European stocks slide at open on mounting recession worries

Sept 28 (Reuters) – European shares opened lower on Wednesday, in line with a sell-off in Asian markets, as an intensifying energy crisis in the region and the relentless surge in global bond yields fuelled worries about a recession.

The continent-wide STOXX 600 index was down 0.8% by 0707 GMT, extending declines for a fifth-straight session, while Germany’s DAX index lost 0.9%, taking cues from Wall Street, which sank deeper into a bear market overnight.

All the sectoral indexes fell, with the economy-sensitive oil and gas, banks and basic resources sectors down between 1% and 1.5%.

Tech stocks came under pressure as the benchmark 10-year US Treasury yields topped 4%, their highest in 12 years, with markets fearing the Federal Reserve might have to take rates past 4.5% in its crusade against inflation.

London’s blue-chip FTSE 100 index dipped 0.9% after Moody’s warned that unfunded UK tax cuts would be “negative” for the country’s credit standing, deepening a sell-off in gilts.

Meanwhile, geopolitical tensions intensified as Europe investigated what Germany, Denmark and Sweden said were attacks on two Nord Stream pipelines at the centre of an energy standoff.

Reflecting the dour outlook, a survey on Wednesday projected German consumer morale would hit a record low in October as high inflation rates and rocketing energy bills show no signs of relenting.

Among stocks, Commerzbank slipped 2.1% as the German lender said it would take a 490 million euro (USD 469 million) hit to its third-quarter operating profit after its Polish mBank unit booked additional provisions for its Swiss franc loans.

MediaForEurope (MFE) slid 2.2% after Italy’s top commercial broadcaster reported a 44% fall in first-half operating profit on the back of flat advertising sales and rising energy costs.

(Reporting by Devik Jain in Bengaluru; Editing by Subhranshu Sahu and Savio D’Souza)

Philippines rejects all bids for 2039 T-bond re-issue

MANILA, Sept 28 (Reuters) – The Philippines’ Bureau of the Treasury said all bids for a re-issue of 2039 T-bonds were rejected at an auction on Wednesday.

(Reporting by Enrico Dela Cruz; Editing by Martin Petty)

Oil prices fall more than 1% as dollar scales new peak

SINGAPORE, Sept 28 (Reuters) – Oil prices fell more than 1% on Wednesday, pressured by a strengthening dollar and crude storage builds that offset support from US production cuts caused by Hurricane Ian.

Brent crude futures fell USD 1.02, or 1.2%, to USD 85.25 per barrel by 0630 GMT, while US West Texas Intermediate (WTI) crude futures were down 97 cents, or 1.2%, at USD 77.53 per barrel. Both contracts had risen over 2% in the previous session.

The dollar hit a fresh two-decade peak against a basket of currencies on Wednesday as rising global interest rates fed recession concerns. A strong dollar reduces demand for oil by making it more expensive for buyers using other currencies.

Asian share markets sank as surging borrowing costs stoked fears of a global recession, spooking investors into the safe-haven dollar.

“With Asian markets tanking due to the surge in bond yields, demand outlooks are darkened amid a possible nearing economic recession,” said Tina Teng, an analyst at CMC Markets.

“Traders’ focus is not on the supply issues right now as the bond market’s turmoil sunk risk assets, along with a stubbornly high US dollar, which pressured oil prices,” Teng added.

US crude oil stocks rose by about 4.2 million barrels for the week ended Sept. 23, while gasoline inventories fell about 1 million barrels, according to market sources on Tuesday, citing figures from industry group the American Petroleum Institute.

Distillate stocks rose by about 438,000 barrels, according to the sources, who spoke on condition of anonymity.

The report comes ahead of official Energy Information Administration data due on Wednesday at 4:30 p.m. EDT.

Goldman Sachs cut its 2023 oil price forecast on Tuesday, due to expectations of weaker demand and a stronger US dollar, but said global supply disappointments only reinforced its long-term bullish outlook.

