US recap: EUR/USD’s Aug-Sept drop halved in haven, rate hike reset

Sept 9 (Reuters) – The dollar index fell 0.5% on Friday, still suffering the effects of aggressive 75bp rate hikes by the BOC and ECB this week and profit-taking on overbought long positions, but it managed to rebound after testing key support.

EUR/USD’s rally reached 1.0114 by the 50% Fibo of the August-September 1.0369-0.9864 drop before falling toward parity due to uncertainty regarding EU efforts to shield the region from its energy crisis.

Hawkish talk from ECB members and reports the central bank might begin discussing quantitative tightening in October failed to get EUR/USD back to its early highs.

However, it retained a 0.58% gain on the day and found buyers by the 21-day moving average at 1.0026 that it cleared for the first time since Mid-August.

Below-forecast Chinese inflation data got some wondering whether that would feed into lower price pressures elsewhere, helping government debt yields retreat and riskier assets recover, to the detriment of the haven dollar.

Despite the Fed’s back-to-back 75bp rate hikes and a third one being priced in for September, 2-year bund-Treasury yield spreads have risen from August’s -2.79% trough to -2.31% currently, just below Thursday’s -2.28% rebound high.

The Fed has already convinced markets to price in a nearly 4% terminal rate next year and less risk of inflation running rampant. The ECB has more recently been forced to join the rapid rate-hiking party after euro zone inflation overtook US inflation.

The most overbought dollar pair coming into this week was USD/JPY, which was down 1% after recovering from Friday’s dive to key supports by the 141.505 low on EBS. The low was by the minimum 23.6% Fibo of the frothy 130.40-144.99 August-September surge.

September’s 139.00-144.99 rise to 24-year highs came despite the uptrend in 2-year Treasury-JGB yields going flat, leaving prices ripe for a correction, particularly with Japanese officials warning against the yen’s rapid fall.

But without the BoJ moving away from ultra-accommodation mode, USD/JPY weakness would have to rely mostly on weaker Fed hike expectations, which makes Tuesday’s US CPI a focus.

Sterling was up 0.8% in the first full day of mourning after the death of Queen Elizabeth, an event that prompted the BoE to delay its previously scheduled Sept. 15 policy meeting until Sept. 22. Gains to 1.1646 were trimmed after the dollar broadly recovered from its lows.

A spate of major UK economic data next week and US CPI will sharpen the focus on the pace of Fed hikes versus BoE hikes, but sterling has tumbled on rising gilt-Treasury yields spreads since mid-August due to the rising cost of fiscal support to dampen the impact of surging energy costs.

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

Gold gains as dollar dip offsets some pressure from rate hike bets

Sept 9 (Reuters) – Gold rose on Friday as the dollar’s retreat temporarily seemed to stave off some pressure on the precious metal from prospects of more interest rate hikes.

Spot gold rose 0.5% to USD 1,716.30 per ounce by 1:55 p.m. ET (1755 GMT), after rising to its highest since Aug. 30 earlier in the session. US gold futures settled 0.5% higher at USD 1,728.6.

The yellow metal was on track to rise 0.3% for the week, its first weekly rise in four.

“The US dollar index really dropped sharply overnight and that has supported the gold and silver markets. Also seeing some short-covering in the futures markets heading into the weekend,” said Jim Wyckoff, senior analyst at Kitco Metals.

The dollar dropped to a more than one-week low against its rivals, making greenback-priced bullion cheaper for overseas buyers.

However, the gold market continues to see a slow and steady reduction of exchange-traded funds (ETFs), and trading volumes on US futures markets continue to weaken, suggesting that the move higher is unlikely to be sustained, said independent analyst Ross Norman.

Investors now await US inflation data for August due early next week after recent hawkish comments from Fed Chair Jerome Powell cemented bets of a large rate hike.

“If consumer prices come in hotter than expected, gold might see selling pressure target the USD 1,680 region” and a sharp deceleration with pricing pressures might only provide a modest boost for gold, Edward Moya, senior analyst with OANDA, said in a note.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

In the physical gold market, demand in some Asian hubs remained firm this week amid lower prices.

