Asian shares climb, oil extends gains after OPEC+ deal

SYDNEY, Oct 6 (Reuters) – Asian shares rose on Thursday as the dollar wobbled ahead of US non-farm payrolls data, and oil prices gained for a fourth day after deep production cuts pledged by OPEC+ members.

The gains are likely to extend to European markets, with the pan-region Euro Stoxx 50 futures up 1.4% and FTSE futures 0.7% higher.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7%, marking its third straight day of gains. It is up 4.5% for the week after a staggering 13% drop in September.

Japan’s Nikkei stock index climbed 1.0% to its highest level since late September, driven by energy and chip-related stocks. South Korea advanced 1.5% while Australian shares reversed losses to be up 0.1%.

Hong Kong’s Hang Seng index also trimmed earlier losses to be off 0.2% on the day. Mainland Chinese markets remain closed for holidays.

Offshore risk sentiment remained buoyant. The S&P 500 futures rose 0.5% and Nasdaq futures increased 0.7%, building on a late rebound in US stocks which helped limit earlier losses.

The S&P 500 finished Wednesday 0.20% lower and the Nasdaq Composite ended down 0.25%.

The Refinitiv Asia Energy index surged 1.4%, after the Organization of the Petroleum Exporting Countries and allies agreed to cut oil production the deepest since the COVID-19 pandemic began, curbing supply in an already tight market.

Oil prices hit their highest level since mid-September. Brent crude futures were up 0.2% at USD 93.51 a barrel while US West Texas Intermediate (WTI) crude futures also gained 0.2% to USD 87.9 per barrel.

SO MUCH FOR FED PIVOT

Earlier this week, US job openings data suggesting that the labor market and economy were slowing as well as the Reserve Bank of Australia’s surprise move to raise rates by only 25 basis points fuelled hopes of less aggressive interest rate hikes by central banks and lifted risk sentiment.

But those hopes were dashed after the ADP National Employment Report showed private employment rising more than estimated in September and the Institute for Supply Management reported the service sector shrank less than expected in September and employment ticked up.

“The optimism that buoyed financial markets earlier this week receded as US data continued to articulate the need for further, decisive central bank policy action,” said analysts at ANZ.

“Attention is now firmly focused on the September labour market report… The market needs to prime for a strong number.”

US non-farm payrolls data is due on Friday and analysts polled by Reuters expect 250,000 jobs were added last month and unemployment to come in at 3.7%.

Overnight, San Francisco Federal Reserve President Mary Daly underscored the US central bank’s commitment to curbing inflation with more interest rate hikes, although she also said the Fed will not simply barrel ahead if the economy starts to crack.

Atlanta Fed president Raphael Bostic said the US Federal Reserve’s fight against inflation is likely “still in early days.”

In currency markets, the dollar eased 0.3% against a basket of major currencies on Thursday, after climbing 0.7% overnight on hawkish comments from Fed officials.

US Treasury yields were largely steady after jumping overnight.

The yield on benchmark ten-year notes was largely unchanged at 3.7471% while the yield on two-year notes stabilised at 4.1562%.

Gold was slightly higher. Spot gold was traded at USD 1,723.4489 per ounce.

(Reporting by Stella Qiu; Editing by Edwina Gibbs)

Gold gains on tepid dollar; traders eye US nonfarm payrolls

Oct 6 (Reuters) – Gold edged higher on Thursday, buoyed by a subdued dollar and Treasury yields, although prices were confined to a narrow range as investors awaited US nonfarm payrolls data that could affect the Federal Reserve’s rate hike strategy.

Spot gold was up 0.3% at USD 1,721.30 per ounce, as of 0653 GMT.

US gold futures rose 0.7% to USD 1,731.90.

Benchmark US 10-year Treasury yields eased after recording their biggest one-day jump since Sept. 26 on Wednesday, while the dollar index ticked 0.1% lower.

Lower yields decrease the opportunity cost of holding gold, which pays no interest.

“A weaker-than-expected non-farm payrolls print would likely constrain the Fed’s pace of tightening,” said Thomas Westwater, an analyst with DailyFX.

