US recap: EUR/USD reverses 2022’s downtrend on tamer Fed view

Oct 26 (Reuters) – EUR/USD rose more than 1% on Wednesday, far above 2022’s well-defined downtrend line, after an unexpectedly small Bank of Canada hike that increased doubts about peak Fed rates nL1N31R1B6.

The dollar retreat had already accelerated after USD/CNY tumbled 1.3% amid reports that major state-owned banks had sold in both onshore and offshore markets.

Sterling piled on against the dollar after news the British government delayed its fiscal statement to Nov. 17 from Oct. 31 and remained 1.2% higher after hitting resistance at 1.1638, its 2022 downtrend line, though it was well above the prior October highs and a 50% Fibo hurdle by 1.1500.

USD/JPY fell more than 1% without any Japanese intervention behind the slide, as 2-year yield spreads slipped to their lowest since Oct. 12.

A close below the 21-day moving average at 146.73 and the kijun at 146.12, would focus attention on Friday’s intervention-derived depth at 144.50, and perhaps much lower levels depending on how the ECB, BoJ and Fed meetings over the next week and next Friday’s US employment data stack up.

Currently the Fed is priced to increase rates by 75bps for a fourth consecutive meeting, with 50bp and 25bp hikes favored in December and February and rates topping out at 4.85% by May, down from the recent peak projection above 5%.

The ECB is fully priced to hike by 75bp Thursday, its second such increase, with a total of roughly 215bp of increases for a peak rate by 2.8% in July.

The BoE is also expected to hike by 75bp at its Nov. 3 meeting, down from recent highs above 100bp. The current terminal rate at 4.86% is by the Fed peak, but sterling is being boosted by tumbling gilts yields reflecting recovering confidence in fiscal and monetary policy after recent setbacks.

US durable goods, Q3 GDP, PCE and weekly jobless claims are on tap Thursday.

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

Gold scales 2-week peak as dollar, yields slip on Fed relief hopes

Oct 26 (Reuters) – Gold prices rose to a two-week high on Wednesday as the dollar and US bond yields slipped on expectations the Federal Reserve will temper its aggressive rate-hike stance starting December.

Spot gold rose 0.8% to USD 1,665.09 per ounce by 1:40 p.m. ET (1740 GMT) after touching its highest since Oct. 13.

US gold futures settled up 0.7% to USD 1,669.20.

“Over the course of the last couple sessions, we’ve seen yields drop, the dollar come down and as a result, we’ve seen a renewed bid in the gold market, said David Meger, director of metals trading at High Ridge Futures.

The dollar extended losses to a more than one-month low against its rivals, making gold less expensive for other currency holders. Benchmark US 10-year Treasury yields dropped to a one-week low.

Data on Tuesday showed that US consumer confidence ebbed in October, home prices fell sharply in August and there were signs that the Fed’s aggressive stance was starting to cool the labour market.

“We might see a slowing of the economy, but inflation may not come down as much as the Fed would like and yet they will be no longer able or willing to raise rates further and that is a very positive environment for gold,” Meger said.

However, the Fed is still widely expected to raise interest rate by 75 basis points in November. Gold is highly sensitive to rising US interest rates, as they increase the opportunity cost of holding non-yielding bullion

Focus now shifts to US GDP data on Thursday, followed by US core inflation numbers on Friday that could offer more clarity on the Fed rate-hike trajectory.

If a half-point rate hike in December is likely, gold could breakout above the USD 1700 level, Edward Moya, senior analyst with OANDA, said in a note.

Spot silver rose 0.86% to USD 19.51 per ounce, platinum rose 3.8% to USD 949.54 and palladium rose 1% to USD 1,942.75.

(Reporting by Seher Dareen in Bengaluru; Editing by Vinay Dwivedi)

European stocks notch 5-week highs on hopes central banks will pivot

Oct 26 (Reuters) – European shares reversed early losses to hit a five-week high on Wednesday after a smaller-than-expected interest rate hike by the Bank of Canada (BoC) ignited hopes that major central banks could temper rate-hike stance.

