S&P posts 4th straight decline amid recession talk

Dec 6 (Reuters) – Wall Street ended lower on Tuesday, with the S&P 500 extending its losing streak to four sessions, as skittish investors fretted over Federal Reserve rate hikes and further talk of a looming recession.

Meta Platforms Inc. (META) dragged down markets, with its shares sliding 6.8% following reports that European Union regulators have ruled the company should not require users to agree to personalized ads based on their digital activity.

However, technology names generally suffered as investors applied caution toward high-growth companies whose performance would be sluggish in a challenging economy. Apple Inc. (AAPL), Amazon.com Inc. (AMZN) and Alphabet Inc. (GOOGL) fell between 2.5% and 3%, while the tech-heavy Nasdaq was pulled lower for a third straight session.

Most of the 11 major S&P sectors declined, with energy and communications services joining technology as leading laggards. Utilities, a defensive sector often preferred during times of economic uncertainty, was the only exception, gaining 0.7%.

Future economic growth prospects were in focus on Tuesday following comments from financial titans pointing toward uncertain times ahead.

Bank of America Corp’s (BAC) chief executive predicted three quarters of mild negative growth next year, while JPMorgan Chase and Co’s (JPM) CEO Jamie Dimon said inflation will erode consumer spending power and that a mild to more pronounced recession was likely ahead.

Their comments came on the heels of recent views from BlackRock and others that believe the US Federal Reserve’s aggressive monetary tightening to combat stubbornly high price rises could induce an economic downturn in 2023.

“The market is very reactive right now,” said David Sadkin, president at Bel Air Investment Advisors.

He noted that, while markets traditionally reflect the future, right now they are moving up and down based on the latest headlines.

Fears about economic growth come amid a re-evaluation by traders of what path future interest rate hikes will take, following strong data on jobs and the services sector in recent days.

Money market bets are pointing to a 91% chance that the US central bank might raise rates by 50 basis points at its Dec. 13-14 policy meeting, with rates expected to peak at 4.98% in May 2023, up from 4.92% estimated on Monday before service-sector data was released.

The S&P 500 rallied 13.8% in October and November on hopes of smaller rate hikes and better-than-expected earnings, although such Fed expectations could be undermined by further data releases, including producer prices due out on Friday.

“The market got ahead of itself at the end of November, but then we got some good economic data, so people are re-evaluating what the Fed is going to do next week,” said Bel Air’s Sadkin.

The Dow Jones Industrial Average fell 350.76 points, or 1.03%, to close at 33,596.34, the S&P 500 lost 57.58 points, or 1.44%, to finish at 3,941.26 and the Nasdaq Composite dropped 225.05 points, or 2%, to end on 11,014.89.

Jitters on the direction of global growth have also weighed on oil prices, with US crude slipping to levels last seen in January, before Russia’s invasion of Ukraine disrupted supply markets. The energy sector fell 2.7% on Tuesday.

Banks are among the most sensitive stocks to an economic downturn, as they potentially face negative effects from bad loans or slowing loan growth. The S&P banks index slipped 1.4% to its lowest close since Oct. 21.

Volume on US exchanges was 11.01 billion shares, in line with the average for the full session over the last 20 trading days.

The S&P 500 posted three new 52-week highs and nine new lows; the Nasdaq Composite recorded 52 new highs and 262 new lows.

(Reporting by Devik Jain, Ankika Biswas and Johann M Cherian in Bengaluru and David French in New York; Editing by Vinay Dwivedi, Shounak Dasgupta and Lisa Shumaker)

Dollar rebound vs yen stuck under November low pre-CPI and Fed

Dec 6 (Reuters) – USD/JPY fell modestly Tuesday after its 137.42 intraday rebound high from Friday’s 133.62 trend low faltered in front of November’s 137.50 low and the 61.8% Fibo of last week’s dive fueled by Fed Chair Jerome Powell, and a deepening slide remains on the cards.

