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MANILA, Oct 17 (Reuters) – The Philippines’ Bureau of the Treasury rejected all bids for 91-day, 182-day and 364-day T-bills at an auction on Monday, as market participants sought significantly higher yields.
(Reporting by Enrico Dela Cruz; Editing by Martin Petty)
Oct 17 (Reuters) – Oil prices rose on Monday after China rolled over liquidity measures to help its pandemic-hit economy, igniting hopes for a better fuel demand outlook from the world’s top crude importer.
Brent crude futures rose 81 cents, or 0.88%, to USD 92.44 a barrel by 0642 GMT, recovering from a 6.4% fall last week. US West Texas Intermediate crude was at USD 86.33 a barrel, up 72 cents, or 0.84%, after a 7.6% decline last week.
China’s central bank rolled over maturing medium-term policy loans while keeping the interest rate unchanged for a second month on Monday.
Analysts said the full rollover is a signal that the central bank would continue to maintain loose monetary policy.
The country also vowed to greatly increase domestic energy supply capacity and step up risk controls in key commodities including coal, oil and gas, and electricity, a senior National Energy Administration official said on Monday.
China will further increase reserve capacities for key commodities, another state official told a news conference in Beijing.
Oil found support from a combination of factors, including Chinese President Xi Jinping’s comments at the Party Congress that reassured accommodative policies for the economy, a positive sign for demand outlook, CMC Markets analyst Tina Teng said.
China is expected to release trade and economic data this week. Although its third-quarter GDP growth could rebound from the previous quarter, President Xi’s stringent COVID-19 policy has the world’s No. 2 economy facing what will most likely be its worst performing year in almost half a century.
Looking ahead, oil prices are expected to remain volatile as production cuts by OPEC+ will tighten supplies ahead of the European Union embargo on Russian oil, while a strong US dollar and further interest rate increases from the US Federal Reserve limit price gains.
St. Louis Fed President James Bullard said on Friday inflation had become “pernicious” and difficult to arrest, and warranted continued “frontloading” through larger increases of three-quarters of a percentage point.
Member states of the Organization of the Production Exporting Countries and their allies, including Russia, lined up on Sunday to endorse the steep production cut agreed to this month after the White House, stepping up a war of words with Saudi Arabia, accused Riyadh of coercing other nations into supporting the move.
OPEC+ pledged on Oct. 5 to cut output by 2 million barrels per day, which will lead to an actual drop of about 1 million bpd as some members are already producing below their targets.
Despite this, top exporter Saudi Arabia will keep exports to key Asia markets steady in November.
“Tighter inventories for oil and oil products along with looming supply risks should keep prices volatile,” analysts at ANZ Research said in a note.
(Reporting by Mohi Narayan in New Delhi and Florence Tan in Singapore; Editing by Gerry Doyle)
HOUSTON, Oct 17 (Reuters) – Oil prices held steady on Monday in choppy trading as fears that high inflation and energy costs could drag the global economy into recession offset China’s continuation of loose monetary policy.
Brent crude futures were down 1 cents, or 0.01%, to USD 91.62 a barrel, recovering from a 6.4% fall last week. US West Texas Intermediate crude was down 15 cents, or 0.2%, at USD 85.46 after a 7.6% decline last week.
“US inflation remains a front topic and with the Fed set to raise rates at least into next year, there are fears that demand destruction will escalate,” said Dennis Kissler, senior vice president of trading at BOK Financial.
China’s central bank rolled over maturing medium-term policy loans on Monday while keeping its key interest rate unchanged for a second month, in a signal that loose monetary policy would be maintained.
Beijing will also greatly increase domestic energy supply capacity and step up risk controls in key commodities including coal, oil, gas and electricity, a senior National Energy Administration official said on Monday.
China will further increase reserve capacities for key commodities, another state official told a news conference in Beijing.
Chinese trade and third-quarter GDP data, along with September activity data, are due to be released on Tuesday, with quarterly growth possibly rebounding from the previous quarter but annual growth threatening to be China’s worst in almost half a century.
Meanwhile, a strong US dollar and the likelihood of further interest rate increases by the Federal Reserve are helping to contain price gains.
St. Louis Fed President James Bullard on Friday said inflation had become “pernicious” and difficult to arrest, warranting continued “frontloading” through larger rate increases of three-quarters of a percentage point.
