Gold steadies off recent lows on dollar, yields pullback

Nov 22 (Reuters) – Gold prices on Tuesday steadied above last session’s low as a retreat in the dollar and benchmark US Treasury yields was offset by a rise in equities, while investors awaited cues on the US Federal Reserve’s monetary policy path.

Spot gold were unchanged at USD 1,737.19 per ounce by 2:04 p.m. ET (1904 GMT), while US gold futures settled broadly unchanged at USD 1,739.9.

“I think the metals work their way out of this and continue to move higher. But right now, it is a direct correlation with interest rates,” said Daniel Pavilonis, senior market strategist at RJO Futures.

Major cities in China tightened COVID-19 curbs as virus cases spiked in the world’s biggest consumer of the metal.

Global equities rose as Wall Street’s main indexes gained on easing worries of a dull holiday season for retailers.

US Treasury yields eased, and the dollar also slipped, while investors waited for clues from the Fed’s minutes due tomorrow.

“Gold got a little boost from the weaker dollar but that appears to be fading quickly,” said Edward Moya, senior analyst with OANDA, in a note.

“The Fed is likely to stick to the hawkish script for a while and unless we see a major improvement with China’s COVID situation, gold should struggle to muster up a meaningful rally.”

Cleveland Fed President Loretta Mester said on Monday the central bank can downshift to smaller interest rate hike increments from next month, while San Francisco Fed President Mary Daly stated the policy rate was “modestly restrictive” with “more work to do.”

While gold is considered an inflation hedge, high interest rates discourage investing in non-yielding bullion.

In other metals, spot silver rose 0.9% to USD 21.04 per ounce, platinum gained 0.5% to USD 987.32 while palladium fell 0.3% to USD 1,859.06.

(Reporting by Seher Dareen in Bengaluru; Editing by Krishna Chandra Eluri)

Emerging market debt ratio climbs back to record highs – IIF

NEW YORK, Nov 22 (Reuters) – Emerging markets’ debt-to-GDP ratio returned to record highs despite a USD 6.4 trillion decline in the global debt pile to USD 290 trillion in the third quarter due to a strong dollar and slowing bond sales, an Institute of International Finance report found.

Budget deficits and slower economic growth lifted the debt-to-GDP ratio in developing economies to 254%, matching a record high hit in the first quarter of 2021, the IIF said in its latest Global Debt Monitor published on Tuesday.

The amount of overall emerging market debt, however, slipped to USD 96.2 trillion from USD 98.7 trillion the previous quarter. Meanwhile the global debt-to-GDP ratio fell for a sixth consecutive quarter, to 343% of GDP.

Soaring energy and food prices have continued to push interest rates and funding costs higher globally, while governments have ramped up spending to shore up economies.

High-yield borrowers have seen spreads widen by about 400 basis points on average this year, but the widening has been smaller for investment grade borrowers, according to the IIF.

“In the face of tightening global financing conditions, access to international markets has become even more challenging for many high-yield borrowers this year,” Emre Tiftik, director of sustainability research at the IIF wrote in the report.

“The global sovereign interest bill is set to increase rapidly, notably for sub-Saharan Africa but also in EM Europe.”

Policymakers and rating agencies have warned that debt pressures on fragile developing economies are far from over and more defaults were likely.

The higher cost of debt servicing could particularly hurt countries most exposed to the effects of climate change, the IIF said.

A deal struck at the COP27 climate talks in Egypt over the weekend agreed to set up a “loss and damage” fund to help poorer countries pay for the impacts of climate disaster while highlighting the need to reform international financial institutions.

The global banking trade group said in its quarterly report that despite a reduction in dollar-debt reliance in the past years, it remains at high levels in Latin America and Africa, “leaving many countries heavily exposed to swings in foreign exchange markets.”

Outside the sovereign sphere, smaller companies and lower-earning families have been hit the hardest by the rising cost of borrowing.

“Given their high reliance on short-maturity funding,” said the IIF, “lower-income households and small-sized firms have been disproportionately affected by higher borrowing costs, with one-third of small-sized firms in mature markets facing difficulty in covering interest expenses.”

The dollar rose as much as 20% strongest in the third quarter, though it has pared that gain to 12% higher so far this year. Emerging market currencies fell as much as 10% to the greenback this year and are now down 7%.

(Reporting by Rodrigo Campos; editing by Karin Strohecker and Toby Chopra)

Domestic investors could absorb heavy 2023 euro debt issuance – JPMorgan

Nov 22 (Reuters) – Demand for euro zone government debt from domestic buyers crowded out by European Central Bank buying is expected to be strong enough in 2023 to absorb hefty debt sales, just as the ECB potentially retreats further as a key buyer, JPMorgan said in a note.