“That would assuage market fears and clear the way for higher gold prices by sapping the dollar’s safe-haven strength.”

US Labor Department’s more comprehensive watched nonfarm payrolls data due on Friday follows a strong ADP National Employment report released on Wednesday.

The ADP report showed private employment rose by 208,000 jobs last month, while separately the Institute for Supply Management’s non-manufacturing PMI reading came in slightly above expectations, suggesting underlying strength in the economy despite rising interest rates.

Upbeat data and hawkish comments from San Francisco Federal Reserve President Mary Daly on Wednesday cooled any hopes of a policy pivot.

“Gold needs to see a sharper slowdown in the US and cooler prices for a bullish breakout to form,” Edward Moya, senior analyst with OANDA said in a note.

“Gold seems poised to consolidate between USD 1,680 and USD 1,740 until we get both the NFP report and latest inflation readings.”

Indicative of sentiment, holdings of the SPDR Gold Trust GLD exchange-traded fund marked their third straight day of inflows on Wednesday.

Spot silver rose 0.1% to USD 20.72 per ounce, platinum was up 0.6% at USD 923.89 and palladium gained 0.6% to USD 2,260.61.

(Reporting by Eileen Soreng in Bengaluru; Editing by Sherry Jacob-Phillips)

Oil prices rise 1% on cuts to OPEC+ output targets

NEW YORK, Oct 6 (Reuters) – Oil prices rose about 1% on Thursday, holding at three-week highs after OPEC+ agreed to tighten global supply with a deal to cut production targets by 2 million barrels per day (bpd), the producers’ largest reduction since 2020.

Brent crude futures settled at USD 94.42 a barrel, up USD 1.05, or 1.1%. US West Texas Intermediate (WTI) crude futures settled at USD 88.45 a barrel, gaining 69 cents, or 0.8% after closing 1.4% up on Wednesday.

The agreement between the Organization of Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, comes ahead of a European Union embargo on Russian oil and would squeeze supplies in an already tight market, adding to inflation.

“We believe that the price impact of the announced measures will be significant,” said Jorge Leon, senior vice president at Rystad Energy. “By December this year, Brent would reach over USD 100/bbl, up from our earlier call for USD 89.”

Following the OPEC+ decision, Goldman Sachs raised its 2022 Brent forecast to USD 104 per barrel from USD 99, and its 2023 forecast to USD 110 from USD 108.

Saudi Energy Minister Abdulaziz bin Salman said the real supply cut would be about 1 million to 1.1 million bpd. Saudi Arabia’s share of the cut is about 500,000 bpd.

Iraq oil minister Ihsan Abdul Jabbar told Kuwait news agency (KUNA) the OPEC+ move came as result of a production surplus.

Several OPEC+ members have been struggling to produce at quota levels because of underinvestment and sanctions.

“Maybe Saudi Arabia, the UAE, Kuwait, and the ‘little train that could’ Kazakhstan may cut production to new quota, but I doubt anybody else will,” said Bob Yawger, director of energy futures at Mizuho in New York.

The output cut comes as the US Federal Reserve and other central banks are raising interest rates to fight inflation. Higher oil prices will likely cut demand, which could cap price gains, said John Kilduff, partner at Again Capital LLC in New York.

“That’s what’s cutting back the other way and why prices have stabilized for WTI just under USD 90,” Kilduff said.

US President Joe Biden expressed disappointment over OPEC+ plans and said the United States was looking at ways to keep prices from rising.

“There’s a lot of alternatives. We haven’t made up our minds yet,” Biden told reporters at the White House.

Earlier, the White House said Biden would continue to assess whether to release more supplies from the Strategic Petroleum Reserve and would consult Congress on other ways to reduce market control of OPEC and its allies.

(Additional reporting by Ahmad Ghaddar and Florence Tan in Singapore; Editing by Marguerita Choy and David Gregorio)

Philippines raises USD 2 billion via triple-tranche dollar bond deal

MANILA, Oct 6 (Reuters) – The Philippine government has raised USD 2 billion from a three-tranche US dollar bond deal, National Treasurer Rosalia de Leon said on Thursday, the first offshore debt issue by the Marcos administration.

