Wall Street ends lower as Fed worries outweigh earnings

NEW YORK, Oct 20 (Reuters) – US stocks closed lower on Thursday as data on the labor market and comments from a US Federal Reserve official reinforced expectations the central bank will be aggressive in hiking interest rates outweighed a flurry of solid corporate earnings.

Stocks initially rose early in the session, boosted by gains in names such as IBM (IBM), up 4.73% after the IT services company beat quarterly earnings estimates on Wednesday and said it expects to exceed full-year revenue growth targets. AT&T Inc. (T) surged 7.72% upon raising its annual profit forecast.

But stocks were unable to hold their gains as strong weekly jobless claims and comments from Federal Reserve Bank of Philadelphia President Patrick Harker bolstered concerns about the Fed hiking rates and potentially tilting the economy into a recession.

Harker said the Fed is not done raising its short-term rate target as high inflation persists, helping to push the yield on the 10-year US Treasury note US10YT=RR to its highest level since June 2008 at 4.239%.

“It’s interest rates that are driving equity volatility, that is the way we have been looking at things all year, that is kind of the precursor of seeing things calm down in the equity space and feeling better about adding risk there is seeing volatility decline in interest rates,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina.

“I’m not sure we are going to be able to see that pause that a few Fed members have been pointing to and certainly a few market participants have been kind of latching on to.”

The Dow Jones Industrial Average fell 90.22 points, or 0.3%, to 30,333.59, the S&P 500 lost 29.38 points, or 0.80%, to 3,665.78 and the Nasdaq Composite dropped 65.66 points, or 0.61%, to 10,614.84.

Better-than-expected results thus far has pushed earnings growth expectations for third-quarter for S&P 500 companies to 3.1% from a 2.8% increase earlier in the week, but still well below the 11.1% increase that was forecast at the start of July.

Tesla Inc. (TSLA) slumped 6.65% as the electric-vehicle maker flagged persistent logistics challenges, with fourth-quarter deliveries growing by less than the aimed 50%.

Stocks have been under pressure this year as concerns about the impact of the Fed’s aggressive path of interest rate hikes on corporate earnings and the overall economy have mounted as the central bank tries to quell stubbornly high inflation.

Other data showed sales of existing homes fell for an eight straight month, while another reading showed factory activity in the Federal Reserve Bank of Philadelphia’s district contracted again in October.

The US central bank is widely expected to announce a fourth straight 75 basis-point hike at its November meeting, with an outside chance of a full percentage point increase.

Volume on US exchanges was 11.37 billion shares, compared with the 11.62 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.12-to-1 ratio; on Nasdaq, a 1.34-to-1 ratio favored decliners.

The S&P 500 posted 3 new 52-week highs and 28 new lows; the Nasdaq Composite recorded 53 new highs and 239 new lows.

(Reporting by Chuck Mikolajczak; Editing by Aurora Ellis)

US recap: EUR/USD up, but early gains and UK-led risk-on flows shed

Oct 20 (Reuters) – The dollar eased on Thursday but recovered from its lows after risk-on flows following British Prime Minister Liz Truss’s resignation reversed as stocks retreated and Treasury yields rose.

Markets projected 2023 peak Fed rate is up at 5% versus 3.18% for the ECB and 0.20% for the BoJ. The BoE’s priced to hike rates by 300bp by mid-2023, with a ceiling near 5.17%.

US initial jobless claims fell to three-week lows, though continued claims rose. Philly Fed came in below forecast, but less negative than September’s.

Existing homes sales were about as forecast, though the downtrend in sales and prices shows the toll 30-year mortgage rates near 7% is taking. With that, Federal Reserve Bank of Philadelphia President Patrick Harker later reaffirmed rates need to be well above 4% by year-end.

EUR/USD was up 0.2%, well off early highs.

USD/JPY, the second-largest component of the dollar index, was marginally positive after a swift rise in Treasury yields brought prices back up toward Thursday’s 32-year peak at 150.09 on EBS.