The pan-European STOXX 600 index ended up 0.7% at its strongest level since September 20.

Germany’s blue-chip DAX jumped 1.1%, France’s CAC 40 rose 0.4% and Italy’s FTSE MIB climbed 0.5%, all the three hitting six-week highs.

Global stock markets rose after the BoC delivered a smaller-than-expected interest rate hike and said it was getting closer to the point where rate increases could end, as it forecast the economy could possibly slip into a slight recession.

“With Bank of Canada raising lesser than expected, you’re definitely seeing a good switching away from earnings,” said Steve Sosnick, chief strategist at Interactive Brokers.

“If the Bank of Canada is not raising as much as expected, maybe that sets the tone for other central banks.”

All eyes are on the European Central Bank’s policy meeting on Thursday where policymakers are widely expected to push ahead with another 75-bps rate increase to tame inflation.

European markets were under pressure for most part of the day as disappointing earnings from Wall Street’s tech giants and a gloomy economic outlook overshadowed strong profits at some of Europe’s largest banks.

Europe’s technology index closed marginally lower after its US peers were dragged down by weak results from Microsoft Corp. (MSFT) and Alphabet Inc. (GOOGL).

Shares of Germany’s Deutsche Bank (DBKGn) rose 1.2%, while Britain’s Barclays BARC.L and Spain’s Santander (SAN) slipped as they warned of growing risks even as they posted stronger-than-expected profits. The European banking index slipped 0.3%.

Italy’s UniCredit (CRDI) rose 4.3% after the bank raised its 2022 profit goal.

“Impressive performance from the likes of UBS, Deutsche Bank, and UniCredit serve to highlight the benefits of higher interest rates and sizeable market movements,” said Joshua Mahony, senior market analyst at online trading platform IG.

“Nonetheless, we are likely to see some hesitation, with the economic implications of rising interest rates yet to be felt. That goldilocks situation of higher margins and economic health could soon come to an end given how the data has been shaping up.”

Meanwhile, London’s blue-chip FTSE 100 rose 0.6% as Britain’s new prime minister, Rishi Sunak, delayed the announcement of a keenly awaited plan for repairing the country’s public finances until Nov. 17.

Among other single stocks, Heineken NV (HEIN)fell 5.4% after the world’s second-largest brewery said it has seen signs of slowdown in demand in some European markets.

ASM International (ASMI) tumbled 7.8%, after the chip supplier said it expected new US export restrictions to weigh heavily on its sales in China.

(Reporting by Sruthi Shankar, Devik Jain and Ankika Biswas in Bengaluru; Editing by Arun Koyyur, Saumyadeb Chakrabarty and Vinay Dwivedi)

China stocks rebound on hope of slower rate rises; COVID lockdowns trim gains

HONG KONG, Oct 26 (Reuters) – China stocks had a strong start on Wednesday on hopes that the United States might slow its aggressive interest rate rises but the optimism was partially offset by new COVID-19 lockdowns in several parts of China.

** China’s blue-chip CSI 300 Index rose 0.81%. The Shanghai Composite Index edged up 0.78%, closing slightly below the key 3,000 level, to 2,999.5.

** Hong Kong’s Hang Seng Index rebounded 1%, ending a five-day losing streak, while the Hang Seng China Enterprises Index climbed 0.72%.

** Asian shares rose on Wednesday on hopes that the pace of global interest rate rises will soon start to slow.

** The Universal Resort theme park in Beijing temporarily shut because of COVID measures.

** Certain areas in several large Chinese cities including Shanghai and Wuhan, were reported to be under new partial lockdowns.

** Foxconn Technology Group confirmed that its iPhone factory, the world’s largest, in the central Chinese city of Zhengzhou, was dealing with a small COVID outbreak but said production remained “relatively stable”, the South China Morning Post reported.

** The People’s Bank of China (PBOC) and the State Administration of Foreign Exchange said they would strengthen collaboration to maintain the healthy development of the stock, bond and property markets, and stabilise the yuan at a reasonable and balanced level.

** Major Chinese state-owned banks sold US dollars in both onshore and offshore markets in late trade on Tuesday to prop up the weakening yuan, two sources with direct knowledge of the matter told Reuters.