It sold USD 500 million worth of five-year bonds, priced at 5.17%, or five-year US Treasury plus 120 basis points (bps).

The 10.5-year bond offer raised USD 750 million, with a yield of 5.609%, or 10-year US Treasury plus 185 bps.

Another USD 750 million was raised via the 25-year green or sustainability bonds, priced at 6.1%.

Proceeds of the 5-year and 10.5-year bond sales will be used for budget financing.

(Reporting by Enrico Dela Cruz; Editing by Kanupriya Kapoor)

Dollar’s blistering rally to extend into next year – FX analysts

BENGALURU, Oct 6 (Reuters) – The unstoppable dollar, which is already having a banner year, is likely to extend its dominance beyond 2022, according to a Reuters poll of foreign exchange strategists who said the currency was still some distance from an inflection point.

Up over 16% so far in 2022, the dollar index has already had its best year in at least five decades, with the currency exhibiting few signs of slowing anytime soon.

Underpinning the greenback’s ascendancy were the US economy’s superior performance, the Federal Reserve hiking interest rates by 300 basis points this year – with more expected – and the role it plays as a safe-haven currency.

With those broad narratives supporting the dollar well into next year the greenback was likely to be well bid over the short-to-medium term.

An overwhelming majority of 85% of analysts, 47 of 55, in the Sept. 30-Oct. 5 Reuters poll who answered an additional question said the dollar’s broad strength against a basket of currencies hasn’t yet reached an inflection point.

When asked when it would be reached, 25 of 46 who responded said within six months and 17 said within three months. Among the remaining four analysts three said within a year and one said over a year.

“It’s definitely too early to start calling the pivot points in the dollar…in the short term we still see more dollar upside,” said Simon Harvey, head of FX analysis at Monex Europe.

“We don’t necessarily see a bigger turning point for the greenback until at least Q2 of next year when we think we will start to see potentially US fundamentals turn against the Fed’s stance of restrictive policies.”

The dollar’s extended rally is bad news for most major currencies which have not only accumulated heavy losses so far this year but have also surprisingly underperformed their emerging market counterparts.

Nearly all major currencies – eight among the G10 – which were down in double digits for the year were not expected to recoup their year-to-date losses over the next 12 months, the poll showed.

The euro EUR= which was down 12% for the year against the dollar and has largely traded below parity since August was expected to stay there for at least another six months.

This is the first time in over two decades median forecasts in Reuters polls have predicted the common currency to trade below parity over a six-month horizon.

It was then expected to gain around 4% to reach USD 1.03 in a year from USD 0.991 it was trading around on Wednesday.

Japan’s yen, which hit a 24-year low of 146/dollar recently, was expected to recover some of its losses in a year.

The safe-haven currency was forecast to trade around 144.0, 140.5 and 135.0 per dollar over the next three, six and 12 months, respectively.

If realized that would amount to only about a 7% gain against the dollar in 12 months for a currency already down more than 20% for the year and the worst performer among majors.

Much of the weakness was down to the Bank of Japan sticking to its ultra-easy monetary policy when nearly every other central bank is moving in the opposite direction.

“The Bank of Japan is still not signaling any change to its ultra-accommodative monetary policy. Adopting a less-dovish monetary policy would probably have a greater, more lasting effect on the yen’s exchange rate,” noted Jimmy Jean, vice-president, chief economist and strategist at Desjardins.

Trading around USD 1.12 on Wednesday the latest poll showed sterling would fall to USD 1.09 in a month and be at USD 1.10 in six months. It was predicted to be around 3.6% stronger at USD 1.16 in a year.

(Reporting by Hari Kishan; Additional reporting and analysis by Indradip Ghosh; Polling by Prerana Bhat, Vijayalakshmi Srinivasan and Maneesh Kumar; Editing by Andrea Ricci)

Dollar gains as investors see Fed stance likely unchanged; euro, sterling fall

NEW YORK, Oct 5 (Reuters) – The dollar rebounded from recent weakness on Wednesday as investors viewed the US Federal Reserve’s aggressive stance on interest rates as likely unchanged, with the euro and sterling down at least 1% each.