Friday’s decent jobs data and Monday’s ISM non-manufacturing beat lifted the expected Fed rates ceiling back to near 5% and 2-year Treasury yields about 13bp off last week’s lows, but it would take a sharply hawkish Fed guidance course correction to bring hike expectations back to their pandemic recovery peaks.

Even though USD/JPY is highly positively correlated with 2-year Treasury yields, USD/JPY and rates slid after the fourth consecutive 75bp Fed hike because of the bearish feedback loop aggressive tightening induced.

New multi-decade 2-10-year Treasury yield curve inversion depths Tuesday and rate cuts yet priced in for H2 2023 highlight this USD/JPY bearish feedback loop.

The Dec. 13-14 CPI and Fed meeting might provide a better level to join the pandemic recovery’s reversal. Above resistance by 137.50, hurdles are at 138.40 and by 139 and 140, with 132.55/46 downside targets.

(Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold little changed as market ponders over Fed rate path

Dec 6 (Reuters) – Gold firmed slightly on Tuesday as the dollar gave up some of its recent gains and US Treasury yields retreated, with traders awaiting further direction from the Federal Reserve’s interest rate hike strategy.

Spot gold rose 0.1% to USD 1,769.42 per ounce by 1:31 p.m. ET (1831) GMT, while moves remained fairly contained. US gold futures settled up 0.1% at USD 1,782.4.

“Gold remains tied to the dollar and has found a fresh bid as it weakens,” said Ole Hansen, head of commodity strategy at Saxo Bank,

Also, considering the market only lost about 2% on Monday on a day that saw a strong US data print (ISM) and a reduction in ETF holdings, the “gold market still has some underlying strength”, Hansen added.

Better-than-expected US services industry data spooked investors on Monday and raised fears that the Fed might stick longer with aggressive rate increases.

As a result, bullion dropped from a five-month high to close 1.6% lower as the dollar rebounded after the data. The greenback is little changed and holding near its lowest since June touched in the last session.

“With the Fed due to meet next week, the direction of prices is likely to be determined on how the US central bank sees the glide path for future rate rises,” said Michael Hewson, chief markets analyst at CMC Markets.

The final Fed meeting of 2022 is scheduled on Dec. 13-14.

However, “signs of stronger-than-expected demand may lead markets to revisit more hawkish expectations”, said IG Market strategist Yeap Jun Rong.

High rates have dimmed gold’s traditional status as a hedge against high inflation and other uncertainties this year to some extent, as they translate into higher opportunity cost to hold the non-yielding asset.

Spot silver fell 0.8% to USD 22.07 per ounce, while platinum dropped 1% to USD 987.75. Palladium shed 1.3% to USD 1,852.38.

(Reporting by Arpan Varghese, Arundhati Sarkar and Ashitha Shivaprasad in Bengaluru; editing by David Evans, Louise Heavens and Nick Macfie)

Bond yields rise as traders sell ahead of RBI rate decision

MUMBAI, Dec 6 (Reuters) – Indian government bond yields tracked US yields to end higher on Tuesday, further propped by traders cutting positions ahead of the Reserve Bank of India’s monetary policy decision due on Wednesday morning.

The benchmark 10-year bond yield ended at 7.2486% after ending at 7.2254% on Monday.

Treasury yields rose on Tuesday after strong data from the services and manufacturing sectors and a solid non-farm payrolls report reinforced expectations of the US Federal Reserve continuing to raise interest rates in 2023.

The 10-year yield rose to 3.60%, while inversion between the two-year yield and the 10-year yield widened, a scenario which generally precedes recession.

“There was some position cutting … traders are now waiting for the RBI’s policy guidance and rate action,” said Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.

The monetary policy committee is expected to hike rates by a smaller 35 bps to 6.25%, according to economists polled by Reuters.

A strong two-thirds majority, however, said it was still too soon for it to take its eye off inflation. The MPC has hiked the repo rate by 190 bps since May.

