More respite for markets, for now at least

MORE RESPITE FOR MARKETS, FOR NOW AT LEAST (0642 GMT)

European stocks look set to get a nice uplift at the open this morning, with STOXX 50 futures indicating a 1.3% gain for the index.

It’s a similar story for the DAX, while FTSE futures are lagging slightly, up 0.9%.

After yesterday’s stunning reversal of Truss’s fiscal plan by new finance minister Jeremy Hunt, news reports this morning that the Bank of England might hold off on winding down its holdings of UK gilts is likely to provide even more respite for markets – for now at least.

The looming earnings season has not been top of the priority list in what has been a chaotic few weeks in markets. But it will provide an important read on how the unfolding economic slowdown is impacting different sectors.

The effects should be clearer this time around compared to last quarter, when outlooks were blurry – and some telltale signs are already emerging.

Roche’s quarterly sales declined 6% after a slump in COVID-19 treatments and diagnostic testing , while Rio Tinto has tempered its annual iron ore shipments outlook as demand weakens.

UK homebuilder Bellway flagged moderating demand amid increased pressure from rising mortgage rates as the housing sector faces the risk of a slowdown amid a deepening cost-of-living crisis.

On a positive note for European IPO market – which has been defined by plunging volumes in 2022 – British exploration and production company Ithaca Energy is planning a London listing.

(Lucy Raitano)

*****

GOOD WILL HUNTING (0615 GMT)

Three days into the job, Jeremy Hunt has pretty much gutted British Prime Minister Liz Truss’ entire economic plan that propelled her to lead the government less than six weeks ago. The new finance minister’s policy reversal has lifted investors’ mood, leading to a rally across equities, bonds and some currencies.

With Truss’s spokesman batting down suggestions that Hunt was running the country, it remains to be seen how long the PM is able to survive the political maelstrom, even though she remains defiant. “I’m sticking around because I was elected to deliver for this country.”

The dramatic U-turn might lead to BoE not hiking interest rates in November by as much as previously anticipated (75-basis-point hike vs previous estimate of 100 basis points, according to Morgan Stanley analysts). Meanwhile, a report from the Financial Times said that the BoE is likely to delay the sale of billions of pounds of government bonds.

Over in Australia, the central bank expects to raise interest rates further over the coming months, while minutes of its meeting last month showed that the surprise decision to slow the pace of rate increases was “finely balanced”.

Elsewhere, another day of intervention watch awaits the currency market as the yen JPY=EBS remains perilously close to the major psychological barrier of 150 after touching a 32-year low of 149.10 against the dollar overnight.

The new low led to yet another response from the Japanese authorities that they are closely watching excessive currency moves.

On the corporate front, a source told Reuters that Credit Suisse Group AG has approached at least one Middle Eastern sovereign wealth fund for a capital injection.

Key developments that could influence markets on Tuesday:

Economic events: Sept car registration data from UK, Germany, France and Italy, Germany Oct ZEW survey, U.S. Sept industrial output data

Speakers: Riksbank’s Per Jansson and Bank of Canada’s Carolyn Rogers to speak at different events

Earnings on the deck: J&J, Goldman and Netflix

(Ankur Banerjee)

*****

Philippines’ Marcos ready to defend peso, fight inflation

MANILA, Oct 18 (Reuters) – Philippine President Ferdinand Marcos Jr said on Tuesday his government was prepared to defend the peso, given that continued weakness in the currency could accelerate inflation that is already at four-year highs.

“We may have to defend the peso in the coming months, but the overall forecast is that we are still doing better than other countries in terms of inflation,” Marcos said on Twitter after meeting with his economic ministers.

Marcos said the government will continue to use interest rates to combat inflation, which is on track to breach a 2%-4% target for the year due in part to higher prices of imported commodities like fuel. Year-to-date inflation was at 5.1% in September, while year-on-year inflation stood at 6.9%.

“Number one priority is still inflation. We will continue to use interest rates to mitigate the effects,” he said.