The earlier initial fleeting 150.09-149.63 drop will lead to more suspicions of stealthy Japanese intervention after recent warnings.

The BoJ remains unwilling to raise its -0.1% policy rate and is also being forced to do more QE to keep 10-year yields below its the 25bp yield curve cap, making MoF intervention to slow the yen’s fall futile.

Japanese CPI Friday may be glossed over again.

Sterling rose 0.12%, shedding most of the gains from 1.1172 to 1.1338 that followed Bank of England Deputy Governor Ben Broadbent’s warning that BoE rate hikes currently priced in could present be a “pretty material” hit to the economy, assuming the reversion to tighter fiscal policy plays out.

That lowered Nov. 3 BoE meeting rate hike pricing to 75bp from recent highs near 100bp, supporting risk-taking and the pound. Truss’s resignation prompted sterling’s rise to 1.1338 high, but that was the third consecutive lower daily peak, suggesting a sell-the-news bias toward less worrisome UK fiscal and political matters.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold trims gains as Treasury yields march higher

Oct 20 (Reuters) – Gold prices pared gains on Thursday, having risen about 1% on a softer dollar, as a jump in equities markets and rallying Treasury yields pulled bullion back toward three-week lows hit earlier.

Spot gold rose 0.1% to USD 1,629.75 per ounce by 1:51 p.m. ET (1751 GMT), earlier touching its lowest since end-September. US gold futures settled up 0.2% at USD 1,636.8.

“It is still our opinion that if rates continue to creep higher as they do, it will continue to lean on the gold market in the near term,” said David Meger, director of metals trading at High Ridge Futures.

“The focus continues to be clearly on interest rates and Fed rate-hike expectations.”

Fed Bank of Philadelphia President Patrick Harker said the central bank is not done with raising its short-term rate target amid high levels of inflation.

Higher US interest rates increase the opportunity cost of holding zero-yield bullion.

Yields on US Treasuries continued their relentless march higher after data showed the number of Americans filing new claims for unemployment benefits fell unexpectedly last week, strengthening expectations of a strong Fed rate hike.

Although separate data showed US existing home sales dropped for an eighth straight month in September.

“Gold prices have been more focused on the anticipation of what the Fed is gonna do next,” Jeffrey Sica, CEO of Circle Squared Alternative Investments, said.

“There’s now the thought that they are potentially slowing the economy… and they may back off this hawkish stance which is helping us today and could help us going forward. But it’s all very data dependent.”

The dollar index was down 0.2% against its rivals, while European shares rose after Liz Truss said she was resigning as the United Kingdom’s prime minister.

Elsewhere, silver rose 1.3% to USD 18.67 per ounce, platinum was up 3.1 % to USD 911.21, while palladium gained 3% to USD 2,060.48.

(Reporting by Seher Dareen in Bengaluru; additional reporting by Swati Verma; Editing by Devika Syamnath and Shailesh Kuber)

European shares rise after UK’s Truss resigns as prime minister

Oct 20 (Reuters) – European shares rose on Thursday after Liz Truss said she was resigning as the United Kingdom’s prime minister, brought down by her economic program that wrecked havoc on markets.

The region-wide STOXX 600 closed 0.3% up after flirting between gains and losses right after the announcement in London.

Appointed on Sept. 6, Truss was forced last week to sack her finance minister and closest political ally, Kwasi Kwarteng, and abandon almost all of her economic program after their plans for vast unfunded tax cuts crashed the pound and British bonds, forcing the Bank of England to intervene.

A leadership election will be completed within the next week. Sterling rallied and the London’s FTSE 100 .FTSE closed higher.

“Truss took on an extra relevance to markets because of the policies that she attempted to implement and the markets’ reaction to them,” said Steve Sosnick, chief strategist at Interactive Brokers.

“You’d think that if someone was that deeply unpopular the market might rally or the currency might rally when she left. But I think the fact that neither is happening is telling us that markets do crave political stability and we don’t have that.”

Meanwhile, Finnish telecom equipment maker Nokia and rival Ericsson reported weaker-than-expected earnings, bruised by ongoing patent battles which pressured margins and offset strong demand for 5G equipment.

