surging prices, with the S&P 500’s consumer discretionary sector falling nearly 33% for the year to date compared with a nearly 17% fall for the broader index.

Yet recent data has shown signs that inflation may be ebbing in the face of stronger-than-expected retail spending, raising cautious optimism that the economy could avoid a recession or experience only a mild downturn. Investors poured a net USD 1.05 billion into consumer discretionary stocks in the past week, the sixth-largest weekly inflows since 2008, data from BofA Global Research showed.

The upcoming Black Friday, the day after the US Thanksgiving holiday and traditionally one of the year’s biggest shopping days, may give investors greater insight into the extent that consumers are opening their wallets.

“There’s some questions as to how strong the consumer really is, so this will be a tricky holiday season,” said Edward Yruma, an analyst at Piper Sandler. “Everybody is watching the strength of the consumer and so far the consumer has held.”

Yruma is bullish on retailers Nordstrom Inc. (JWN) and Target. He believes, however, it may be too early to bet on the sector as a whole since inflation remains high by historical standards while many on Wall Street fear the Federal Reserve’s monetary policy tightening may bring on a US recession.

To be sure, consumer stocks have had more than their fair share of woes this year.

Target shares plunged on Tuesday after the company warned of “dramatic changes” in consumer behavior that were hurting demand. Amazon.com, the world’s biggest online retailer, said on Oct. 27 it was preparing for slower growth because “people’s budgets are tight” due to inflation.

The companies’ shares are down 29.6% and 43.5% year-to-date, respectively.

While retail sales in October were strong, data suggests that subprime auto loan delinquencies are increasing and higher-income shoppers are starting to trade down, Morgan Stanley economists said in a note on Friday.

“The consumer has been a pillar of strength this year, but as rates keep rising and the labor market slows, consumers will have no choice but to pull back on spending,” the firm’s economists wrote. The bank’s analysts are underweight the consumer discretionary sector.

Others, however, see reasons to remain bullish – even in the face of a potential economic downturn.

“Recession fears are so priced in to this group,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “If we have a mild recession … they will do very well from here on out.” He is betting shares of retailers, hotels and restaurants will outperform the rest of the sector in the coming year.

Some companies’ lower valuations may also give investors wiggle room if the economy slows, said Bobby Griffin, an analyst at Raymond James. His firm has a strong “buy” on shares of Home Depot Inc. (HD), which are trading at a 15% discount to their historic forward price-to-earnings multiple.

“We’ve had this fear of inflation all year and the consumer has held up pretty well so far,” he said.

At the same time, signs of consumer strength could also be a red flag to the inflation-fighting Fed, bolstering the case for the central bank to push forward with the monetary policy tightening that has pressured markets and drained risk appetite this year.

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, believes signs that consumers are not being affected by rising rates could lead to a higher-than-expected peak in the Fed’s rate hiking cycle.

“We’re skeptical the worst is behind us,” he said.

(Reporting by David Randall in New York; Editing by Ira Iosebashvili and Matthew Lewis)

Falling Q4 profit forecasts another negative for US stocks

NEW YORK, Nov 18 (Reuters) – After a disappointing third-quarter reporting period, analysts are projecting that fourth-quarter US earnings will decline for the first time in two years as rising interest rates and slowing growth further dampen the outlook.

Estimates have been falling for 2023 quarters as well, and Goldman Sachs recently cut its 2023 S&P 500 earnings per share growth forecast to zero, citing weakening profit margins.

As of Friday, analysts were forecasting a 0.4% fall in year-over-year fourth-quarter earnings for S&P 500 companies, according to IBES data from Refinitiv. That compares with the 5.8% increase they forecast on Oct. 1.

The last time there was a quarterly decline in S&P 500 earnings was in the third quarter of 2020, when companies were still reeling from the initial shock of and disruptions caused by the coronavirus pandemic.

The weakening profit outlook only adds to worries for investors, who have been concerned that aggressive interest rate hikes by the Federal Reserve to control inflation could lead to a recession. The S&P 500 is down about 17% for the year-to-date.

“Third-quarter earnings, they missed expectations. But what we’ve been focusing on really is 2023,” said Michael Mullaney, director of global markets research at Boston Partners in Boston.