The central bank has so far raised key policy rates by 225 basis points (bps) this year, including an off-cycle 75 bps hike in July, to tame inflation and slow the peso’s decline. Bangko Sentral ng Pilipinas has two more meetings left before the end of the year.

Central Bank Governor Felipe Medalla has said the monetary authority was active in the forex market and selling strategically to prevent “excessive” forex movements.

The peso, like other emerging market currencies, has hit multi-year lows this year as aggressive monetary tightening by the US Federal Reserve strengthened the greenback by boosting its safe-haven appeal. The peso, the worst-performing Southeast Asian currency, has lost 13.5% against the US. dollar year-to-date.

Marcos’ statement was consistent with recent signals from the central bank about a possible large hike in policy rates and increased intervention in the foreign exchange market, said Michael Ricafort, an economist at Rizal Commercial Banking Corp. in Manila.

“These measures help stabilise both the peso exchange rate and overall inflation, as well as inflation expectations,” Ricafort said.

(Reporting by Enrico dela Cruz, Karen Lema and Neil Jerome Morales; Editing by Martin Petty and Kanupriya Kapoor)

Oil prices rise on softer US dollar, supply woes

SINGAPORE, Oct 18 (Reuters) – Oil prices climbed on Tuesday, bolstered by a weaker US dollar and supply woes, although gains were capped by the spectre of lower fuel demand from China as it persists with its stringent zero-COVID policy.

Brent crude futures LCOc1 rose 82 cents, or 0.9%, to USD 92.44 per barrel by 0643 GMT, while US West Texas Intermediate (WTI) crude CLc1 futures gained 86 cents, or 1.0%, to USD 86.32 per barrel.

The US dollar index – which measures the greenback against six major peers including sterling – sagged to its lowest since Oct. 6. A weaker dollar makes oil cheaper for buyers holding other currencies, making them more likely to make purchases.

Following the steep production cut agreed on by OPEC+ – the Organization of the Production Exporting Countries (OPEC) and its allies, including Russia – earlier this month, investors have been seen increasing their long positions in futures, ANZ Research analysts said in a note.

OPEC+ member states have been lining up to endorse the cut to the output target after the White House accused Riyadh of coercing some other nations into supporting the move.

Meanwhile, expectations that China will stick to a loose monetary policy to help its economy, hobbled by COVID-19 restrictions, lent some support to oil prices. The country’s central bank rolled over maturing medium-term policy loans on Monday while keeping its key interest rate unchanged for a second month.

China’s fuel demand outlook, however, weighed on sentiment after the world’s top crude oil importer delayed the release of its economic indicators, originally scheduled to be out on Tuesday, CMC Markets analyst Tina Teng said. No date for a rescheduled release has been given.

China’s adherence to its zero-COVID policy has continued to increase the uncertainties about the country’s economic growth, Teng said.

On the supply side, US crude oil stocks were expected to have risen a second consecutive week and are estimated to have increased by 1.6 million barrels in the week to Oct. 14, a preliminary Reuters poll showed on Monday.

Output in the Permian Basin of Texas and New Mexico, the biggest US shale oil basin, is forecast to rise by about 50,000 barrels per day (bpd) to a record 5.453 million bpd this month, the Energy Information Administration said.

(Reporting by Isabel Kua in Singapore and Laila Kearney in New York; Editing by Edwina Gibbs and Tom Hogue)

Oil prices settle lower on US supply, lower China demand

Oct 18 (Reuters) – Oil prices settled lower on Tuesday on fears of higher US supply combined with an economic slowdown and lower Chinese fuel demand.

Brent crude futures settled down USD 1.59, or 1.7%, to USD 90.03 per barrel, while US West Texas Intermediate (WTI) crude settled down USD 2.64, or 3.1%, to USD 82.82 per barrel.

China, the world’s top crude oil importer, indefinitely delayed release of economic indicators originally scheduled to be published on Tuesday, indicating to the market that fuel demand is significantly depressed in the region.