Shares of the companies slumped 7.6% and 14.8%, respectively.

More than half of the sectors advanced, with tech .SX8P rising 1.94%. Telecom was the biggest loser, down 2.5%.

The STOXX 600 had snapped a four-day rally on Wednesday, as earnings optimism was snuffed out by worrying inflation reports from Canada and the United Kingdom that fanned fears about more aggressive policy moves from central banks to rein in prices.

“There has been a pretty negative reaction in risk assets and bond markets to the inflation data. It ultimately means central banks like the Fed and the Bank of Canada may have to do even more work to tighten,” said Stephen Gallo, European head of FX strategy for BMO Capital Markets.

Adding to the concerns, data on Thursday showed German producer prices rose more than expected in September, as energy prices soared.

However, in a bright spot, Finnish banking group Nordea beat profit estimates, while Hermes added 1.6% after the Birkin bag maker saw a sharp pickup in sales growth with no signs of a slowdown.

Among other stocks, Swedish Match AB gained 1.9% after Philip Morris International PM.N raised its buyout offer for the nicotine products maker.

(Reporting by Amruta Khandekar and Devik Jain in Bengaluru; Editing by Savio D’Souza, Subhranshu Sahu, Arun Koyyur and Paul Simao)

Yen weakens past 150 per dollar for first time in 32 years

SINGAPORE/LONDON, Oct 20 (Reuters) – The dollar hit the symbolic level of 150 yen on Thursday as the greenback was supported by Treasury yields trading at multi-year highs, keeping markets on high alert for any signs of an intervention from Japanese authorities.

Moves among other majors were more muted with the euro at USD 0.97835 and sterling at USD 1.1217, both failing to regain ground on the dollar, after tumbling the day before.

The fragile yen briefly weakened past 150 per dollar in early European trading for the first time since August 1990. It was last trading flat a little below that level.

It has been on a losing streak for 11 straight sessions as of Wednesday’s close, and has renewed 32-year lows for six sessions now.

“It’s a big psychological level that could trigger intervention … people have been anticipating intervention for a while,” said Sim Moh Siong, currency strategist at Bank of Singapore.

“People are going to look over their shoulders for a while and see whether there’s any action or not, if not, they’re going to push it further, higher. That’s how the market goes. The next resistance I see would be around 153 level.”

Last month, Japan intervened in the foreign exchange market to buy yen for the first time since 1998 in an attempt to shore up the battered currency.

The Japanese currency has been weakening as the country’s central bank has been intervening in markets to keep Japanese benchmark yields pinned near zero, at a time when those elsewhere are rising.

The benchmark US 10-year Treasury yield rose to 4.18% on Thursday, its highest level since mid-2008, while the two-year Treasury yields touched a 15-year high of 4.6079%.

US yields have been driven higher as the Federal Reserve looks set to continue with its aggressive pace of interest rate hikes.

Overnight, Fed officials also continued their hawkish rhetoric, as Federal Reserve Bank of Minneapolis President Neel Kashkari said that US job market demand remains strong and underlying inflation pressures probably have not peaked yet.

The euro climbed a whisker on the pound but the British currency largely ignored the latest political turmoil in the United Kingdom, with the departure of the interior minister being the latest matter to add to the uncertainty.

The surging greenback also pushed the Chinese offshore yuan to a record low in Asia of 7.2794 early in the session, its weakest level since such data first became available in 2011.

It later trimmed intraday losses on a Bloomberg report China is considering a cut in the duration of quarantine for inbound visitors from 10 days to seven days.

(Reporting by Rae Wee and Alun John; Editing by Stephen Coates and Angus MacSwan)

Gold pinned near 3-week low as higher yields, rate-hike bets weigh

Oct 20 (Reuters) – Gold prices stalled near a three-week low on Thursday, as higher US Treasury yields and fears of more sharp rate hikes by the Federal Reserve dampened investor appetite for the metal.