JPMorgan said it expected gross government bond issuance after factoring in ECB buying in the bloc to rise to 861 billion euros (USD 884 billion) in 2023 without the ECB running down its massive bond holdings and to 958 billion euros if it embarks on the debt run-off.

That is a sharp rise from the 627 billion euros JPMorgan expects at the end of 2022, as states fund energy support measures.

The ECB had absorbed governments’ debt issuance in the bloc since it began purchases in 2015, so an increase in issuance just as it backs out has raised questions over who will step in.

Since the second quarter of this year, when the ECB stopped its pandemic emergency bond purchase scheme, domestic credit institutions including banks and money market funds have stepped in as buyers in France, Italy, Spain and Greece, the JPMorgan note said on Tuesday.

It added that other domestic investors have become buyers across most euro area debt markets.

JPMorgan analysts expected demand to increase further next year as bond yields, after a surge this year as inflation soared and the ECB hiked interest rates, lure buyers.

“We believe that the pick-up in demand would be enough to absorb the heavy 2023 issuance and avoid any material widening in intra-EMU spreads,” rates strategists Elisabetta Ferrara and Aditya Chordia wrote in the note, referring to the additional yield member states pay over benchmark Germany.

JPMorgan said demand from pension funds and insurers, who had reduced investments in government bonds since the pandemic, could also increase next year, noting even modest demand could be enough to support long-dated debt issuance.

The decline in bond market volatility JPMorgan expects next year could also lure foreign buyers, who became net sellers of the debt during the period of ECB bond purchases, the bank said.

However, demand could easily be challenged due to political risks, a policy mistake by the ECB, or higher market volatility, JPMorgan added.

(USD 1 = 0.9739 euros)

(Reporting by Yoruk Bahceli; editing by Dhara Ranasinghe and Emelia Sithole-Matarise)

China leads global equity IPO volumes this year

Nov 22 (Reuters) – Chinese companies are at the forefront of global stock offerings this year, with their issuances being facilitated by easy monetary settings at home and a lack of clarity on access to offshore capital markets.

According to Refinitiv data, Chinese companies have raised USD 71.2 billion through initial public offerings (IPOs) in the domestic and overseas markets this year, which is lower than the USD 98.48 billion raised in the same period last year.

But it’s much higher compared to the US companies’ issuance of USD 17.3 billion and Europe’s USD 16.4 billion so far.

The increase in mainland IPOs comes as companies and dealmakers await final rules from the China Securities Regulatory Commission and Cyberspace Administration of China that will govern overseas listings, especially for firms that handle data.

“China’s domestic market is less impacted by global volatilities. Internally, China has a lower inflation environment and loosening monetary policy, equity market valuation is more resilient,” said Mandy Zhu, head of China Global Banking – UBS.

While global central banks are grappling with a surge in inflation, price pressures are rather benign in China, with interest rates there being cut.

Shanghai United Imaging Healthcare Co Ltd. led China’s IPO issuance this year, raising USD 1.63 billion, followed by Hygon Information Technology Co Ltd. and Jiangxi Jinko Pv Material Co Ltd, raising USD 1.6 billion and USD 1.58 billion, respectively.

While a surge in volatility has prompted global investors to exit riskier equity markets in the last few months, Chinese markets have been relatively resilient.

According to Refinitiv Lipper, global equity funds witnessed outflows of USD 144 billion since April, while Chinese equity funds received inflows worth USD 21.3 billion.

OVERSEAS LISTINGS DROP

However, Chinese companies’ listings overseas have dropped sharply this year.

The data showed that IPO issuances on the mainland fell just 11%, while Chinese listings in US and Europe slumped 97% and 81%, respectively.

Analysts said the declines in overseas listings are due to concerns over China’s COVID-19 lockdowns, growth worries, ongoing audit disputes with the United States, and uncertainties over offshore listing rules.

“We expect international issuance volume to recover, too, led by valuation re-rating in secondary markets. Hong Kong has accumulated a strong IPO pipeline, which will see a surge of issuance when the market recovers to a supportive level,” said UBS’ Zhu.

She added that a recovery in the US market listings will take a longer time, given the uncertainty over US-China relations.

(Reporting By Patturaja Murugaboopathy; Editing by Rashmi Aich)

Asian shares recover but concerns over China may resume strict COVID curbs linger

HONG KONG, Nov 22 (Reuters) – Asian stock markets mostly recouped early losses on Tuesday, supported by improved sentiment for China shares, but concerns lingered that Beijing may reimpose strict COVID curbs that could cause supply chain disruptions.