** “Both Hong Kong and A-share stocks were oversold, we have seen investors coming back and buying in the dip this week as trading volumes are picking up,” said Linus Yip, chief strategist at First Shanghai Securities, adding that the decline in the 10-year U.S. treasury yield also boosted sentiment.

** In A-shares, healthcarE and IT-related stocks bounced back 5.6% and 3.5%, respectively.

** In Hong Kong, the Hang Seng Tech Index rallied for a second day after a brutal selloff on Monday, gaining 2.5%. Food delivery giant Meituan jumped 5.0%, while Tencent added 2.5%.

(USD 1 = 7.2864 Chinese yuan renminbi)

(Reporting by Summer Zhen; Editing by Rashmi Aich, Robert Birsel)

Dollar slides on expectations of less hawkish Fed, euro at 1-month high

LONDON/TOKYO, Oct 26 (Reuters) – The euro climbed back above parity against the dollar for the first time in a month on Wednesday after poor US economic data reinforced speculation that the Federal Reserve will slow its interest rate hikes, sending the greenback tumbling.

The European common currency rose 0.66% to USD 1.0042, the highest since Sept. 20. Sterling rose 1.05% to USD 1.1592, its best since Sept. 14, and the dollar also fell against the Japanese yen, sliding 0.6% to 146.9.

“It’s a continuation of the (dollar) sell-off that we’ve seen since the end of last week. Markets are anticipating a potential slowdown in the pace of Fed hiking,” said Lee Hardman a currency analyst at MUFG.

“We don’t think that’s going to happen at the next meeting in November, but certainly by December there’s a higher probability they could step down the pace to 50 basis points rather than the 75 basis points we’ve seen recently.”

The aggressive pace of Fed tightening has sent the dollar higher.

Fed officials have begun sounding out their desire to slow down the pace of increases soon, according to a Wall Street Journal report on Friday that caused markets to reprice.

This was reinforced by data overnight showing that US home prices sank in August as surging mortgage rates sapped demand, in the latest sign that Fed rate increases are already working to slow the world’s biggest economy.

Traders and economists predict another 75 basis point increase next Wednesday, but there is a growing view that it will slow to half a point in December.

The benchmark 10-year US Treasury yield continued its descent from last week’s multi-year high of 4.338%, and was last down seven basis points at 4.038%.

The Canadian dollar also firmed to 1.352 per US dollar, its strongest in three weeks, ahead of a Bank of Canada policy meeting at which analysts polled by Reuters expect a rate increase of 50 basis points.

That would be the second consecutive reduction in the size of rate rises after a 100 basis point move in July and 75 basis points last month.

The dollar was also weaker elsewhere, falling around 0.5% on both the Norwegian and Swedish crowns, and over 1% on China’s offshore yuan.

The Australian dollar rose 1.24% to USD 0.64735 as hotter-than-expected inflation data put pressure on the Reserve Bank ahead of a rate decision next week.

Cryptocurrencies extended their sharp rallies from the day before. Bitcoin was 1.2% higher at around USD 20,300, and ether was up 3.6% just above USD 1,500, building on Tuesday’s 8.7% surge.

(Reporting by Kevin Buckland in Tokyo and Alun John in London. Editing by Gerry Doyle and Jamie Freed)

Nasdaq futures fall 1% as tech earnings spark slowdown fears

Oct 26 (Reuters) – Nasdaq futures fell more than 1% on Wednesday, after disappointing results from technology giants Microsoft and Alphabet sparked losses in other megacap companies and raised fears of slowing economic growth.

Microsoft Corp posted its lowest sales growth in five years and forecast second-quarter revenue below Wall Street estimates, while Google-parent Alphabet posted downbeat ad sales and cautioned of a slowdown in advertising spending.

Shares of the companies sank 5.7% and 6.0%, respectively, in premarket trading, while those of Amazon.com and Apple, which are scheduled to report results this week, fell 3.7% and 0.6%.

