BSP hopes to cut rates in 2024, flags RRR reduction

MANILA, Jan 12 (Reuters) – The Philippines’ central bank governor said on Thursday he hoped benchmark interest rates could be cut in 2024, once inflation was under control, and flagged the prospect of lowering reserve requirements for banks in the first half of the this year.

While pent-up domestic demand will carry the economy this year, it will likely fade by 2024, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said in a speech at a Rotary Club event.

“By 2024, when pent-up demand is gone, then monetary policy hopefully at that time will be much looser than what we have now,” he said.

Central banks around the world, led by the US Federal Reserve, have since last year raced to contain elevated inflation through large increases in benchmark rates, dampening economic growth and fueling fears of recession.

Another easing measure could involve banks’ reserve requirement ratio, with a high probability of it being cut in the first half, Medalla told reporters.

“Cutting the RRR is very important to us”, he said.

Monetary authorities last cut the RRR, or the percentage of deposits and deposit substitutes banks must keep with the BSP, by 200 basis points to 12% in March 2020.

The BSP stands ready to take further monetary policy actions to bring inflation back to within a target-consistent path, Medalla said.

The consumer price index rose 8.1% to a 14-year high in December from a year earlier, mainly driven by food and energy costs. The figure brought the average full-year inflation rate to 5.8%, also a 14-year high and above the official 2%-4% target band.

“If the US is increasing policy rates, we need not match it but if it’s 50 (basis points), it’s hard not to respond, at least partially,” Medalla said.

(Reporting by Neil Jerome Morales; Editing by Ed Davies)

Australian shares rise on optimism ahead of US inflation data

Jan 12 (Reuters) – Australian shares rallied on Thursday, driven by broad-based gains across almost all sectors, supported by optimism that upcoming US December inflation data would point to a more resilient economy and a slower pace of interest rate hikes.

The S&P/ASX 200 index jumped 0.6% to 7,240.70 by 2323 GMT. The benchmark finished 0.9% higher on Wednesday.

The US consumer price index for December, crucial for investors placing bets on the Federal Reserve’s next steps, is expected to show annual inflation at 6.5%, down from 7.1% in November. Data is due later in the day.

Investors are expecting a 25 basis points (bps) interest rate increase at the Fed’s February meeting after a 50 bps increase in December.

Back in Australia, miners rose 0.5% as concerns over supply added support to iron ore prices already boosted by brightening demand prospects in top steelmaker China.

Shares of heavyweights Rio Tinto, BHP Group and Fortescue Metals Group added between 0.5% and 1.1%.

Financials gained about 0.6%, with the “Big Four” lenders advancing between 0.3% and 0.7%.

Tech stocks jumped 0.8%, tracking overnight Wall Street gains. ASX-listed shares of Block Inc and shares of accounting software provider Xero Ltd advanced 1.3% and 1.5%, respectively.

Energy stocks jumped 0.5%, as oil prices touched a one-week high on hopes of an improved global economic outlook.

Santos and Woodside Energy rose 0.7% and 0.8%, respectively.

On the other hand, a fall in bullion prices dragged gold stocks 0.6% lower, with sector majors Newcrest Mining and Northern Star Resources falling 0.4% and 0.3%, respectively.

Across the Tasman Sea, New Zealand’s benchmark S&P/NZX 50 index jumped 0.2%to 11,662.93.

(Reporting by Echha Jain in Bengaluru; Editing by Rashmi Aich)

Gold off 8-month highs as markets brace for US inflation data

Jan 11 (Reuters) – Gold prices held steady after touching an eight-month peak on Wednesday as investors positioned themselves ahead of US inflation data that could influence the Federal Reserve’s policy path.

Spot gold was steady at USD 1,877.51 per ounce by 1:40 p.m. ET (1840 GMT). US gold futures settled up 0.1% at USD 1,878.9.

Prices were trending lower on some “profit-taking from the shorter-term futures traders ahead of the CPI report tomorrow,” said Jim Wyckoff, senior analyst at Kitco Metals, adding that the market could continue to trade sideways ahead of the data.

