Asia stocks surge as cooling inflation feeds hopes Fed will ease up

SINGAPORE, Nov 11 (Reuters) – Asian shares spiked higher on Friday, while the dollar nursed steep losses after a smaller-than-expected increase in US consumer prices fuelled hopes that the Federal Reserve could tone down its aggressive pace of interest rate hikes.

MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 3.72%. Australia’s S&P/ASX 200 index climbed 2.43% and Japan’s Nikkei rose 3%.

The US consumer price index climbed 7.7% year on year – the first time since February that the annual increase was below 8%, and the smallest gain since January.

“It’s something the market had been waiting for a long time,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital. “There was a lot of money sitting on the sidelines.”

Overnight, the S&P 500 and Nasdaq notched up their biggest daily percentage gains in over 2-1/2 years on the data.

After four consecutive 75 basis-point interest rate hikes to tame decades-high inflation, the case is now building for the Fed to moderate its aggressive stance, said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.

Financial markets have now priced in an 85% likelihood of a smaller, 50 basis-point interest rate hike at the conclusion of next month’s FOMC policy meeting, according to CME’s Fedwatch tool.

Mainland China stocks opened 2.1% higher, while Hong Kong shares shot up 6.5% in early trade.

China stocks have had a turbulent few weeks – sliding on outbreaks of COVID-19, the ensuing lockdowns as well as feeble economic data, but also surging sporadically on hopes of an eventual economic reopening.

In the currency market, the US dollar index slumped more than 2% overnight to 108.100, the most in over a decade. It was last at 108.230.

The greenback on Thursday recorded its worst day against the Japanese yen since 2016, having fallen 3.7%. It has since clawed back some of those losses and on Friday was up 0.53% at 141.69 yen.

The CPI data sent US Treasury yields to a five-week low overnight.

Bitcoin fell 1% as crypto exchange FTX scrambles to raise about USD9.4 billion from investors and rivals in a bid to save the firm.

Meanwhile, oil prices rose on Friday as fears of a US recession eased but they were on track for weekly declines of more than 4% due to COVID-related worries in China.

US crude rose 0.25% to USD86.69 per barrel and Brent LCOc1 was at USD93.88, up 0.22% on the day.

(Reporting by Ankur Banerjee; Editing by Edwina Gibbs)

MSCI announces changes to China stock indexes

NEW YORK, Nov 10 (Reuters) – Index provider MSCI said on Thursday there will be 69 additions to and seven deletions from its MSCI China A Onshore Index, as well as 34 additions to and 39 deletions from MSCI China All Shares Index.

The three largest additions to the China A onshore index by market capitalization will be Zhuzhou CRRC Times Electric A 3898.HK, Datang International Power Generation A 601991.SS and Shanghai Fudan Microelectronics Group A 688385.SS.

The three largest additions to the China All Shares Index will be China Tourism Group Duty Free Corporation H 601888.SS, Chow Tai Fook Jewellery Group 1929.HK and Datang International Power Generation A 601991.SS.

MSCI said there will be 186 additions to and 69 deletions from the MSCI China A Onshore Small Cap Index, and 266 additions to and 69 deletions from the MSCI China All Shares Small Cap Index.

All changes will be effective as of the close on Nov. 30, MSCI said.

(Reporting by Rodrigo Campos. Editing by Chris Reese)

Wall Street ends sharply higher on sign of cooling inflation

Nov 10 (Reuters) – The S&P 500 and Nasdaq jumped on Thursday, racking up their biggest daily percentage gains in about 2-1/2 years, as a sign of slowing inflation in October sparked speculation the Federal Reserve might get less aggressive with interest rate hikes.

Stocks in sectors across the board surged as the latest consumer price data cheered investors worried that ongoing interest rate hikes could hobble the US economy.

One-time Wall Street darlings tarnished in 2022’s bear market were among Thursday’s strongest performers, with Nvidia, Meta Platforms and Alphabet all soaring.

The Labor Department’s data showed the annual CPI number below 8% for the first time in eight months.

“This is a big deal,” said King Lip, chief strategist at Baker Avenue Asset Management in San Francisco. “We have been calling the peak of inflation for the last couple of months and just have been incredibly frustrating that it hasn’t shown up in the data. For the first time, it has actually shown up in the data.”

Growing recession worries have hammered Wall Street this year. The S&P 500 remains down about 17% year to date, and it is on course for its biggest annual decline since 2008.