The downbeat results follow Snap Inc’s warning last week on slowing ad demand and a string of mixed earnings reports that have fed into worries that decades-high inflation and aggressive interest rate hikes to quell it are taking a toll on the economy.

Wall Street’s three main indexes, however, posted gains for the past three days, fueled by hopes that the Federal Reserve could soon slow down the pace of its monetary policy tightening.

At 4:13 a.m. ET, Dow e-minis were down 13 points, or 0.04%, S&P 500 e-minis were down 24.25 points, or 0.63%, and Nasdaq 100 e-minis were down 169 points, or 1.44%.

(Reporting by Amruta Khandekar in Bengaluru; Editing by Saumyadeb Chakrabarty)

Oil prices stable as rising US crude stocks balance supply concerns

LONDON, Oct 26 (Reuters) – Oil prices were broadly stable on Wednesday, moving in and out of negative territory after industry data showed U.S. crude stockpiles rose more than expected, though supply concerns and a weaker dollar gave support.

Brent crude futures for December were down 4 cents, or 0.04%, to USD 93.48 a barrel by 0849 GMT. US West Texas Intermediate (WTI) crude futures for December were up 25 cents, or 0.3%, to USD 85.57 a barrel.

A weaker US dollar sent a bullish signal, making oil cheaper for holders of other currencies.

But US. crude inventories rose by about 4.5 million barrels in the week ended Oct. 21, according to market sources citing figures from the American Petroleum Institute, an industry group, above expectations from five analysts polled by Reuters.

Official US stockpile data from the government’s Energy Information Administration is due at 1430 GMT.

Rising stockpiles reinforce fears of a global recession that would further cut demand, weakness in which has also been apparent in softer Chinese crude import data.

But ongoing supply constraints, highlighted by the International Energy Agency’s head warning of the “first truly global energy crisis”, gave prices a floor.

“OPEC production cuts effective November and the new EU sanctions on Russian oil to be enforced from December should be positive (for prices),” Stephen Innes, managing partner at SPI Asset Management, told Reuters.

With respect to the wide WTI-Brent spread in recent sessions, Innes added that WTI buyers are watching for any more interventions by President Joe Biden ahead of the US mid-term elections on Nov. 8.

Biden announced a plan last week to sell off the rest of a record release from the nation’s emergency oil reserve by year-end as he tries to dampen high gasoline prices.

Meanwhile Biden, facing criticism over high inflation, has warned that Saudi Arabia would face consequences for aligning with Russia and agreeing to reduce crude supply.

(Additional reporting by Sonali Paul in Melbourne and Jeslyn Lerh in Singapore; Editing by Jan Harvey)

Weak dollar, big US crude exports buoy oil markets

NEW YORK, Oct 26 (Reuters) – Oil prices surged nearly 3% on Wednesday, bolstered by record US crude exports and as the nation’s refiners operated at higher-than-usual levels for this time of year.

The dollar’s weakness added support, as the greenback’s strength of late has been a notable factor inhibiting oil market gains.

Brent crude futures settled USD 2.17, or up 2.3%, to USD 95.69 a barrel. US West Texas Intermediate (WTI) crude rose USD 2.59, or 3%, to USD 87.91.

The US dollar fell 1.2%, making oil cheaper for holders of other currencies. The US greenback has been stronger than other key foreign currencies as the US Federal Reserve has been more aggressive about raising rates.

“Across the board this is a dollar-denominated move, and if you try to read outside out of that, it’s foolish,” said Eli Tesfaye, senior market strategist at RJO Futures.

US crude stocks rose 2.6 million barrels last week, according to weekly government data, more than anticipated, but that was lower than industry figures, which showed a 4.5 million-barrel build.

Crude exports rose to 5.1 million barrels a day, the most ever, dropping net US crude imports to their lowest in history.

“Overall, thanks to the export market, this turns into a bullish report despite a medium-sized build in commercial crude inventories,” said John Kilduff, partner at Again Capital in New York.

Traders attributed the surge in exports to the widened WTI-Brent spread, which, coming into Wednesday’s trade, was at more than USD 8 per barrel.

US refining rates remained steady at nearly 89% of capacity, the highest for this time of year since 2018.