“For the Fed to achieve their inflation targets, they’re going to have to push the economy into a recession,” which means 2023 profit estimates “have to come down a lot more,” he said.

Technology and tech-related companies have accounted for more than half of the negative S&P 500 profit revisions for the fourth quarter, Jonathan Golub, head of US equity strategy and quantitative research at Credit Suisse, wrote in a recent research note.

Several of the big tech and growth companies including Amazon.com (AMZN) and Facebook parent Meta Platforms (META) hit investors with big disappointments for the third quarter and gave disappointing forecasts for the fourth quarter.

Rising Treasury yields have pressured shares of tech and growth companies especially hard.

Top retailers were also among those reporting disappointing results, led by Target (TGT), although Walmart delivered cheer to investors.

With results in from 475 of the S&P 500 companies as of Friday, third-quarter earnings are now estimated to have increased just 4.2% from a year ago. That is weaker than the 4.5% gain predicted at the start of October, based on Refinitiv data.

Estimates for future earnings tend to fall as companies give guidance, but strategists said the declines this time have been larger than usual.

Analysts expect S&P 500 technology sector earnings to drop 7.8% in the fourth quarter, compared with a gain of 1.0% forecast on Oct. 1. Earnings for the communication services sector are predicted to fall 20.9%, compared with a 9.2% decline forecast on Oct. 1, per Refinitiv data.

Overall, seven of the 11 major S&P 500 sectors are expected to show a decline in fourth-quarter earnings from the year-ago period, based on the data.

(Reporting by Caroline Valetkevitch; Editing by Alden Bentley and Leslie Adler)

FTX’s Sam Bankman-Fried cashed out USD 300 million during funding spree – WSJ

Nov 18 (Reuters) – FTX founder Sam Bankman-Fried sold a stake in the company worth USD 300 million when the crypto exchange raised capital last year, the Wall Street Journal reported on Friday, citing the firm’s financial records and people familiar with the transaction.

At the time, Bankman-Fried told investors it was a partial reimbursement of money he’d spent to buy out rival Binance’s stake in FTX a few months earlier, the report added.

Bankman-Fried and FTX did not immediately respond to Reuters’ requests for comment on the matter.

The Journal’s report cited FTX’s October 2021 funding round where the company had raised USD 420 million from a clutch of big name investors including Temasek and Tiger Global, valuing the crypto exchange at USD 25 billion.

Last week, FTX filed for US bankruptcy protection and Bankman-Fried resigned as chief executive, after Binance walked away from its proposed acquisition.

Several crypto firms have since been bracing for a fallout from the FTX collapse, with many counting their exposure in millions to the beleaguered exchange.

(Reporting by Manya Saini in Bengaluru; Editing by Maju Samuel)

US recap: EUR/USD consolidates rally driven by Fed pivot hopes

Nov 18 (Reuters) – The dollar index rose on Friday for a second day after becoming oversold in its tumble following last week’s softer US CPI, consolidating above supports as Fed speakers pushed back against the market pricing a dovish policy pivot.

The dollar shrugged off data showing US existing home sales fell to their lowest since 2012, outside of the pandemic plunge, and leading indicators dropping by twice the 0.4% decline forecast.

EUR/USD fell 0.3% regardless of ECB speakers affirming rates need to rise further to become restrictive, as there was some relief Germany’s biggest union agreed to wage increases well below currently record-high euro zone inflation.

The ECB, and other central banks, are wary of wages trending sharply higher, exacerbating inflation and requiring even more policy tightening.

Sterling rose 0.2%, but like the EUR/USD, its recent recovery highs remained capped just below the 50% Fibo of this year’s downtrend, in sterling’s case at 1.2038.

The highly anticipated UK budget announcement Thursday was followed by a rebound in gilts yields, partly because the risk premia caused by September’s mini budget had already been shed and also because the new budget plan reveals how difficult it will be to lower rising debt servicing costs.

USD/JPY was nearly flat in a tight range below the 100-day moving average it broke bearishly below last week, now at 140.98. Friday’s 139.63 EBS low was the third consecutive higher low, as bulls try to keep prices from closing below the cloud base, last at 140.42, for the first time in 14 months.

Because the base rises above 141 next week, a bearish close is becoming harder to fend off.

Wednesday’s US durable goods and S&P Global’s November PMI are the last data points before Thursday’s Thanksgiving Day holiday.