The dollar pulled back from strong overnight gains while oil took a pause from Monday’s retreat.

European stock futures indicated a sluggish open with Eurostoxx 50 futures up 0.15%, German DAX futures up 0.09% and FTSE futures FFIc1 up 0.30%

The broad Asia-Pacific index ex-Japan recovered earlier losses to inch 0.07% higher in the afternoon.

The biggest driver for the recovery was China, with its benchmark up 0.43%. Losses on Hong Kong’s benchmark index narrowed to 0.7%.

Support came from the property sub-sector, as fresh government moves dished out late Monday to aid the struggling industry helped buoyant sentiment.

China’s central bank said late on Monday it will provide 200 billion yuan (USD 28 billion) in loans to six commercial banks for housing completions.

Gains in China were capped by worsening COVID-19 situation in the country, however.

The fact China has showed movement away from on zero COVID is “very significant” but it has been drowned out by the latest new on resurgence of cases in Beijing, said Ray Attrill, head of FX strategy, National Australia Bank.

The Chinese capital warned on Monday it was facing its most severe test of the pandemic, fuelling investor concerns that China may be forced to resume strict mobility curbs and issue stay at home orders across cities.

Surging cases in manufacturing cities may cause supply chain disruptions, said Redmond Wong, market strategist for Greater China at Saxo Markets in Hong Kong.

Japan’s benchmark Nikkei average rose 0.69%, as the yen’s weakness against the dollar raised prospects for domestic manufacturers.

Australian shares rose 0.59%, supported by strength in miners and banks.

The dollar pared some of its strong overnight gains on Tuesday after investors flocked to the safe-haven currency on nerves over China’s COVID flare ups, but analysts at the National Australia Bank questioned whether demand for the greenback was sustainable.

“Evidence US inflation has peaked and can fall significantly in 2023, together with China and Europe developments, convince us a USD depreciation cycle is now in train,” they said in a note on Tuesday.

US Treasury yields across most maturities rose on Tuesday amid expectations of further Federal Reserve interest rate hikes, as the market awaits latest Fed minutes due to be released on Wednesday to provide greater clarity.

The benchmark 10-year Treasury yield rose five basis points.

Oil prices rose on Tuesday, a day after Saudi Arabia denied a media report that it was discussing an increase in oil supply with OPEC and its allies.

US crude extended gains from early trades to rise 0.36% to USD 80.33 per barrel and Brent was at USD 87.88, up 0.49%.

Spot gold up 0.3% to trade at USD 1,742.91 an ounce.

(Reporting by Selena Li in Hong Kong, additional reportng by Kevin Buckland in Tokyo; Editing by Ana Nicolaci da Costa and Lincoln Feast.)

Dollar pauses climb; China COVID fears mount

SINGAPORE, Nov 22 (Reuters) – The dollar retreated on Tuesday following an overnight rally that saw investors flocking to the safe-haven currency on worries over China’s COVID flare ups, though cautious risk sentiment kept the greenback supported.

The fresh bout of risk aversion had weighed particularly on the antipodean currencies – often used as liquid proxies for the Chinese yuan – with the Aussie sliding nearly 1% overnight. It recouped some losses on Tuesday, rising 0.14% to USD 0.6615.

The kiwi was last 0.36% higher at USD 0.6122, after falling more than 0.8% overnight.

China’s capital warned on Monday that it was facing its most severe test of the COVID-19 pandemic, with a surge in COVID cases sparking fresh restriction measures. Deaths from the virus were also recorded in Beijing for the first time since late May.

The offshore yuan gained 0.3% to 7.1574 per dollar in Asia trade, after falling more than 0.7% overnight.

“The situation in China is deteriorating. There does seem to be some … increased restrictions on movement of people, and I think there’s going to be inevitable economic impacts,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia.

“What’s going on in China is going to take centre stage.”

Similarly, the euro was up 0.12% at USD 1.0253, after its 0.8% overnight loss, while sterling rose 0.25% to USD 1.1845, partially reversing its 0.6% fall overnight.

“It could just be a consolidation phase after yesterday’s pretty big move up,” said Capurso of the US dollar.

The Japanese yen last traded 0.2% higher at 141.79 per dollar, after slumping more than 1% to the weaker side of 142 per dollar in the previous session.

“The curiosity is how Japan has also shown a great deal of sensitivity … if anything, the takeaway there is that Japan’s safe haven appeal is no longer there,” said Rodrigo Catril, a currency strategist at National Australia Bank, of the yen.