The inflation data prompted traders to adjust rate hike bets, with odds of a 50-basis point rate hike in December, rather than a 75-basis point hike, jumping to about 85% from 52% before the data was released, according to the CME FedWatch tool.

San Francisco Fed President Mary Daly and Dallas Fed President Lorie Logan welcomed the most recent inflation data, but warned that the fight with rising prices was far from over.

Amazon.com Inc surged more than 11% after the Wall Street Journal reported that the e-commerce heavyweight was reviewing unprofitable business units to cut costs.

The CBOE volatility index, also known as Wall Street’s fear gauge, fell to a near two-month low of about 23 points.

According to preliminary data, the S&P 500 gained 205.53 points, or 5.48%, to end at 3,954.10 points, while the Nasdaq Composite gained 754.48 points, or 7.29%, to 11,107.66. The Dow Jones Industrial Average rose 1,182.58 points, or 3.64%, to 33,696.52.

Some investors urged caution that Thursday’s rally may be overdone.

“The market is – as it has been a few times this year – very eager to trade a ‘Fed pivot’ … but we think the market is getting a little ahead of itself based on one print,” said Zach Hill, head of portfolio management at Horizon Investments in Charlotte.

The PHLX Housing index jumped to its highest since August after tumbling this year over concerns about higher mortgage rates denting affordability.

Rivian Automotive Inc surged after the electric-vehicle maker reported a smaller-than-expected loss, higher number of pre-orders and reaffirmed its full-year production outlook.

The Dow has now recovered about 17% from its closing low on Sept. 30, and it remains down about 9% from its record high close in early January.

Fed officials embrace ‘gradual’ rate hikes, still aim high

Nov 10 (Reuters) – For most of this year, Federal Reserve policymakers salted their speeches with new-to-central-banking words like “expeditious” and “front-loading” to underscore their rush to raise interest rates in the face of 40-year-high inflation.

Now some of those same policymakers are reaching for a more familiar lexicon dating from a time when rate hikes came in bland, quarter-point increments, not the 75-basis-point-per-meeting pace they’ve stuck to since June.

It’s one clear signal the US central bank is poised to slow what’s been the fastest round of rate hikes in 40 years to take stock of the impact of higher borrowing costs.

Fresh data on Thursday showed inflation slowed more than expected last month, and suggests the Fed’s rate hikes so far, which have lifted the Fed’s benchmark rate up from near zero in March to a 3.75%-4% range as of last week, may be beginning to bite.

But even as policymakers speaking Thursday used words like “gradual” and “measured” to describe their new approach to rate hikes, they sought to emphasize that US borrowing costs may still end up higher for longer than most thought just a couple months ago.

It was a point seemingly lost on market participants, as US stocks soared and traders priced in a lower peak for the Fed policy rate next year – 4.75%-5%, versus the 5%-plus level seen before the inflation report and the policymaker speeches. Markets are also expecting interest-rate cuts for the second half.

San Francisco Fed President Mary Daly, in a virtual appearance before the European Economics & Financial Centre, said that as of September she expected rates to need to rise to 4.9% next year, higher than the median forecast of her colleagues.

Given that inflation tends to lag other economic data and in light of the various headwinds facing the U.S. economy including the slowdown in global growth, she said, “I support a more gradual approach of getting to it so we can be discovering the right rate as we go.”

But, she added, she would rather err on the side of raising rates slightly too far, than not raising them high enough, and would want to keep them there long enough to bring inflation “reliably” back to 2%.

“A more measured approached to rate increases may be particularly useful as policymakers judge the economy’s response to higher rates,” was how Kansas City Fed Bank President Esther George put it at an energy conference co-hosted by her bank and the Dallas Fed.

But even as she said the peak fed funds rate cannot be “predetermined,” she noted that “some have argued” the Fed funds rate must at a minimum rise above year-ahead inflation expectations, currently running at about 5%.

Federal Reserve Bank of Cleveland President Loretta Mester in a separate event on Thursday signaled that she, like Daly, also feels the main risk for the US central bank is that it doesn’t act aggressively enough.

“Given the current level of inflation, its broad-based nature, and its persistence, I believe monetary policy will need to become more restrictive and remain restrictive for a while in order to put inflation on a sustainable downward path to 2%,” Mester said.