The Organization of the Petroleum Exporting Countries surprised markets with a larger-than-expected cut to its output targets earlier this month. Oil analysts anticipate supply will tighten in coming months after that move, and as Europe is expected next month to ban oil imports from Russia and restrict Russian shippers from the global shipping insurance industry.

That ban may tighten world shipping markets, which could also increase the price of oil. Many analysts believe Russia will be able to circumvent the measures, but it could still cause Moscow to shut between 1 million and 2 million barrels of daily production; it could as well hit the distillates markets.

“Until 2024 we believe oil price will be strongly influenced by the availability of tankers that are willing to transport Russian oil rather than global supply-demand fundamentals, keeping oil price elevated,” JP Morgan analysts wrote.

(Reporting by David Gaffen; Additional reporting by Laura Sanicola, Shadia Nasralla and Rowena Edwards; Editing by Marguerita Choy and Cynthia Osterman)

Wall Street extends rally on signs of ebbing Fed rate hikes

NEW YORK, Oct 25 (Reuters) – US stocks closed sharply higher on Tuesday as soft economic data hinted that the Fed’s aggressive policy is taking effect, while falling benchmark Treasury yields boosted the rally’s momentum.

All three major US stock indexes advanced for the third straight session, with market-leading megacaps providing the most upside muscle. The S&P 500 has reclaimed about 8% from the trough of its Oct. 12 close.

“There’s increasing discussion about a light at the end of the tunnel for Fed rate hikes,” said Bill Merz, head of capital market research at US Bank Wealth Management in Minneapolis. Merz also cautioned that it wouldn’t be known for some time whether decades-high inflation was “decisively headed toward the Fed’s target.”

“We’re seeing a bit of a reprieve in the dollar and long-term bond yields have come down a little bit,” Merz added. “Those factors are combining to provide room for a bit of a rally.”

After the bell, Microsoft (MSFT) and Alphabet (GOOGL) delivered weaker than expected quarterly results, sending their shares down about 7%. That helped push S&P 500 emini futures down almost 1%, suggesting traders expect the stock market to open deep in negative territory on Wednesday.

Yields of 10-year Treasuries pulled pack on hopes that the Federal Reserve could begin easing its battle against inflation.

A mixed brew of earnings and downbeat forecasts, usually a negative for markets, have suggested the barrage of interest rate hikes from the Fed is beginning to be felt, raising expectations that the central bank could pull back on the size of rate hikes after its Nov. 1-2 policy meeting.

Data on Tuesday showed slowing home price growth and souring consumer confidence. Such signs of economic softness, ordinarily unsupportive of risk appetite, are evidence of abating Fed hawkishness.

The financial market is nearly evenly split on whether the central bank’s December rate increase will ease to 50 basis points after a string of 75 basis point hikes, according to CME’s FedWatch tool.

The Dow Jones Industrial Average rose 337.12 points, or 1.07%, to 31,836.74, the S&P 500 gained 61.77 points, or 1.63%, to 3,859.11 and the Nasdaq Composite added 246.50 points, or 2.25%, to 11,199.12.

Among the 11 major sectors of the S&P 500, all but energy posted gains on the day, with real estate enjoying the largest percentage gain.

Third-quarter reporting season is firing on all pistons, with 129 of the companies in the S&P 500 having reported. Of those, 74% have beaten consensus expectations, according to Refinitiv.

Analysts have set the bar low; aggregate S&P 500 earnings growth is now seen landing at 3.3% year-on-year, down from 4.5% at the beginning of the month, per Refinitiv.

Coca-Cola Co. (KO) rose 2.4% after the company upped its revenue and profit forecasts, banking on steady demand amid price increases.

General Motors (GM) reaffirmed its outlook after posting solid earnings, sending its shares jumping 3.6%.

On the downside, aerospace company Raytheon Technologies Corp. (RTX) posted a near 5% annual revenue increase, but its shares slid 1.5% on the company’s trimmed sales outlook.

Advancing issues outnumbered declining ones on the NYSE by a 5.35-to-1 ratio; on Nasdaq, a 3.67-to-1 ratio favored advancers.

