Wall Street ends sharply higher, dollar dips on UK U-turn, strong earnings

NEW YORK, Oct 17 (Reuters) – Wall Street jumped to robust gains on Monday as solid earnings and a financial policy reversal in Britain fueled risk appetite and boosted the sterling and euro against the greenback.

All three major US stock indexes rallied to end the session 1.9% to 3.4% higher while and the dollar lost ground against a basket of world currencies.

“The catalysts that have triggered in the markets year-to-date are well-known,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “Now, investors are looking for green shoots of catalysts that can start to provide some improvement.”

Stocks were primed for a strong open after Britain’s new finance minister Jeremy Hunt scrapped Prime Minister Liz Truss’s proposed tax cuts and reined in her energy subsidies, while Bank of America Corp. (BAC) posted consensus-beating third quarter results, having benefited from a spate of interest rate hikes from the Federal Reserve.

The Dow Jones Industrial Average rose 550.99 points, or 1.86%, to 30,185.82, the S&P 500 gained 94.88 points, or 2.65%, to 3,677.95 and the Nasdaq Composite added 354.41 points, or 3.43%, to 10,675.80.

European stocks closed sharply higher on the UK’s financial policy reversal.

That reversal has “lifted some clouds, but it doesn’t lift the political risk,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York, who added that the new government formed by British Prime Minister Liz Truss “has caused a lot of uncertainties.”

Meanwhile, the easing yuan weighed on Asian markets.

The pan-European STOXX 600 index rose 1.83% and MSCI’s gauge of stocks across the globe gained 2.09%.

Emerging market stocks rose 0.32%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.19% lower, while Japan’s Nikkei lost 1.16%.

Long-dated Treasury yields turned higher late in a choppy session for the bond market, even as investor sentiment eased in the wake of the British policy about-face.

Benchmark 10-year notes last fell 3/32 in price to yield 4.0166%, from 4.006% late on Friday.

The 30-year bond last fell 23/32 in price to yield 4.0214%, from 3.975% late on Friday.

The euro and sterling gained strength following Hunt’s announced policy announcement, causing the greenback to lose ground against a basket of major world currencies.

The dollar index fell 1.02%, with the euro EUR= up 1.19% to USD 0.9835.

The Japanese yen weakened 0.19% versus the greenback at 149.06 per dollar, while sterling was last trading at USD 1.135, up 1.61% on the day.

Crude prices oscillated as markets juggled signs of looming recession and China’s continued loose monetary policy.

US crude settled down 0.18% to close at USD 85.46 per barrel, while Brent settled at USD 91.62 per barrel, essentially flat on the day.

Softness in the greenback gave a lift to gold prices.

Spot gold added 0.4% to USD 1,648.39 an ounce.

(Reporting by Stephen Culp Additional reporting by Marc Jones in London; Editing by Mark Potter, Will Dunham and Nick Zieminski)

Gold up about 1% as US dollar, yields pull back

Oct 17 (Reuters) – Gold prices rose more than 1% on Monday after declines in the previous two sessions, as the US dollar and Treasury yields faltered, although risks from looming Federal Reserve interest rate hikes persisted.

Spot gold was up 0.9% at USD 1,656.25 per ounce by 1:41 p.m. ET (1741 GMT), having risen more than 1% earlier in the session and moving away from the more than two-week low touched in the last session.

US gold futures settled 0.9% higher at USD 1,664.

“The dollar’s significantly lower … yields are ticking lower,” said Bob Haberkorn, senior market strategist at RJO Futures, who also noted some “safe-haven demand with heightened geopolitical risks.”

Making bullion less expensive for overseas buyers, the dollar slipped 1.1%, while Treasury yields also retreated.

However, it’s going to be “a struggle for gold to rally even though there’s a lot of question marks out in the world. Investors want safety, but it’s hard not to go into Treasuries with rates going up as fast as they are,” Haberkorn added.

Gold faces headwinds as the Fed is expected to continue on its rate-hiking trajectory and increase its benchmark overnight interest rate by at least 75 basis points at its next policy meeting in November to curb stubbornly high inflation.

Gold prices have fallen 20% since scaling above the key USD 2,000 per-ounce level in March.

Even though gold is seen as a hedge against inflation, rising interest rates dim the appeal of the non-yielding asset.

“In the near term, however, the recovery in risk assets bolstered by signs of stabilising gilts is raising pressure on precious metal shorts, but gold prices need to break above USD 1,750/oz to extend the short squeeze,” TD Securities said in a note.

Elsewhere, spot silver climbed 2.5% to USD 18.72 per ounce after posting eight consecutive daily losses. Platinum rose 1.7% to USD 913.77 and palladium added 0.6% to USD 1,998.82.

“A surplus palladium market in 2023 should ultimately lead to lower palladium prices, although near term the market remains tight,” Heraeus Precious Metals said in a note.