Philadelphia Fed President Patrick Harker for his part said he believes the Fed ought to pause once rates get above 4.6%, to gauge the effects of tighter policy. “If we have to, we can always tighten further, based on the data,” he said.

(Reporting by Ann Saphir and Howard Schneider; Additional reporting by Michael S. Derby and Lindsay Dunsmuir; Editing by Andrea Ricci)

Dollar climbs ahead of inflation data; cryptos crumble

SINGAPORE, Nov 10 (Reuters) – The dollar inched higher ahead of US inflation data due later on Thursday, while cryptocurrencies remained under pressure after crypto exchange Binance scrapped plans to rescue its ailing rival FTX.

The greenback surged on Wednesday against its peers but later pared some of those gains, with investors also digesting the US midterm election results.

The dollar index, which tracks the currency against major peers, was last up 0.11% to 110.48.

All eyes were on US inflation figures due later on Thursday, which could have a big impact on the scale of the US Federal Reserve’s future interest rate hikes. Economists polled by Reuters expect the headline consumer price index to show an 8% year-on-year rise in October, down from 8.2% in September.

“I think the biggest risk going into today’s US CPI release is for the markets to be over-reading it. There is potential for a softer print, no doubt, but the Fed has already communicated a downshift in its rate hike trajectory without exiting its hawkish bent,” said Charu Chanana, market strategist at Saxo Markets.

The euro slipped below parity and last stood 0.18% lower at USD 0.9992. Sterling gained 0.32% to USD 1.1396, making a partial recovery from a 1.6% slide in the previous session.

The dollar has lost some steam over the past few weeks on hopes that the Fed could begin making smaller interest rate hikes from as soon as December.

The Japanese yen edged higher to 146.22 per dollar on Thursday. It hit a roughly two-week high of 145.18 in the previous session before ceding its gains.

A crisis in the crypto world also hurt risk sentiment and supported the dollar, analysts said.

The Binance exchange on Wednesday abandoned a bailout deal of its rival FTX, leaving FTX Chief Executive Officer Sam Bankman-Fried scrambling to explore all options for his firm.

Just a day earlier, Binance had signed a nonbinding agreement to buy FTX’s non-US unit to help cover a “liquidity crunch”.

“I do think there’s been a bit of contagion from what’s been going on in crypto … It does seem to be having something of an unsettling effect,” said Ray Attrill, head of FX strategy at National Australia Bank.

FTX’s native token, FTT, was last 123% higher for the day at USD 3.394, though its month-to-date loss remained more than 85%.

Bitcoin rose 5% to USD 16,690, after plunging below USD 16,000 for the first time since late 2020 in the previous session. It has tumbled more than 60% this year.

The latest results from Tuesday’s US midterm elections showed Republicans were edging closer to securing a majority in the US House of Representatives. Yet control of the Senate hung in the balance after Democrats performed better than expected.

Elsewhere, the Aussie dollar edged 0.26% lower to $0.6414 while the kiwi was down 0.23% at USD 0.587. Both had fallen more than 1% in Wednesday trading.

(Reporting by Rae Wee; Editing by Simon Cameron-Moore and Mark Heinrich)

China, HK stocks fall on COVID outbreaks, weak economic data

SHANGHAI, Nov 10 (Reuters) – China and Hong Kong stocks fell on Thursday, as worsening COVID situations and feeble economic data outweighed optimism about an eventual economic reopening.

** China’s bluechip CSI300 index fell 0.8%, to 3,685.69 points, while the Shanghai Composite Index lost 0.4%, to 3,036.13 points.

** In Hong Kong, the Hang Seng index dropped 1.7%, to 16,081.04 points, while the Hong Kong China Enterprises Index lost 2.1%.

** China reported 9,005 new COVID-19 infections for Nov. 9, including both symptomatic and asymptomatic cases, compared with 8,335 new cases a day earlier.

** In China’s southern manufacturing hub of Guangzhou, millions of residents are being tested for COVID-19 in a fight against city’s worst outbreak so far.

** Stringent COVID curbs have added downward pressure on an economy already suffering from a property debt crisis.

** China’s new yuan loans likely slumped in October from September, a Reuters poll showed.

** That followed Wednesday’s data showing China’s factory gate inflation fell in October, the first monthly decline since 2020.

** Gloomy economic outlook offset optimism that China may relax COVID restrictions next spring. Such hopes triggered a strong rally in Chinese shares last week.