“It’s not a good sign when China decides not to publish economic figures,” said John Kilduff, partner at Again Capital LLC in New York.

China’s adherence to its zero-COVID policy has continued to increase uncertainties about the country’s economic growth, CMC Markets analyst Tina Teng said.

Oil prices were also pressured by reports that the US government would continue releasing crude oil from reserves.

The Biden administration plans to sell oil from the Strategic Petroleum Reserve in an effort to cool fuel prices before next month’s congressional elections, sources told Reuters on Monday.

In addition, US crude oil stocks were expected to have risen for a second consecutive week, a preliminary Reuters poll showed on Monday.

Investors had been increasing long positions in futures after OPEC+ agreed to lower output by 2 million barrels per day, ANZ Research analysts said in a note.

Several members of the oil producer group have endorsed the cut after the White House accused Saudi Arabia of coercing some nations into supporting the move, a charge Riyadh denies.

(Additional reporting by Rowena Edwards in London, Isabel Kua in Singapore; Editing by David Goodman, Ed Osmond, Nick Macfie and David Gregorio)

BoE set to delay start of bond sales again until markets calm -FT

LONDON, Oct 18 (Reuters) – The Bank of England is likely to further delay the Oct. 31 start of its sales of billions of pounds of government bonds to help stabilise the government bond markets after Britain’s failed “mini” budget, the Financial Times reported on Tuesday.

Amid turmoil in financial markets, the BoE had already pushed back the start of a scheme to sell some of its 838 billion pounds (USD954.90 billion) of government bond holdings, which was originally due to begin on Oct. 6.

The pound briefly rose against the US dollar on the report but was flat at USD1.1353 at 7:22 am (0622 GMT).

The FT said it had learned that top officials at the BoE had come to the view that a delay was needed after judging the gilts market to be “very distressed” in recent weeks, a view backed by its Financial Policy Committee.

No one at the Bank of England’s press office was immediately available to comment on the report.

BoE Governor Andrew Bailey said in a speech on Saturday that the central bank was not using its stock of bonds as an active tool of monetary policy at present and its benchmark Bank Rate remained its primary instrument of policy.

British financial markets have been under strain since former finance minister Kwasi Kwarteng announced the string of tax cuts with no details of how they would be paid for on Sept. 23.

On Monday, new finance minister Jeremy Hunt scrapped most of Prime Minister Liz Truss’s economic plan and scaled back her vast energy support scheme, making a historic policy U-turn to try to stem a dramatic loss of investor confidence.

British bond prices rose after his announcement.

(USD1 = 0.8776 pounds)

(Reporting by Akriti Sharma in Bengaluru and William Schomberg in London; Additional reporting by Kevin Buckland in Tokyo; Editing by Clarence Fernandez, Sam Holmes and Andrew Heavens)

BoE to start selling bonds on Nov. 1, but not longer-dated gilts

LONDON, Oct 18 (Reuters) – The Bank of England said it would start selling some of its huge stock of British government bonds from Nov. 1 but would not sell this year any longer-duration gilts that have been in the eye of a recent storm in the British government bond market.

The BoE said it was delaying its start date for the launch of its so-called quantitative tightening programme by a day from its previous schedule to avoid clashing with a government fiscal statement on Oct. 31.

The central bank wants to reduce its 838 billion pounds (USD 948 billion) of government bonds acquired over more than a decade of crisis-fighting, from the global financial crisis to the coronavirus pandemic and its aftermath.

The BoE said sales in 2022 would be in short- and medium-maturity sectors, not bonds of more than 20 years. They suffered the biggest sell-offs in the recent market upheaval caused by the government’s now-abandoned tax-cutting mini-budget.

Last month, the BoE sought to stop the bond market rout from damaging pension funds by starting an emergency round of buying long-dated debt, delaying its “quantitative tightening” (QT) sales by almost a month.

Those purchases ended on Friday last week.

Analysts at consultancy Evercore said the plan looked “punchy” given the still volatile market conditions.