The euro was down 1% at USD 0.9892, and was set for its biggest daily percentage slide since Sept. 23, after rising 1.7% on Tuesday.

Sterling was down 1.1% at USD 1.1344 after rising for six straight sessions. Its fall extended slightly as UK Prime Minister Liz Truss pledged to bring down debt as a share of national income, just over a week after the government’s plans to slash taxes and ramp up borrowing spooked markets.

Adding to the pressure on the pound, data showed Britain’s private-sector economy last month suffered the sharpest contraction in activity since a COVID-19 lockdown early last year.

A dollar index measuring the greenback against a basket of currencies was last up about 1%. On Tuesday, it had its biggest daily percentage decline since March 2020.

Recent gains for most major currencies against the dollar have been underpinned by hope among investors and traders that the Fed will raise interest rates by less than previously expected.

“You had a general risk-on where the euro, sterling really traded well and the stock market gained. I kind of think this is just (investors) exploring a trading range,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“The bottom line is the bounce in risk assets is not taking place because of a change in Fed views,” he said.

On Wednesday, the ADP National Employment report showed private employment rose by 208,000 in September, above the 200,000 consensus forecast of economists polled by Reuters, while separately the Institute for Supply Management’s (ISM) non-manufacturing PMI reading came in slightly above expectations.

Also, US Fed Governor Philip Jefferson reiterated overnight that inflation was the top target for policymakers and that growth would suffer in efforts to bring it down.

San Francisco Fed President Mary Daly took a softer line and said the impact of the dollar, which is up sharply this year, on other currencies and economies was a concern.

From here, investors are likely to focus on Friday’s US jobs report, Bannockburn’s Chandler said, which will be watched for clues on the possible trajectory of the Fed’s monetary policy.

In other currencies, the dollar was up 0.2% against the Japanese yen, while the dollar was up 0.4% at 7.0676 against China’s offshore yuan. Chinese authorities have come out in recent weeks with maneuvers to slow the yuan’s slide.

A fifth consecutive 50-basis-point rate hike from the Reserve Bank of New Zealand (RBNZ) on Wednesday reminded investors that inflation remains the main focus of central banks.

The New Zealand dollar was last up 0.1% at USD 0.5744, having jumped as much as 1.3% earlier in the session. The Aussie dollar was near flat at USD 0.6502.

(Additional reporting by Harry Robertson in London. Additional reporting by Tom Westbrook in Sydney; Editing by Bernadette Baum and Jonathan Oatis)

Mixed inflation signals

Oct 6 (Reuters) – As the US inflation debate intensifies, the signals are getting murkier.

For investors, this makes markets more skittish and day-to- day moves harder to predict, and makes Fed forecasting even more difficult than it already is.

On Wednesday, the headline US services ISM purchasing managers index reading for September was surprisingly strong, declining far less than expected to 56.7 from 56.9. ADP employment figures for September were also stronger than expected.

On the other hand, the ISM prices paid index fell to 68.7, the lowest since January last year. And Tuesday’s “JOLTS” jobs data show job openings fell in August at the fastest pace in nearly 2-1/2 years.

Oil prices spiked higher on Wednesday after OPEC+ announced a whopping 2 million barrels a day production cut, yet Brent’s year-on-year rise – which factors into inflation forecasting models – is ‘only’ 13%.

Also this week, US breakeven inflation rates on inflation-linked bonds, from two-years maturities out to 20 years, have slid as low as 2.15% – close to the Fed’s 2% inflation goal – while the University of Michigan’s consumer inflation expectations have fallen too.

Another four Fed officials will be on the tapes on Thursday, hopefully shedding some much-needed light on the inflation debate. For now, it seems like investors are itching for the Fed to pivot, but are not fully confident one would be merited.