** Most sectors fell in China, with defence, tech and environment protection stocks leading the declines.

** In Hong Kong, tech stocks slumped 3.3%, while Chinese developers lost 0.7%.

(Reporting by Shanghai Newsroom. Editing by Jane Merriman)

Oil steadies as traders await direction from US inflation data

MELBOURNE, Nov 10 (Reuters) – Oil prices steadied on Thursday after falling for three days as the impact of renewed COVID curbs in China, the world’s biggest crude importer, weighed and traders await U.S. inflation data that may give direction on further interest rate increases.

Brent crude futures fell 2 cents to USD 92.63 a barrel at 0534 GMT. US West Texas Intermediate (WTI) crude futures were down 8 cents at USD 85.75 a barrel.

Brent prices have dropped more than 6% so far this week, while WTI is down more than 7%.

The manufacturing hub of Guangzhou, a city of 19 million people, on Thursday reported more than 2,000 new cases for Nov. 9, the third day above that level, in the city’s worst outbreak so far. Millions of residents were told to get tested for COVID-19 on Wednesday, and one city district has been locked down, as local cases across China reached their highest since April 30.

Consumer price index (CPI) data for the United States will be released later on Thursday that is expected to show a slowdown in the inflation rate for both the monthly and yearly core numbers. That may lead the US Federal Reserve to reduce the size of their planned interest rate increases which would be considered a postive for economic and oil demand growth.

Prices were also under pressure after a big build in US crude inventories reported on Wednesday.

“The outlook for oil prices has become more cautious,” said analysts from Haitong Futures in Shanghai. “The US CPI data … will further affect market expectations from the macro level, which further increases the market’s wait-and-see sentiment.”

Crude oil stockpiles rose by 3.9 million barrels last week, the US Energy Information Administration said, taking inventories to their highest since July 2021.

However, gasoline inventories fell by 900,000 barrels to their lowest since November 2014 and distillate stockpiles fell by 500,000 barrels.

Bearishness around the rise in US crude oil stockpiles may have been overdone, Commonwealth Bank analyst Vivek Dhar said.

He noted that distillate stockpiles, which include diesel, heating oil and jet fuel, fell to their lowest in a decade and the number of days those inventories can meet expected demand is at 26, nearly five days below the five-year average, “indicating much tighter conditions than US oil or gasoline markets”.

In a note to clients, Dhar forecasts that Brent will average about USD 95 a barrel in the fourth quarter as oil markets will tighten following the implementation of the European Union’s planned ban on Russian seaborne oil imports starting on Dec. 5 in response to Russia’s invasion of Ukraine.

(Reporting by Sonali Paul in Melbourne and Muyu Xu in Singapore; Editing by Christian Schmollinger)

Oil prices settle 1% higher on tepid US inflation data

BENGALURU, Nov 10 (Reuters) – Oil prices settled 1% higher on Thursday, ending lower for the first time this week, as tamer-than-expected U.S. inflation data offset worries that renewed COVID-19 curbs in China would hurt fuel demand.

After three days of declines, crude futures rallied after the inflation data supported investor hopes that the Federal Reserve would temper its interest rate hikes, which could support oil demand.

“(Consumer Price Index data) could be the turning point investors have craved,” said Craig Erlam, senior market analyst at OANDA.

“There’s still plenty of pain ahead but things suddenly look ever-so-slightly more positive,” Erlam said.

Brent crude settled 1.1% higher at USD 93.67, a USD 1.02 gain. US West Texas Intermediate crude rose 0.8% to settle at USD 84.67, or 64 cents higher.

The US dollar index also slid over 2%, as the sunny economic data lured investors away from the safe-haven greenback towards riskier assets including oil. A weakening dollar makes greenback-denominated oil less expensive for other currency holders.

However, China is battling a rebound in COVID-19 infections in several economically vital cities, including Beijing. Concerns on additional mobility restrictions are keeping a lid on crude price gains, said Giovanni Staunovo, commodity analyst at UBS.

In the manufacturing hub of Guangzhou, millions of residents were told to get tested on Wednesday.

Russia’s withdrawal of troops from Kherson in Ukraine also held price gains in check, said Matt Smith, analyst at Kpler.

Crude surged earlier this year as Russia’s invasion of Ukraine raised concerns about supply, with Brent coming close to its record high of USD 147 a barrel. Prices have since fallen on concerns of a possible recession. Brent has dropped more than 6% this week.

