Foreigners exit Asian bonds for second straight month in October

Nov 16 (Reuters) – Asia ex-China bonds witnessed outflows for a second straight month in October, pressured by higher US yields and a weaker growth outlook as the region’s exports fell sharply last month.

Overseas investors sold a net USD 3.24 billion worth of bonds in India, Indonesia, Malaysia, South Korea and Thailand, after withdrawing a net USD 2.91 billion in the previous month, data from regulatory and bond market associations showed.

The US Federal Reserve has been aggressively hiking interest rates to combat sky-high inflation, raising the chances of a recession and pushing investors away from higher-risk emerging markets.

Malaysian bonds recorded foreign outflows of USD 1.32 billion, their biggest monthly net selling since March 2020. Indonesian bonds witnessed disposals of USD 1.1 billion, a little lower than the previous month’s outflows of USD 1.9 billion.

Indonesia’s central bank raised its policy rates by 50 basis points for the second month in October in an effort to curb inflation and arrest portfolio outflows.

Indian and Thai bonds also recorded foreign outflows, worth USD 432 million and USD 392 million, respectively, last month, but South Korean bonds saw small inflows.

Worsening investor woes, exports slumped in most of the region, including China, South Korea, and Taiwan, as demand from developed countries slowed.

However, most emerging market currencies have surged against the dollar this month as US inflation rose less than expected in October, raising hopes that the Fed would slow the pace of its hikes.

“The US monetary policy outlook is still the major driver of portfolio flows in Asia,” said Khoon Goh, head of Asia research at ANZ.

“Although the magnitude of future US rate hikes will likely be trimmed, the prospect of a higher terminal fed funds rate remains a headwind, though the recent softer US CPI print has provided some respite.”

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Devika Syamnath)

Dollar rally fizzles as traders reassess risks from Poland

TOKYO, Nov 16 (Reuters) – The safe-haven US dollar’s early gains fizzled following volatile trading on Wednesday as traders took comfort from US President Joe Biden’s remarks that a missile that caused a explosion in Poland may not have been fired from Russia.

NATO-member Poland and Ukraine say the blast that killed two in a town close to their border was caused by a Russian-made rocket, raising concerns of an escalation in the war. However, Biden said the weapon was probably not fired by Russia, although the investigation was ongoing.

According to US officials, initial findings suggested that the missile that hit Poland had been fired by Ukrainian forces at an incoming Russian missile, the Associated Press said.

Russia denies it was responsible for the explosion.

“The market is trying to size up the risk and what that really means,” said Moh Siong Sim, currency strategist at Bank of Singapore. “Is that something that is going to lead to further tension or perhaps this is something that will deescalate over the next few days.”

“Right now, it’s a bit of a tussle in the market as to how to price this risk,” he added.

Biden was speaking after global leaders held an emergency meeting on Wednesday following the deadly explosions that Ukraine and Polish authorities said were caused by Russian-made missiles.

Turbulent trading during the Asian session saw major currencies swing between gains and losses, with the US dollar index, which measures the greenback against six peers and weights the euro most heavily, rising as much as 0.31% to 106.76 before last trading 0.05% lower at 106.38.

The euro was up 0.127% at USD 1.0377, having slipped 0.18% earlier. The currency saw similar moves overnight.

Sterling was last trading at USD 1.1875, up 0.06% after reversing its losses from earlier in the day.

The Japanese yen was about 0.3% weaker at 139.75 per dollar, influenced by a rise in US long-term Treasury yields during Tokyo trading as haven demand eased. Bond yields move inversely to prices.

Risk-sensitive Antipodean currencies recovered from earlier declines with Australian dollar last up 0.19% at USD 0.67685, while the kiwi was flat at USD 0.6158.

“The currency market is stabilising, toying with the notion that this … doesn’t necessarily imply an escalation in the war, with NATO needing to get involved,” said Rodrigo Catril, a senior currency strategist at National Australia Bank.

Resiliency in the Aussie and New Zealand dollars despite the swings in risk sentiment shows “there is a lot of appetite to push the US dollar lower,” Catril said.