Retail inflation eased to a three-month low of 6.77% in October, helped by a slower rise in food prices and a higher base effect.

India’s benchmark bond yield is expected to rise on the back of higher government borrowings, Rohit Arora, senior emerging markets forex and rates strategist at UBS Global Research said.

“For the fiscal year end, we are forecasting the 10-year India bond yield at around 7.50%. Over the course of next few months, we expect the debt markets’ demand-supply misbalances to resurface,” he said.

Arora said he did not see value in entering the Indian bond market at current levels as a combination of “somewhat elevated supply burden,” and tapering demand from banks fuel a rise in yields.

(Reporting by Dharamraj Dhutia; Editing by Nivedita Bhattacharjee)

Dollar holds firm on upbeat US data, RBA rate rise lifts Aussie

LONDON/TOKYO, Dec 6 (Reuters) – The US dollar index held firm on Tuesday, following its biggest rally in two weeks after strong services data in the United States fuelled expectations for higher interest rates from the Federal Reserve than recently projected.

The Australian dollar perked up from near one-week lows after the Reserve Bank of Australia (RBA) raised rates for the eighth time in as many months.

The US dollar index, which measures the currency against six major peers, was at 105.24, steady after Monday’s 0.7% rally, its biggest since Nov. 21.

It had dipped to 104.1 on Monday for the first time since June 28. It later reversed course after data showing US services industry activity unexpectedly picked up in November, with employment rebounding.

“The longer the U.S. economy is robust the more doubts are probably going to increase as to whether the US will actually face a recession next year and whether the US central bank will actually cut its key rate at that stage,” said You-Na Park-Heger, FX Analyst at Commerzbank.

The Federal Open Market Committee decides policy on Dec. 15. Traders currently expect a half-point hike to a 4.25-4.5% policy band and a terminal rate of just above 5% in May.

German industrial orders recovered more than expected in October, but that failed to strengthening the euro, flat on the day at USD 1.0500 after on Monday touching its highest level since late June.

The Western price cap on Russian seaborne crude, which came into force on Monday, may start to show its impact on the energy market soon, said Francesco Pesole, FX strategist at ING.

“When adding an expected drop in temperatures in Europe from this week, the risks of a new rally in energy prices are non-negligible, and the euro is highly exposed to such risks,” he said.

The Aussie dollar rose 0.3% to USD 0.6718, clawing back some of a 1.4% tumble on Monday as the RBA said it was not on a preset course to tighten policy but that inflation was still high.

“Whilst the RBA have spoken of a pause publicly, we may not be as close to one as I originally thought,” said Matt Simpson, a senior analyst at brokerage City Index in Brisbane.

In volatile Monday trading, the Aussie reached a 2-1/2-month peak of USD 0.6851.

(Reporting by Joice Alves and Kevin Buckland; Editing by Alexander Smith)

Japanese shares end higher as chip stocks, exporters gain

TOKYO, Dec 6 (Reuters) – Japanese shares closed slightly higher on Tuesday, supported by gains in chip-related stocks and as exporters advanced after the yen weakened against the dollar overnight.

The Nikkei share average rose 0.24% to close at 27,885.87, while the broader Topix ended 0.12% higher at 1,950.22.

“As the yen weakened, some shares looked attractive,” said Chihiro Ohta, assistant general manager at the investment research and investor services at SMBC Nikko Securities.

The dollar gained against the yen overnight, after data showed that US services industry activity unexpectedly picked up in November, prompting speculation the Federal Reserve may lift interest rates more than recently projected.

Tokyo Electron and Advantest rose 1.04% and 0.95%, respectively. Robot maker Fanuc 6954.T gained 1.1%.

Uniqlo brand owner Fast Retailing rose 2.04% and provided the biggest support to the Nikkei.

Automaker Mitsubishi Motors jumped 3.31% and Mazda Motor climbed 3.23%. Motorcycle maker Yamaha Motor rose 2%.