Silver rose 1.2% to USD 18.79 per ounce and was set for a weekly gain.

Palladium gained 2% to USD 2,182.18 per ounce and was headed for its best week since July.

Platinum inched up 0.1% to USD 879.83 per ounce and was on track for its biggest weekly gain since early June.

(Reporting by Brijesh Patel, Arundhati Sarkar and Arpan Varghese in Bengaluru; Editing by Vinay Dwivedi and Shounak Dasgupta)

European stocks clock first weekly rise in four

Sept 9 (Reuters) – European stocks marked their first weekly rise in four on Friday, boosted by a surge in banking shares on expectations of further monetary policy tightening by the European Central Bank, while soaring metal prices lifted mining stocks.

The pan-European STOXX 600 index rose 1.5% to close at over one-week highs.

European stocks briefly shed gains in afternoon trading following reports that ECB policymakers are likely to kick off a debate next month about whittling down the 4-trillion-euro bond pile.

That comes a day after the central bank raised its key rates by an unprecedented 75 basis points (bps) and promised further hikes. Several money houses are forecasting another 75 bps rate hike in October.

Euro zone banks, rocked by worries over their profitability in a low interest rate environment, jumped 3.2% to mark their biggest percentage gains in almost two months. The index is still down 16.3% year-to-date.

“Traders are in risk-on mood even though yesterday there was a rate hike from the ECB and hawkish commentary from (Fed Chair) Jerome Powell,” said David Madden, market analyst at Equiti Capital.

“It is possible that dealers are getting used to the idea of interest rates being increased, and elevated bond yields.”

Miners jumped 3.0% as a softer dollar and fresh stimulus for China’s slowing economy boosted prices of industrial metals and iron ore.

Investors are focussed on a meeting of European Union countries’ energy ministers later in the day, where they will figure out solutions from a long list of possible measures to shield citizens from sky-high energy prices as winter approaches.

While the STOXX 600 managed to end the week 1.1% higher, investors doubt whether the rally can be sustained as Russia turns off its gas taps to Europe indefinitely amid a brewing cost-of-living crisis in the region.

“We remain negative on European equities given a backdrop of heightened geopolitical/energy uncertainty at the same time as central banks are tightening policy into an economic slowdown,” Morgan Stanley analysts said in a note.

Telecom Italia (TIM) shares rose 2.8% as sources close to the matter said it is close to kicking off a process to sell a minority stake in its enterprise service arm.

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Sherry Jacob-Phillips, Rashmi Aich and Jonathan Oatis)

India’s rice curbs to lift prices, stoke food inflation worries

SINGAPORE, Sept 9 (Reuters) – India’s decision to curb rice exports is expected to lift world prices of the staple and trigger a rally in rival wheat and corn markets, deepening concerns over food inflation.

Rice prices in key exporters India, Thailand, Vietnam and Myanmar are set to rise, traders and analysts said, hitting food importers already suffering from higher costs due to adverse weather and the Russia-Ukraine war.

India banned exports of broken rice and imposed a 20% duty on exports of various grades of rice on Thursday as the world’s biggest exporter of the grain tries to augment supplies and calm local prices after below-average monsoon rainfall curtailed planting.

“There is going to be substantial stresses on food security across many countries,” said Phin Ziebell, agribusiness economist at National Australia Bank. “Global fundamentals could see further upside across the grains complex.”

Chicago wheat prices rose on Friday, poised for a third straight weekly gain, as India’s move and talk about Russia’s restrictions on Ukrainian grain shipments underpinned the market.

“This is an inflationary move for food prices,” said Ole Houe, director of advisory services at agriculture brokerage IKON Commodities in Sydney. “This could trigger a rally in wheat and corn prices.”

India accounts for more than 40% of global rice shipments and competes with Thailand, Vietnam, Pakistan and Myanmar in the world market.

“Myanmar prices should go up by USD 50 a tonne while suppliers in Thailand and Vietnam will be quoting higher prices,” said one Singapore-based trader.