The S&P 500 posted 14 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 85 new highs and 120 new lows.

Volume on US exchanges was 11.89 billion shares, compared with the 11.57 billion average over the last 20 trading days.

(Reporting by Stephen Culp; Additional reporting by Amruta Khandekar and Shreyashi Sanyal in Bengaluru and Noel Randewich in Oakland, Calif.; editing by Grant McCool)

Sterling at 6-week high as Sunak becomes PM, while dollar sags

NEW YORK, Oct 25 (Reuters) – Sterling rallied to a six-week high on Tuesday on improved risk sentiment as Rishi Sunak became Britain’s prime minister, while the dollar fell to a three-week low as weakening US economic data cooled expectations on the pace of future US rate hikes.

The potential for foreign exchange volatility is elevated this week, with central banks in the euro zone and Canada expected to hike rates by 75 basis points, and the Bank of Japan set to maintain ultra-low interest rates to support its fragile economy.

Rishi Sunak became Britain’s third prime minister in two months on Tuesday, tasked with tackling a mounting economic crisis and a warring political party.

Sterling GBP=D3 surged to its strongest level since Sept. 15, and was last up 1.66% at USD 1.147, but currency strategists expect the pound’s climb to be short-lived.

“Beyond a brief honeymoon phase rally, I think the daunting road ahead for the UK economy is likely to cap sterling gains,” said Joe Manimbo, senior market analyst at Convera.

The US dollar was broadly weaker amid signs that Federal Reserve rate hikes are slowing the world’s biggest economy. The greenback slid into negative territory after data showed that US home prices sank in August as surging mortgage rates sapped demand.

“US economic data is deteriorating and that is helping push down Treasury yields,” said Edward Moya, senior market analyst at Oanda. “If the data keeps on getting uglier, the December FOMC meeting debate might not be between a half point increase and 75 basis point hike, but with a quarter point rise and 50 basis-point boost.”

The Fed is expected to raise rates by 75 basis points for a fourth-straight time at its Nov. 1-2 meeting.

The dollar index, which measures the greenback against six major peers, was down 0.822% at 110.94 at 3:10 p.m. EDT (1910 GMT).

The euro strengthened to a 20-day high ahead of Thursday’s ECB meeting, where a three-quarter point hike is expected by the central bank as it seeks to rein in red-hot inflation.

The common currency was last up 0.87% at 0.99595.

“Warm weather is fueling (relative) optimism about the energy crisis, even if Germany’s IFO data is deep into recessionary territory,” said Kit Juckes, chief FX strategist at Societe General.

The Ifo Institute for Economic Research said Germany is heading into recession, forecasting that Europe’s biggest economy will contract by 0.6% in the fourth quarter.

YEN AND YUAN

The yen firmed against the dollar after suspected Bank of Japan (BOJ) intervention on Friday and Monday.

A retreat this week in long-term Treasury yields also helped support the Japanese currency. However, the policy background for yen weakness is likely to be put into stark relief in coming days, with the BOJ expected to stick to monetary stimulus on Friday.

At 147.96 yen, the dollar was down from a 32-year high against the Japanese currency of 151.94 on Friday, which appeared to trigger successive bouts of BOJ intervention.

Japan’s Ministry of Finance declined to comment on whether it had ordered interventions in recent days, though it did confirm action in September, which was the first yen-buying foray by Japanese authorities since 1998.

China’s currency, meanwhile, extended the weakness seen since Chinese leader Xi Jinping’s choice of leadership team at the twice-a-decade Communist Party Congress raised fears that growth will be sacrificed for ideology-driven policies.

The onshore yuan slid to its lowest in nearly 15 years on Tuesday after the central bank set the lowest mid-point since 2008. The offshore yuan CNH=D3 dipped to a record low of 7.375 against the dollar.

(Reporting by John McCrank in New York and Joice Alves in London; Editing by David Goodman, Bernadette Baum and Nick Zieminski)

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Inflation Update: Prices rise even slower in May

Monthly Recap: BSP to outpace the Fed in rate cuts