“The market took cues from the US market and was down earlier, but there was demand for buying on dips mainly from retail investors,” said Shigetoshi Kamada, general manager at the research department at Tachibana Securities.

CyberAgent, which has been streaming all the FIFA World Cup matches on its Abema platform, slipped 4.14% to become the worst performer on the Nikkei after Japan lost against Croatia.

British-style pub chain Hub Co., another stock which benefited from Japan’s surprise win over Germany and Spain at the World Cup, fell 6.21%.

(Reporting by Junko Fujita; Editing by Subhranshu Sahu)

Oil prices climb after Russian crude sanctions kick in

Dec 6 (Reuters) – Oil rebounded on Tuesday after plunging by more than 3% in the previous session, as the implementation of sanctions on Russian seaborne crude oil eased concerns about oversupply while the relaxing of China’s COVID curbs bolstered the demand outlook.

Brent crude futures had gained 85 cents to USD 83.53 a barrel by 0733 GMT. West Texas Intermediate crude (WTI) rose 68 cents to USD 77.62 a barrel.

Crude futures on Monday recorded their biggest daily drop in two weeks, after US service sector data raised worries that the Federal Reserve could continue its aggressive policy tightening path.

The Group of Seven set a top price of USD 60 a barrel on Russian crude, aiming to limit Moscow’s ability to finance its war in Ukraine, but Russia has said it will not abide by the measure even if it has to cut production.

The price cap, to be enforced by the G7 nations, the European Union and Australia, comes on top of the EU’s embargo on imports of Russian crude by sea and similar pledges by the United States, Canada, Japan and Britain.

While the market weighs the impact of sanctions on Russian supply, it was also watching a traffic jam of oil tankers off the coast of Turkey on Monday, with Ankara insisting on new proof of insurance for all vessels.

“The threat of losing protection and indemnity (P&I) insurance will limit Russia’s access to the tanker market, reducing crude exports to 2.4 million barrels per day (bpd) – 500,000 bpd lower than levels seen before Russia invaded Ukraine in late February this year,” said analysts from Rystad Energy in a note.

In China, more cities are easing COVID-19-related curbs, prompting optimism for increased demand in the world’s top oil importer.

The country is set to announce a further relaxation of some of the world’s toughest COVID curbs as early as Wednesday, sources said.

Business and manufacturing activity in China, the world’s second-largest economy, have been hit this year by strict measures to rein in the spread of the coronavirus.

But the oil price gains could prove fragile, as it would take time to confirm a sustained recovery in Chinese consumption, as well as the supply impact of Russian sanctions.

Saudi Arabia, the world’s top oil exporter, cut the January official selling price for its flagship Arab Light crude for Asian buyers to a 10-month low.

(Reporting by Stephanie Kelly; Editing by Bradley Perrett and Edmund Klamann)

Oil prices slump to pre-Ukraine crisis levels on economic jitters

NEW YORK, Dec 6 (Reuters) – US oil prices fell in frenzied trading on Tuesday to their lowest settlement levels this year, with Brent finishing below USD 80 per barrel for the second time in 2022, as investors fled the volatile market in an uncertain economy.

Brent crude futures fell USD 3.33, or 4%, to settle at USD 79.35 a barrel. WTI crude futures fell USD 2.68, or 3.5%, to settle at USD 74.25 a barrel, their lowest settlement this year.

Prices have dropped by more than 1% for three straight sessions, giving up most of their gains for the year. A string of bearish news has unnerved investors despite an ongoing war in Ukraine and one of the worst energy crises in recent decades.

“It’s been quite the three days – with OPEC+ deciding not to further cut production on Sunday, the toothless start of the Russian price cap and sanctions yesterday, and a rout in equity markets today, oil speculators are charging for the exits amid a flight from risk assets,” said Matt Smith, lead oil analyst at Kpler.