Five percent broken rice in Myanmar was quoted around USD 390-USD 395 a tonne, free on board, before India’s decision on export restrictions. In India, 5% broken white rice prices were quoted around USD 348 a tonne.

The decision will impact trade flows as India’s white rice prices of the variety are about USD 60-USD 70 per tonne cheaper than Thailand’s, Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, told Reuters.

“More orders will flow for Thai and Vietnamese rice,” he said. “We have to wait and see how long this policy from India will go on for, if it is longer, it will increase demand for Thai rice exports…”

TOP BUYERS CHINA, PHILIPPINES TO SUFFER

The world’s top rice importers China and the Philippines are likely to take an immediate hit with higher rice prices.

China, one of the biggest importers of Indian broken rice for use in animal feed, is expected to shift to corn, traders said.

“We expect import volumes will decrease with this ban…the new Chinese corn crop is coming to market soon and there are large volumes of other imported grains,” said Rosa Wang, analyst at Shanghai JC Intelligence Co Ltd.

“In fact there is news already about an alliance of Thailand and Vietnam planning to increase export prices. We are analysing the possible impact of these possible moves,” Mercedita Sombilla, undersecretary for policy, planning and regulations at the Philippines’ Department of Agriculture, told Reuters.

Thailand and Vietnam have agreed to cooperate on raising prices, a move aimed at increasing their leverage in the global market and boosting farmers’ incomes.

(Reporting by Naveen Thukral; additional reporting by Chayut Setboonsarng in Bangkok, Khanh Vu In Hanoi, Dominique Patton in Beijing and Enrico Dela Cruz in Manila; Editing by Kim Coghill)

Oil supported by supply threats, but heads for weekly drop on demand fears

SINGAPORE, Sept 9 (Reuters) – Oil prices rose on Friday as investors considered Russia’s threat to halt oil and gas exports to some buyers, but crude was set for a second weekly decline as central banks’ aggressive rate hikes and China’s COVID-19 curbs weighed on demand.

Brent crude futures rose 22 cents, or 0.3%, to USD 89.37 a barrel by 0635 GMT. US West Texas Intermediate (WTI) crude futures climbed 10 cents, or 0.1%, to USD 83.64.

“I think the selloff in oil prices may come to a pause for now due to a recovery in risk sentiment across the board,” said CMC Markets analyst Tina Teng, adding that a weaker dollar and falls in bond yields have offered support for a rebound in risk assets.

“Fundamentally, a sharp decline in the US SPR suggests that undersupply is still a predominant issue in the physical oil markets, though recession fears may continue to weigh,” Teng said.

Both oil benchmarks were headed for a weekly drop of 4%, with the market sliding at one point this week to its lowest level since January.

The decline has been checked by underlying supply tightness amid Russia’s threat to cut oil flows to any country that backs a price cap on its crude, a small output cut by the Organization of the Petroleum Exporting Countries (OPEC) and allies, and a weaker outlook for US oil production growth.

The US Energy Information Administration on Thursday said it expected US crude output to rise by 540,000 barrels per day to 11.79 million bpd in 2022, down from an earlier forecast for a 610,000 bpd increase.

Analysts said in light of the supply outlook, the sell-off, which sent the 50-day moving average below the 200-day moving average mid-week in what’s referred to as a “death cross”, may have been overdone, as demand in China, the world’s biggest oil importer, could recover swiftly.

“China demand is more difficult to predict, but a post-COVID reopening has previously seen a snap back rather than a gradual rise in demand. In that context the fundamentals appear skewed against the latest technical signals,” National Australia Bank analysts said in a note.

For now, curbs are tightening in China. The city of Chengdu on Thursday extended a lockdown for most of its more than 21 million residents, while millions more in other parts of China were urged not to travel during upcoming holidays.

(Reporting by Sonali Paul in Melbourne and Jeslyn Lerh in Singapore; Editing by Kenneth Maxwell, Kim Coghill and Tom Hogue)

Asia shares edge higher as dollar eases

SYDNEY, Sept 9 (Reuters) – Asian shares crept higher as the dollar eased, with markets turning calmer after a record interest rate hike from the European Central Bank and hawkish comments from the US Federal Reserve Chair reinforced bets of aggressive tightening ahead.