The US consumer price report will be closely watched, after the Fed slowed its pace of rate hikes to 50 basis points in December after four consecutive 75 bps increases.

Traders see a 77% chance the Fed will raise the benchmark rate by 25 bps to 4.50%-4.75% in February and see rates peaking at 4.92% by June.

Susan M. Collins, the president of the Federal Reserve Bank of Boston, said she was leaning toward a quarter-point interest rate increase at the central bank’s next meeting, the New York Times reported on Wednesday.

Gold is considered an inflation hedge, but is highly sensitive to rising interest rates, which increase the opportunity cost of holding non-yielding bullion.

“This could be a big report if we get another good reading that shows inflation falling faster than anticipated,” said Craig Erlam, a senior market analyst at OANDA.

While worries linger over the scale and impact of the COVID outbreak in top gold consumer China, “over the longer term, China is expected to bounce back strongly, which could stimulate additional demand”, Erlam said.

Spot silver fell 0.9% to USD 23.40 per ounce, platinum was down 0.5% to USD 1,075.63 while palladium was unchanged at USD 1,780.66.

Despite palladium lagging, platinum, gold and silver have been seeing bullish attitudes based upon China’s reopening, Wyckoff said.

(Reporting by Seher Dareen in Bengaluru, additional reporting by Swati Verma; Editing by Tomasz Janowski and Shailesh Kuber)

European shares rise on bets of easing rate hikes

Jan 11 (Reuters) – European shares advanced on Wednesday, buoyed by hopes of less aggressive interest rate hikes, while insurer Direct Line fell sharply after scrapping its full-year dividend.

The pan-regional STOXX 600 climbed 0.4%, with market participants awaiting US inflation data on Thursday for clues on the Federal Reserve’s interest rate policy.

“Investors remain in an upbeat mood going into tomorrow’s US inflation report, buoyed still by the December jobs report and the prospect of the economy being less squeezed by interest rates,” said Craig Erlam, senior market analyst at OANDA.

On Tuesday, Wall Street ended higher and European stocks cut their losses as risk appetite improved on the expectation of softer inflation data and after Fed Chair Jerome Powell refrained from commenting on the US rate policy.

Europe’s STOXX 600 has risen 5.4% so far in the year, helped by a sharp decline in natural gas prices due to warmer weather, and as data pointed to a milder-than-expected recession in the euro zone.

Signs of slowing wage inflation last week also boosted bets of a less aggressive tightening by the Fed and the European Central Bank.

“The real driver of everything this week is the US CPI data due tomorrow and expectations are that it is going to be mildly weaker than expected,” said Mark Taylor, a trader at Mirabaud Securities.

“There is actually maybe a chance that a positive or an inline shock from the CPI may trigger a little bit of profit-taking.”

On Wednesday, rate-sensitive tech stocks rose 1.3%. Energy stocks advanced 0.9%, while miners jumped 0.1% as commodity prices rose on optimism over top consumer China’s reopening of its borders.

Among individual stocks, Direct Line Insurance Group Plc dropped to the bottom of STOXX 600, plunging 23.5% after the British motor and home insurer unexpectedly scrapped its 2022 final dividend.

Rivals Admiral and Aviva fell 6.8% and 2.1%, respectively.

Sainsbury’s, Britain’s second-biggest supermarket group, fell 1.6% after Chief Executive Simon Roberts said he was cautious on the consumer backdrop.

Nevertheless, Britain’s commodity-heavy FTSE 100 hit its highest in more than four years as oil majors and mining giants advanced.

Bayer rose 3.6% as a source told Reuters that activist investor Bluebell was pushing for a break-up of the German pharmaceutical company. Bluebell’s move was first reported by Bloomberg late on Tuesday.

LVMH gained 2.1% after Chairman and Chief Executive Bernard Arnault tightened his family’s grip on the luxury goods empire, putting his daughter Delphine in charge of one of its leading labels, Christian Dior.

Denmark’s Jyske Bank hit an all-time high after hiking its full-year outlook. Peers Danske Bank and Sydbank added 1.0% and 0.9%, respectively.

(Reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in Bengaluru; Editing by Uttaresh.V, Subhranshu Sahu and Alison Williams)

BSP chief: too early to say if rate hikes may be paused

MANILA, Jan 11 (Reuters) – The Philippine central bank chief said on Wednesday it was too early to say whether monetary authorities will pause raising interest rates this year, though he said upcoming hikes will not be as large as they were previously.

In comments to reporters, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla at the same time ruled out rate cuts in the near term.

“Monetary policy is responding to inflation. It is not causing inflation,” Medalla said, speaking on the sidelines of a business forum.

“I am ruling out (rate) cuts in the very short run. But I am not ruling out the increases. But maybe the increases will not be as large as it used to,” he said.

He also said the likelihood of the BSP not doing anything on monetary policy in its next two policy meetings was “quite low”.

On Tuesday, he confirmed rates would likely need to rise a further 25 or 50 basis points at next month’s policy meeting, though said pressure to match hikes by the US Federal Reserve was waning.

The BSP, which raised its benchmark interest rate by a total of 350 basis points last year, as inflation hit a 14-year high, will hold its first policy meeting of the year on Feb. 16.

(Reporting by Neil Jerome Morales; Editing by Ed Davies)

Oil gains 3% on global economic optimism, despite surprise US crude build

NEW YORK, Jan 11 (Reuters) – Oil prices rose 3% to a one-week high on Wednesday as hopes for an improved global economic outlook and concern over the impact of sanctions on Russian crude output outweighed a massive surprise build in US crude stocks.

Brent futures rose USD 2.57, or 3.2%, to settle at USD 82.67 a barrel. US West Texas Intermediate (WTI) crude rose USD 2.29, or 3.1%, to settle at USD 77.41.

Both benchmarks settled at their highest since Dec. 30, with WTI up for a fifth day in a row for the first time since October and Brent up for a third day in a row for the first time since December.

Global equities were up on hopes that US inflation and earnings figures due on Thursday will indicate a resilient economy and result in a slower pace of interest rate hikes.

If inflation comes in below expectations, that will drive the dollar lower, analysts said, which could boost oil demand because it makes crude cheaper for buyers holding other currencies.

The Federal Reserve will likely hike its target interest rate for the last time at its Jan. 31-Feb. 1 monetary policy meeting, raising it by 50 basis points (bps) to a range of 4.75%-5.00%, HSBC said in a research note.

Much of the market’s optimism was pinned on top oil importer China’s reopening of its economy after the end of strict COVID-19 curbs.

“Energy traders should get used to seeing oil prices head higher. Oil demand is coming back and expectations are high that China’s demand is about to skyrocket,” said Edward Moya, senior market analyst at data and analytics firm OANDA.

China’s overall passenger vehicle sales are estimated to rise 5% in 2023, Volkswagen AG’s China President Ralf Brandstaetter told Chinese media.

China’s industrial output is expected to have grown 3.6% in 2022 from the previous year, the Ministry of Industry and Information Technology (MIIT) said, despite production and logistics disruptions from COVID-19 curbs.

The US Energy Information Administration (EIA) said crude inventories jumped by 19.0 million barrels last week, the third biggest weekly gain ever and the most since stocks rose by a record 21.6 million barrels in Feb 2021. Last week’s increase came as refiners were slow to restore production after a cold freeze shut operations in late 2022.

Analysts polled by Reuters had forecast a 2.2-million-barrel decline in crude stocks, and industry data from the American Petroleum Institute (API) showing a 14.9 million-barrel build.

EIA this week forecast US crude production will reach all-time highs in 2023 and 2024.

An international price cap imposed on sales of Russian crude took effect on Dec. 5 and more curbs aimed at products sales are set to come into force next month as the European Union (EU) keeps working on more sanctions against Moscow over the invasion of Ukraine.

EIA said the upcoming EU ban on seaborne imports of petroleum products from Russia on Feb. 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022.

Russian Deputy Prime Minister Alexander Novak said the country’s oil producers have had no difficulties in securing export deals despite Western sanctions and price caps.