The market also came under pressure on Wednesday from a big rise in US crude inventories, up by 3.9 million barrels to their highest level since July 2021.

(Reporting by Shariq Khan in Bengaluru; additional reporting by Alex Lawler in London, Sonali Paul in Melbourne and Muyu Xu in Singapore
Editing by Kirsten Donovan, David Goodman, David Gregorio, Alexandra Hudson and Paul Simao)

Gold ticks higher as dollar slips ahead of US inflation data

Nov 10 (Reuters) – Gold edged higher on Thursday supported by a dip in the dollar, but moved in a relatively narrow range on caution ahead of U.S. inflation data that could influence the Federal Reserve’s future interest rate hikes.

Spot gold was up 0.3% at USD 1,710.62 per ounce, as of 0521 GMT. US gold futures were flat at USD 1,713.70.

The dollar index inched 0.3% lower. A weaker dollar makes greenback-priced gold more attractive to other currency holders.

Gold prices are marginally up as the dollar is slightly weakening; it looks like prices are consolidating ahead of the inflation data, said Brian Lan, managing director at Singapore-based dealer GoldSilver Central.

The US consumer price index (CPI) report for October is due at 1330 GMT. Economists expect core inflation to decline both on a monthly and annual basis.

Gold could rise if there are signs of cooling inflation, but if the numbers come higher, then there will be speculations of the Fed using a heavy hand again and thereby pressuring gold, Lan added.

Rising interest rates increase the opportunity cost of holding non-yielding bullion.

Gold could consolidate around the USD 1,700 level, but if the strong dollar trade gains traction leading up to CPI, selling pressure could target the USD 1685 region, said Edward Moya, senior analyst with OANDA, in a note.

Minneapolis Fed President Neel Kashkari on Wednesday said it’s “entirely premature” to discuss any pivot away from the Fed’s current policy tightening, even as he appeared to endorse the possibility of adjusting the size of future rate hikes.

Silver rose 0.7% to USD 21.16. Platinum climbed 0.6% to USD 991.54, while palladium was up 0.3% at USD 1,870.56.

“Easing semi-conductor supply tightness could revive auto-sector demand for platinum group metals. That said, doubts around the economic outlook could cap the upside,” ANZ said in a note.

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

Philippines’ Q3 growth outpaces expectations, on track to beat 2022 target

MANILA, Nov 10 (Reuters) – The Philippine economy grew at a faster-than-expected clip in the third quarter, but the government said the recovery is not without risks given rising interest rates and soaring inflation that could crimp consumer spending.

Underpinned by pent-up domestic demand, the economy expanded 7.6% in the third quarter from a year earlier, official data showed on Thursday, far outpacing the 6.3% forecast in a Reuters poll and faster than the 7.5% growth in the second quarter.

The economy would likely grow above the government’s 6.5%-7.5% growth target for 2022, Economic Planning Secretary Arsenio Balisacan told a media briefing.

On a quarterly basis, gross domestic product (GDP) rose 2.9% versus a 0.1% contraction in April-June and an expected 1% rise, the data showed.

“While these developments are remarkable, I want to underscore that our nation still faces a considerable burden in the form of high inflation,” Balisacan said.

Rising import costs, aggravated by a weaker peso, pushed inflation to a near 14-year high in October, cementing expectations of a sixth rate increase at the Bangko Sentral ng Pilipinas'(BSP) meeting on Nov. 17.

A 75-basis-point hike appeared to be in the bag after the BSP said on Nov. 3 it will match the Federal Reserve’s three-quarters of a percentage point rate rise to support the peso, which has so far lost 12.3% against the US dollar this year.

Despite the series of rate hikes, growth in the Philippines averaged 7.7% in the nine months to September helped by the full reopening of the economy as the government continuously lifted COVID-19 restrictions from early this year.

Balisacan said the government remained committed to fighting inflation to protect people’s purchasing power, including by tightening monetary policy.

“We cannot afford not to adjust (rates) with the rest of the world,” he said.

Household consumption rose 8.0% in the third quarter from a year ago, slower than the previous quarter’s 8.6% pace but faster than the 7.1% growth in the same period last year, the data showed.

“In the face of surging prices, that’s a big upside surprise,” said ING economist Nicholas Mapa.

(Reporting by Neil Jerome Morales and Enrico dela Cruz; Writing by Karen Lema; Editing by Muralikumar Anantharaman and Ana Nicolaci da Costa)

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