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

Gold falls on Fed rate hike prospects, on track for weekly dip

Nov 18 (Reuters) – Gold prices fell on Friday and were bound for a weekly dip following indications from US Federal Reserve officials that more interest rate hikes were due as the bank seeks to lower inflation.

Spot gold fell 0.7% to USD 1,748.84 per ounce by 2:08 p.m. ET (1908 GMT), set for a weekly decline of about 1.3%, its biggest since mid-October.

US gold futures settled down 0.5% at USD 1,754.4.

The slight pullback in gold after the recent rally has been through a technical retracement in the gold market, said David Meger, director of metals trading at High Ridge Future.

The pullback could continue going into next week’s December option expiration, which could cause a further consolidation in gold, Meger said, adding that the market overall seems focused on interest rate expectations from the Fed.

Federal Reserve Bank of Boston leader Susan Collins said on Friday the central bank has more rate rises ahead of it as it seeks to lower inflation, adding that a 75-basis point hike was still on the table.

The dollar index steadied, making gold more expensive for other currency holders, while benchmark US Treasury yields also edged higher.

While gold has shed 15% since its March peak after the Fed began tightening monetary policy, it has gained about 7% since the beginning of November as markets started pricing in a slower pace of rate hikes.

Markets currently see an 87% chance of a 50-bps hike at the Fed’s December meeting.

“Gold had been able to hold its own relatively well so far …(yet) a correction was always likely after its big move upward,” Fawad Razaqzada, market analyst at City Index, said.

Spot silver fell 0.3% to USD 20.90 per ounce, en route falling 3.7% for the week.

Platinum fell 0.4% to USD 976.67, seeing its biggest weekly fall since mid-September, while palladium dropped 3.3% to USD 1,940.14, also falling for the week.

(Reporting by Seher Dareen in Bengaluru; Editing by Shailesh Kuber, Shounak Dasgupta and Krishna Chandra Eluri)

China issues rules to lure foreign investors into bond market

BEIJING, Nov 18 (Reuters) – China’s central bank issued new rules on Friday to make the country’s bond market more attractive to foreign institutional investors, expanding currency hedging channels and making it easier for them to repatriate funds.

China will unify its rules on cash accounts and cash payments for foreign investors and improve the way it manages foreign exchange sales and purchases for foreign investors, according to the rules published on the central bank’s website.

The rules “will be conducive to further facilitating foreign institutional investors’ investment in China’s bond market,” the central bank said, announcing the latest of several steps taken over the past few months to make the bond market more attractive to foreign investors.

China will encourage foreign institutional investors to use the yuan in cross-border settlements, and complete deals through China’s Cross-Border Interbank Payment System (CIPs), according to the rules that will take effect from Jan. 1, 2023.

The changes will allow institutional investors to transfer funds held in their special accounts under the Qualified Foreign Institutional Investor (QFII) scheme and its yuan-denominated sibling, RQFII, and funds in their bond market special accounts.

In July, China said it would facilitate foreign investment in its bond market, pledging to cut service fees, improve overseas access to foreign exchange hedging, and streamline the process of opening accounts.

(Reporting by Beijing newsroom, Ellen Zhang and Kevin Yao; Editing by Raissa Kasolowsky & Simon Cameron-Moore)

Philippine central bank: October balance of payments at USD 711-million surplus

MANILA, Nov 18 (Reuters) – The Philippines’ overall balance of payments (BOP) position was a surplus of USD 711 million in October, lower than the USD 1.1 billion surplus recorded in the same month last year, the central bank said on Friday.

The BOP surplus for October reduced the cumulative BOP deficit in January-October to $7.1 billion from a deficit of USD 7.8 billion in the first three quarters of the year, it said in a statement.

(Reporting by Enrico Dela Cruz; Editing by Christopher Cushing)

Philippine central bank has to raise rates along with Fed to support peso

MANILA, Nov 18 (Reuters) – The Philippine central bank will have to raise interest rates if the US Federal Reserve tightens policy further to support the peso and prevent the currency’s weakness from further stoking inflation, its governor said on Friday.

Bangko Sentral ng Pilipinas has raised interest rates by 300 basis points this year to curb inflation, running near 14-year highs, and support the peso which has fallen sharply against the dollar, underpinned by aggressive US monetary tightening.