(Additional reporting by Noah Browning in London, Sonali Paul in Melbourne, Trixie Yap in Singapore and Laila Kearney in New York; Editing by Marguerita Choy, David Goodman and David Gregorio)

REFILE-PRECIOUS-Gold climbs 8-month high ahead of U.S. inflation test

Corrects typo in analyst’s organisation name in paragraph four

U.S. CPI data due at 1330 GMT on Thursday

Fed’s Bowman: more rate hikes needed to fight inflation

Soft inflation numbers could push gold above $1,900- analyst

By Ashitha Shivaprasad

Jan 11 (Reuters) – Gold prices scaled an eight-month peak on Wednesday, underpinned by a subdued dollar, although they traded in a tight range as traders positioned themselves for inflation data that could influence the U.S. Federal Reserve’s rate-hike stance.

Spot gold XAU= was up 0.3% at $1,883.48 per ounce, as of 0727 GMT, its highest level since early-May. U.S. gold futures GCv1 rose 0.5% to $1,885.90.

The dollar index =USD slipped 0.1%, making greenback-priced bullion cheaper for overseas buyers. Benchmark U.S. 10-year Treasury yields also edged lower. USD/ USD/

Overall, it looks like gold is currently consolidating into a range as the focus turns to the U.S. consumer price index (CPI) data on Thursday, said Ilya Spivak, head of global macro at Tastylive.

“If the data shows that inflation is softer, then gold might go north of the $1,900 level. However, it would be interesting to see if gold can get much traction beyond that.”

Gold is considered an inflation hedge, but is highly sensitive to rising interest rates, which increase the opportunity cost of holding the non-yielding bullion.

Fed Governor Michelle Bowman said on Tuesday that the U.S. central bank will have to raise rates further to combat high inflation and that will likely lead to softer job market conditions.

Spot silver XAG= rose 1.1% to $23.88 and platinum XPT= gained 0.7% to $1,088.08.

Palladium XPD= was up 0.5% at $1,789.57. Automakers embed palladium in exhaust pipes to neutralise harmful emissions, but the metal is not required for that function in electric vehicles (EVs).

The expansion of EVs is expected to continue in 2023, leading to a small overall decline in palladium’s demand for cars, despite an expected increase in overall new cars across markets, analysts at Heraeus Precious Metals said in a note.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)

((Ashitha.Shivaprasad@thomsonreuters.com;))

Asian shares subdued, dollar steady, focus on US CPI data

SINGAPORE, Jan 11 (Reuters) – Asian equities edged higher on Wednesday, while the dollar steadied as investors braced for US inflation data that will influence the Federal Reserve’s interest rate policy.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.28% higher, while Japan’s Nikkei gained 1%. Australia’s S&P/ASX 200 index rose 0.80%.

While China’s reopening from pandemic controls has boosted investor sentiment, with stocks in the country and Hong Kong starting the year with a strong rally, some investors have booked profits on doubts over the sustainability of the market’s rebound.

China’s stocks opened 0.1% higher while Hong Kong’s Hang Seng index gained 0.6% at the start of the day.

Overnight, US stocks ended higher as investors heaved a sigh of relief after Fed Chair Jerome Powell refrained in a speech from commenting on rate policy but said the Fed’s independence was essential for it to battle inflation.

“With some expectations that Powell would likely pushback on the easing financial conditions, equity markets celebrated the lack of any clear guidance on policy direction,” Saxo strategists said.

Investor attention will squarely be on the US consumer price index (CPI), scheduled to be released on Thursday. The data is expected to show December’s headline annual inflation at 6.5%, versus 7.1% in November.

Thursday’s data will be crucial in determining what the Fed is likely to do with interest rates in its next meeting at the start of next month.

The US central bank raised interest rates by 50 basis points in December after four straight 75 bps hikes in 2022 but has reiterated that it will keep rates higher for longer to tame inflation.

Investors are betting that the upcoming inflation report could show further deceleration, potentially giving the Fed room to slow the pace of interest rate rises, said Stephen Wu, economist at Commonwealth Bank of Australia.

