China’s yuan ends at 2-year low on dollar strength, COVID resurgence

SHANGHAI, Sept 5 (Reuters) – China’s yuan ended the domestic trading session at a more than two-year low against the dollar on Monday, pressured by broad greenback strength in global markets and a resurgence of COVID-19 infections across the country.

Worries over widening disruptions to economic activity resurfaced after China’s southern tech hub of Shenzhen said it would adopt tiered anti-virus restrictions starting on Monday, while the southwestern metropolis of Chengdu announced an extension of lockdown-related curbs.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.8998 per dollar, 81 pips weaker than the previous fix of 6.8917.

Monday’s fixing was 155 pips firmer than the Reuters estimate of 6.9153, marking the ninth straight trading day that the PBOC set firmer-than-expected official guidance, and prompting many market watchers to speculate there was an official effort to rein in excess yuan weakness.

Tommy Xie, head of Greater China research at OCBC Bank, said the recent firmer-than-expected fixings reinforced “the view that China has a strong incentive to slow down the pace of RMB depreciation as part of sentiment management amid the rising uncertainty from the property mess and COVID situation.”

Liu Guoqiang, vice governor of the PBOC, told a briefing on Monday that China’s FX market is operating normally at the moment, with orderly cross-border flows. He did not expect one-way yuan bets in the market.

The onshore yuan finished the domestic trading session at 6.9366 per dollar, the weakest such close since Aug. 17, 2020, and down 351 pips or 0.5% from the previous late night close of 6.9015.

Several currency traders said the yuan decline in morning deals was a reaction to strength in the dollar, which hit a two-decade high against its major trading partners.

Investment houses have cut their yuan forecasts as its fall against the dollar accelerated, with some expecting a breach of the 7-per-dollar milestone before next month’s politically sensitive Party Congress despite authorities’ efforts to slow the slide.

“Pressure for CNY likely remains in near term, we are seeing USD/CNY to reach 7.00 in the near term,” said Li Lin, head of global markets research for Asia at MUFG Bank.

Li noted that August trade data due on Wednesday could serve as one of the market movers for the yuan this week.

(Reporting by Winni Zhou and Brenda Goh; Editing by Edmund Klamann and Angus MacSwan)

China blue-chip stocks end lower on COVID woes, yuan weakness

SHANGHAI, Sept 5 (Reuters) – China’s blue-chip stocks closed lower on Monday, led by consumer staples amid tightening COVID-19 curbs in some big cities, while foreign investors also dumped Chinese shares as the yuan tumbled to a more than two-year low.

Shanghai stocks, meanwhile, closed higher on boost from energy companies.

** The blue-chip CSI 300 Index lost 0.2% at close, while the Shanghai Composite Index ended higher 0.4%.

** The Hang Seng Index fell 1.2%, and the Hang Seng China Enterprises Index dropped 1.4%.

** China’s Shenzhen moved away from a weekend COVID-19 lockdown covering most parts of the city, while the southwestern metropolis of Chengdu extended its lockdown by three days for most of its 21.2 million residents.

** A strong rebound in China’s services sector eased slightly in August amid fresh COVID-19 flare-ups but business confidence rose to a nine-month high, a private survey showed.

** Other Asian markets and European stocks slid after Russia shut a major gas pipeline to Europe.

** Consumer staples lost 1.4% and healthcare companies declined 1.7%, while an energy crisis in Europe lifted Chinese energy shares by 5.3%.

** Foreign investors sold more than 7.6 billion yuan (USD 1.1 billion) of Chinese shares through the stock connect scheme, the most since Aug. 23.

** China’s yuan touched a more than two-year low against the dollar, pressured by broad greenback strength in the global market and a resurgence of COVID infections.

** Separately, a magnitude 6.8 earthquake struck China’s Sichuan on Monday, the strongest to hit the province since 2013.

** Tech giants listed in Hong Kong declined nearly 2%, with index heavyweights Meituan, Tencent and Alibaba down between 1.4% and 3%.