Producers began returning workers to offshore oil platforms after shutting in output ahead of Hurricane Ian, which entered the US Gulf of Mexico on Tuesday and is forecast to become a dangerous Category 4 storm over the warm waters of the Gulf.

About 190,000 barrels per day of oil production, or 11% of the Gulf’s total were shut-in, according to offshore regulator the Bureau of Safety and Environmental Enforcement (BSEE).

Producers lost 184 million cubic feet of natural gas, or nearly 9% of daily output. Personnel were evacuated from 14 production platforms and rigs, the BSEE said.

Ian is the first hurricane this year to disrupt oil and gas production in the US Gulf of Mexico, which produces about 15% of the United States’ crude oil and 5% of its dry natural gas.

(Reporting by Laila Kearney in New York and Isabel Kua in Singapore; Editing by Leslie Adler, Richard Pullin and Kim Coghill)

China’s oil demand set to recover as COVID curbs ease

SINGAPORE, Sept 28 (Reuters) – China’s economy is recovering from a trough hit in the second quarter, with oil demand expected to rebound next year as Beijing eases COVID-19 restrictions, senior Chinese refining executives said on Wednesday.

The recovery will come on the back of an expected contraction in oil demand in the world’s biggest energy consumer in 2022, the first in two decades, as China’s zero-COVID policy ravaged its economy and restricted movements.

“This year we have seen the decline of imports of crude oil, first time in many, many years in China,” Chen Hongbing, deputy general manager at Rongsheng Petrochemical, told a forum at the 38th Annual Asia Pacific Petroleum Conference (APPEC).

“We have seen output of gasoline and jet fuel is down but the output for diesel is actually up and demand is still healthy,” he said, adding that China’s diesel inventories are currently low.

Beijing is expected roll out more measures to shore up its economy, with a focus on reviving consumption and boosting investment, while easing strict measures to contain the spread of COVID-19 infections.

“We look at high frequency data like airlines bookings, road congestion, consumption, and we see a little better activity in China,” Wu Qiunan, chief economist at PetroChina International said, pointing to better demand growth in the fourth quarter versus the third.

Easing mobility restrictions could lift gasoline consumption next year although strong electric vehicle (EV) sales, which hit 6 million units in the first eight months this year, will affect growth in the motor fuel, he added.

“That’s a big replacement of gasoline consumption,” he said, adding this may lower gasoline demand growth even as consumption is expected to recover when China eases COVID-19 restrictions.

Both executives also expect jet fuel to recover with aviation demand.

However, the recovery in aviation fuel demand may take longer than other fuels because of difficulties in international travel, Rongsheng’s Chen said.

As for fuel exports, the executives said export economics will determine the volume of oil products Chinese refiners ship abroad.

“Even if the government says (refiners) can have the quota to export, they will wait and see when to export, when is the right time,” PetroChina’s Wu said.

Chinese refiners are expecting Beijing to release up to 15 million tonnes worth of oil product export quotas for the rest of the year to support sagging exports in the world’s second-largest economy.

For petrochemical production, China has also become more cost competitive than Europe where electricity prices have surged following a disruption in natural gas supplies from Russia in the wake of the Ukraine war, Sun Xin, director of China’s privately-owned Shenghong Petrochemical said.

“Because of the Ukraine war, the industrial power consumption cost between China and Europe has widened and the gap has been as large as half a dollar per kilowatt hour at one point,” Sun said.

“The basic production cost for raw materials such as ethylene is way below that of Europe’s and I believe this could be in the range of USD 1,200-USD 1,300 per tonne.”

(Additional reporting by Chen Aizhu and Muyu Xu; Editing by Jacqueline Wong)

S&P 500 ends near two-year low as bear market deepens

Sept 27 (Reuters) – Wall Street sank deeper into a bear market on Tuesday, with the S&P 500 recording its lowest close in almost two-years as Federal Reserve policymakers showed an appetite for more interest rate hikes, even at the risk of throwing the economy into a downturn.

The benchmark S&P 500 is down about 24% from its record high close on Jan. 3. Last week, the Fed signaled that high rates could last through 2023, and the index erased the last of its gains from a summer rally and recorded its lowest close since November 2020.