Service-sector activity in China has hit a six-month low, and European economies have slowed due to the high cost of energy and rising interest rates.

Wall Street benchmarks also tumbled on Tuesday on uncertainty around the direction of Federal Reserve rate hikes and further talk of a looming recession.

Tuesday’s slump was the largest daily decline in Brent prices since late September, which have traded in a USD 62 range this year – their widest swing in a single year since the 2008 financial meltdown.

“We could be looking at USD 60-a-barrel WTI the way that things are going,” Eli Tesfaye, senior market strategist at RJO Futures said. “I think USD 80s are going to be the new high, and I would be very surprised to see any higher than that.”

The oil market has also largely overlooked threats to supply, such as the one from a G7 price cap of USD 60 on Russian seaborne crude oil exports, which is likely to make the country cut its oil output.

Russia has said it will not sell oil to anyone who signs up to the price cap. Russia’s January-November oil and gas condensate production rose 2.2% from a year ago, according to Deputy Prime Minister Alexander Novak, who expects a slight output decline following the latest sanctions.

In China, more cities are easing COVID-19-related curbs, prompting expectations of increased demand in the world’s top oil importer, although that has not been enough to stop the bleed in oil futures.

“Oil markets will likely stay volatile in the near term, driven by COVID headlines in China and central bank policies in the US and Europe,” UBS analyst Giovanni Staunovo said.

US crude oil inventories fell by 6.4 million barrels last week, while gasoline and distillate stockpiles rose, according to market sources citing American Petroleum Institute figures on Tuesday.

(Reporting by Shariq Khan; Additional reporting by Rowena Edwards, Muyu Xu; Editing by Barbara Lewis, Mark Potter, David Gregorio and Deepa Babington)

Philippines’ November annual inflation at 8.0%

MANILA, Dec 6 (Reuters) – Philippine annual inflation was 8.0% in November, the statistics agency said on Tuesday, faster than the 7.7% rate in October.

Last month’s inflation was above the 7.8% forecast in Reuters poll, but within the central bank’s 7.4%-8.2% forecast for November.

(Reporting by Neil Jerome Morales and Enrico dela Cruz; Writing by Karen Lema
Editing by Ed Davies)

Gold flat after sharp declines on US data

Dec 6 (Reuters) – Gold prices were little changed in early Asian trade on Tuesday, after falling more than 1.5% in the previous session as the US dollar rebounded on bets that strong economic data may prompt bigger interest rate hikes by the Federal Reserve.

FUNDAMENTALS

* Spot gold was flat at USD 1,768.61 per ounce, as of 0011 GMT. Bullion hit a five-month high on Monday before closing 1.6% lower in its biggest daily drop since Sept. 23.

* US gold futures were little changed at USD 1,780.90.

* The dollar index rebounded on Monday after data showed US services industry activity unexpectedly picked up in November, prompting speculation the Fed may lift interest rates more than recently projected.

* Higher interest rates tend to weigh on gold’s appeal as they increase the opportunity cost of holding the non-yielding metal.

* Meanwhile, the European Central Bank is likely to raise interest rates by 50 basis points next week, governing council member Gabriel Makhlouf said on Monday.

* SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.2% to 903.46 tons on Monday.

* Top bullion consumer China is set to announce a further easing of some of the world’s toughest COVID curbs as early as Wednesday, sources said, as investors cheered the prospect of a policy shift that follows widespread protests and mounting economic damage.

* Spot silver inched 0.1% lower to USD 22.23, platinum was flat at USD 997.84 and palladium rose 0.2% to USD 1,878.93.

DATA/EVENTS (GMT)

0030 Australia Current Account Balance SA Q3

0030 Australia Net Exports Contribution Q3

0700 Germany Industrial Orders MM Oct

0700 Germany Manufacturing O/P Cur Price SA Oct

0700 Germany Consumer Goods SA Oct

1330 US International Trade Oct

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Subhranshu Sahu)

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