** Electric vehicle maker BYD Co dropped 5.9% as Warren Buffett’s Berkshire Hathaway Inc trimmed stake in the company for a second time following last week’s reduction.

(Reporting by Shanghai Newsroom; Editing by Maju Samuel and Uttaresh.V)

Gas pipeline shutdown hits European markets

LONDON, Sept 5 (Reuters) – European stock indexes opened lower and the euro dropped below 99 cents for the first time in twenty years after Russia said gas supply down its main pipeline to Europe would stay shut.

Gas deliveries had been due to resume on Saturday but Russia scrapped this deadline and did not give a new timeframe for re-opening. The news reinforced expectations for a recession in Europe, as businesses and households are hurt by sky-high energy prices.

European gas prices jumped as much as 30% on Monday.

Germany announced on Sunday around USD 65 billion of support to help protect Germans from soaring inflation.

Finland and Sweden announced plans to offer liquidity guarantees to power companies in their countries.

At 0743 GMT, the MSCI world equity index , which tracks shares in 47 countries, was down 0.5% on the day. Europe’s STOXX 600 was down 1.5%, not far from a seven-week low.

London’s FTSE 100 was 0.8% lower and Germany’s DAX was down 2.9%.

A public holiday in US markets means lower liquidity, which could lead to outsized market moves.

The euro was trading around USD 0.99185, down 0.4% on the day. It slid during Asian trading hours and hit USD 0.9876 in early European hours, its lowest since 2002.

Euro zone government bond yields rose, with Italian yields heading towards 4%.

The European Central Bank (ECB) meets later this week and is expected to deliver its second big rate hike in an attempt to combat inflation.

“Sky-high energy prices, the risk of gas shortages and the fiscal and regulatory response will shape the outlook for Eurozone GDP and inflation much more than anything the ECB may do with rates,” said Berenberg chief economist Holger Schmieding in a client note.

Meanwhile in the UK, Liz Truss is expected to be named as Britain’s next prime minister later on Monday. She is poised to take power at a time when the country faces a cost of living crisis, industrial unrest and a recession.

The British pound was down around 0.4% at USD 1.1476, but flat against the euro at 86.405 pence.

The US dollar index was steady and the risk-sensitive Australian dollar was near a seven-week low.

Oil prices rose more than USD 2 a barrel as investors waited for an OPEC+ meeting later in the day. Since March’s multi-year highs, oil prices have fallen due to concerns that interest rate rises and COVID-19 curbs in parts of China, the world’s top crude importer, may slow global economic growth.

China’s service sector growth rebound eased slightly in August, data on Monday showed, but business confidence rose to a nine-month high.

Other PMI survey data on Monday showed that Germany’s services sector contracted for a second month running in August, while Spain’s services sector expanded at its slowest rate since January.

(Reporting by Elizabeth Howcroft; Editing by Mark Potter)

Philippines’ Marcos visits Indonesia in first overseas trip as president

JAKARTA, Sept 5 (Reuters) – Philippine President Ferdinand Marcos Jr met with his Indonesian counterpart Joko Widodo on Monday for a state visit focused on bolstering defence, trade and other ties between the two neighbours.

The trip by Marcos, the son and namesake of the late ruler who was overthrown in a popular uprising 36 years ago, is his first official venture overseas since his landslide election victory in May.

President Widodo, widely known as Jokowi, said the leaders had signed a defence and security cooperation agreement, a five-year diplomatic action plan, and agreed to speed up and review maritime borders arrangements.

Trade between the countries had increased by nearly 50% compared to last year, Jokowi said, calling for border trade to be developed further and transport routes revitalised.

Speaking alongside Jokowi at the state palace in Bogor, Marcos said both nations were committed to maintaining regional stability through the 10-member regional grouping, the Association of Southeast Asian Nations (ASEAN).

“We also spoke at length about the role that we believe ASEAN should play while we faced difficulties, (at) this very volatile time in geopolitics, not only in our region, but also in the rest of the world,” he said.

“We agreed that ASEAN is going to be the lead agent in the changes that we would like to see in continuing to bring peace to our countries.”