Wall Street clawed back opening losses on Wednesday despite the spike in Treasury yields to keep its solid start to the quarter on track. The S&P 500’s surge of 5.7% was its best start to a new quarter in decades.

Key developments that could provide more direction to markets on Thursday:

India services PMI (September)

Australia trade balance (August)

Philippines unemployment (August)

Euro zone retail sales (August)

Fed’s Mester, Cook, Evans and Waller speak

IMF’s Georgieva speaks ahead of IMF/World Bank meetings

(Reporting by Jamie NcGeever in Orlando, Fla.; Editing by Josie Kao)

US yields jump as hope for Fed pivot fizzles

NEW YORK, Oct 5 (Reuters) – The yield on the benchmark US 10-year Treasury note jumped on Wednesday after two straight days of declines, as economic data failed to buttress recent hopes the US Federal Reserve might adopt a less hawkish policy stance.

US economic data over the past two days hinting the labor market and economy were slowing, as well as a surprise move by the Reserve Bank of Australia (RBA) to raise rates by a less-than-expected 25 basis points helped push the yield on the 10-year down nearly 19 basis points as optimism grew the Fed might start to be less aggressive in tightening policy.

The yield on 10-year Treasury notes was up 14.4 basis points to 3.761%, on track for its biggest one-day jump since Sept. 26.

But on Wednesday, the ADP National Employment report showed private employment rose by 208,000 in September, above the 200,000 estimate of economists polled by Reuters and the 185,000 for August that was revised higher.

In addition, the Institute for Supply Management (ISM) said its non-manufacturing PMI dipped to a reading on 56.7 last month from 56.9 in August, but was above the 56.0 estimate, while its employment gauge jumped up to 53 from 50.2 in the prior month.

“The mistake some investors may be making is to be overly optimistic about a Fed pivot in the near term and they have been abundantly clear that the bar for that is just extraordinarily high to the point they haven’t even talked about a pivot,” said Bill Merz, head of capital market research at US Bank Wealth Management in Minneapolis.

“So optimism that maybe there is a Fed pivot around the corner is quite premature.”

The yield on the 30-year Treasury bond was up 8.1 basis points to 3.768%.

Investors will get two more looks at the labor market this week in the form of weekly initial jobless claims and the September payrolls report, with soft data likely to be welcomed.

Taking a different path than the RBA, the Reserve Bank of New Zealand (RBNZ) on Wednesday raised rates by 50 basis points to a seven-year high and contemplated whether to hike by 75 basis points, helping to dent hopes for a Fed shift.

Also on the hawkish side, the Swiss National Bank is prepared to raise interest rates further to tackle inflation after its recent 75-basis-point hike, SNB Governing Board member Andrea Maechler said.

Fed officials have been steadfast in recent comments that the central bank will take aggressive measures in hiking interest rates to combat rising inflation even after three straight hikes of 75 basis points.

San Francisco Federal Reserve Bank President Mary Daly said on Wednesday that markets are working well and the central bank is “resolute” on raising rates to bring down inflation.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as a reliable indicator of an economic recession when inverted, was inverted by 39.5 basis points, up from the negative 57.85 hit on September 22.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 5.7 basis points at 4.154%.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.32%, after closing at 2.34% on Tuesday.

The 10-year TIPS breakeven rate was last at 2.219%, indicating the market sees inflation averaging 2.2% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski, Kirsten Donovan)

Gold retreats on comeback in US dollar, yields

Oct 5 (Reuters) – Gold prices slipped more than 1% on Wednesday, weighed down by a jump in the dollar and US Treasury yields in the run up to US jobs data that could influence the Federal Reserve’s rate hike path.

Spot gold was down 0.8% at USD 1,712.93 per ounce by 1:52 p.m. ET (1752 GMT), after hitting a three-week peak at USD 1,729.39 on Tuesday.

US gold futures settled 0.6% lower at USD 1,720.80 per ounce.

“We’re seeing a resurgence in the dollar and yields, as a result, we’ve seen a pullback in gold after a pretty aggressive move higher over the course of the last several sessions,” said David Meger, director of metals trading at High Ridge Futures.