The S&P 500 has declined for six straight sessions, its longest losing streak since February 2020.

Speaking on Tuesday, St. Louis Fed President James Bullard made a case for more rate hikes, while Chicago Fed President Charles Evans said the central bank will need to raise rates by at least another percentage point this year.

“It’s disappointing, but it’s not a surprise,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “People are concerned about the Federal Reserve, the direction of interest rates, the health of the economy.”

Analysts at Wells Fargo now see the US central bank taking its target range for the Fed funds rate to between 4.75% and 5.00% by the first quarter of 2023.

Seven of 11 S&P 500 sector indexes fell, with utilities and consumer staples each down about 1.7% and leading declines.

The energy sector index rallied 1.2% after Sweden launched a probe into possible sabotage after major leaks in two Russian pipelines that spewed gas into the Baltic Sea.

Tesla (TSLA) gained 2.5% and Nvidia (NVDA) added 1.5%, with both companies helping keep Nasdaq in positive territory.

Traders exchanged over USD 17 billion worth of Tesla shares, more than any other stock.

The benchmark US 10-year Treasury yield touched its highest level in more than 12 years amid the hawkish comments from Fed officials.

The Dow Jones Industrial Average fell 0.43% to end at 29,134.99 points, while the S&P 500 lost 0.21% to 3,647.29.

The Nasdaq Composite climbed 0.25% to 10,829.50.

Concerns about corporate profits taking a hit from soaring prices and a weaker economy have also roiled Wall Street in the past two weeks.

Analysts have cut their S&P 500 earnings expectations for the third and fourth quarters, as well as for the full year. For the third quarter, analysts now see S&P 500 earnings per share rising 4.6% year-over-year, compared with 11.1% growth expected at the start of July.

Volume on US exchanges was 11.7 billion shares, compared with an 11.3 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 1.25-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored advancers.

The S&P 500 posted no new 52-week highs and 146 new lows; the Nasdaq Composite recorded 28 new highs and 502 new lows.

(Reporting by Ankika Biswas, Shreyashi Sanyal and Susan Mathew in Bengaluru; Editing by Shounak Dasgupta, Arun Koyyur and David Gregorio)

Dollar takes a breather even as rate worries dent risk appetites

NEW YORK/LONDON Sept 27 (Reuters) – The dollar made little progress in a choppy session on Tuesday while appetites for riskier bets were still weak as Federal Reserve policymakers talked about more interest rate hikes.

The greenback was up against the euro but losing ground against the British pound and Japan’s yen with all eyes on central banks and the impact on economic growth from their efforts to tame inflation.

Sterling, after earlier climbing more than 1% to USD 1.0837, was last up 0.3%. It had plunged to a record low on Monday. The euro was down 0.20% against the dollar at USD 0.96, and the dollar up 0.1% against the yen at 144.86. It didn’t help that Wall Street indexes were also having a volatile session.

Minneapolis Federal Reserve Bank President Neel Kashkari said in a WSJ Live interview Tuesday that the Fed needs to keep tightening until it has evidence underlying inflation is heading down, then should pause and “let the tightening work its way through the economy” to see if it has done enough.

Earlier, Bank of England (BoE) Chief Economist Huw Pill said the BoE is likely to deliver a “significant policy response” to last week’s tax cut announcement but should wait until its next meeting in November.

“There has been no letting up by central banks despite the financial market disruption we’ve seen. Markets had been looking for some kind of rescue and it’s not coming, from the BoE or from the Fed. That makes the dollar still a very compelling safe haven,” said Mazen Issa, senior FX strategist at TD Securities in New York.

And the week’s trading involves “a bit of additional noise” as investors also prepare their portfolios for the quarter end, according to Issa.

Tuesday’s moves were mild compared with the dollar’s significant recent gains. The euro was still not far above its more than 20-year trough hit a day earlier, and the yen was just off its 24-year low hit last week before Japanese authorities intervened to strengthen the currency.