The Jakarta Post newspaper in an editorial on Monday said the visit would also be a chance for the new president to lobby Widodo on the case of Mary Jane Veloso, a Filipino on death row in Indonesia for drug smuggling, although neither president publicly mentioned the case.

The leaders share joint security concerns with suicide bombings in both countries, including on churches, in recent years. The involvement of Indonesian fighters in the 2017 takeover of the Philippines’ Marawi City by Islamist militants had also demonstrated what analysts say are linkages between regional extremists.

Marcos, who described Indonesia as one of his country’s closest allies, is due to meet business leaders with his economic team later on Monday and will fly to Singapore on Tuesday.

(Reporting by Ananda Teresia and Zahra Maharani in Jakarta and Enrico Dela Cruz and Karen Lema in Manila; Writing by Kate Lamb; Editing by Martin Petty, Ed Davies)

Philippines partially awards T-bill offer, rejects 364-day bids

MANILA, Sept 5 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction of T-bills on Monday:

* BTR raises 7.068 billion pesos (USD 124.05 million) from 91-day, 182-day T-bills, less than total 10 billion pesos offered

* BTr awards 4.543 billion pesos of 91-day T-bills at average rate of 2.318% versus previous auction average of 2.070%

* BTr awards 2.525 billion pesos of 182-day T-bills at average rate of 3.485% versus previous auction average of 3.336%

* BTr rejects all bids for 364-day T-bills

* Details are on the BTr’s website www.treasury.gov.ph

(USD 1 = 56.9750 Philippine pesos)

(Reporting by Enrico Dela Cruz; Editing by Kim Coghill)

Oil up nearly 3% as OPEC+ agrees to small oil output cut

HOUSTON, Sept 5 (Reuters) – Oil prices rose about 3% on Monday, as OPEC+ members agreed to a small production cut of 100,000 barrels per day to bolster prices.

Brent crude futures for November delivery settled USD 2.72 higher at USD 95.74 a barrel, a 2.92% gain.

Prices had climbed nearly USD 4 earlier in the session, but were tamed by comments from the White House that US President Joe Biden was committed to taking all steps necessary to shore up energy supplies and lower prices.

US crude CLc1 rose USD 2 to USD 88.85 per barrel, a 2.3% rise after a 0.3% gain in the previous session, in thin volumes during the US Labor Day holiday.

The 100,000 barrels per day (bpd) reduction by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, amounts to only 0.1% of global demand. The group also agreed they could meet any time to adjust production before the next scheduled meeting on Oct. 5.

“It’s the symbolic message the group wants to send to the markets more so than anything,” said Oanda analyst Craig Erlam, adding that the 100,000 bpd raise last month by OPEC+ was not seen as a big deal.

“What we’ve probably seen from the markets was pricing in most of the worst-case scenario,” Erlam added.

Top OPEC producer Saudi Arabia last month flagged the possibility of output cuts to address what it sees as exaggerated oil price declines.

Russian Deputy Prime Minister Alexander Novak said that expectations of weaker global economic growth were behind a decision by Moscow and its OPEC allies to cut oil output.

Russian Energy Minister Nikolai Shulginov said the country would most likely reduce its oil production by around 2% this year, TASS news agency reported.

“The bigger picture is that OPEC+ is producing well below its output target and this looks unlikely to change given that Angola and Nigeria, in particular, appear unable to return to pre-pandemic levels of production,” Caroline Bain, chief commodities economist at Capital Economics, said.

Oil prices have fallen in the past three months from multi-year highs hit in March, pressured by concerns that interest rate increases and COVID-19 curbs in parts of China could slow global economic growth and dent oil demand.

Lockdown measures in China’s southern technology hub of Shenzhen eased on Monday as new infections showed signs of stabilizing though the city remains on high vigilance.

Meanwhile, talks to revive the West’s 2015 nuclear deal with Iran, potentially providing a supply boost from Iranian crude’s returning to the market, have hit a new snag. The White House on Friday rejected Iran’s call for a deal to be linked with closure of investigations by the U.N. nuclear watchdog, a Western diplomat said.

