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)

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)

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