Global equity funds receive inflows for first time in 10 weeks

Oct 28 (Reuters) – Global equity funds attracted money inflows in the week ended Oct. 26, bolstered by expectations the Federal Reserve would slow its pace of rate hikes to counter the economic slowdown.

According to Refinitiv Lipper data, investors bought a net USD 7.8 billion worth of global equity funds in the week, after ditching them in the previous nine weeks.

US equity funds obtained USD 7.9 billion, while Asian equity funds received USD 2.1 billion. On the other hand, European equity funds faced net sales of USD 2.3 billion during the week, the data showed.

US business activity contracted for a fourth straight month, data on Monday showed, suggesting that the Fed’s rate increases have softened the economy, which in turn raised hopes that the central bank could begin slowing the pace of the hikes.

Global stock markets were also buoyed this week after the Bank of Canada delivered a smaller-than-expected interest rate hike and said it was getting closer to the point where rate increases could end.

However, lingering worries over an economic recession were evident, as investors put a huge amount of money in safer money market funds.

The data showed global money market funds received inflows worth USD 18.6 billion, its fourth consecutive weekly inflow.

Meanwhile, global bond funds had outflows for the 10th successive week, with net sales of USD 4.9 billion.

Emerging market (EM) bonds and equities faced outflows worth USD 2.1 billion and USD 1.4 billion respectively, data for 24,664 EM funds showed.

Among commodity funds, precious metal funds had outflows of USD 457 million, lesser than the net sales of USD 1.2 billion in the previous week. Energy funds, on the other hand, received a small inflow of USD 81.3 million.

(Reporting By Patturaja Murugaboopathy in Bengaluru; editing by David Evans)

Oil futures ease 1% as China widens COVID curbs

NEW YORK, Oct 28 (Reuters) – Oil prices eased about 1% on Friday after top crude importer China widened its COVID-19 curbs, though the crude benchmarks were poised for a weekly gain on supply concerns and surprisingly strong economic data.

Brent futures fell USD 1.19, or 1.2%, to settle at USD 95.77 a barrel. US West Texas Intermediate (WTI) crude fell USD 1.18, or 1.3%, to USD 87.90.

US gasoline futures RBc1 dropped about 3%, while US diesel futures rose about 5% to their highest since mid-June.

“Diesel (was) still (the) strongest component of complex (with) shorts being squeezed out of the November contract ahead of Monday expiry,” analysts at energy consulting firm Ritterbusch and Associates said.

For the week, Brent rose about 2% and WTI was up about 3%.

Chinese cities ramped up COVID-19 curbs on Thursday, sealing up buildings and locking down districts after China registered 1,506 new COVID infections on Oct. 27, the National Health Commission said, up from 1,264 new cases a day earlier.

The International Monetary Fund expects China’s growth to slow to 3.2% this year, a downgrade of 1.2 points from its April projection, after an 8.1% rise in 2021.

“It’s hard to make a case for a rebound in China’s crude purchases given the backdrop of uncertainty over its zero-COVID policy,” said PVM Oil analyst Stephen Brennock.

PetroChina said China’s demand for refined fuel and natural gas was set to grow year-on-year in the fourth quarter in tandem with an expected economic recovery as Beijing rolls out more stimulus policy.

Economic strength in two major economies limited oil’s losses.

Data on Thursday showed a strong rebound in US gross domestic product (GDP) in the third quarter, demonstrating resilience in the world’s largest economy and oil consumer.

The German economy also grew unexpectedly in the third quarter, data showed on Friday, as Europe’s largest economy kept recession at bay despite high inflation and energy supply worries ahead of a looming European ban on Russian crude imports.

“The market remains wary of the impending deadlines for European purchases of Russian crude before the sanctions kick in on 5 December,” ANZ Research analysts said in a note.

Global oil-and-gas giants including Exxon Mobil, Chevron, and Equinor posted huge third-quarter profits, feeding criticism from consumer groups in the United States and Europe. US President Joe Biden has told oil companies they are not doing enough to bring down energy costs.

US oil and natural gas rigs fell this week, but in October notched their first monthly increase since July, according to energy service firm Baker Hughes Co.

The Organization of the Petroleum Exporting Countries (OPEC) is likely to maintain its view world oil demand will rise for another decade.