The Federal Reserve is expected to deliver a smaller rate hike in December, but economists polled by Reuters see a longer period of tightening and a higher policy rate peak as risks to the current outlook.

“If the Fed does 50, we cannot have zero, right? So, the question is whether it’s 25 or 50,” BSP Governor Felipe Medalla told Reuters in an interview in Manila.

“If you have a scenario (where) the Fed will not hike any more then I can tell you flat out, neither are we.”

BSP raised interest rates by 75 basis points on Thursday, largely to match the Fed’s three-quarter point hike this month and is expected to hike again in December.

The Fed will likely raise rates by 50 basis points next month after four consecutive 75-bp increases, according to the Reuters poll.

Medalla reiterated the rate differentials between the United States and the Philippines should not be allowed to narrow sharply, lest the weakness in the peso would persist and push up already elevated prices of imported food and fuel.

BSP’s rate hike on Thursday brought the rate on its overnight reverse repurchase facility to 5.0%, the highest in nearly 14 years. That compares with the Fed’s policy rate of 3.75%-4%.

A shrinking rate gap has spurred an 11% decline in the peso against the dollar this year, putting the currency at the forefront of the BSP’s policy decisions. Medalla says the weak currency has become a price “shock generator.”

“If inflation is a huge problem, you don’t want the weakening of the peso to add to that further,” Medalla said.

The central bank wants to bring inflation, currently running at 7.7%, back to its 2%-4% target by the second half of next year, Medalla said.

Medalla said the economy, which grew by a faster-than-expected 7.6% in the third quarter, is strong enough to withstand the series of rate hikes, thanks largely to pent-up demand.

“The postponed spending on the capex side plus the pent-up demand on (the) consumer side means we will have fairly strong demand despite the rate increases,” Medalla said.

(Reporting by Karen Lema; Editing by Ana Nicolaci da Costa)

Oil retreats as demand concerns weigh, tracking for steep weekly losses

MELBOURNE, Nov 18 (Reuters) – Oil pared early gains and was on track for a steep weekly decline on concerns about weakening demand in China and further interest rate rises by the US Federal Reserve.

Brent crude futures had edged lower by 13 cents or 0.1% to USD89.65 a barrel by 0737 GMT, and were not far off four-week lows of USD89.53 hit in the previous session.

US West Texas Intermediate (WTI) crude futures rose 13 cents, or 0.2%, to USD81.77 a barrel, but held near a six-week low. WTI is down 8% so far this week, while Brent is down more than 6%.

The dollar index inched lower on Friday, making oil cheaper for buyers holding other currencies.

“I hate using the lame short-covering mantra, but there is little other than the slightly weaker greenback to trigger a bid under oil so far,” said Stephen Innes, managing partner at SPI Asset Management.

Analysts said concerns about potential lockdowns in China to curb a surge in COVID cases, which hit their highest level since April, and worries that more interest rate hikes will drive the US economy into recession cast a pall over the market.

Remarks from US Federal Reserve officials this week and stronger-than-expected retail sales data have dashed some hopes for the moderation of aggressive interest rate hikes in the United States.

The Fed is expected to raise rates by a smaller 50 basis points in December after four consecutive 75 bp hikes, according to a Reuters poll.

“In the near term sentiment is likely to remain negative given the deteriorating macro picture and signs of physical weakness,” said Warren Patterson, head of commodities strategy at ING.

China, the world’s biggest oil importer, reported 25,353 new COVID-19 infections on Nov. 17 up from 23,276 new cases a day earlier, the National Health Commission said on Friday.

“The policy settings in the city of Guangzhou in southern China, where COVID‑19 cases have surged significantly, will be important to watch,” Commonwealth Bank commodities analyst Vivek Dhar said in a note. Guangzhou, a key manufacturing hub in China, is home to 19 million people.

Recession concerns have dominated this week even with the European Union’s ban on Russian crude looming on Dec. 5 and the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, tightening supply.

The premium for front-month WTI futures over barrels loading in six months was pegged at USD2.42 a barrel, the lowest level in three months, indicating less worry about future supply.

(Reporting by Sonali Paul in Melbourne and Muyu Xu in Singapore; Editing by Ana Nicolaci da Costa and Bradley Perrett)

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