S&P 500 adds to mid-October rebound from bear market low

Oct 25 (Reuters) – The S&P 500’s over 1% surge on Tuesday adds to two weeks of strong gains as investors speculate that third-quarter earnings reports could help pull the market out of its downturn.

Apple (AAPL), Tesla (TSLA) and other tech-related stocks drove Wall Street higher, with Microsoft (MSFT) and Alphabet (GOOGL) each adding about 1% ahead of their quarterly reports after the bell as investors bet that a relatively strong start to third-quarter earnings season will continue.

With its latest rise, the S&P 500 is up about 8% from its closing low on Oct. 12, and a close at its current level would mark the index’s third largest gain from a low so far in 2022’s bear market. Tuesday’s gains put the S&P 500 about 10% above its intra-day low on Oct. 13.

Over 280 days have passed between the S&P 500’s record high and its most recent low. That compares to 33 days that the S&P 500 took in 2020 to fall from its record high close to its lowpoint as global markets reeled because of disruptions caused by the coronavirus pandemic.

This year’s selloff has dragged the S&P 500’s forward earnings valuation down from a historically high 21 to about 15, just below its 10-year average of 17, according to Refinitiv data.

Earnings expectations have also sunk this year, with analysts on average expecting S&P 500 companies to increase their adjusted earnings per share by 6.8% in 2022. That compares to an estimate of 9.5% in July.

Still, third-quarter earnings season so far has been better than expected, with nearly three quarters of the 129 companies in the S&P 500 exceeding earnings per share estimates, according to Refinitiv data.

Following this year’s rout, several sectors this month are showing signs of recovery.

With Amazon (AMZN), Microsoft, Tesla, Nvidia (NVDA) and other tech-related heavyweights still badly bruised in 2022, the S&P 500 growth index’s performance is far below the value index, which reflects smaller losses in sectors ranging from industrials to consumer staples.

(Reporting by Noel Randewich; editing by Grant McCool)

Gold glitters as dollar retreat adds sheen

Oct 25 (Reuters) – Gold reversed course to trade higher after the dollar fell as weakness in the US economy fuelled expectations the Federal Reserve would likely slow the pace of its interest rate hikes.

Spot gold was up 0.4% at USD 1,654.58 per ounce as of 1:45 p.m. ET (1745 GMT), while US gold futures settled 0.2% higher at USD 1,658.

“We’re seeing some weakness in the dollar and some upside in some of the other currencies against the dollar, and it’s pushing gold back up,” said Bob Haberkorn, senior market strategist at RJO Futures.

The dollar index =USD, which measures the currency against six major peers, was down about 0.9%, making gold less expensive for overseas buyers.

A survey on Monday showed US business activity contracted for a fourth straight month, sparking bets the Fed might rein in its aggressive policy stance.

If the Fed goes with a rate hike below the expected 75 basis points, that’ll signal a slowdown in these hikes and be bullish for gold, “but gold traders are waiting for something more concrete,” Haberkorn added.

Rising interest rates dim bullion’s appeal as they increase the opportunity cost of holding the non-yielding asset.

“Investors are still giving gold the cold shoulder, thereby generating persistent headwind,” with positioning data indicating that a majority of speculative financial investors are continuing to bet on a falling gold price, Commerzbank analysts said in a note.

Speculators switched to net short positions of 20,633 contracts in COMEX gold in the latest week, the US Commodity Futures Trading Commission (CFTC) said on Friday.

Meanwhile, data showed top consumer China’s net gold imports via Hong Kong in September halved from the previous month.

Spot silver rose 0.4% to USD 19.34 per ounce, platinum shed 0.8% to USD 917.53, while palladium dropped 2.1% to USD 1,926.75.

(Reporting by Kavya Guduru in Bengaluru; Editing by Mark Potter and Vinay Dwivedi)

Stocks struggle over China growth concerns

Oct 25 (Reuters) – Emerging market stayed at 2-1/2-year lows on Tuesday as Asian shares continued to struggle over policy worries under Xi Jinping’s third presidential term, while Hungary’s forint looked to a central bank policy decision due later in the day.