(Additional reporting by Ahmad Ghaddar in London, Jeslyn Lerh in Singapore and Sonali Paul in Melbourne; Editing by David Goodman , Marguerita Choy and David Gregorio)

BoJ Preview – No policy tweaks expected

Oct 27 (Reuters) – The Bank of Japan is not looking to make any changes when it announces policy tomorrow. Specifically, the BoJ is looking to remain on hold until April 2023 when current Gov Haruhiko Kuroda’s term expires.

The governor and other members of the BoJ’s Policy Board have made it clear on repeated occasions that monetary policy will remain on hold till inflation stabilizes around its 2% target and the economy is on a clearer path to growth. The government seems to agree.

The BoJ again conducted operations to cap JGB yields under yield curve control on Wednesday, attesting to its resolve. Such measures will continue until there is fundamental shift in the BoJ’s policy stance.

On USD/JPY, the BoJ’s ultra-easy monetary policy stance will remain a JPY negative. That said, dovish shifts in central banks’ expectations abroad, especially the US Federal Reserve, the resulting broad USD weakness this week and the relative success of Japanese intervention efforts, suggest a possible USD/JPY cap in place for now at Friday’s 151.94/95 peak Friday.

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

Wall Street loses over USD 200 billion in value after report from Amazon

Oct 27 (Reuters) – Over USD 200 billion in US stock market value went up in smoke in extended trade on Thursday, after a weak forecast from Amazon (AMZN) added to a string of downbeat quarterly reports from Big Tech companies.

Amazon’s stock tumbled 17% after the bell, wiping out USD 190 billion in market capitalization after the retail and technology heavyweight projected a holiday slump that would leave current-quarter sales below Wall Street estimates.

Also after the bell, Apple (AAPL) shares fell about 1%, erasing about USD 30 billion of its stock market value after the Cupertino, California company reported quarterly iPhone sales that fell short of Wall Street targets.

The latest in a string of poor quarterly results from some of Wall Street’s most widely owned companies underscores deep worries about the health of the global economy as central banks raise interest rates in a battle against inflation.

“Big Tech companies are not impervious to slowdowns in the economy, particularly if they are consumer driven,” said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

“As the Fed embarks on this planned slowdown, it is eating away at some of their consumer-faced businesses, and given their high multiples it is causing big contractions in their stock prices,” Meckler said.

Amazon’s weak report sent Nasdaq futures tumbling about 3%, showing traders expect Wall Street to open with a deep decline on Friday. Google-owner Alphabet (GOOGL) and Microsoft (MSFT) dropped about 1% each, adding to losses following their own poorly received quarterly reports on Tuesday.

Thursday’s late-day reports also followed disappointing results from Facebook-owner Meta Platforms (META) that earlier sent its stock plummeting 25%. Thursday’s drop left Meta’s stock market value at about USD 260 billion, with the one-time behemoth now about the 20th most valuable company on Wall Street.

If Amazon’s drop after hours is reflected in Friday’s trading session, it will have been its deepest one-day loss since 2006.

Among a handful of winners late on Thursday, Pinterest PINS.N surged 12% after the social media platform reported higher than expected quarterly revenue, while Intel (INTC) climbed 6%, despite forecasting annual revenue below analysts’ estimates.

(Reporting by Noel Randewich and Lewis Krauskopf; editing by Richard Pullin)

Euro sinks more than 1% after ECB rate hike, US GDP data

NEW YORK, Oct 27 (Reuters) – The euro dropped more than 1% on Thursday, falling back below parity with the dollar, after the European Central Bank (ECB) raised interest rates and US data showed that the world’s biggest economy rebounded more than expected in the third quarter.

The ECB raised its deposit rate by 75 basis points to 1.5%, the highest since 2009, in an effort to prevent rapid price growth from becoming entrenched. Further rate hikes are almost certain, but with a weakening economy, the pace is up for debate.

While risks to the euro zone’s growth outlook had shifted to the downside, the central bank has made substantial progress in removing monetary accommodation through three consecutive rate increases, ECB President Christine Lagarde said at a news conference.

“Overall, Lagarde seems to have indicated a pivot without explicitly saying as much,” foreign exchange strategists at TD Securities said.