Saxo strategists said despite Powell’s relative silence on policy outlook, there were other Fed and non-Fed speakers on Tuesday who continued to sound hawkish and raising alarms on inflation.

Federal Reserve Governor Michelle Bowman said on Tuesday the central bank would have to raise interest rates further to combat high inflation and that would likely lead to softer job market conditions.

JPMorgan Chase & Co Chief Executive Officer Jamie Dimon said heightened economic uncertainties might encourage the Federal Reserve to raise interest rates to 5%.

In the foreign exchange market, the Australian dollar was 0.3% higher after data showed the annual pace of inflation had increased to 7.3% in November. The New Zealand dollar rose 0.2%.

The dollar index, which measures the dollar against six major currencies, rose 0.058% to 103.31, hovering close to seven-month low.

The Japanese yen weakened 0.05% to 132.33 per dollar, while sterling was last trading at USD 1.2146, down 0.07% on the day.

The yield on 10-year Treasury notes was down 1.3 basis points to 3.606%, while the yield on the 30-year Treasury bond was down 1.5 basis points to 3.739%.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 1.7 basis points at 4.241%.

US crude fell 0.71% to USD 74.59 per barrel and Brent was at USD 79.56, down 0.67% on the day.

(Reporting by Ankur Banerjee; Editing by Bradley Perrett)

Oil slips as US crude, fuel inventories reignite demand concerns

MELBOURNE, Jan 11 (Reuters) – Oil prices fell on Wednesday, erasing the previous session’s gains, after industry data showed an unexpected build in crude and fuel inventories in the United States, the world’s biggest oil user, which reignited worries about fuel demand.

US West Texas Intermediate (WTI) crude futures fell 59 cents, or 0.8%, to USD 74.53 a barrel at 0134 GMT, while Brent crude futures were down 62 cents, or 0.8%, at USD 79.48 a barrel.

US crude stocks jumped by 14.9 million barrels in the week ended Jan. 6, sources said, citing data from the American Petroleum Institute (API). At the same time, distillate stocks, which include heating oil and jet fuel, rose by about 1.1 million barrels.

Analysts polled by Reuters expected crude stocks to fall by 2.2 million barrels and distillate stocks to drop by 500,000 barrels.

Traders will be looking out for inventory data from the US Energy Information Administration due later Wednesday to see if it matches the preliminary view from API.

The oil market has been pulled lower by worries about US interest rate hikes to curb inflation which would trigger a recession and curtail fuel demand, offsetting hopes for fuel demand growth in China, the world’s second largest oil consumer, as it eases COVID-19 curbs and resumes international travel.

“Monday’s news that China had issued a fresh batch of import quotas suggests the world’s large importer is ramping up to meet higher demand,” ANZ Research analysts said in a note.

The big focus this week is on US inflation data, due on Thursday. If inflation comes in below expectations that would drive the dollar down, analysts said. A weaker dollar can boost oil demand as it makes the commodity cheaper for buyers holding other currencies.

(Reporting by Sonali Paul in Melbourne; Editing by Christian Schmollinger)

China central bank steps up short-term liquidity injection ahead of long holiday

SHANGHAI, Jan 11 (Reuters) – China’s central bank ramped up a liquidity injection on Wednesday, offering fresh funds to the banking system for the first time this year to help meet seasonal cash demand before the long holidays.

The People’s Bank of China (PBOC) injected 87 billion yuan (USD 12.84 billion) through reverse repurchase agreements in open market operations, including 65 billion yuan through seven-day tenor and another 22 billion yuan through 14-day tenor, according to an online statement.

The PBOC added that the move was to “maintain reasonably ample liquidity” in the banking system.

Market participants believed the higher cash injection was meant to help counteract higher cash demand ahead of the week-long Lunar New Year holidays, which starts on Jan. 21 this year.

With 14 billion yuan worth of such reverse repos maturing on Wednesday, the central bank injected a net 71 billion yuan on the day, making the first daily net fund offering this year.

(USD 1 = 6.7770 Chinese yuan)

(Reporting by Winni Zhou and Brenda Goh; Editing by Jacqueline Wong)

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