The broader emerging market currencies index was at near 2-1/2-year lows as the Chinese yuan was at January 2008 lows against the dollar. The offshore yuan slipped further into record low territory.

China stocks, which plunged on Monday on worries that Xi’s appointment of loyalists to his leadership team could mean prioritising the state over growth, were flat to lower.

“Further growth in China cannot be based on foreign trade, but rather on deepening its domestic market. The key question is whether the political regime facilitates this. It seems legitimate to harbour some doubts in this regard,” said economists Bruno Cavalier and Fabien Bossy at ODDO BHF.

“With the evaporation of the booster effect of unbridled residential construction, China’s growth regime has structurally declined… economic policy has the leeway to steer the slowdown, but not to vigorously boost demand.”

Asian shares, which depend on robust growth in the world’s second largest economy, were mostly in the red, led by a 1.5% slide in Taiwan shares .

But MSCI’s index of emerging market stocks, which is heavily weighted towards China, fell 0.7% before trading flat thanks to gains elsewhere. Turkish XU100, South African .JTOPI and central European shares .WIG, .BUX gained between 0.3% and 1%, taking heart from a stronger open in Europe.

London’s FTSE underperformed as HSBC dragged on a drop in quarterly profit, and as optimism following Rishi Sunak’s victory in UK’s prime ministerial race faded. HSBC’s Hong Kong shares slumped 5%.

Risk assets have tumbled this year as worries about China’s growth and aggressive monetary policy tightening by major central banks, notably the US Federal Reserve, diverted funds towards safer assets such as the dollar.

“Right now, we’re not going all in in EM precisely because the Fed is still hiking,” Jonathan Liang, head of Global Fixed Income, Currency & Commodities (GFICC) group at JPMorgan, told the Reuters Global Markets Forum.

“The FX part is still an area of concern for us. The key would be, at what point does the Fed stop hiking, and when does the market gain confidence that we’re getting there.”

Hungary’s forint was flat after sliding 1.4% for its worst session in a month on Monday. The central bank is seen holding the base rate at 13% after a string of tightening moves last week to rein in the forint from record lows.

(Reporting by Susan Mathew in Bengaluru and Divya Chowdhury in Mumbai; Editing by Shailesh Kuber)

China’s yuan extends slide, stock rebound peters out

SHANGHAI, Oct 25 (Reuters) – China’s yuan extended its decline on Tuesday to a near 15-year low, following Monday’s sell-off in Chinese assets by global investors worried about Beijing’s policy direction, while Hong Kong and China stocks ended lower as a rebound petered out.

The onshore yuan finished the domestic session at 7.3085 per dollar, the weakest official close since December 2007. It followed a sharply weaker official midpoint set by the People’s Bank of China.

The offshore yuan weakened to as much as 7.3655 per dollar, a new low.

The yuan is suffering from “the double whammy of mounting capital outflow and PBOC’s CNY fixing guidance tweak,” Mizuho Bank strategist Ken Cheung wrote in a note to clients. He added that the end of the 20th Communist Party Congress “marked the beginning of the mega China sell-offs.”

However, the panic selling “was largely driven by sentiment and based on plenty of policy prediction and it could be overdone,” he said, referring to fears that under President Xi Jinping’s third leadership term, China will sacrifice economic growth for ideology and stick with its zero-COVID policy.

Hong Kong’s Hang Seng Index .HSI, which plunged 6.4% in the previous session, fell 0.1% to a 13-year closing low, wiping out earlier gains. The Hang Seng Tech Index closed 3% higher, after jumping as much as 6.1% following Monday’s market rout.

China stocks also ended in negative territories after giving up earlier gains.

The CSI300 Index fell 0.2%, while the Shanghai Composite Index ended roughly flat.

“Market sentiment on China equities is still weak because of the macroeconomic backdrop, and with the dynamic zero-COVID policy still in place,” said Pruksa Iamthongthong, senior investment director of Asian equities at abrdn.