The euro fell from a one-month high of USD 1.0094 versus the dollar earlier in the day to back below parity with the greenback after the ECB rate decision. The single currency was down 1.1% at 0.9969 at 3:20 p.m. EDT (1920 GMT).

The greenback strengthened after data showed that US gross domestic product rose at a 2.6% annualized rate last quarter, ending two straight quarterly decreases in output that had raised concerns the economy was in recession.

Economists polled by Reuters had forecast GDP growth would rebound at a 2.4% rate.

The stronger-than-expected GDP figures followed a raft of weaker-than-forecast economic data in recent weeks that had raised concerns about the impact of the Federal Reserve’s aggressive interest rate increases on the economy.

“Despite the shiny headline number, a look under the hood shows a much grimmer picture of the US economy, one that is clearly losing steam,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

“With the full effect of past and future Fed rate hikes still to be felt, the economy appears poised for a modest downturn in the first half of next year,” he said.

The Fed is expected to raise its benchmark overnight interest rate by 75 basis points to 1.5%, a 13-year high, at its Nov. 1-2 policy meeting It is also likely to reel in a key subsidy to commercial banks.

Speculation that the Fed will pivot from its hawkish stance starting at its December policy meeting had caused the greenback to decline in recent days and Thursday’s bounceback was natural, analysts said.

“A bit of profit-taking at this level is not unheard of,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. “Since Monday, the euro-dollar has gone up around 2.2%, so we’ve had quite a big move in the dollar over the last two days.”

The British pound was down 0.58% against the greenback to USD 1.1559 following a two-day rally on the back of Rishi Sunak’s appointment as the United Kingdom’s prime minister.

Japan’s yen rose 0.14% to 146.19 to the dollar.

Trading in the Japanese currency has been volatile after suspected interventions by the government to boost the ailing currency on Friday and Monday.

On Wednesday, the Bank of Canada announced a smaller-than-expected interest rate hike of 50 basis points. The move has made investors even more alert to signs that the Fed and ECB might be slowing their tightening down.

The Canadian dollar last traded 0.03% lower at 1.3557 per US dollar.

(Reporting by John McCrank; Editing by Paul Simao)

Gold prices edge down after dollar’s rebound

Oct 27 (Reuters) – Gold prices eased in choppy trading on Thursday as a rise in the US dollar offset support for the precious metal from expectations the Federal Reserve will slow its interest rate hikes after a policy meeting next week.

Spot gold was down 0.2% to USD 1,661.25 per ounce by 1:41 p.m. EDT (1741 GMT), while US gold futures settled at USD 1,665.60, 0.2% lower on the day.

“Gold seems to be focused on the dollar and technicals here, along with an element of profit-taking from yesterday,” said Bart Melek, head of commodity markets strategy at TD Securities.

The dollar rose 0.6% against its rivals after dropping to more than a one-month low in the last session, making bullion less attractive for overseas buyers.

Data showed the US economy rebounded more than expected in the third quarter amid a decline in the trade deficit, returning to growth after a contraction in the first half of the year. Consumer spending, however, was curbed by the Fed’s aggressive rate increases.

Markets expect the US central bank to raise its benchmark overnight interest rate by another 75 basis points at its Nov. 1-2 policy meeting, with a potential for a smaller increase in December. US rate hikes increase the opportunity cost of holding zero-yielding bullion.

“It’s probably too early to talk about stopping rate increases … we don’t expect a pivot because inflation will continue to be a problem through much of next year,” Melek added.

In addition to next week’s US monetary policy meeting, investors will focus on the release on Friday of US personal income data for September, which will include the latest reading of an inflation measure closely watched by the Fed.

Elsewhere, spot silver fell 0.6% to USD 19.51 per ounce, platinum rose 1.3% to USD 963.38 and palladium was down 1.2% to USD 1,940.33.

(Reporting by Seher Dareen in Bengaluru; Editing by Maju Samuel, Susan Fenton and Paul Simao)

Euro zone government bond yields fall, spreads tighten, after ECB

LONDON, Oct 27 (Reuters) – Euro zone government bond yields fell on Thursday after European Central Bank (ECB) statements led markets to bet on a potential slowdown of its monetary tightening path.

The ECB raised rates by an expected 75 basis points (bps), and further rises are almost certain as unwinding a decade’s worth of stimulus will take it well into next year and beyond.