MSCI’s broadest index of Asia-Pacific shares outside Japan .out a gain of 0.3% early on Friday. But it was headed for a weekly drop of 1.2%, battered by a slew of outsized rate hikes from global central banks this week – and the expectations of more to come.

Japan’s Nikkei rose 0.3%, Chinese blue chips were up 0.2%, while Hong Kong’s Hang Seng Index advanced 0.4%.

Overnight, Wall Street’s main indexes posted modest gains after heavy selling earlier in the week. S&P 500 futures rose 0.3% and Nasdaq futures was up 0.5%, in a sign of improved risk appetite as markets stabilised.

Fed chair Jerome Powell on Thursday said the bank is “strongly committed” to controlling inflation but there remains hope it can be done without the “very high social costs” involved in prior inflation fights.

“With Powell offering little in the way of push-back against market pricing, we think that the FOMC will affirm market expectations. In addition, we now expect a 50 bp (basis point) hike in November, though it is a close call,” said analysts at Barclays.

US rate futures have priced in an 86% chance the Fed will hike by another 75 basis points at this month’s meeting, which would increase the Fed funds rate to 3.0% to 3.25%. That was up from a 77% probability a day earlier.

US Treasury yields climbed slightly on Friday, with the yield on benchmark two-year notes edging 4 basis points higher to 3.5264%. The yield on 10-year bonds stood at 3.3284%, compared with its previous close of 3.2920%.

Across the Atlantic, the European Central Bank raised interest rates by a record 75 basis points and also signalled further hikes to fight inflation, even as the bloc’s economy is heading for a likely winter recession.

That sent euro zone government bond yields soaring and supported the euro. Germany’s two-year bond yield climbed more than 20 bps to 1.326%, its highest since 2011, while 10-year bond yields were up 14 bps to 1.71%.

The euro gained 0.5% to USD 1.0049 and managed to stand above parity with the U.S. dollar.

The dollar eased 0.3% against a basket of major currencies.

For the week, though, it has surged 2.6% against the rate-sensitive yen. The yen has been a victim of the dovish monetary stance from the Bank of Japan, in contrast with rate hikes elsewhere.

Oil prices turned down in early trade on Friday and were headed for a 4% weekly drop on worries that central banks’ aggressive rate hikes and China’s COVID-19 curbs will hurt demand.

US crude dipped 0.1% to USD 89.07 a barrel while Brent crude rose to USD 89.07 per barrel.

Elsewhere, Britain’s new leader, Liz Truss, on Thursday announced a cap on soaring consumer energy bills for two years to cushion the economic shock of war in Ukraine.

Gold was slightly higher. Spot gold was traded at USD 1713.99 per ounce.

(Editing by Kenneth Maxwell)

Philippines July trade deficit hits record high USD 5.93 billion

MANILA, Sept 9 (Reuters) – The Philippines posted a record high trade deficit of USD 5.93 billion in July, as the value of imports increased at double-digit pace while exports contracted, government data showed on Friday.

Imports rose 21.5% from a year earlier to USD 12.1 billion, while exports fell 4.2% to USD 6.2 billion, the Philippine Statistics Authority said

(Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Martin Petty)

Dollar relaxes after steep climb, euro gains on ECB hike

SINGAPORE, Sept 9 (Reuters) – The dollar took a breather from its surging rally on Friday as markets digested yet more hawkish Fed speak, while the euro hung on to parity, helped by an outsized rate hike from the European Central Bank.

Currency moves overnight were calmer for once even as Federal Reserve Chair Jerome Powell reaffirmed the central bank’s aggressive stance against inflation, which reinforced the greenback’s dominance.

The euro was up 0.52% at USD 1.0050, inching away from its two-decade trough of USD 0.9864 hit earlier in the week as speculators took profits on crowded short positions.

The ECB on Thursday raised its key interest rates by an unprecedented 75 basis points and promised further hikes to come in its fight against inflation, even as the bloc is likely heading towards a winter recession and gas rationing.