(Reporting by Kavya Guduru in Bengaluru; Editing by Shounak Dasgupta and Paul Simao)

Philippines’ cash remittances up 4.3% in August

MANILA, Oct 17 (Reuters) – Cash remittances rose 4.3% to USD 2.72 billion in August from a year ago, the Philippine central bank said on Monday.

In January to August, cash remittances through banks increased 3% to USD 20.99 billion.

(Reporting by Neil Jerome Morales; Editing by Martin Petty)

BoE reiterates liquidity available, following end of gilt support

LONDON, Oct 17 (Reuters) – The Bank of England on Monday outlined the various liquidity operations it holds following last week’s conclusion of its emergency gilt market support.

“As intended, these operations have enabled a significant increase in the resilience of the sector,” the BoE said in a statement.

It pointed to the new Temporary Expanded Collateral Repo Facility, in which banks can access cash for low-rated corporate bond collateral, as well as other long-standing sources of liquidity.

(Reporting by Kylie MacLellan, Writing by Andy Bruce)

Philippines rejects all bids for T-bills at auction

MANILA, Oct 17 (Reuters) – The Philippines’ Bureau of the Treasury rejected all bids for 91-day, 182-day and 364-day T-bills at an auction on Monday, as market participants sought significantly higher yields.

(Reporting by Enrico Dela Cruz; Editing by Martin Petty)

Oil climbs on China’s fuel demand recovery hopes

Oct 17 (Reuters) – Oil prices rose on Monday after China rolled over liquidity measures to help its pandemic-hit economy, igniting hopes for a better fuel demand outlook from the world’s top crude importer.

Brent crude futures rose 81 cents, or 0.88%, to USD 92.44 a barrel by 0642 GMT, recovering from a 6.4% fall last week. US West Texas Intermediate crude was at USD 86.33 a barrel, up 72 cents, or 0.84%, after a 7.6% decline last week.

China’s central bank rolled over maturing medium-term policy loans while keeping the interest rate unchanged for a second month on Monday.

Analysts said the full rollover is a signal that the central bank would continue to maintain loose monetary policy.

The country also vowed to greatly increase domestic energy supply capacity and step up risk controls in key commodities including coal, oil and gas, and electricity, a senior National Energy Administration official said on Monday.

China will further increase reserve capacities for key commodities, another state official told a news conference in Beijing.

Oil found support from a combination of factors, including Chinese President Xi Jinping’s comments at the Party Congress that reassured accommodative policies for the economy, a positive sign for demand outlook, CMC Markets analyst Tina Teng said.

China is expected to release trade and economic data this week. Although its third-quarter GDP growth could rebound from the previous quarter, President Xi’s stringent COVID-19 policy has the world’s No. 2 economy facing what will most likely be its worst performing year in almost half a century.

Looking ahead, oil prices are expected to remain volatile as production cuts by OPEC+ will tighten supplies ahead of the European Union embargo on Russian oil, while a strong US dollar and further interest rate increases from the US Federal Reserve limit price gains.

St. Louis Fed President James Bullard said on Friday inflation had become “pernicious” and difficult to arrest, and warranted continued “frontloading” through larger increases of three-quarters of a percentage point.

Member states of the Organization of the Production Exporting Countries and their allies, including Russia, lined up on Sunday to endorse the steep production cut agreed to this month after the White House, stepping up a war of words with Saudi Arabia, accused Riyadh of coercing other nations into supporting the move.

OPEC+ pledged on Oct. 5 to cut output by 2 million barrels per day, which will lead to an actual drop of about 1 million bpd as some members are already producing below their targets.

Despite this, top exporter Saudi Arabia will keep exports to key Asia markets steady in November.

“Tighter inventories for oil and oil products along with looming supply risks should keep prices volatile,” analysts at ANZ Research said in a note.

(Reporting by Mohi Narayan in New Delhi and Florence Tan in Singapore; Editing by Gerry Doyle)

Oil steady as recession woes counter positive Chinese signals

HOUSTON, Oct 17 (Reuters) – Oil prices held steady on Monday in choppy trading as fears that high inflation and energy costs could drag the global economy into recession offset China’s continuation of loose monetary policy.

Brent crude futures were down 1 cents, or 0.01%, to USD 91.62 a barrel, recovering from a 6.4% fall last week. US West Texas Intermediate crude was down 15 cents, or 0.2%, at USD 85.46 after a 7.6% decline last week.

“US inflation remains a front topic and with the Fed set to raise rates at least into next year, there are fears that demand destruction will escalate,” said Dennis Kissler, senior vice president of trading at BOK Financial.

China’s central bank rolled over maturing medium-term policy loans on Monday while keeping its key interest rate unchanged for a second month, in a signal that loose monetary policy would be maintained.