“It’s more like a cork in the ocean, subject to risk aversion as well as movements in 10-year Treasury yields.”

US Treasury yields across most maturities inched higher overnight, as investors continued to re-price expectations for how high the Federal Reserve will hike rates as it attempts to bring inflation down from close to 40-year highs.

The benchmark 10-year Treasury yield eked out a marginal gain overnight, and last stood at 3.8212%.

The US dollar index fell 0.08% to 107.68. It had risen close to 0.8% overnight, the largest daily gain since Nov. 3.

Speeches from Fed speakers on Monday delivered few surprises, with Cleveland Fed President Loretta Mester saying the central bank can downshift to smaller interest rate hike increments from next month.

San Francisco Fed President Mary Daly said the real-world impact of interest rate hikes is likely greater than what its short-term rate target implies.

“Fed comments remained in line with the recent slant of rhetoric,” said economists at ING in a note.

In the cryptoverse, lender Genesis was the latest victim to come under the spotlight following the collapse of crypto exchange FTX.

Genesis said on Monday it has no plans to file for bankruptcy imminently, though Bloomberg News reported, citing sources, that Genesis was struggling to raise fresh cash for its lending unit, and warning investors it may need to file for bankruptcy if it does not find funding.

Bitcoin was last 0.12% higher at USD 15,785, while Ether lost 0.71% to USD 1,097.70.

(Reporting by Rae Wee; Editing by Sam Holmes and Kim Coghill)

Oil rises 1% as OPEC+ focus on supply cuts outweighs recession concerns

NEW YORK, Nov 22 (Reuters) – Oil prices rose about 1% on Tuesday after top exporter Saudi Arabia said OPEC+ was sticking with output cuts and could take further steps to balance the market.

However, prices pared gains late in the session after Bloomberg reported that the European Union watered down its latest sanctions proposal for a price cap on Russia’s oil exports by delaying its full implementation and softening key shipping provisions.

The bloc proposed adding a 45-day transition to the introduction of the cap, according to Bloomberg.

On Dec. 5, a European Union ban on Russian crude imports is set to start, as is a G7 plan that will allow shipping services providers to help to export Russian oil, but only at enforced low prices.

“The price cap is turning out to be an enabling device for western countries to keep Russian crude on the market,” said John Kilduff, partner at Again Capital LLC in New York. “The big crux of this market has been whether or not we will lose meaningful amounts of crude and refined products from Russia and that still has not happened.”

Brent crude rose 91 cents, or 1%, to settle at USD 88.36. US West Texas Intermediate (WTI) crude was up 91 cents, or 1.1%, at USD 80.95.

Supporting prices throughout the session, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman on Monday was quoted by state news agency SPA as denying a Wall Street Journal report that sent prices plunging by more than 5%, saying the Organization of the Petroleum Exporting Countries was considering boosting output.

The United Arab Emirates, another big OPEC producer, denied it was holding talks on changing the latest OPEC+ agreement, while Kuwait said there were no such talks. Algeria said an “improbable” revision of the OPEC+ agreement was not discussed.

OPEC, Russia and other allies, known as OPEC+, meet on Dec. 4.

Concerns over oil demand in the face of the US Federal Reserve’s interest rate hikes and China’s strict COVID lockdown policies also tempered prices.

Beijing shut parks, shopping malls and museums on Tuesday and more Chinese cities resumed mass COVID testing. The Chinese capital on Monday warned that it is facing its most severe challenge of the pandemic and tightened rules for entering the city.

Analysts now are cutting forecasts for China’s year-end oil demand.

In focus later will be the latest weekly snapshots of supply in the United States, which are expected to show crude inventories fell by 2.2 million barrels. The American Petroleum Institute’s report is due at 2130 GMT.

(Reporting by Stephanie Kelly; additional reporting by Alex Lawler, Laura Sanicola and Isabel Kua; Editing by Marguerita Choy, Jane Merriman, David Gregorio and Cynthia Osterman)

Philippines central bank plans December hike to keep pace with Fed, says governor

MANILA, Nov 22 (Reuters) – The Philippines’ central bank plans to adjust its policy rates in December to keep up with an expected 50 basis points rate hike by the US Federal Reserve, its governor said on Tuesday.

Keeping in step with the Fed will prevent volatility and pressure on the peso, Bangko Sentral ng Pilipinas Governor Felipe Medalla told reporters at the sidelines of a fintech summit.