“We assess that the Bank sees pressing ahead with substantial QT as essential to uphold its independence and credibility amid the UK’s fiscal misadventures,” they said.

BoE officials have stressed their bond-buying is not aimed at underwriting the increased borrowing of the British government in recent years.

The central bank confirmed on Tuesday that it would start the tightening scheme in a statement after markets closed.

“The maturity split of gilt sales for subsequent quarters will be considered ahead of Q1 2023,” it said.

Earlier the central bank described as inaccurate a report in the Financial Times which said top officials at the BoE had decided that a delay to QT was likely to be needed after judging the gilts market to be “very distressed” in recent weeks.

British government bonds – or gilts – suffered historic losses after the Sept. 23 publication of Prime Minister Liz Truss’ new economic growth plan.

Gilts have recouped some of their losses following a major U-turn announced by new finance minister Jeremy Hunt on Monday.

“The Bank will continue to monitor market conditions closely, and where appropriate factor that into the design of its sales operations,” the BoE statement said.

BoE Deputy Governor Jon Cunliffe said on Tuesday financial markets could remain volatile in the coming weeks but the risk of another gilts “fire sale” had been significantly reduced.

The central bank has previously said there would be a “high bar” for any delays to its sales plans.

“There’s not a huge amount of sales to come this quarter, which could support their view that sales go ahead but perhaps it’s a bit early to be sure,” said Chris Scicluna, head of economic research at Daiwa Capital Markets, London.

BoE Governor Andrew Bailey said on Saturday that the central bank was not using its stock of bonds as an active tool of monetary policy at present and its benchmark Bank Rate remained its primary instrument of policy.

(USD 1 = 0.8842 pounds)

(Reporting by Akriti Sharma in Bengaluru and William Schomberg and William James in London; Additional reporting by Kevin Buckland in Tokyo and Dhara Ranasinghe in London; Editing by William Maclean, Marguerita Choy and Matthew Lewis)

Wall Street ends sharply higher, dollar dips on UK U-turn, strong earnings

NEW YORK, Oct 17 (Reuters) – Wall Street jumped to robust gains on Monday as solid earnings and a financial policy reversal in Britain fueled risk appetite and boosted the sterling and euro against the greenback.

All three major US stock indexes rallied to end the session 1.9% to 3.4% higher while and the dollar lost ground against a basket of world currencies.

“The catalysts that have triggered in the markets year-to-date are well-known,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “Now, investors are looking for green shoots of catalysts that can start to provide some improvement.”

Stocks were primed for a strong open after Britain’s new finance minister Jeremy Hunt scrapped Prime Minister Liz Truss’s proposed tax cuts and reined in her energy subsidies, while Bank of America Corp. (BAC) posted consensus-beating third quarter results, having benefited from a spate of interest rate hikes from the Federal Reserve.

The Dow Jones Industrial Average rose 550.99 points, or 1.86%, to 30,185.82, the S&P 500 gained 94.88 points, or 2.65%, to 3,677.95 and the Nasdaq Composite added 354.41 points, or 3.43%, to 10,675.80.

European stocks closed sharply higher on the UK’s financial policy reversal.

That reversal has “lifted some clouds, but it doesn’t lift the political risk,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York, who added that the new government formed by British Prime Minister Liz Truss “has caused a lot of uncertainties.”

Meanwhile, the easing yuan weighed on Asian markets.

The pan-European STOXX 600 index rose 1.83% and MSCI’s gauge of stocks across the globe gained 2.09%.

Emerging market stocks rose 0.32%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.19% lower, while Japan’s Nikkei lost 1.16%.

Long-dated Treasury yields turned higher late in a choppy session for the bond market, even as investor sentiment eased in the wake of the British policy about-face.

Benchmark 10-year notes last fell 3/32 in price to yield 4.0166%, from 4.006% late on Friday.

The 30-year bond last fell 23/32 in price to yield 4.0214%, from 3.975% late on Friday.