But valuations are highly supportive following the recent market declines, so “we remain buyers of Chinese equities.”

TRADING BAND

In the currency market, the yuan almost hit the weak end of its daily trading band for a second consecutive session on Tuesday, despite government moves to ease depreciation pressure.

Regulators on Tuesday raised the cross-border macro prudential adjustment ratio for corporates and financial institutions, making it easier for domestic firms to raise funds from overseas markets, thus encouraging more capital inflows.

In addition, China’s foreign exchange regulator sent a survey to some banks late on Monday asking them about their positioning in the currency market, sources told Reuters, signs that authorities are concerned about the yuan’s depreciation.

Mizuho’s Cheung expects the PBOC to continue to narrow the gap between the yuan’s fixing and spot prices gradually to alleviate depreciation pressure, predicting the Chinese currency should start to find its footing below 7.4 level.

In both onshore and offshore yuan markets, volatility implied by 1-month options hit record highs on Tuesday.

(Reporting by Shanghai newsroom; Editing by Jacqueline Wong and Maju Samuel)

Gold listless as traders navigate steady dollar, Fed cues

Oct 25 (Reuters) – Gold prices were little changed on Tuesday, as the dollar steadied and offset limit support for bullion from lingering expectations that the US Federal Reserve may slow the pace of interest rate hikes.

Spot gold 0.1% to USD 1,646.79 per ounce by 0735 GMT, while US gold futures eased 0.1% to USD 1,652.50 per ounce.

The dollar index found some footing due to a plunge in China’s yuan, shaking off pressure from bets of a less hawkish Fed and a firmer sterling as Rishi Sunak prepared to become Britain’s prime minister.

Gold competes with the dollar a safe store of value and gains in the currency also make bullion unattractive for overseas buyers.

But propping up gold to some extent, the market is sensing that the Fed is leaning towards the end of the aggressive part of the rate hike cycle, Stephen Innes, managing partner at SPI Asset Management said.

The central bank might be prepared to take a wait-and-see stance after the next few hikes, Innes added.

While the Fed appears set to deliver another 75-basis-point interest rate hike at its next policy meet, policymakers are seen debating the size of future increases.

Higher interest rates increase the opportunity cost of holding the zero-yield bullion, while boosting the dollar and bond yields.

“Gold is at last finding some relative stability above USD 1,600,” said Clifford Bennett, chief economist at ACY Securities.

Should pressures from stronger dollar and some sovereign selling dissipate over coming months, gold could move significantly higher towards USD 1,850 to USD 2,200 over much of 2023, Bennett added.

Meanwhile, holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, recorded their first inflow after six straight days of declines.

Spot silver fell 0.7% to USD 19.12 per ounce, platinum eased 0.3% to USD 921.63 and palladium rose 1.2% to USD 1,991.27.

(Reporting by Eileen Soreng in Bengaluru; Editing by Rashmi Aich, Neha Arora, Editing by Louise Heavens)

Oil rises as US dollar loses steam though demand fears linger

Oct 25 (Reuters) – Oil prices rose on Tuesday as the US dollar eased against major peers but gains were limited by worries of slowing global fuel demand growth amid bearish economic data from key oil importing economies such as China.

International benchmark Brent crude futures gained 3 cents to USD 93.29 per barrel by 0652 GMT, after falling 0.3% in the previous session. US West Texas Intermediate crude futures for December delivery rose 11 cents to USD 84.69 per barrel, after a previous decline of 0.6%.

The greenback eased on Tuesday amid signs US Federal Reserve rate hikes are putting the brakes on the world’s biggest economy, while risk sentiment improved as Rishi Sunak prepared to become Britain’s prime minister.

A weaker U. dollar makes dollar-denominated oil less expensive for other currency holders and helps push prices higher.

However, signs of uncertain economic activity in the United States and China, the world’s two biggest oil consumers, limited the increase.

“The intraday price swings aside, Brent and WTI futures are stuck in a relatively narrow band since Thursday,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Supply and demand fundamentals remain largely stable, leaving economic sentiment at the centre-stage for the oil market, Hari added.