Inflation in the United States remains stubborn and growth in European Union countries is expected to weaken to 0.5%, International Monetary Fund official Gita Gopinath said on Monday.
“It’s been another turbulent few weeks in oil markets from global growth concerns to super-sized OPEC+ output cuts and it seems they’re yet to fully settle down,” said Craig Erlam, senior markets analyst at OANDA.
“Brent has seen lows of USD 82 and highs of USD 98, so perhaps what we’re now seeing is it finding its feet somewhere in the middle.”
Oil supply is likely to remain tight after OPEC and allies including Russia pledged on Oct. 5 to cut output by 2 million barrels per day while a war of words between OPEC’s de facto leader Saudi Arabia and the United States could foreshadow more volatility.
OPEC+ output cuts attracted funds back to the oil markets, with continued heavy buying of crude oil futures and options for a second straight week.
Easing the supply crunch, oil output in the Permian in Texas and New Mexico, the biggest US shale oil basin, is due to rise by about 50,000 barrels per day (bpd) to a record 5.453 million bpd in November, the US Energy Information Administration (EIA) said in its productivity report on Monday.
(Additional reporting by Noah Browning in London, Mohi Narayan in New Delhi and Florence Tan in Singapore; Editing by Susan Fenton, Kirsten Donovan, David Goodman, Ed Osmond, Paul Simao and David Gregorio)
Oct 17 (Reuters) – Gold prices rose on Monday as the dollar retreated slightly, but impending supersized US interest rate hikes tempered further gains for the non-yielding bullion.
Spot gold rose 0.6% to USD 1,651.76 per ounce, as of 0703 GMT. Last week’s more than 3% decline was gold’s worst performance since July.
US gold futures were up 0.4% at USD 1,655.30.
The dollar index slipped 0.1%, reviving some of gold’s appeal for overseas buyers. Benchmark US 10-year Treasury yields also eased further from a 14-year peak scaled last week.
While the dollar’s still on a strong footing with the Federal Reserve likely to continue aggressive rate hikes, the “market is already reflecting these hawkish expectations and any softer data from the US. could see the USD stalling,” capping gold’s declines, said ANZ commodities strategist Soni Kumari.
US retail sales were unexpectedly flat in September, although the August reading was revised up 0.4%.
A survey from the University of Michigan on Friday showed consumer sentiment improved further in October, but inflation expectations deteriorated a bit, keeping bets for another 75-basis-point rate hike next month intact.
St. Louis Fed President James Bullard said the latest CPI data warrants continued “frontloading” through larger rate hikes of three-quarters of a percentage point but that does not necessarily mean rates need to be raised above the central bank’s projections.
Fed policymakers have raised rates sharply this year, sending gold down nearly 10% so far this year.
Reflecting sentiment, holdings of the SPDR Gold Trust GLD exchange-traded fund marked their biggest one-day outflow since Sept. 26 on Friday.
Gold prices may retest support at USD 1,641 per ounce, a break below which could open the way towards $1,614, according to Reuters technical analyst Wang Tao.
Spot silver climbed 1.3% to USD 18.50 per ounce, platinum rose 1.1% to USD 909.00 and palladium gained 1.4% to USD 2,017.22.
(Reporting by Eileen Soreng in Bengaluru; Editing by Sherry Jacob-Phillips, Rashmi Aich, and Uttaresh.V)
NEW YORK, Oct 14 (Reuters) – Gut-wrenching market volatility and attractive valuations are prompting some investors to keep their bullish views on energy stocks, one of the few bets that have thrived in an otherwise punishing year.
It’s not an easy call. The S&P 500 energy sector is already up around 46% this year and monetary policy tightening around the world has bolstered the chances of a global recession that could curtail energy demand.
Still, signs that supply will remain comparatively scarce are prompting some investors to stick with the sector, drawn by attractive earnings prospects and valuations that remain comparatively low despite big gains in many energy stocks this year. The S&P 500 energy sector trades at a trailing price-to-earnings ratio of 9.9, nearly half the 17.4 valuation of the broader index.
Few also see any end to the selloff in broader markets, as stubborn inflation boosts expectations for more market-punishing rate hikes from the Federal Reserve and other central banks. The S&P 500 is down around 24.5% this year while bonds – as measured by the Vanguard Total Bond Market index fund – are down nearly 18%.