Making gold less appealing for other currency holders, the dollar gained over 1% against its rivals, after posting its worst day since March 2020 on Tuesday. Benchmark US 10-year Treasury yields US10YT=RR also climbed.

Data showed US private employers stepped up hiring in September, suggesting demand for workers remains strong despite rising interest rates and tighter financial conditions.

Focus now shifts to the US Labor Department’s closely watched nonfarm payrolls data for September on Friday.

“The Fed is very much focused on the jobs market right now. We’ve seen little hints as to slowdown in manufacturing. However, if we do see a better-than-expected jobs number, that may be disappointing to the gold market,” Meger said.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.

Spot silver dropped 2.7% to USD 20.54 per ounce, after rising to a three-month peak in the previous session.

“Silver had previously been significantly undervalued vis-à-vis gold. Its undervaluation now is no longer so pronounced,” Commerzbank analysts said in a note.

Platinum fell 1.5% to USD 915.97 per ounce, and palladium dipped 2.8% to USD 2,250.67.

(Reporting by Brijesh Patel in Bengaluru; Additional reporting by Bharat Govind Gautam; Editing by Maju Samuel and Krishna Chandra Eluri)

Global bond funds see biggest outflows in two decades

Oct 5 (Reuters) – Global bond funds saw the biggest outflows in two decades in the first three quarters of this year as hefty interest rate increases by central banks to tame inflation sparked fears of a recession.

According to Refinitiv Lipper, global bond funds faced a cumulative outflow of USD 175.5 billion in the first nine months of this year, the first net sales in that period since 2002.

Global bond funds declined by 10.2% on average in their net asset values, their worst slump since at least 1990, the data showed.

Governments and companies have borrowed heavily in the past few years, taking advantage of ultra-low interest rates, and they now stare at bigger interest liabilities due to a rise in yields.

“The combination of high debt levels and a rise in interest rates has reduced investors’ confidence in the government’s ability to pay back debt, which has resulted in the massive outflows we are seeing,” said Jacob Sansbury, CEO at Pluto Investing.

He added that outflows from bond funds might continue into 2023, as a reduction in interest rates and reduced debt loads are unlikely.

Emerging market bonds faced an outflow of about USD 80 billion in the first three quarters of this year, while US high yield bonds and inflation-linked bonds witnessed net sales of USD 65.81 billion and USD 16.44 billion, respectively.

The iShares UK Gilts All Stocks Index (UK) recorded outflows of USD 6.67 billion in the last quarter, while the ILF GBP Liquidity Plus Class 2 LP60100834 and Vanguard U.K. Short Term Investment Grade Bond Index GBP Acc fund saw withdrawals of USD 2.16 billion and USD 993 million respectively.

BONDS ATTRACTIVE NOW

However, some funds managers said bonds looked attractive after the slump this year.

The ICE BoFA US Treasury Index has fallen 13.5% so far this year, while the Bloomberg Global Aggregate Bond Index has shed about 20%.

“The yield cushion now protects the investor against negative total returns significantly more than it did at the beginning of the year,” said Jake Remley, portfolio manager at Income Research + Management.

“This almost certainly makes the prospects for bonds better between now and year-end, even if interest rates continue to rise as briskly as they have over the past 9 months.”

The yields on 2-year and 10-year US Treasury bonds stood around 4.12% and 3.68% respectively on Wednesday, compared with 0.7% and 1.5% at the start of the year.

Similarly, the yield on the ICE BofA US High Yield index, the commonly used benchmark for the junk bond market, stood at 9%, compared with 4.3% at the start of the year.

“Some bonds have become the proverbial ‘babies thrown out with the bathwater’ and offer compelling value at these levels,” said Ryan O’Malley, portfolio manager at Sage Advisory Services.

“However, it’s important to note that there will likely be further credit stress in many corners of the bond market and risk management is paramount in these uncertain times.”

(Reporting By Patturaja Murugaboopathy; Editing by Vidya Ranganathan and Mark Potter)

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