“Much of the souring outlook on demand has already been baked in, so any further downward pressure may be slow-acting,” she said.

US business activity contracted for a fourth month in October, with manufacturers and services firms saying in a monthly S&P Global survey of purchasing managers published on Monday that client demand is falling .

That weakening could indicate that the Fed’s interest rate increases to fight inflation have been working and may persuade it to slow its rate hike policies, a positive signal for fuel demand.

Also on Monday, government data showed China’s crude oil imports in September were 2% lower than a year earlier, continuing a trend of lower imports at the same time it reported slowing retail sales.

US crude oil inventories are also expected to rise this week, which may limit price gains. Analysts polled by Reuters estimated on average that crude inventories rose by 200,000 barrels in the week to Oct. 21.

Analysts estimated stockpiles of gasoline fell by about 1.2 million barrels and distillate inventories, which include diesel and heating oil, were expected to have dropped by 1.1 million barrels last week.

Separately, International Energy Agency head Fatih Birol said on Tuesday the world will still need Russian oil to flow to the market despite a price cap, with between 80% to 90% an “encouraging level” to meet demand.

Many details of a price cap on Russian oil still have to be ironed out, Birol said during the Singapore International Energy Week.

(Reporting by Mohi Narayan and Stephanie Kelly; Editing by Kenneth Maxwell, Christian Schmollinger and Jamie Freed)

Oil prices rise on weaker dollar, supply worries

NEW YORK, Oct 25 (Reuters) – Oil prices edged higher on Tuesday, rebounding from an early fall of more than USD 1 a barrel, on a lift from a weaker dollar and supply concerns highlighted by Saudi Arabia’s energy minister.

Brent crude futures rose 26 cents to settle at USD 93.52 per barrel, while US West Texas Intermediate crude futures rose by 74 cents to USD 85.32.

Both benchmarks rose and fell by USD 1 during the session.

The US dollar index fell during afternoon trade, making greenback-denominated oil less expensive for other currency holders and helping to push prices higher.

Further support came from comments by Saudi Arabia’s Energy Mister Prince Abdulaziz bin Salman that energy stockpiles were being used as a mechanism to manipulate markets.

“It is my duty to make clear that losing emergency stocks may be painful in the months to come,” he told the Future Initiative Investment (FII) conference in Riyadh.

Meanwhile, tightening markets for liquefied natural gas (LNG) worldwide and supply cuts by major oil producers have put the world in the middle of “the first truly global energy crisis,” Fatih Birol, the head of the International Energy Agency (IEA), said.

The comments out of Riyadh and from the IEA are “a reminder that when it comes to the energy crisis, it’s far from over,” said Phil Flynn, an analyst at Price Futures Group. “There are still concerns the market is undersupplied.”

Uncertain economic activity in the United States and China, the world’s two biggest oil consumers, limited oil’s gains, however.

On Monday, government data showed China’s crude oil imports in September were 2% lower than a year earlier, while business activity contracted in the euro zone, Britain and the United States in October.

Goldman Sachs Chief Executive David Solomon said that he believes a US recession is “most likely,” while a recession could be occurring in Europe.

The US Federal Reserve could raise its benchmark overnight interest rate beyond the 4.50%-4.75% range if it does not see real changes in behavior, he said at the FII conference.

US crude stocks rose by about 4.5 million barrels for the week ended Oct. 21, according to market sources citing American Petroleum Institute figures on Tuesday. Gasoline inventories fell by about 2.3 million barrels, while distillate stocks rose by about 600,000 barrels.

US government data on crude stockpiles is due on Wednesday.

(Reporting by Stephanie Kelly; Additional reporting by Rowena Edwards and Mohi Narayan; Editing by Marguerita Choy, Paul Simao and David Gregorio)

Japan sees BOJ easing and gov’t FX intervention not contradictory

TOKYO, Oct 25 (Reuters) – Japanese Finance Minister Shunichi Suzuki said on Tuesday there was no policy contradiction between his ministry’s yen-buying to support the currency and the Bank of Japan (BOJ) printing money to sustain its ultra-loose monetary policy.