“It’s hard to see people giving up on energy because it’s the best of both worlds,” said Jack Janasiewicz, portfolio manager with Natixis Investment Managers Solutions, referring to the sector’s low valuation and potential for more gains if supply remains tight. “If you’re worried about the direction of the market it’s a great place to hide.”
Analysts expect third-quarter earnings per share growth for energy companies of 121% compared with the same period a year ago, while those for the broader index excluding energy fall 2.6%, Refinitiv data showed.
Energy is the only sector in the S&P 500 expected by analysts at Credit Suisse to post positive revisions to their third quarter earnings. US oil giants Exxon Mobile Corp. and Chevron Corp. report earnings on Oct. 28.
In the coming week, investors will be focused on earnings from Tesla Inc., Netflix, and Johnson & Johnson, among others.
Expectations for further tightness in the oil market have been boosted by recent production cuts by OPEC+, as well as the European Union’s plans to move off Russian crude by February.
US output in 2022 is expected to average 11.75 million bpd, down from a previous estimate of 11.79 million bpd, according to the US Energy Department.
Prices for Brent crude stood at USD 91.46 per barrel on Friday, up nearly 10% from a recent low after falling by nearly a third between July and September.
“There is an outsized probability that crude prices can surge higher, particularly if demand concerns fail to materialize to the extent some bears expect,” wrote analysts at TD Securities, who expect oil prices to hit USD 101 in 2023. Analysts at UBS Global Wealth Management expect oil to hit USD 110 by year-end.
Some fund managers remain skeptical that energy can continue its outperformance if the global economy slows in the face of monetary policy tightening from central banks.
“We’re surging toward recession all over the world and that’s going to cut into the demand side,” said Burns McKinney, a portfolio manager at NFJ Investment Group, who is increasing his overweight in dividend-paying tech companies such as Texas Instruments and Cisco.
At the same time, the selloff in the S&P 500 is creating buying opportunities in consumer discretionary and large-cap tech stocks that are more attractive over the long run than energy, said Lamar Villere, a portfolio manager at Villere & Co.
“We’re starting to see opportunities that are harder to not take advantage of,” he said.
Others, however, believe that the fundamentals remain aligned for the sector and see more upside. Saira Malik, chief investment officer at Nuveen, believes that fund managers will remain lightly positioned in energy shares despite recent gains. She is also betting that China’s economy will rebound in coming months, supporting global oil prices
“We still think energy has legs here,” she said.
(Reporting by David Randall; Editing by Ira Iosebashvili, Mark Porter and David Gregorio)
LONDON, Oct 14 (Reuters) – British Prime Minister Liz Truss and new finance minister Jeremy Hunt will have to do a lot more than Friday’s U-turn on corporation tax to restore Britain’s credibility with financial markets after three bruising weeks.
Truss and Hunt, a former foreign minister, will be looking to Oct. 31 – the date of the government’s medium-term budget plan announcement – as a moment to win back the trust of investors.
The pound and British government bond prices rose on Thursday and Friday in anticipation of the policy shift, but they retreated after Truss gave a short news conference on Friday, which underwhelmed analysts.
“Undertaking a U-turn that is forced doesn’t really give the impression that Liz Truss is driving forward with a credible policy plan but rather reacting to developments as they unfold, which itself doesn’t engender much confidence,” said Richard McGuire, head of rates strategy at Rabobank in London.
As Truss spoke on Friday gains made in anticipation of the corporation tax U-turn faded.
Ten-year gilt yields were 40 bps above session lows hit earlier on Friday, also pushed up by moves in bond yields globally. This puts them some 80 bps above their levels before the government’s mini-budget on Sept. 23 that triggered the recent turmoil.
The pound fell more than 1% against the dollar and remains 0.6% below its pre-Sept. 23 levels.
Investors and analysts said the reinstating of a previously scheduled corporate tax hike did little to resolve the challenges the “mini-budget” had originally introduced.
Paul Dales, chief UK economist at Capital Economics, called Friday’s move a “mini-U-turn,” noting there were still 25 billion pounds (USD 28.07 billion) of unfunded tax cuts remaining, down from 45 billion pounds in the original plan.