However, while inflation is close to 10%, versus the central bank’s target of 2%, the euro zone economy faces an increased risk of recession.

“ECB statements suggest that they might slow down the monetary tightening,” Massimiliano Maxia, senior fixed income specialist at Allianz Global Investors, said.

“They didn’t mention quantitative tightening measures, and they said they will take decisions meeting by meeting, depending on economic data,” he added.

Some economists expect the bloc’s economy to enter a recession and inflation to peak early next year.

Yields on the benchmark German 10-year Bund were last down 11 bps at 2%.

“Mainly the commitment to the reinvestments to the end of 2024 and the omission of starting talking about QT helped rates markets to find a solid footing,” Kaspar Hense, senior portfolio manager at BlueBay, said.

Italy’s 10-year yield fell 21 bps to 4.12%, with the spread between Italian and German 10-year yields hitting its tightest since mid-August at 207 bps.

Heavily indebted peripheral countries will benefit most from softening expectations for the ECB’s tightening path.

The market outlook on rates declined too, with the peak still at the end of next year.

The November 2023 forward on the ECB euro short-term rate (ESTR) dropped to around 2.55% from 2.9% before the central bank’s statements.

The ECB said the interest rate on TLTRO operations would be indexed to the average applicable key ECB interest rates, which will encourage early repayment of the loans, reducing excess liquidity and collateral shortage.

“Over time, this (TLTRO changes) could turn into a rate increase through the backdoor by lifting the money market rate from the deposit rate (now 1.5%) towards the main refinancing rate (now 2%),” said Holger Schmieding, economist at Berenberg.

The German two-year swap spread, which measures the difference between the bond yield and the fixed leg of a two-year interest rate swap that investors pay to hedge against rising rates in exchange for floating-rate payments, widened to 88.5 bps after hitting 83 bps – the smallest gap since mid-August.

But it is still up around 55 bps this year, highlighting the shortage of available collateral. It recently touched its widest since the euro zone debt crisis.

(Editing by Andrew Heavens)

Oil settles higher on strong crude demand, easing recession fears

Oct 27 (Reuters) – Oil rose more than USD 1 a barrel on Thursday, extending the previous day’s rally of nearly 3%, as optimism over record US crude exports and signs that recession fears are abating outweighed concern over slack demand in China.

Data showed record US crude exports, a hopeful sign for demand. Speculation that central banks could be nearing the end of rate-hiking cycles added support, after the European Central bank raised rates by 75 basis points.

“Crude prices are rallying after the US economy bounced back last quarter,” said Edward Moya, senior market analyst at OANDA, referring to strong corporate earnings reports in the latest quarter, though he added oil’s gains were capped by the view that an economic slowdown remains.

Brent crude settled up USD 1.27, or 1.3%, to USD 96.96 a barrel while US West Texas Intermediate (WTI) crude settled up USD 1.17, or 1.3%, to USD 89.08 a barrel.

Worries about Chinese demand limited the rally. Global investors dumped Chinese assets early this week as the economy of the world’s biggest energy consumer was beset by a zero-COVID policy, a property crisis and falling market confidence.

“Concerns that China’s muddled economic policies may continue under President Xi Jinping’s growing power weighed on sentiment,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

In early trade, the US dollar touched a one-month low, lending oil support, although the US currency rallied later. A weaker dollar makes oil cheaper for holders of other currencies and usually reflects greater investor appetite for risk.

Crude surged early this year after Russia invaded Ukraine, with Brent coming close to its all-time high of USD 147 in March. More recently, oil has slumped on economic worries.

US and Western officials are finalising plans to impose a cap on Russian oil prices. The World Bank warned that any plan will need active participation of emerging market economies.

(Additional reporting by Alex Lawler in London and Yuka Obayashi in Tokyo; Editing by Mike Harrison, Kirsten Donovan, David Gregorio and Deepa Babington)

Japan’s extra budget for stimulus package to exceed USD 198 billion

TOKYO, Oct 27 (Reuters) – Japan’s upcoming economic stimulus package is expected to include an extra budget of more than 29 trillion yen (USD 198 billion), far exceeding a previous estimate, national broadcaster NHK reported on Thursday.

Only a day earlier, Japanese media had reported that the government was set to spend about 25 trillion yen on the stimulus package, aimed at easing the pain from rising energy and other living costs.