Spot gold was flat at USD 1,627.98 per ounce, as of 0709 GMT. Prices had earlier hit their lowest since Sept. 28 at USD 1,621.20.

US gold futures were down 0.1% to USD 1,632.70.

The dollar index ticked 0.1% lower, alleviating some pressure off the greenback-priced bullion. Meanwhile, benchmark 10-year Treasury yields held near their highest since mid-2008.

“Gold is still vulnerable as the inflation and interest rate environment is far from favourable,” said Craig Erlam, a senior market analyst at OANDA, adding that the metal had found some temporary support around USD 1,620.

“The recent trend is very much against it… A test of USD 1,600 may be on the cards.”

While gold is often considered a hedge against inflation and economic turmoil, rising US interest rates have increased the opportunity cost of holding the zero-yielding metal, which has fallen nearly 11% so far in the year.

The Fed’s “Beige Book” survey showed US economic activity expanded modestly in recent weeks, although it was flat in some regions and declined in a couple of others, while firms noted that price pressures remained elevated.

The report did little to temper expectations for a fourth straight 75-basis-point Fed rate hike in November.

Gold might consolidate above the USD 1,600 level, with the US core personal consumption expenditures data due next week being the next major inflection point, said Ilya Spivak, a currency strategist at DailyFX.

Indicative of sentiment, holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, fell 6.08 tonnes on Wednesday in their biggest one-day outflow since July 6.

Spot silver fell 0.2% to USD 18.40 per ounce, platinum rose 0.1% to USD 884.75 and palladium slipped 0.4% to USD 1,992.88.

(Reporting by Eileen Soreng in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu)

Oil prices rise on possible easing in China COVID quarantine measure

SINGAPORE, Oct 20 (Reuters) – Oil prices gained around USD 1 on Thursday as investor sentiment rose on news that China is considering a cut in the duration of quarantine for inbound visitors.

Brent crude futures for December settlement rose 80 cents, or 0.9%, to USD 93.21 a barrel at 0610 GMT.

US West Texas Intermediate crude for November delivery (WTI), which expires on Thursday, rose USD 1.29, or 1.5%, to USD 86.84 per barrel. The WTI contract for December delivery was last up 1.4%, or USD 1.16 cents, at USD 85.68 a barrel.

“The market is bouncing on that quarantine news and by extension a flickering light at the end of the zero-Covid policy tunnel,” said Stephen Innes, managing partner at SPI Asset Management, adding that this is “the first positive sign we have seen out of China on the Covid front.”

China, the world’s largest crude importer, has stuck to strict COVID-19 curbs this year, weighing heavily on business and economic activity which lowers demand for fuel.

Bloomberg news reported on Thursday that China is considering cutting the quarantine period for inbound visitors to seven days from 10 days, citing people familiar with the matter.

The report said officials are targeting a cut in the quarantine period to two days in a hotel and then five days at home, but there is no clarity yet on how the new restrictions would apply to foreigners and other visitors without a residence in China.

Innes, however, cautioned that China’s zero-Covid policy is likely to stay in place “at least through Q1” next year, and maintains a bullish view on oil.

“Short of an unlikely shale oil revival, there are few lasting policy measures the Biden administration can use to effective push oil much lower.”

Oil prices have seen support from a looming European Union ban on Russian crude and oil products, as well as the output cut from the Organization of the Petroleum Exporting Countries and other producers including Russia, known as OPEC+.

The OPEC+ agreed on a production cut of 2 million barrels per day in early October – but analysts expect a smaller decline in actual output of about 1 million barrels per day due to under-production in countries such as Iran, Venezuela and Nigeria.

Separately, US President Joe Biden announced a plan on Wednesday to sell off the rest of his release from the nation’s emergency oil reserve by year’s end, or 15 million barrels of oil, and begin refilling the stockpile as he tries to dampen high gasoline prices ahead of midterm elections on Nov. 8.

However, the release is “too small to impact the market,” said Commonwealth Bank commodities analyst Vivek Dhar in a Thursday note, estimating it would increase global oil supplies by just 0.04 million barrels per day.