Without further changes the Office for Budget Responsibility – Britain’s fiscal watchdog – will say a 43-billion-pound hole in the public finances will need to be filled to put the debt-to-GDP ratio on a falling path in three years, he estimated.
Focus also turned to growing political instability with the fourth finance minister in as many months appointed in a country grappling with a cost-of-living crisis, and some questioned how long Truss herself could stay in office.
“Markets are potentially seeking out a hard reset back to square one. Like we’ve seen in Greece and Italy, the market can force a change of leadership if necessary,” said Janus Henderson portfolio manager Bethany Payne.
UNDERWHELMED
Britain’s mini-budget three weeks ago triggered some of the biggest ever jumps in British bond yields, exposed vulnerabilities in the pensions sector — undermining the country’s financial stability.
Sterling, already hurt by a strong dollar, fell to record lows, creating another headache for the Bank of England which is has accelerated the pace of its interest rate increases in a bid to tackle an inflation rate running at nearly 10%.
The BoE was also forced to carry out a round of emergency bond-buying which ended on Friday, leaving many investors anxious about what might happen next week.
“These sudden changes of policy both from the government and the central bank raise uncertainty for market participants potentially stalling or deterring investment, which has been weakening since Brexit,” said Ken Egan, director of European sovereign credit at Kroll Bond Rating Agency.
“How it impacts liquidity on the gilt market going forward is something we are monitoring closely.”
Nomura said sterling’s decline was unlikely to slow until economic growth rebounds. It forecasts a fall in sterling to USD 0.975 by year-end. The pound was trading at around USD 1.1191 and is already down 17% against the dollar this year.
NatWest Markets also suggested Friday’s announcement would do little to tame gilt yields. A roughly 20 billion-pound reduction in funding needs over the next two years — Friday’s measures are expected to raise 18 billion pounds — would be worth only 30 bps off the 10-year gilt yield, which has already been more than priced in, its economists said.
Rabobank’s McGuire said pressure on UK assets could lead the BoE to re-intervene in the bond market or delay its quantitative tightening, bond-selling plans.
Investors may need more reassurance, especially given the scale of Britain’s six-month, 60 billion-pound energy support package, fund managers said.
“Thus far, the investment community has been underwhelmed by the move on corporation tax and is looking for a more substantive ‘U-Turn’ in order to restore fiscal credibility,” said Mark Dowding, chief investment officer at BlueBay Asset Management.
“A windfall tax to reduce the cost of the energy price cap will be required along with further steps,” he added.
(USD 1 = 0.8908 pounds)
(Reporting by Yoruk Bahceli, Dhara Ranasinghe, Nell Mackenzie, Harry Robertson, Editing by William Schomberg and Jane Merriman)
Oct 14 (Reuters) – Gold prices fell more than 1% on Friday and were headed for their worst week since mid-August, dragged lower by a stronger US dollar and worries the Federal Reserve will persist with sharp rate hikes to curb inflation.
Spot gold had fallen 1.3% to USD 1,643.90 per ounce by 13:42 p.m. EDT (1742 GMT), down about 2.9% so far this week. US gold futures settled 1.6% lower at USD 1,649.50.
The US dollar rose over 0.6% against its rivals, making greenback-priced bullion more expensive for overseas buyers.
Gold prices are increasingly correlated with the moves in the dollar and could fall to as low as USD 1,600 an ounce, said Daniel Ghali, commodity strategist at TD Securities.
Data on Thursday showed US consumer prices increased more than expected in September, providing ammunition to the Fed to deliver another big rate hike, and consequently setting up what could be gold’s worst week in nearly two months.
Gold is highly sensitive to rising US rates, which boost bond yields, increasing the opportunity cost of holding non-yielding gold.
Bullion shed as much as 1.8% on Thursday before recovering to end the session 0.4% lower as the dollar lost ground after initially spiking following the inflation report.
“A rebound of that magnitude (for gold) after that inflation report was strange to say the least,” said Craig Erlam, senior market analyst at OANDA. “Gold moving lower again today is more in line with what we learned from the data.”
Benchmark US 10-year Treasury yields firmed, further weighing on gold.
Silver fell 3.5% to USD 18.22 per ounce, and was set for its biggest weekly drop since September 2020.
Platinum dipped 0.3% to USD 893.99 per ounce, while palladium fell 4.9% to USD 2,003.38. Both remain on course for weekly declines.