The single currency is on track for a 0.9% weekly gain, snapping three straight weeks of decline, but has nonetheless fallen more than 10% this year.

Meanwhile, sterling was last up 0.43% to USD 1.1547, reversing its losses from the previous session.

The pound fell overnight after news that Queen Elizabeth, Britain’s longest-reigning monarch and the nation’s figurehead for seven decades, died peacefully on Thursday at the age of 96.

The US dollar index was down 0.25% to 109.25, just off a 20-year top of 110.79.

“Effectively, the ECB and Powell kind of cancel each other out, so there was sort of volatility, but at the end, not much happened in that sense,” said Rodrigo Catril, a currency strategist at National Australia Bank.

“I think the market now is starting to look towards next week, US CPI, and I think to some extent, that will set the tone in terms of what to expect from the Fed.”

Against the Japanese yen, the dollar was last down 0.29% to 143.69, but is up nearly 3% on the week, the largest weekly gain since June.

The yen fell to a 24-year low this week as the policy divergence between the Bank of Japan’s ultra-dovish stance and the rest of the world, particularly the Fed, proved too stark to be ignored.

Japan’s top currency diplomat said on Thursday that the country is ready to take action in the market and will not rule out any options to address “clearly excessive volatility” seen in the yen.

Officials from the Ministry of Finance, the Bank of Japan (BOJ) and the Financial Services Agency (FSA) met the same day to discuss the slide.

“The arguments from the BoJ that a lower currency is net beneficial for the economy starts to ring hollow when the cost of living is still rising, given those energy prices that have been exacerbated by a much weaker yen,” said NAB’s Catril.

The Australian and New Zealand dollars also made early gains in Asia trade, recovering from dips overnight.

The Aussie was up 0.55% to USD 0.6788, while the kiwi was up 0.47% to USD 0.6084, though the two antipodean currencies were on track for another weekly loss.

(Reporting by Rae Wee; Editing by Lincoln Feast)

Wall Street ends higher, gains driven by banks, healthcare

Sept 8 (Reuters) – Wall Street’s main indexes posted gains on Thursday mainly lifted by financial institutions and healthcare companies, as investors digested hawkish remarks from policymakers that cemented bets of a large interest rate hike later this month.

Indexes bounced back and forth in a choppy trading as concerns over Federal Reserve’s next steps to tame a surging inflation remain.

“There’s just a lot of uncertainty and I think people aren’t going to really make up their minds for longer than five minutes or five seconds, you know, until there’s a little bit more clarity or light at the end of the tunnel,” said Grace Lee, an equity income senior portfolio manager at Boston-based Columbia Threadneedle Investments.

Money market traders see 87% odds that the Fed will hike rates by 75 basis points at this month’s meeting.

Bank of America, Barclays and Jefferies said they now see a 75-basis points interest rate hike. Before Barclays had said it could be a 50- or 75-basis point increase, while Bank of America and Jefferies were betting on a 50-basis point rise.

Federal Reserve Chair Jerome Powell said the central bank is “strongly committed” to bringing inflation down and needs to keep going until it gets the job done.

Chicago Fed President Charles Evans joined his fellow policymakers in saying that reining in inflation is “job one.”

Investors are also awaiting the US August inflation report next week for fresh clues on whether the Federal Reserve will hike rates by half or three-quarters of a percentage point at the next policy meeting due Sept. 20-21.

Worries over aggressive monetary tightening across the globe stalled equity markets on Thursday after the European Central Bank hiked interest rates by an unprecedented 75 basis points and signaled further hikes.

Meanwhile, data showed the number of Americans filing new claims for unemployment benefits fell last week to a three-month low, underscoring the robustness of the labor market even as the Fed raises interest rates.

With increasing odds of another outsized rate hike, both the rate-sensitive S&P 500 bank index and the S&P 500 healthcare sector rose 2.8% and 1.8%, respectively.

The healthcare sector was boosted by news that Regeneron Pharmaceuticals Inc’s anti-blindness treatment Eylea was shown to work as well when given at a higher dose at a longer interval between injections. The drugmaker’s shares jumped 18.8%.