Lawmakers from the ruling Liberal Democratic Party objected to the lower estimate citing heightened uncertainty over the economy, prompting Prime Minister Fumio Kishida and Finance Minister Shunichi Suzuki to meet on Wednesday evening to review the plan, NHK reported.

Japan’s public debt is already the biggest among major economies at twice the size of its economy. The extra spending, which is likely to be finalized on Friday, is expected to be partially funded by additional debt issuance, raising concerns over Japan’s fiscal discipline.

With his approval ratings plunging, Kishida has been under pressure to take steps to alleviate the blow to households and retailers from rising fuel and food prices, which have been exacerbated by a roughly 30% rise in the dollar against the yen.

Under the stimulus package, the government will extend a gasoline subsidy to curb rising energy costs for households and businesses until the first half of the next fiscal year, a draft document seen by Reuters showed on Wednesday.

It will also include support for rising electricity bills, which will be implemented as early as next January, according to the draft.

(USD 1 = 146.3200 yen)

(Reporting by Mariko Katsumura and Chang-Ran Kim; Editing by Stephen Coates and Sam Holmes)

Dollar sells off on speculation of less hawkish Fed, euro regains parity

NEW YORK, Oct 26 (Reuters) – The US dollar sank more than 1% against a basket of peers on Wednesday as weakening economic data firmed views that the Federal Reserve will slow the pace of its rate hiking cycle, sending the euro back above parity with the greenback for the first time in a month.

At 3:15 p.m. EDT (1915 GMT), the dollar was down 1.118% at 109.7 against a basket of six currencies, its weakest since Sept. 20.

The dollar’s decline came as the benchmark 10-year US Treasury yield continued its descent from last week’s multi-year high of 4.338%, and was last down four basis points at 4.0317%.

“Broad dollar weakness and further but milder declines in US Treasury yields than yesterday appear to reflect wishful thinking toward a Fed pivot next week,” said Derek Holt, head of capital markets at Scotia Economics.

The aggressive pace of Fed tightening this year, aimed at taming stubbornly high inflation, has turbo-charged the dollar.

Traders and economists predict a fourth-straight 75 basis-point interest rate increase next Wednesday, but there is growing speculation that the central bank will slow to half a point in December.

The view that the Fed could begin to pivot in December was reinforced by data on Tuesday that showed US home prices sank in August as surging mortgage rates sapped demand.

Data on Wednesday showed that sales of new US single-family homes dropped in September and data for the prior month was revised lower, supporting the view that Fed rate increases are already working to tap the breaks on the world’s biggest economy.

The European common currency was up 1.11% at USD 1.0079, its highest since Sept. 13.

Sterling GBP=D3 also hit its highest since Sept. 13, surging 1.33% to USD 1.1625, extending the previous day’s 1.6% gain when markets took succor from Rishi Sunak becoming Britain’s prime minister.

“Optimism that Rishi Sunak and his team will restore stability and credibility in the UK is overshadowing the very difficult economic situation that he has inherited,” said Fiona Cincotta, senior financial markets analyst at City Index.

Elsewhere, the Bank of Canada hiked interest rates by a smaller-than-expected 50 basis points and said future increases would be influenced by its assessment of how tighter policy was working to slow demand and ease inflation.

The Canadian dollar initially fell against the US dollar after the Bank of Canada decision, which was the second consecutive reduction in the size of rate rises after a 100 basis-point move in July and 75 basis points last month, but then firmed up again. The loonie hit a three-week high of 1.35105 earlier in the day.

The dollar slumped 1.55% against China’s offshore yuan, while the onshore yuan finished the domestic trading session at 7.1825 per dollar, the strongest close since Oct. 12.

Market participants became cautious after major state-owned banks were spotted selling the dollar in the previous session to stabilize the market, traders said, wondering if the yuan has reached its peak weakness for the time being. CNY/

The dollar also fell against the Japanese yen, sliding 1.11% to 146.290.

Cryptocurrencies extended their sharp rallies from the day before. Bitcoin BTC=BTSP was 4.45% higher at USD 20,981.

(Reporting by John McCrank in New York and Alun John in London; Editing by Jamie Freed, David Holmes, Hugh Lawson and Marguerita Choy)

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