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)

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)

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