Also, sterling was not too far above its record low of USD 1.0327 hit Monday in a plunge that began Friday when markets were spooked by Britain’s proposed budget which would rely on unfunded tax cuts to spur growth.

England’s central bank had said on Monday that it would not hesitate to change rates and was monitoring markets “very closely,” leading some market participants to look for a rate hike between meetings.

The Aussie was last down 0.5% at USD 0.64 while New Zealand’s kiwi was down 0.0% at USD 0.56.

Bitcoin was last down 0.6% at USD 19,118 after earlier trading above USD 20,000.

(Reporting by Sinéad Carew, Alun John, Tom Westbrook; Editing by Mark Potter, Nick Zieminski and Jonathan Oatis)

US 10-year yield jumps to 12-1/2 year high

NEW YORK, Sept 27 (Reuters) – Benchmark US 10-year Treasury yields rose to their highest level in about 12-1/2 years on Tuesday as investors girded for higher interest rates that could possibly remain for longer than anticipated as Federal Reserve officials held firm in their hawkish stance.

US 10-year yield hit 3.992%, the highest since April 5, 2010. It was last up 8.3 basis points to 3.964%.

Since August 2, the 10-year yield has surged by 145 bps.

US 30-year yields also touched a milestone on Tuesday, advancing to 3.847%, the strongest level since January 2014. The yield was last up 13.2 basis points to 3.829%.

Fed officials have been resolute in their comments that the central bank will take strong steps in raising interest rates to combat rising prices until they see extended evidence that inflation is on the wane.

“That is going to be the name of the game for the next four to six months, inflation is not headed lower on a string, it is going to be a bumpy road to get down below 3%,” said John Luke Tyner, fixed income analyst at Aptus Capital Advisors In Fairhope, Alabama.

“We are in for a world of pain until the problem gets cleared by.”

Chicago Fed President Charles Evans, St. Louis Fed President James Bullard and Minneapolis Federal Reserve Bank President Neel Kashkari on Tuesday all reiterated the central bank’s stance and pushed yields higher.

Evans said the Fed will need to raise interest rates to a range between 4.50% and 4.75%, a more aggressive stance than he had previously embraced. Evans will be a voter at next year’s Federal Open Market Committee (FOMC).

Bullard, a current voter at this year’s policy meeting, said he sees the likely peak for policy rate at 4.5%, and noted that the Fed will have to stay at the higher rate for some time.

Kashkari, an alternate voting member, said US central bankers are united in their determination to do what is needed to bring inflation down.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, remained inverted at -35.1 basis points. This curve has been inverted since July 5.

An inversion of this specific yield curve is widely seen as a reliable indicator of an impending recession.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 0.2 basis points at 4.312%. On Monday, it surged to 15-year high of 4.36%.

US data on Tuesday indicated the economy may be able to sustain growth even in the face of higher interest rates, as new orders for US-manufactured capital goods increased more than expected in August. In addition, an index on consumer confidence rose for September rose to 108 from the prior month and and topped expectations of 104.5

Sales of new US single-family homes also showed a surprise increase in August. New home sales surged 28.8% to a seasonally adjusted annual rate of 685,000 units, data showed. July’s sales pace was revised higher to 532,000 units from the previously reported 511,000 units.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

US recap: EUR/USD rebound fizzles before Friday’s lows as risks persist

Sept 27 (Reuters) – The dollar rose on Tuesday after unexpectedly strong U.S. home sales and consumer confidence reports enhanced the U.S. economic outlook, in contrast to Europe’s increasingly dire inflation and recession risks that sent gilt and euro zone bond yields sharply higher and riskier assets lower.

Brief and corrective dollar pullbacks against the euro and sterling hit the wall by Friday’s 0.9668 and 1.0840 lows.

Massive gilt yields gains of 27bp and 39bp in 2-year and 10-year tenors spread across European government bonds and to less extent Treasuries, funneling funds back into the relative safety of the dollar.

Though strong, above forecast U.S. single-family home sales and consumer confidence also displayed modest signs of disinflation.