(Reporting by Kevin Buckland and Ankur Banerjee in Singapore; Editing by Edmund Klamann and Bradley Perrett)

G20 vows to calibrate pace of interest rate hikes, avoid spillovers

NUSA DUA, Indonesia, Nov 16 (Reuters) – Leaders of the world’s biggest economies agreed to pace their interest rate hikes carefully to avoid spillovers and warned of “increased volatility” in currency moves, a sea change from last year’s focus on mending the scars of the COVID-19 pandemic.

In a leaders’ declaration signed on Wednesday, the Group of 20 (G20) members said the world economy was facing “unparalleled multidimensional crises” ranging from the war in Ukraine to a surge in inflation, which are forcing many central banks to tighten monetary policy.

“G20 central banks … are closely monitoring the impact of price pressures on inflation expectations and will continue to appropriately calibrate the pace of monetary policy tightening in a data-dependent and clearly communicated manner,” said the statement signed after a two-day G20 summit held in Bali.

The central banks will also be mindful of the need to limit spillovers, the statement added, in a nod to emerging economies’ concerns about the potential for huge capital outflows if aggressive US rate hikes continue.

“Central bank independence is crucial to achieving these goals and buttressing monetary policy credibility,” it added.

The emphasis on the need to fight inflation contrasted with the G20 statement last year, which said central banks must avoid overreacting to transitory rises in inflation.

The G20 leaders also called for “temporary and targeted” fiscal spending to low-income households which are particularly vulnerable to rising living costs. Last year, the leaders warned against any premature withdrawal of support to ensure the global recovery remained intact.

The shift in tone underscores the rapid change in the global environment and policymakers’ priorities, caused in large part by Russia’s invasion of Ukraine in February.

An abrupt, sharp rise in inflation, driven by increasing commodity and fuel costs, caught many central banks off guard and forced them to shift gear toward rapid monetary tightening.

Now, policymakers are faced with the dilemma of having to combat inflation with interest rate hikes, without cooling economies that are already facing the risk of recession.

The head of the World Trade Organization (WTO) warned of the risk of various uncertainties clouding the global economic outlook.

“It may not happen everywhere, but several key countries risk sliding into recession,” said WTO Director-General Ngozi Okonjo-Iweala.

“Of course, the impact of that can be quite significant for emerging markets and poor countries, which need external demand from the developed countries to recover,” she told Reuters.

Aggressive rate hikes by the US Federal Reserve have already jolted financial markets by causing a broad-based rise in the dollar, forcing countries like Japan to intervene in the foreign exchange market to stem sharp declines in their currencies.

In Wednesday’s declaration, the G20 members reaffirmed their commitment to avoid excessive currency volatility. It also included a phrase recognising that many currencies have “moved significantly this year with increased volatility.”

Tokyo authorities have justified their yen-buying intervention as aimed at smoothing what they saw as excessively volatile moves in the currency.

(Reporting by Leika Kihara; Editing by Shri Navaratnam and Ana Nicolaci da Costa)

Asian stocks shaken by blast in Poland; dollar gains

HONG KONG, Nov 16 (Reuters) – Asian stocks dropped and the dollar gained on Wednesday after a blast in Poland that Ukraine and Polish authorities said was caused by a Russian-made missile.

Worries over a potential ratcheting up of geopolitical tensions spurred a drop of 1% in MSCI’s broadest index of Asia-Pacific shares outside Japan.

Australian shares fell 0.4%, while Japan’s Nikkei stock index dropped 0.1%.

Hong Kong’s Hang Seng Index shed 1.1% and China’s CSI 300 fell 0.4% by the midday break. The struggling property sector weighed on the markets, with China’s new home prices falling at their fastest pace in more than seven years in October, weighed down by COVID 19-related curbs and industry-wide problems.

US stock futures, the S&P 500 e-minis, fell 0.2%.

In early European trade, the pan-region Euro Stoxx 50 futures lost 0.9%, German DAX futures dipped 1%, and FTSE futures fell 0.5%.