Beijing will also greatly increase domestic energy supply capacity and step up risk controls in key commodities including coal, oil, gas and electricity, a senior National Energy Administration official said on Monday.

China will further increase reserve capacities for key commodities, another state official told a news conference in Beijing.

Chinese trade and third-quarter GDP data, along with September activity data, are due to be released on Tuesday, with quarterly growth possibly rebounding from the previous quarter but annual growth threatening to be China’s worst in almost half a century.

Meanwhile, a strong US dollar and the likelihood of further interest rate increases by the Federal Reserve are helping to contain price gains.

St. Louis Fed President James Bullard on Friday said inflation had become “pernicious” and difficult to arrest, warranting continued “frontloading” through larger rate increases of three-quarters of a percentage point.

Inflation in the United States remains stubborn and growth in European Union countries is expected to weaken to 0.5%, International Monetary Fund official Gita Gopinath said on Monday.

“It’s been another turbulent few weeks in oil markets from global growth concerns to super-sized OPEC+ output cuts and it seems they’re yet to fully settle down,” said Craig Erlam, senior markets analyst at OANDA.

“Brent has seen lows of USD 82 and highs of USD 98, so perhaps what we’re now seeing is it finding its feet somewhere in the middle.”

Oil supply is likely to remain tight after OPEC and allies including Russia pledged on Oct. 5 to cut output by 2 million barrels per day while a war of words between OPEC’s de facto leader Saudi Arabia and the United States could foreshadow more volatility.

OPEC+ output cuts attracted funds back to the oil markets, with continued heavy buying of crude oil futures and options for a second straight week.

Easing the supply crunch, oil output in the Permian in Texas and New Mexico, the biggest US shale oil basin, is due to rise by about 50,000 barrels per day (bpd) to a record 5.453 million bpd in November, the US Energy Information Administration (EIA) said in its productivity report on Monday.

(Additional reporting by Noah Browning in London, Mohi Narayan in New Delhi and Florence Tan in Singapore; Editing by Susan Fenton, Kirsten Donovan, David Goodman, Ed Osmond, Paul Simao and David Gregorio)

Gold firms on softer dollar; rate-hike bets cap gains

Oct 17 (Reuters) – Gold prices rose on Monday as the dollar retreated slightly, but impending supersized US interest rate hikes tempered further gains for the non-yielding bullion.

Spot gold rose 0.6% to USD 1,651.76 per ounce, as of 0703 GMT. Last week’s more than 3% decline was gold’s worst performance since July.

US gold futures were up 0.4% at USD 1,655.30.

The dollar index slipped 0.1%, reviving some of gold’s appeal for overseas buyers. Benchmark US 10-year Treasury yields also eased further from a 14-year peak scaled last week.

While the dollar’s still on a strong footing with the Federal Reserve likely to continue aggressive rate hikes, the “market is already reflecting these hawkish expectations and any softer data from the US. could see the USD stalling,” capping gold’s declines, said ANZ commodities strategist Soni Kumari.

US retail sales were unexpectedly flat in September, although the August reading was revised up 0.4%.

A survey from the University of Michigan on Friday showed consumer sentiment improved further in October, but inflation expectations deteriorated a bit, keeping bets for another 75-basis-point rate hike next month intact.

St. Louis Fed President James Bullard said the latest CPI data warrants continued “frontloading” through larger rate hikes of three-quarters of a percentage point but that does not necessarily mean rates need to be raised above the central bank’s projections.

Fed policymakers have raised rates sharply this year, sending gold down nearly 10% so far this year.

Reflecting sentiment, holdings of the SPDR Gold Trust GLD exchange-traded fund marked their biggest one-day outflow since Sept. 26 on Friday.

Gold prices may retest support at USD 1,641 per ounce, a break below which could open the way towards $1,614, according to Reuters technical analyst Wang Tao.

Spot silver climbed 1.3% to USD 18.50 per ounce, platinum rose 1.1% to USD 909.00 and palladium gained 1.4% to USD 2,017.22.

(Reporting by Eileen Soreng in Bengaluru; Editing by Sherry Jacob-Phillips, Rashmi Aich, and Uttaresh.V)

Japan’s FX diplomat vows ‘decisive’ action against volatile yen moves

WASHINGTON, Oct 14 (Reuters) – Japan’s top currency diplomat Masato Kanda on Friday said authorities are ready to take decisive action in the currency market if excessive moves in the yen continue.

In a statement issued on Wednesday, the Group of Seven (G7) finance leaders said they will closely monitor “recent volatility” in markets, and reaffirmed their position that excessive exchange-rate moves were undesirable.

“As mentioned in the statement, excessive volatility and disorderly moves in the currency market have a negative impact on economies,” said Kanda, who oversees Japan’s currency policy as vice finance minister for international affairs.