“Monetary easing aimed at sustainable and stable price hikes including wage growth, and currency intervention in response to excessive market moves, are different in terms of policy objectives, and thus they are not contradictory,” Suzuki said.

The central bank’s policy was aimed at achieving price stability, not targeting currencies, he said.

Suzuki made the remarks at a news conference when asked whether the BOJ’s monetary easing may cause excessive yen weakening and whether the policy mix between the government and the central bank was having the intended effects.

The BOJ is set to maintain ultra-low interest rates at its two-day policy meeting ending on Friday to support the fragile economy, even at the cost of accelerating an unwelcome fall in the yen to new 32-year lows.

Policymakers have voiced concerns about the impact of a weak yen on living costs. And investors regard the BOJ as an outlier for pursuing ultra-low rates while central banks elsewhere have raised rates to combat soaring inflation.

Global commodity costs stemming from Russia’s invasion of Ukraine and the weak yen account equally for rising prices, Suzuki said.

Japan has been conducting yen-buying interventions to defend the yen against sharp declines, which have been driven by the widening divergence between Japanese and US interest rates.

Japan likely spent up to 900 billion yen (USD 6 billion) on its second straight day of suspected currency intervention on Monday, bringing total yen-buying since last month to as much as 9.2 trillion yen, market estimates show.

Authorities’ so-called stealth intervention in rapid succession has underscored their resolve to fight what they have characterized as “intolerable and speculative” yen-selling, although the impact has proved short-lived.

IN TOUCH WITH US

Japanese authorities are in constant touch with US counterparts and stand ready to take appropriate action in the currency market against volatile yen moves, Suzuki said.

The minister repeated that the government would not tolerate excessively volatile yen moves driven by speculative trading.

Japan and the United States have reaffirmed a Group of Seven (G7) agreement on currencies, Suzuki said, adding that he and Yellen both believed currencies should be set by markets.

“If we leave unattended sharply volatile currency moves, driven by speculative trading, that would affect companies and households,” Suzuki said.

He also said Japan’s yen-buying intervention was aimed at smoothing market volatility, signaling that Tokyo was not targeting a specific currency level in deciding when to step into the market to buy yen.

(USD 1 = 148.8700 yen)

(Additional reporting by Daiki Iga; Writing by Leika Kihara and Tetsushi Kajimoto; Editing by Jacqueline Wong, Sam Holmes & Simon Cameron-Moore)

Unfazed by yen’s slump, BOJ seen keeping ultra-low rates

TOKYO, Oct 24 (Reuters) – The Bank of Japan is expected to raise its inflation forecasts on Friday but keep ultra-low interest rates steady in a show of resolve to support the fragile economy, even at the cost of accelerating an unwelcome fall in the yen to fresh 32-year lows.

Authorities have struggled to tame the yen’s relentless declines as investors focus on the BOJ’s ultra-low interest rates that make it an outlier among a global wave of central banks tightening policy to combat soaring inflation.

Given rising commodity prices and the boost to import costs from the yen’s slump, Japan’s core consumer inflation rate hit an eight-year high of 3% in September and is seen staying above the BOJ’s 2% target for the rest of this year, analysts say.

But with inflation modest compared with western nations and Japan’s economic recovery still fragile, the BOJ is set to leave intact its minus 0.1% target for short-term interest rates and the target for the 10-year bond yield at around 0% at its two-day policy meeting that ends on Friday.

“It’s hard to expect the BOJ to take monetary action to stem the yen’s fall as currency policy falls under the jurisdiction of the finance ministry,” said Mari Iwashita, chief market economist at Daiwa Securities.

Some market participants speculate the BOJ could tweak its dovish policy guidance amid growing public discontent over the weak-yen effect of its ultra-loose monetary policy.

“With the Fed determined to combat inflation, a minor policy tweak by the BOJ will do little to narrow the gap between US and Japanese monetary policy,” said Iwashita.