(Reporting by Bharat Govind Gautam and Brijesh Patel in Bengaluru; Editing by Tomasz Janowski and Vinay Dwivedi)
LONDON, Oct 14 (Reuters) – Investors with classic “60/40” portfolios are facing the worst returns this year for a century, BofA Global Research said in a note on Friday, noting that bond markets continue to see huge outflows.
“2022 (is) a simple tale of “inflation shock” causing “rates shock” which in turn threatening “recession shock” & “credit event”; inflation shock ain’t over,” BofA said in its weekly “Flows Show” report.
Soaring inflation, rising interest rates, war in Europe and an energy crunch have seen valuations plunge across asset classes in 2022.
The S&P 500 index of shares is down around 23% this year, having shed 15% since mid-August alone.
Hopes that inflation may be receding were dashed on Thursday after data showed U.S consumer prices increased faster than expected in September, reinforcing expectations that the Federal Reserve will deliver another 75-basis points interest rate hike next month.
Using data from EPFR, BofA said investors have sold bonds for eight consecutive weeks, while European equity funds have seen outflows for the 35th straight week.
So-called “60/40” portfolios typically have 60% of their holdings in stocks and the remaining 40% in fixed income.
BofA said annualised returns so far in 2022 on portfolios like these are the worst in the past 100 years, while those on “25/25/25/25” portfolios that hold equal portions of cash, commodities, stocks and bonds have dropped 11.9%, the worst sinced 2008.
Equity funds recorded USD 0.3 billion of inflows during the week to Wednesday while bonds saw massive outflows of USD 9.8 billion.
It was the sixth week in a row that investors sold financials, the first outflow from infrastructure in 11 weeks and the 18th week of outflows from bank loans, Bofa said.
Bofa’s bull & bear indicator remains at “max bearish” for the fourth consecutive week.
Anticipation that inflation will fall and the fact that in 2023 inflation will be expected rather than unanticipated is good news, Bofa said.
(Reporting by Lucy Raitano; Editing by Amanda Cooper)
NEW YORK, Oct 14 (Reuters) – Oil prices plummeted more than 3% on Friday as global recession fears and weak oil demand, especially in China, outweighed support from a large cut to the OPEC+ supply target.
Brent crude futures dropped USD 2.94, or 3.1%, to settle at USD 91.63 a barrel, while US West Texas Intermediate (WTI) crude futures fell USD 3.50, or 3.9%, to USD 85.61.
The Brent and WTI contracts both oscillated between positive and negative territory for much of Friday but fell for the week by 6.4% and 7.6%, respectively.
US core inflation recorded its biggest annual increase in 40 years, reinforcing views that interest rates would stay higher for longer with the risk of a global recession. The next US interest rate decision is due on Nov. 1-2.
US consumer sentiment continued to improve steadily in October, but households’ inflation expectations deteriorated a bit, a survey showed.
The improvement in consumer sentiment “is being viewed as a negative because it means the Fed needs to break the spirit of the consumers and slow the economy down more, and that’s caused an increase in the dollar and downward pressure on the oil market,” said Phil Flynn, analyst at Price Futures Group in Chicago.
The US dollar index rose around 0.8%. A stronger dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.
In US supply, energy firms this week added eight oil rigs to bring the total to 610, their highest since March 2020, energy services firm Baker Hughes Co said.
China, the world’s largest crude oil importer, has been fighting COVID-19 flare-ups after a week-long holiday. The country’s infection tally is small by global standards, but it adheres to a zero-COVID policy that is weighing heavily on economic activity and thus oil demand.
The International Energy Agency (IEA) on Thursday cut its oil demand forecast for this and next year, warning of a potential global recession.
The market is still digesting a decision last week from the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, when they announced a 2 million barrel per day (bpd) cut to oil production targets.
Underproduction among the group means this will probably translate to a 1 million bpd cut, the IEA estimates.
Saudi Arabia and the United States have clashed over the decision.
Meanwhile, money managers raised their net long US crude futures and options positions by 20,215 contracts to 194,780 in the week to Oct. 11, the US Commodity Futures Trading Commission (CFTC) said.
(Reporting by Stephanie Kelly in New York; additional reporting by Shadia Nasralla in London, Emily Chow in Singapore; Editing by David Evans, Will Dunham and Marguerita Choy)