NATO member Poland said on Wednesday that a Russian-made rocket killed two people in eastern Poland near Ukraine, and it summoned Russia’s ambassador to Warsaw for an explanation after Moscow denied it was responsible.

“(It) interrupted what is a far more constructive tone in markets over the last three, four days,” said Dwyfor Evans, head of Asia Pacific macro strategy at State Street Global Markets in Hong Kong, who noted optimism in the financial markets that US inflation was cooling.

US President Joe Biden said the United States and its NATO allies were investigating the blast but early information suggested it may not have been caused by a missile fired from Russia.

“I do think President Biden’s comment was clear in representing the US government,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

“Unless there’s evidence to the contrary, (market concerns) should dissipate.”

The safe-haven US dollar pared gains against its major peers but was still mostly higher, led by a 0.63% advance versus the yen.

Sterling lost 0.32%, while the risk-sensitive Aussie dollar weakened 0.34%. The euro was flat.

“A lot of headlines are going on around today but there’s a feeling that this is not going to, at this stage… result in an escalation in tensions, or at least there is no appetite to go in that direction,” said Rodrigo Catril, senior currency analyst at National Australia Bank in Sydney.

The fact that the risk-sensitive, pro-growth Australia and New Zealand dollars retained most of their big gains from Tuesday, following soft US PPI readings, is an indication that “there is a lot of appetite to push the US dollar lower,” Catril said.

The yield on benchmark 10-year Treasury notes rose to 3.8068% in Tokyo, compared with 3.799% at the close of US trading on Tuesday. It earlier fell as low as 3.757%, matching the previous session’s intraday trough, which was the lowest since Oct. 6.

US crude dipped 0.74% to USD 86.29 a barrel. Oil prices rose on Tuesday after news that oil supply to Hungary via the Druzhba oil pipeline had been temporarily suspended due to a fall in pressure.

Gold was slightly lower, with spot gold trading at USD 1,778.17 per ounce.

(Reporting by Xie Yu; Additional reporting by Ankur Banerjee; Editing by Edwina Gibbs and Edmund Klamann)

Oil prices ease as China COVID concerns outweigh supply woes

SINGAPORE, Nov 16 (Reuters) – Oil prices slid on Wednesday as COVID-19 cases in China continued to climb, sparking worries of lower fuel demand in the world’s top crude importer that outweighed concerns about an escalation of geopolitical tensions and tighter oil supply.

Brent crude futures dropped by 33 cents, or 0.4%, to USD 93.53 a barrel by 0737 GMT, while US West Texas Intermediate (WTI) crude futures fell 44 cents, or 0.5%, to USD 86.48 a barrel. Both benchmarks fell more than USD 1 earlier in the session.

Oil prices settled higher on Tuesday after oil supply to parts of Eastern and Central Europe via a section of the Druzhba pipeline was temporarily suspended, according to oil pipeline operators in Hungary and Slovakia.

The disruption came concurrent with an explosion in a village in eastern Poland near the Ukraine border that killed two people and raised the possibility that the Russian-Ukraine conflict could spill over.

But after the initial “knee-jerk rally in oil prices, the tepid market follow-through reflects the significant prudence that will be taken to avoid an escalation,” said Stephen Innes, managing partner at SPI Asset Management.

US President Joe Biden’s comments that the missile was probably not fired from Russia also helped to ease immediate escalation worries, Innes said.

In China, rising COVID-19 cases are weighing on sentiment despite the hopes raised by easing virus restrictions this week.

“From all accounts, China is persisting with its zero-COVID policy, which is a natural dampener for oil market sentiment,” said Vandana Hari, founder of Vanda Insights in Singapore.

That has dampened the oil demand growth outlook, with the International Energy Agency (IEA) forecasting demand growth to slow to 1.6 million bpd in 2023 from 2.1 million bpd this year.

Earlier, the Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for 2022 global oil demand growth for a fifth time since April citing mounting economic challenges.

Industry data showing a bigger-than-expected drop in US crude stockpiles provided some support to oil prices.

US crude oil inventories fell by about 5.8 million barrels for the week ended Nov. 11, according to market sources citing American Petroleum Institute figures.