In fresh quarterly projections due on Friday, the BOJ is expected to slightly revise up its consumer inflation forecasts for the year ending in March 2023 and the following year, said five sources familiar with the bank’s thinking.

The upgraded forecast will still show core consumer inflation sliding below the BOJ’s 2% target next fiscal year as the impact of one-off factors, such as past rises in fuel costs, dissipate, the sources said.

The board will likely cut its growth forecasts for the current and following fiscal years, as global recession fears cloud the outlook for the export-reliant economy, they said.

Investors’ attention will be focused on Governor Haruhiko Kuroda’s post-meeting briefing for his views on the economic fallout from the yen’s sharp declines, and clues on the timing of an eventual exit from the ultra-loose policy.

In July, the BOJ forecast core consumer inflation to hit 2.3% in fiscal year 2022 before slowing to 1.4% the following year. It projects the economy to expand 2.4% in the current fiscal year and rise 2% in fiscal 2023.

(Reporting by Leika Kihara; Editing by Christian Schmollinger)

Dollar rises amid suspected BOJ intervention; pound choppy

NEW YORK, Oct 24 (Reuters) – The dollar edged higher on Monday despite another suspected foreign exchange intervention by Japan, while sterling was choppy after Rishi Sunak was picked to become Britain’s third prime minister in the last seven weeks, and China’s offshore yuan fell to a record low.

The yen hit a low of 149.70 per dollar overnight before surging to a high of 145.28 within minutes in a move that suggested the Bank of Japan (BOJ), acting for Japan’s Ministry of Finance, had stepped in again.

Yen overnight volatility surged to its highest since Sept. 21, the day before the BOJ stepped in to prop up the currency for the first time since 1998.

Japan likely spent a record 5.4 trillion to 5.5 trillion yen (USD 36.16 billion to USD 36.83 billion) in its yen-buying intervention last Friday, according to estimates by Tokyo money market brokerage firms.

The Japanese currency was last at 148.89, down 0.77% against the greenback.

The dollar held firm after the suspected BOJ intervention, but weakened, briefly turning negative, after S&P flash PMI data showed US business activity contracting for a fourth straight month in October, the latest evidence of an economy softening in the face of high inflation and rising interest rates.

The data may indicate that the dollar’s strong run is nearing its end, said Edward Moya, senior market analyst at OANDA.

“You had significant weakness in these flash PMIs. That to me was the big red flag,” he said. “The US economy has steadily been showing signs of strong resilience and now it seems like that is going away.”

In September, the Federal Reserve delivered its third straight 75-basis-point rate hike, and a fourth hike of that size is expected at next week’s policy-setting meeting, though how aggressive policymakers remain after that is up for debate.

The market is now waiting to see how much the economy is weakening and if the Fed will pause after hiking rates in December and February, Moya said.

At 3:30 p.m. EDT (1930 GMT), the dollar =USD was up 0.089% at 111.93 against a basket of six peer currencies.

Sterling GBP= see-sawed after Sunak, the country’s former chancellor,
was appointed leader
of Britain’s Conservative Party, clearing the way for him to become the next prime minister.

“However Sunak’s premiership unfolds, there are likely to be more difficult times ahead for the UK economy as it grapples its way out of a worsening downturn and even the prospect of a general election,” said Giles Coghlan, chief market analyst at HYCM.

“That said, there is one aspect of help for the GBP that is often overlooked. On the other side of the Atlantic, a slowdown in Federal Reserve policy would likely help lift the GBP as much, if even not more, than UK fiscal policy.”

Sterling was last down 0.16% at USD 1.12915, off an overnight high above USD 1.14.

The euro was last up 0.18% at USD 0.98805, while China’s offshore yuan plummeted to a new record low against the dollar of 7.3322.

Chinese President Xi Jinping secured a precedent-breaking third leadership term, picking a top governing body stacked with loyalists. Xi is likely to stick to his zero-COVID policy and could favor the state over private-sector growth, analysts say.

(Reporting by John McCrank in New York; additional reporting by Amanda Cooper in London; Editing by Bernadette Baum, Kirsten Donovan and Paul Simao)

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