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

Oil rises after Saudis deny report of OPEC+ supply increase

Nov 22 (Reuters) – Oil prices rose slightly in early Asian trade on Tuesday, a day after Saudi Arabia denied a media report that it was discussing an increase in oil supply with OPEC and its allies.

Brent crude futures rose 17 cents, or 0.2%, to USD87.62 by 0007 GMT. US West Texas Intermediate (WTI) crude futures for January began trading Tuesday, rising 7 cents, or 0.1%, to USD80.11 a barrel.

Both benchmarks had plunged by more than USD5 a barrel in the previous session after the Wall Street Journal (WSJ) reported an increase of up to 500,000 barrels per day will be considered at the OPEC+ meeting on Dec. 4.

Prices rebounded quickly in full after Saudi Arabian energy minister Prince Abdulaziz bin Salman said the kingdom is sticking with output cuts and not discussing a potential oil output increase with other OPEC oil producers, state news agency SPA reported, denying the WSJ report.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) recently cut production targets and the energy minister of de facto leader Saudi Arabia was quoted this month as saying the group will remain cautious on oil production because of uncertainty about the global economy.

The front-month Brent crude futures spread narrowed sharply last week, while WTI flipped into contango, reflecting easing supply concerns.

Rising COVID-19 cases in China capped market gains as the country battles outbreaks nationwide that are nearing April peaks.

(Reporting by Laura Sanicola; Editing by Jamie Freed)

Wall Street slips as concerns rise of stricter China COVID curbs

Nov 21 (Reuters) – Wall Street’s main indexes ended Monday roughly down on fears that China could resume stricter measures to fight COVID-19 after it said it faces its most severe test of the pandemic.

Beijing said on Monday it would shut businesses and schools in hard-hit districts and tighten rules for entering the city, as infections ticked higher.

“There is this fear that China might reinstitute some of the COVID restrictions that they’ve just purportedly started to lift,” said Carol Schleif, deputy chief investment officer at BMO Family Office.

US casino operators with businesses in China including Wynn Resorts Ltd, Las Vegas Sands Corp, MGM Resorts International and Melco Resorts & Entertainment Ltd all fell at least 2%.

The Dow Jones Industrial Average fell 45.41 points, or 0.13%, to 33,700.28, the S&P 500 lost 15.4 points, or 0.39%, to 3,949.94 and the Nasdaq Composite dropped 121.55 points, or 1.09%, to 11,024.51.

Trading volume was low on Monday, and likely to lessen towards the Thanksgiving holiday on Thursday, leaving markets more prone to volatility.

Volume on US exchanges was 9.43 billion shares, compared with the 11.88 billion average for the full session over the last 20 trading days.

“If you want to blame a little bit of profit taking on some concerns on spikes in COVID cases, that’s fine,” said Jack Janasiewicz, lead portfolio strategist and portfolio manager at Natixis Investment Managers Solutions. “It gets really tricky because of volume.”

Stocks trimmed losses in early afternoon after the San Francisco Federal Reserve President Mary Daly commented that officials need to be careful to avoid a “painful downturn.”

Cleveland Fed President Loretta Mester echoed Daly, saying she supports a smaller rate hike in December.

The S&P 500 energy sector index fell almost 3% on Monday to its lowest level in four weeks as oil prices tumbled more than 5% after a report that Saudi Arabia and other OPEC oil producers were discussing an output increase. The index, however, pared losses after Saudi Arabia denied talks about it.

Energy was the only major S&P 500 sector eying gains for the year, surging around 63%.

Walt Disney Co jumped 6.30% after Bob Iger’s return as chief executive to the entertainment giant.

The S&P 500 extended its fall from the previous week when multiple Federal Reserve officials reiterated the central bank’s pledge to raise rates until inflation was in check, as investors now await the release of minutes from the Fed’s November meeting on Wednesday.

Traders are widely betting on a 50-basis point hike in the December meeting, with a peak for rates expected in June.

Among other stocks, Tesla Inc plummeted 6.84% after the electric-car maker said it will recall vehicles in the United States over an issue that may cause tail lights to intermittently fail to illuminate.

Gay dating app Grindr tumbled 46.00% amid a broader market weakness, after skyrocketing in its debut on the New York Stock Exchange in the previous session.

Declining issues outnumbered advancing ones on the NYSE by a 1.27-to-1 ratio; on Nasdaq, a 1.60-to-1 ratio favored decliners.

The S&P 500 posted 9 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 96 new highs and 220 new lows.

(Reporting by Carolina Mandl, in New York, Ankika Biswas, Shubham Batra and Shreyashi Sanyal in Bengaluru; Editing by Arun Koyyur, Shounak Dasgupta and Grant McCool)

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