By comparison, seven analysts polled by Reuters estimated on average that crude inventories dropped by about 400,000 barrels.

Official US inventory data from the Energy Information Administration is due at 10:30 a.m. EST (1530 GMT).

In the United States, producer prices increased less than expected in October, suggesting inflation was starting to ease, which may allow the Federal Reserve to slow its aggressive pace of interest rate hikes.

(Reporting by Isabel Kua; Editing by Tom Hogue)

Oil falls as Druzhba pipeline reopens, China COVID worries stay at the fore

BENGALURU, Nov 16 (Reuters) – Oil prices settled more than a dollar lower on Wednesday after Russian oil shipments via the Druzhba pipeline to Hungary restarted and as rising COVID-19 cases in China weighed on sentiment.

Brent crude futures settled a dollar lower at USD 92.86 a barrel, down 1.1%. US West Texas Intermediate (WTI) crude futures slid by USD 1.33, or 1.5%, to settle at USD 85.59 a barrel.

The market gave up early gains after Hungarian Foreign Minister Peter Szijjarto said that flows through the Druzhba oil pipeline from Russia had resumed following a brief outage.

The market later recovered some losses after US crude stocks fell more than expected on the back of heavy refining activity. The Energy Information Administration said US crude inventories fell by 5.4 million barrels last week, compared with expectations for a 440,000-barrel drop.

In addition, tanker-tracker Petro-Logistics said in a report that exports from the Organization of Petroleum Exporting Countries (OPEC) have fallen significantly so far this month.

“Various geopolitical influences – from an oil tanker being hit by a bomb-carrying drone off the coast of Oman, to Russia tensions – are being largely dismissed in favor of a focus on the more bearish elements such as weak Chinese economic data and demand,” said Matt Smith, oil analyst at Kpler.

In China, rising COVID-19 cases weighed on sentiment after an easing of virus restrictions this week.

Meanwhile, Iraq plans to raise its production capacity to around 7 million barrels a day in 2027, state-owned oil marketer SOMO told Reuters, although any increases will be in coordination with OPEC.

The International Energy Agency (IEA) forecast demand growth to slow to 1.6 million bpd in 2023 from 2.1 million bpd this year.

(Reporting by Shariq Khan in Bengaluru; Additional reporting by Isabel Kua in Singapore; Editing by Jonathan Oatis, Matthew Lewis and Deepa Babington)

Wall Street gains on inflation data, but rocky on geopolitics

Nov 15 (Reuters) – Wall Street’s main indexes gained on Tuesday, shaking off an unconfirmed report of Russian missiles crossing into Poland that sparked volatility, as investors seized on softer-than-expected inflation data that raised hopes of a pullback in rate hikes by the US Federal Reserve.

Equities were boosted by Tuesday’s inflation report that showed producer prices rising 8% in the 12 months through October against an estimated 8.3% rise.

The gains built on a rally that was kicked off late last week by a cooler-than-expected report on consumer prices.

“The market has been driven by the inflation number that came out a little bit lower than expected and confirmed last week’s number to some degree that we may have rounded the corner on inflation,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

The market was “a little bit more volatile this afternoon as news stories came out about the Russian missile landing in Poland,” Tuz said.

The Dow Jones Industrial Average rose 56.22 points, or 0.17%, to 33,592.92, the S&P 500 gained 34.48 points, or 0.87%, to 3,991.73 and the Nasdaq Composite added 162.19 points, or 1.45%, to 11,358.41.

Two people were killed in an explosion in Przewodow, a village in eastern Poland near the border with Ukraine, firefighters said as NATO allies investigated reports that the blast resulted from Russian missiles.

The Associated Press earlier cited a senior US intelligence official as saying the blast was due to Russian missiles crossing into Poland. But the Pentagon said it could not confirm that account.

Stocks pulled back around mid-day after the report, with the Dow turning negative, before they steadied.

“The decline was triggered by reports of a Russian missile landing in Poland,” said Steve Sosnick, chief strategist at Interactive Brokers. “This could develop into something far worse, but right now markets are nervous, not panicked.”