The euro and sterling gained strength following Hunt’s announced policy announcement, causing the greenback to lose ground against a basket of major world currencies.

The dollar index fell 1.02%, with the euro EUR= up 1.19% to USD 0.9835.

The Japanese yen weakened 0.19% versus the greenback at 149.06 per dollar, while sterling was last trading at USD 1.135, up 1.61% on the day.

Crude prices oscillated as markets juggled signs of looming recession and China’s continued loose monetary policy.

US crude settled down 0.18% to close at USD 85.46 per barrel, while Brent settled at USD 91.62 per barrel, essentially flat on the day.

Softness in the greenback gave a lift to gold prices.

Spot gold added 0.4% to USD 1,648.39 an ounce.

(Reporting by Stephen Culp Additional reporting by Marc Jones in London; Editing by Mark Potter, Will Dunham and Nick Zieminski)

Gold up about 1% as US dollar, yields pull back

Oct 17 (Reuters) – Gold prices rose more than 1% on Monday after declines in the previous two sessions, as the US dollar and Treasury yields faltered, although risks from looming Federal Reserve interest rate hikes persisted.

Spot gold was up 0.9% at USD 1,656.25 per ounce by 1:41 p.m. ET (1741 GMT), having risen more than 1% earlier in the session and moving away from the more than two-week low touched in the last session.

US gold futures settled 0.9% higher at USD 1,664.

“The dollar’s significantly lower … yields are ticking lower,” said Bob Haberkorn, senior market strategist at RJO Futures, who also noted some “safe-haven demand with heightened geopolitical risks.”

Making bullion less expensive for overseas buyers, the dollar slipped 1.1%, while Treasury yields also retreated.

However, it’s going to be “a struggle for gold to rally even though there’s a lot of question marks out in the world. Investors want safety, but it’s hard not to go into Treasuries with rates going up as fast as they are,” Haberkorn added.

Gold faces headwinds as the Fed is expected to continue on its rate-hiking trajectory and increase its benchmark overnight interest rate by at least 75 basis points at its next policy meeting in November to curb stubbornly high inflation.

Gold prices have fallen 20% since scaling above the key USD 2,000 per-ounce level in March.

Even though gold is seen as a hedge against inflation, rising interest rates dim the appeal of the non-yielding asset.

“In the near term, however, the recovery in risk assets bolstered by signs of stabilising gilts is raising pressure on precious metal shorts, but gold prices need to break above USD 1,750/oz to extend the short squeeze,” TD Securities said in a note.

Elsewhere, spot silver climbed 2.5% to USD 18.72 per ounce after posting eight consecutive daily losses. Platinum rose 1.7% to USD 913.77 and palladium added 0.6% to USD 1,998.82.

“A surplus palladium market in 2023 should ultimately lead to lower palladium prices, although near term the market remains tight,” Heraeus Precious Metals said in a note.

(Reporting by Kavya Guduru in Bengaluru; Editing by Shounak Dasgupta and Paul Simao)

Philippines’ cash remittances up 4.3% in August

MANILA, Oct 17 (Reuters) – Cash remittances rose 4.3% to USD 2.72 billion in August from a year ago, the Philippine central bank said on Monday.

In January to August, cash remittances through banks increased 3% to USD 20.99 billion.

(Reporting by Neil Jerome Morales; Editing by Martin Petty)

BoE reiterates liquidity available, following end of gilt support

LONDON, Oct 17 (Reuters) – The Bank of England on Monday outlined the various liquidity operations it holds following last week’s conclusion of its emergency gilt market support.

“As intended, these operations have enabled a significant increase in the resilience of the sector,” the BoE said in a statement.

It pointed to the new Temporary Expanded Collateral Repo Facility, in which banks can access cash for low-rated corporate bond collateral, as well as other long-standing sources of liquidity.

(Reporting by Kylie MacLellan, Writing by Andy Bruce)

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

Philippines Trade Update: Growing exports lead to stronger trade balance

Policy Rate Views: Fed’s cautious step towards neutral