Dollar-supported upside in short-term Treasury yields diminished following St. Louis Fed President James Bullard’s comment that fed funds would probably peak near 4.5%, a level market pricing had already slightly surpassed.

Sterling was about flat after slipping from Tuesday’s 1.0837 high, which is near Friday’s low, but failed to sustain the rebound from Monday’s 1.0327 record low even after BoE Chief Economist Huw Pill said the UK central bank is likely to deliver a “significant policy response” to the government’s fiscal stimulus plans.

EUR/USD was down about 0.1% and 1% off Tuesday’s 0.9670 high on EBS. The euro’s outlook is dimmed by the deteriorating prospects for Europe’s economy amid increasing energy insecurity that threatens significant losses for businesses and soaring costs for consumers and governments trying subsidize energy costs.

USD/JPY’s early dip with Treasury yields reversed in NorAm trading, lifting prices close to major 145 options expiries this week and ahead of Thursday’s 24-year peak at 145.90 on EBS that triggered Japanese intervention.

But Tuesday’s BOJ yield curve control buying of JGBs to cap 10-year yields at 0.25% reinforced the impression that monetary policy would not be giving the MOF any assistance in supporting the yen anytime soon.

Therefore, USD/JPY drops on intervention are buying opportunities unless U.S. disinflation takes hold faster than expected and peak Fed funds pricing has already been witnessed.

Otherwise, a close above 145 would suggest 145.90 is in play, and perhaps tech targets near 150.

High-beta currencies also shed earlier gains. And a strong start for bitcoin and ether became losses as the S&P 500 breached June’s major lows.

Russia-related risks and energy price cap plans will be watched along with U.S. PCE data Friday, followed by non-farm payrolls next Friday.

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

S&P 500 falls to two-year low, bear market rally snuffed out

Sept 27 (Reuters) – The S&P 500 fell to its lowest level in almost two years on Tuesday on worries about super aggressive Federal Reserve policy tightening, trading under its June trough and leaving investors appraising how much further stocks would have to fall before stabilizing.

Stocks have been under pressure since late August after comments and aggressive actions by the U.S. Federal Reserve signaled the central bank’s top priority is to stamp out high inflation even at the risk of putting the economy into a recession.

The S&P 500 touched a session low of 3,623.29, its lowest point on an intraday basis since Nov. 30, 2020. A late rally helped push the index off its worst level of the day, but the index still closed lower for a sixth straight session as it lost 7.75 points, or 0.21%, to 3,647.29 .

After the benchmark index fell more than 20% from its early January high to a low on June 16, which confirmed that the retreat was indeed a bear market, the S&P then rallied into mid-August before running out of gas.

That bear-market rally is now over.

“As long as the Fed continues to raise rates, and investors don’t anticipate an end of the rate hikes, I think this market is going to continue to be weak,” said Tim Ghriskey, Senior Portfolio Strategist, Ingalls & Snyder, New York.

The big blow for the index that re-ignited selling pressure was Fed Chair Jerome Powell’s speech at Jackson Hole that confirmed the Fed’s resolve to fight inflation, followed by a third straight 75 basis point interest rate hike by the central bank last week. The index has tumbled more than 12% since Powell’s speech and has shown little signs of stabilizing.

Many analysts had looked at 3,900 as a strong technical support level for the index. That gave way 11 days ago under four straight days of selling.

“When you have these cascades of selling like we’ve seen since the Fed, really, support doesn’t really matter, you can slice right through it,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska.

“Fundamentals and logic are almost thrown out the window because we are all wondering just how hawkish is the Fed, and then you look around this week and all these central banks around the globe hiked rates.” Detrick said that coordinated hikes by multiple central banks left investors wondering how hawkish they all will end up being.

Robert Pavlik, Senior Portfolio Manager at Dakota Wealth in Fairfield, Connecticut said he is looking at a worst case of 3,000 for the S&P as a support level.