Shares of Walmart Inc jumped 6.5% after the top US retailer lifted its annual sales and profit forecasts, benefiting from a steady demand for groceries despite higher prices.

Shares of other retailers, including Target Corp and Costco, also rose following Walmart’s report. Target, which is due to report on Wednesday, rose 3.9%, while Costco gained 3.3%.

Home Depot HD.N shares rose 1.6% after the home improvement chain’s results showed it tapped higher prices to override a drop in customer transactions for the third quarter.

Advancing issues outnumbered declining ones on the NYSE by a 3.25-to-1 ratio; on Nasdaq, a 2.01-to-1 ratio favored advancers.

The S&P 500 posted 5 new 52-week highs and no new lows; the Nasdaq Composite recorded 85 new highs and 76 new lows.

About 13.1 billion shares changed hands in US exchanges, compared with the 12.2 billion daily average over the last 20 sessions.

(Reporting by Lewis Krauskopf and Carolina Mandl in New York, Shubham Batra, Sruthi Shankar, Amruta Khandekar and Ankika Biswas; Additional reporting by Devik Jain;
Editing by Shounak Dasgupta and Arun Koyyur)

Oil prices settle higher on Druzhba oil pipeline disruption

NEW YORK, Nov 15 (Reuters) – Oil prices rose on Tuesday and settled higher after news that oil supply to Hungary via the Druzhba oil pipeline has been temporarily suspended due to a fall in pressure.

Brent crude futures rose 72 cents to settle at USD 93.86 a barrel, while US West Texas Intermediate crude rose USD 1.05 to USD 86.92.

Russia’s state-owned pipeline monopoly Transneft has been notified by Ukraine of the pipeline disruption, the RIA news agency quoted Transneft as saying on Tuesday.

The United States said it was investigating unconfirmed reports that stray Russian missiles caused an explosion that killed two people in a Polish village near the border with Ukraine.

A European Union ban on seaborne Russian crude, set to start on Dec. 5, means that 1.1 million barrels per day (bpd) must be replaced, the International Energy Agency said on Tuesday.

“When you look at what we saw from the IEA about global oil inventories, that should be very bullish,” said Phil Flynn, an analyst at Price Futures Group.

Adding support to oil prices, US producer prices increased less than expected in October, more evidence inflation was starting to ease, which could allow the Federal Reserve to slow its aggressive interest rate hikes.

Wall Street indexes rose after the data, while the US dollar index fell, making greenback-denominated oil less expensive for other currency holders.

“The inflation data was positive in a way. Stocks took off from that and it looks like we’re getting dragged higher now,” said John Kilduff, partner at Again Capital LLC in New York. “We’re still in that inverse dollar effect here.”

The IEA forecast that a gloomy economic outlook will put global oil use on track to contract by nearly a quarter million bpd in the fourth quarter of 2022 year on year, with demand growth slowing to 1.6 million bpd in 2023 from 2.1 million bpd this year.

US crude stocks fell by about 5.8 million barrels for the week ended Nov. 11, according to market sources citing American Petroleum Institute figures on Tuesday. Gasoline inventories rose by about 1.7 million barrels, while distillate stocks rose by about 850,000 barrels.

US government data on inventories is due Wednesday.

In China, COVID cases rose further, including in the capital Beijing, and the country’s factory output growth slowed.

Investment bank JPMorgan cut its quarterly and full-year forecasts for economic growth in China. The Organization of the Petroleum Exporting Countries (OPEC) cut its 2022 global oil demand growth forecast for a fifth time since April, citing mounting economic challenges including high inflation and rising interest rates.

(Reporting by Stephanie Kelly in New York; Additional reporting by Rowena Edwards in London and Florence Tan and Isabel Kua in Singapore; Editing by David Gregorio and Emelia Sithole-Matarise)

US recap: EUR/USD rally hits near-term crescendo on soft US PPI

Nov 15 (Reuters) – The dollar index firmed on Tuesday, rallying back sharply from a three-month low as risk sentiment deteriorated rapidly late in the session after Russia-Ukraine concerns vaulted back to the forefront of investors’ worries.