“EU sanctions on Russian oil imports will likely become the focus of the oil market in coming weeks… We expect Brent oil futures to average USD 100 per barrel in Q4 2022 on the back of supply disruption from the EU sanctions,” Dhar added.

Meanwhile, global demand for fuel remains uncertain. US economic activity expanded modestly in recent weeks, although it was flat in some regions and declined in a couple of others, the Federal Reserve said on Wednesday in a report that showed firms growing more pessimistic about the outlook.

(Reporting by Laura Sanicola and Emily Chow in Singapore; editing by Richard Pullin, Ana Nicolaci da Costa and Kim Coghill)

Oil near flat, inflation worries counter potential boost in China demand

NEW YORK, Oct 20 (Reuters) – Oil prices were near flat during a choppy trading session on Thursday, as worries about inflation dampening demand for oil contended with news that China is considering easing COVID-19 quarantine measures for visitors.

Brent crude futures fell 3 cents to settle at USD 92.38 a barrel.

US West Texas Intermediate crude for November delivery, which expires on Thursday, rose 43 cents to USD 85.98 per barrel. WTI for December delivery CLc2 edged down 1 cent at USD 84.51 per barrel.

Both Brent and WTI earlier gained by over USD 2 per barrel.

To fight inflation, the US Federal Reserve is trying to slow the economy and will keep raising its short-term rate target, said Federal Reserve Bank of Philadelphia President Patrick Harker on Thursday.

The US dollar index pared losses after the comments, weighing on oil prices. A stronger dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.

“Harker is saying that the war on inflation has just begun,” said Phil Flynn, analyst at Price Futures Group in Chicago. “So it seems like the market is getting nervous.”

Supporting prices, however, Beijing is considering cutting the quarantine period for visitors to seven days from 10 days, Bloomberg news reported on Thursday, citing people familiar with the matter.

“That’s been seen as a positive demand indicator for the market,” said Bob Yawger, director of energy futures at Mizuho in New York.

China, the world’s largest crude importer, has stuck to strict COVID curbs this year, which weighed heavily on business and economic activity, lowering demand for fuel.

A looming European Union ban on Russian crude and oil products, as well as the output cut from the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, have also supported prices.

OPEC+ agreed on a production cut of 2 million barrels per day in early October.

Separately, US President Joe Biden announced a plan on Wednesday to sell off the rest of his release from the nation’s Strategic Petroleum Reserve (SPR) by year’s end, or 15 million barrels of oil, and begin refilling the stockpile as he tries to dampen high gasoline prices ahead of midterm elections on Nov. 8.

The announcement, however failed to ease oil prices, as official US data showed that the SPR last week dropped to their lowest since mid-1984, while commercial oil stocks fell unexpectedly.

(Reporting by Stephanie Kelly in New York; Additional reporting by Ahmad Ghaddar in London and Emily Chow in Singapore; Editing by Marguerita Choy, Kirsten Donovan and David Gregorio)

Wall Street ends red, Treasury yields climb on dour guidance

NEW YORK, Oct 19 (Reuters) – Wall Street closed lower on Wednesday, marking the end of a multi-session rally, and Treasury yields spiked as gloomy data and downbeat corporate outlooks tossed cold water on investor risk appetite.

All three major US stock indexes lost ground, while the benchmark Treasury yield shot up to touch a new 14-year high.

“It’s partly a pause after the rally, some concern over higher-than-expected inflation in great Britain, and some companies expressing caution about the outlook going forward,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “The market is taking a breather.”

Market participants balanced a string of mixed company earnings, notably from Procter & Gamble (PG), Travelers Companies Inc. (TRV), and Baker Hughes Co. (BKR), against ongoing concerns over whether central bank interest rate hikes to contain inflation could push the global economy into contraction.

“The market is still unsure as to when the Fed is going to recognize what they’ve done to date is beginning to take effect,” said David Keator, partner at the Keator Group, a wealth management firm in Lenox, Massachusetts. “The Fed is taking its mandate of tackling inflation seriously, but there’s been chatter of tightening too much.”