“People are embracing safety. Healthcare is a very safe sector and it’s still fairly cheap, the same way with the broader financial sector,” said Lee.

The Dow Jones Industrial Average rose 193.24 points, or 0.61%, to 31,774.52, the S&P 500 gained 26.31 points, or 0.66%, to 4,006.18 and the Nasdaq Composite added 70.23 points, or 0.6%, to 11,862.13.

GameStop Corp surged 7.4% after the video game retailer reported a smaller-than-expected quarterly loss.

American Eagle Outfitters Inc. tumbled 8.7% after the apparel maker missed second-quarter profit estimates and said it would pause quarterly dividend as it fortifies its finances against a hit from inflation.

Volume on US exchanges was 10.19 billion shares, compared with the 10.37 billion average for the full session over the last 20 trading days.

On Wednesday, Wall Street’s main indexes climbed the most in about a month as bond yields retreated after a recent surge that was driven by expectations of higher interest rates. Still, the benchmark S&P 500 is down over 16% year-to-date.

Advancing issues outnumbered declining ones on the NYSE by a 1.34-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored advancers.

The S&P 500 posted 7 new 52-week highs and 8 new lows; the Nasdaq Composite recorded 37 new highs and 153 new lows.

(Reporting by Carolina Mandl, with additional reporting by Sruthi Shankar, Ankika Biswas and Anisha Sircar in Bengaluru; Editing by Saumyadeb Chakrabarty, Maju Samuel, Vinay Dwivedi and Aurora Ellis)

US recap: EUR/USD’s rebound on ECB’s 75-bp hike faces hawkish Fed

Sept 8 (Reuters) – The dollar index eased slightly on Thursday, shedding gains that followed hawkish comments from Fed Chair Jerome Powell as weakness associated with the ECB’s historic 75bp rate hike reappeared in late trading.

Markets are pricing in a third straight 75-bp Fed hike at the Sep. 21 meeting, but broad profit-taking on overbought dollar positions is part of the mix ahead of next week’s key US CPI and retail sales reports.

EUR/USD’s initial rise following the ECB hike came as there was some doubt whether the ECB would hike rates 50bp or 75bp, which sent 2-year bund yields up 31.8bp versus a 4bp rise in 2-year Treasury yields.

EUR/USD ran into sellers by the falling 21-day moving average on Powell’s comments and traders remain wary about the euro zone’s economic prospects compared to the US

The ECB shifted its 2023 GDP forecast sharply lower and inflation forecast higher. The EU and UK are scrambling to provide fiscal relief to offset the surge in energy costs since the pandemic receded and Russian energy supplies were throttled.

The Fed is less constrained since the US is a major energy producer and natgas exporter. Even after the 75bp hike to 0.75%, the ECB is well behind the Fed’s current 2.5% policy rate, with a third 75bp hike expected on Sept. 21.

Before then attention will be on next week’s US CPI and retail sales reports and energy-related issues.

EUR/USD recovered to about flat, but below its high of 1.0030 on EBS near the falling 21-DMA at 1.0038. The 47bp narrowing of the 2-year bund-Treasury yield spreads since August’s lows offers some support, as does broader consolidation of dollar gains since Wednesday’s peak.

That peak seemed timed by USD/JPY’s 24-year high Wednesday at 144.99 on EBS that was buttressed somewhat by broadening Japanese warnings about the yen’s rapid retreat.

USD/JPY was up 0.2% Thursday, but well within Wednesday’s 142.75-144.99 range. The BOJ’s negative interest rates and yield curve control leave the yen vulnerable. But the overbought USD/JPY may need US CPI and retail sales data to keep strong Fed hike expectations intact to overcome 145 and FX intervention unease.

Sterling was modestly lower amid choppy trading as the market onboarded UK plans for papering over the looming energy crisis as the BoE finally got some yield competition from the ECB, as well as news that Queen Elizabeth died.

The Australian dollar’s early slip on RBA comments opening the door on slower rate hikes diminished as other central banks will eventually indicate the same.

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

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