A senior US intelligence official said Russian missiles crossed into Poland, killing two people, the Associated Press reported. Reuters could not immediately confirm the information.

Polish Prime Minister Mateusz Morawiecki has called an urgent meeting of a government committee for national security and defense affairs, the government spokesman said on Twitter. Russia rained missiles on cities across Ukraine on Tuesday after its withdrawal from Kherson.

The afternoon price action reversed much of the earlier trends that followed well-below-forecast US PPI readings, which had sent Treasury yields lower and stocks higher.

Following last Thursday’s disinflationary CPI report the terminal fed funds rate has settled around 4.9% — from above 5% at its peak — while futures also project a switch to rate cuts in the second half of 2023, with nearly two reductions of 25bp priced in.

Most Fed speakers maintained the need to keep hiking rates, albeit smaller than the preceding four 75bp moves, with a data-dependent plateau after that to make certain inflation is retreating toward the long-term 2% objective.

EUR/USD was flat after retreating well back from its earlier 1.0481 four-month high on EBS that overtook the 200-day moving average at 1.0429, but then faltered ahead of the 50% Fibo of 2022’s range by 1.0500. The late drop sent prices to new Tuesday lows.

With IMM specs already well net long EUR/USD before the softer US inflation data boosted prices, it doesn’t have the short squeeze fodder that has helped accelerate yen and sterling recoveries against the dollar.

But EUR/USD’s pandemic downtrend has clearly been reversed and a near-term corrective pullback should precede a broader recovery toward resistance near 1.08.

Sterling rose 0.8% after slipping from its post-PPI spike and 3-month high at 1.2026 that was capped near the 50% Fibo of this year’s implosion.

UK jobs data were somewhat disappointing ahead of Wednesday’s CPI report and Thursday’s autumn statement that’s seen restoring fiscal policy confidence lost after the ill-fated mini-budget in September.

USD/JPY fell 0.48%, having recovered from of its post-PPI slide to 137.665 that briefly breached daily cloud base support at 138.15. But upside is capped by the cresting 100-DMA at 140.86.

US retail sales, IP and NAHB are out Wednesday to sway Fed expectations.

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

Gold near three-month high on latest Russia jitters

Nov 15 (Reuters) – Gold prices edged up near their highest in three months reached earlier on Tuesday on some safe-haven buying after news that two people were killed in eastern Poland near the Ukraine border.

The deaths were in an explosion, firefighters said on Tuesday, with a senior US intelligence official stating Russian missiles had crossed into Poland.

Spot gold rose 0.3% to USD 1,776.64 per ounce by 2:08 p.m. ET (1908 GMT). US gold futures settled little changed at USD 1,776.8.

“It is almost certainly a mistake and would be portrayed as such but Poland is a NATO country, so while gold might not erupt higher it will keep the market nervous for a bit,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York.

Gold prices had turned negative and slipped from their highest since Aug. 15 reached earlier in the session as the dollar index turned higher from its three-month low.

If gold manages to close above the USD 1,780 to USD 1,800 area, then that would be another bullish development, encouraging more bulls to step back in, Fawad Razaqzada, market analyst at City Index, said in a note.

Data earlier showed US producer prices increased less than expected in October, further evidence that inflation was starting to subside.

“The cooling inflation data is good news for gold, but it just seems that we have a strong price barrier within the USD 1,800 level,” said Edward Moya, senior analyst with OANDA.

Atlanta Fed President Raphael Bostic on Tuesday said he sees little evidence that aggressive monetary policy tightening is slowing inflation, anticipating that more hikes would be needed to get inflation down to the Fed’s 2% target.

Rising interest rates dim non-yielding bullion’s appeal.

Among other precious metals, spot silver slipped 1.8% to USD 21.56 per ounce, platinum fell 0.4% to USD 1,013.25 and palladium rose 2.9% to USD 2,085.52.

(Reporting by Seher Dareen and Arundhati Sarkar in Bengaluru; Editing by Shailesh Kuber)

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