“If excessive moves in the yen continue, we’re ready to take decisive action any time,” Kanda told reporters in Washington.

The dollar jumped about 1% to a fresh 32-year high of 148.83 yen on Friday as investors remained focused on the policy divergence between the US Federal Reserve’s aggressive interest rate hikes and the Bank of Japan’s ultra-low rates.

Japanese authorities last month sold dollars and bought yen in a market intervention for the first time in 24 years, aiming to slow a rapid slide in the yen that Tokyo considered a threat to the economy.

“I won’t comment on specific market moves,” Kanda said when asked whether the yen’s sharp declines in recent days were deemed volatile. “I will, however, mention that many people believe recent moves have been somewhat rapid,” he added.

His comments came on the sidelines of a gathering of global finance officials in Washington, at which the broad strength of the greenback was a major topic of discussion.

The dollar has strengthened by more than 18% year to date against a basket of major trading partners’ currencies and by nearly 30% against the yen alone.

“I won’t comment on other countries’ central bank policy,” he said when asked whether the Fed’s rate hike plans are driving up the dollar across the board and causing spillovers.

(Reporting by Leika Kihara in Washington; Editing by Mark Porter & Shri Navaratnam)

As US markets churn, some stick with rare 2022 winner: energy shares

NEW YORK, Oct 14 (Reuters) – Gut-wrenching market volatility and attractive valuations are prompting some investors to keep their bullish views on energy stocks, one of the few bets that have thrived in an otherwise punishing year.

It’s not an easy call. The S&P 500 energy sector is already up around 46% this year and monetary policy tightening around the world has bolstered the chances of a global recession that could curtail energy demand.

Still, signs that supply will remain comparatively scarce are prompting some investors to stick with the sector, drawn by attractive earnings prospects and valuations that remain comparatively low despite big gains in many energy stocks this year. The S&P 500 energy sector trades at a trailing price-to-earnings ratio of 9.9, nearly half the 17.4 valuation of the broader index.

Few also see any end to the selloff in broader markets, as stubborn inflation boosts expectations for more market-punishing rate hikes from the Federal Reserve and other central banks. The S&P 500 is down around 24.5% this year while bonds – as measured by the Vanguard Total Bond Market index fund – are down nearly 18%.

“It’s hard to see people giving up on energy because it’s the best of both worlds,” said Jack Janasiewicz, portfolio manager with Natixis Investment Managers Solutions, referring to the sector’s low valuation and potential for more gains if supply remains tight. “If you’re worried about the direction of the market it’s a great place to hide.”

Analysts expect third-quarter earnings per share growth for energy companies of 121% compared with the same period a year ago, while those for the broader index excluding energy fall 2.6%, Refinitiv data showed.

Energy is the only sector in the S&P 500 expected by analysts at Credit Suisse to post positive revisions to their third quarter earnings. US oil giants Exxon Mobile Corp. and Chevron Corp. report earnings on Oct. 28.

In the coming week, investors will be focused on earnings from Tesla Inc., Netflix, and Johnson & Johnson, among others.

Expectations for further tightness in the oil market have been boosted by recent production cuts by OPEC+, as well as the European Union’s plans to move off Russian crude by February.

US output in 2022 is expected to average 11.75 million bpd, down from a previous estimate of 11.79 million bpd, according to the US Energy Department.

Prices for Brent crude stood at USD 91.46 per barrel on Friday, up nearly 10% from a recent low after falling by nearly a third between July and September.

“There is an outsized probability that crude prices can surge higher, particularly if demand concerns fail to materialize to the extent some bears expect,” wrote analysts at TD Securities, who expect oil prices to hit USD 101 in 2023. Analysts at UBS Global Wealth Management expect oil to hit USD 110 by year-end.

Some fund managers remain skeptical that energy can continue its outperformance if the global economy slows in the face of monetary policy tightening from central banks.

“We’re surging toward recession all over the world and that’s going to cut into the demand side,” said Burns McKinney, a portfolio manager at NFJ Investment Group, who is increasing his overweight in dividend-paying tech companies such as Texas Instruments and Cisco.

At the same time, the selloff in the S&P 500 is creating buying opportunities in consumer discretionary and large-cap tech stocks that are more attractive over the long run than energy, said Lamar Villere, a portfolio manager at Villere & Co.

“We’re starting to see opportunities that are harder to not take advantage of,” he said.

Others, however, believe that the fundamentals remain aligned for the sector and see more upside. Saira Malik, chief investment officer at Nuveen, believes that fund managers will remain lightly positioned in energy shares despite recent gains. She is also betting that China’s economy will rebound in coming months, supporting global oil prices

“We still think energy has legs here,” she said.

(Reporting by David Randall; Editing by Ira Iosebashvili, Mark Porter and David Gregorio)

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