“People are concerned about the Federal Reserve, the direction of interest rates, the health of the economy, and also the next couple of weeks with earnings season coming up and companies reporting lower-than-expected earnings.”

Analysts are still looking for signposts of investor capitulation that can show selling pressure is exhausted. But sell-offs this year have not contained all those ingredients — a sharp drop in prices, a day of unusually high volume and a jump in the CBOE Volatility index to 40 or above. So, many investors to conclude that selling has yet to be depleted.

“It goes down, you get some decent volume but you don’t necessarily have the classic signs of capitulation,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Menomonee Falls, Wisconsin.

“Maybe enough has changed over the years that some of those indicators aren’t going to be a very good guide for the future.”

That leaves investors looking for the next catalyst to help markets stabilize, or get cheap enough for to start buying again, such as signs the Fed’s actions may be starting to tame inflation, a weakening of the labor market, and what the upcoming corporate earnings season may bring about.

“On (October 7), you get the employment situation report and the following week you get the inflation report so we will be on pins and needles waiting to see what those numbers say, and then you have earnings,” said Jacobsen.

(Reporting by Chuck Mikolajczak; additional reporting by Noel Randewich and Ankika Biswas; Editing by Alden Bentley, Franklin Paul, Nick Zieminski, Chizu Nomiyama and David Gregorio)

China prepares to tweak yuan fixing process to slow its fall – source

SHANGHAI, Sept 27 (Reuters) – Chinese monetary authorities are asking local banks to revive a yuan fixing tool it abandoned two years ago as they seek to steer and defend the rapidly weakening currency, a source said on Tuesday.

The source, who is familiar with the yuan rate-setting process, said monetary authorities were prodding banks to include the so-called counter-cyclical factor in their daily fixings for the tightly managed exchange rate.

It’s an adjustment that 14 banks make to their yuan quotes that the People’s Bank of China (PBOC) uses to set the daily reference rate, effectively introducing a bias to the fixing rate. It was abandoned in 2020 when the yuan rose sharply, and authorities decided to let market forces dictate the rate around which the yuan is allowed to move.

The source said some banks that contribute the fixing quotes had been asked on Tuesday to start including the counter-cyclical factor, or X-factor as it is known locally, and that this tweak could happen in the coming days.

The 14 contributing banks are the key members of the China FX Market Self-Regulatory Framework, which serves as a market self-regulatory and coordinating mechanism.

The committee did not immediately respond to Reuters’ emailed request for comment outside of business hours.

The move aims to restore and strengthen the two-way floating nature of the yuan, said the source.

It follows other steps authorities have taken to put a floor under the yuan, which is down more than 11% against a US dollar boosted this year against most global currencies by surging US interest rates.

YUAN PRESSURED

A domestic economic slowdown and outflows of foreign portfolio flows have piled pressure on the local currency.

Its losses accelerated after the PBOC cut key interest rates in August, further widening its policy stance from other major economies that are raising rates aggressively to combat inflation.

Chinese authorities have made efforts to rein in yuan weakness, through persistently setting firmer-than-expected mid-point fixings, verbal warnings and holding off major monetary easing efforts.

Tuesday marked the 24th straight trading session that the actual official mid-point fixing had the yuan stronger than market projections, hence somewhat limiting the downside for the currency.

The PBOC has also rolled out policy measures this month, increasing the cost of shorting the currency by lowering the amount of foreign exchange financial institutions must hold as reserves and reinstating risk-reserve requirements on currencies purchased through forwards.

China first introduced the counter-cyclical factor in 2017 in what regulators said was an effort to better reflect market supply and demand, lessen possible “herd effects” in the market and help guide market participants to focus more on macroeconomic fundamentals.

It has adjusted its methodology a number of times to cope with market conditions and keep the currency stable, before phasing out the tool in October 2020, when the yuan rose sharply.

(Reporting by Shanghai newsroom; Editing by Vidya Ranganathan, Mark Potter and Emelia Sithole-Matarise)

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Quarterly Economic Growth Release: 5.4% Q12025

Policy rate views: Uncertainty stalls cuts