The Dow Jones Industrial Average fell 99.99 points, or 0.33%, to 30,423.81, the S&P 500 lost 24.82 points, or 0.67%, to 3,695.16 and the Nasdaq Composite dropped 91.89 points, or 0.85%, to 10,680.51.

Data showing UK inflation hitting 10.1% in September pushed European stocks to break their recent winning streak.

The pan-European STOXX 600 index lost 0.53% and MSCI’s gauge of stocks across the globe shed 0.89%.

Emerging market stocks lost 1.62%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.65% lower, while Japan’s Nikkei rose 0.37%.

A sell-off in US government bonds pushed the benchmark Treasury yield to its highest level since mid-2008 on expectations of continued aggressive interest rate hikes from the Federal Reserve.

Benchmark 10-year note were last at 4.1272%, from 3.998% late on Tuesday.

The 30-year bond yield was 4.1259%, from 4.021% late on Tuesday.

The dollar rebounded from two-week lows as hotter-than-expected UK inflation data fueled recession worries, which dragged down the sterling and helped support the greenback against a basket of world currencies.

The dollar index rose 0.7%, with the euro down 0.83% to USD 0.977.

The dollar also touched a 32-year peak against the yen, hovering close to a level that some believe could trigger intervention by Japan.

The Japanese yen weakened 0.40% versus the greenback at 149.88 per dollar, while sterling was last trading at USD 1.122, down 0.87% on the day.

Crude prices edged higher on tighter supply conditions, bouncing back after hitting two week lows in the wake of US President Joe Biden’s plans to release oil from strategic reserves.

US crude rose 3.30% to settle at USD 85.55 per barrel, while Brent settled at USD 92.41 per barrel, up 2.64% on the day.

Dollar strength weighed on gold, sending prices for the safe-haven metal to a three-week low.

Spot gold dropped 1.4% to USD 1,628.61 an ounce.

(Reporting by Stephen Culp; Additional reporting by Dhara Ranasinghe in London; Editing by Nick Macfie, Chris Reese and Deepa Babington)

US recap: EUR/USD down on Treasury yield rise, haven dollar demand

Oct 19 (Reuters) – The dollar index rose about 1% on Wednesday as record euro zone and 40-year-high UK inflation heightened recession fears, sending safe-haven flows into the US currency.

Meanwhile, 10-year Treasury yields rose to 14-year highs, adding to support for the dollar.

The recent pullback in gilts yields due to the government’s fiscal U-turn and the BoE’s attempts to calm markets persisted, but in curve-flattening fashion after the BoE said that QT beginning on Nov. 1 will not involve maturities beyond 20-years.

Investors shrugged off more weak US housing data, with a fourth consecutive 75bp Fed rate hike still priced in for Nov. 2 and the early 2023 terminal rate now by 5%.

Gilts yields eased on hopes the worst of the UK pension fund crisis is over nL8N31K53F but have become a drag on sterling as Treasury and bund yields rise to new long-term highs.

Sterling fell 1% to tenkan support just above Monday’s 1.1175 low.

EUR/USD fell 0.9% toward tenkan support at 0.9753 amid Wednesday’s risk aversion.

USD/JPY was up 0.4% to its highest since 1998 and very nearly at major psychological resistance at 150. The gain in Treasury yields was unopposed by BoJ-corralled JGB yields and no willingness to lift rates to help the MoF’s interventions to support the yen.

USD/JPY cleared technical hurdles near 149.50. Another bout of Japanese selling would be viewed as a buying opportunity unless materially weaker US employment and inflation data pointed to a nearer peak in Fed funds and Treasury yields.

USD/CNH and USD/CNY were up 0.66% and 0.39%, with the offshore yuan making record highs and USD/CNY close to September’s 14-year highs, as the Chinese economy struggles with a weakening property sector, ongoing COVID lockdowns and widening Treasury yields spreads over Chinese government debt. Also worries about delayed China economic data releases.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

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