Iran’s minister of petroleum said the global energy market needs an increase in supply of oil from Iran. nC6N2ZI00P

Use of oil in power generation is also expected to pick up, analysts said, as Russia’s state-controlled Gazprom GAZP.MM on Friday said it would stop pumping gas via the Nord Stream 1 pipeline due to a fault.

The International Energy Agency last month raised its oil demand forecast for the year, partly because it expects gas-to-oil switching in some countries due to record natural gas and electricity prices.

(Reporting by Arathy Somasekhar in Houston and Noah Browning in London; Additional reporting by Florence Tan in Singapore and Emily Chow in Kuala Lumpur; Editing by Leslie Adler, Andrea Ricci and Matthew Lewis)

Gold muted as US jobs data raises doubts over Fed rate-hike path

Sept 5 (Reuters) – Gold prices were steady on Monday, having posted their best day in a month in the last session after a US jobs report showed unemployment rising in August, suggesting the Federal Reserve might slow the pace of rate hikes.

Spot gold was flat at USD 1,710.88 per ounce by 0523 GMT. US gold futures were little changed at USD 1,723.10.

Gold rose as much as 1.3% on Friday after data showed US employers hired more workers than expected in August, but moderate wage growth and a rise in the unemployment rate to 3.7% suggested the labor market was starting to loosen.

“With the Fed meeting just over two weeks away and their ‘blackout period’ fast approaching, any comments from Fed members this week will be scrutinised by traders as they have the ability to move the needle on Fed policy,” said Matt Simpson, a senior market analyst at City Index.

“Any comments alluding to a 75 bp hike could keep gold prices under pressure.”

Fed’s next policy meeting is scheduled for Sept. 20-21.

“Gold gained on Friday as more Americans returned to the workforce. Any easing of the tight labour market will help the Fed tame inflation and potentially reduce its need to tighten rates aggressively,” ANZ said in a note.

Gold tends to perform badly amid a high-interest rate environment as it yields no interest.

The dollar index hit a 20-year high, making gold expensive for holders of other currencies.

Speculators cut net long position in COMEX gold by 9,599 contracts to 20,726 in the week to Aug. 30, while net short position increased in COMEX silver, the US Commodity Futures Trading Commission (CFTC) said on Friday.

Spot silver was flat at USD 18.02 per ounce, platinum rose 0.2% to USD 836.50 per ounce, while palladium gained 0.7% to USD 2,037.50.

Stronger-than-expected platinum shipments to China in the first half of the year spurred shortages elsewhere, as supply declined from mines and recycling, the World Platinum Investment Council said.

(Reporting by Ashitha Shivaprasad and Eileen Soreng in Bengaluru; Editing by Maju Samuel)

Philippines raises USD 7.4 billion via retail treasury bond issue

MANILA, Sept 5 (Reuters) – The Philippines has raised 420.45 billion pesos (USD 7.39 billion) from a retail treasury bond offering that ended on Sept. 2, National Treasurer Rosalia de Leon said on Monday.

The peso-denominated retail bonds due in 2028, which pay a coupon of 5.75%, were the first such issue under the administration of President Ferdinand Marcos Jr. It included a swap offer for holders of existing notes maturing this year and in 2023.

(Reporting by Enrico Dela Cruz; Editing by Martin Petty)

Oil prices climb more than $1/bbl ahead of OPEC+ meeting

SINGAPORE, Sept 5 (Reuters) – Oil prices jumped more than USD 1 a barrel on Monday, extending gains as investors eyed possible moves by OPEC+ producers to tweak production and support prices at a meeting later in the day.

Brent crude futures rose USD 1.43, or 1.5%, to USD 94.45 a barrel by 0054 GMT after gaining 0.7% on Friday. US West Texas Intermediate crude was at USD 88.12 a barrel, up USD 1.25, or 1.4%, following a 0.3% advance in the previous session. US markets are closed for a public holiday on Monday.

Oil prices have fallen in the past three consecutive months, after touching multi-year highs in March, on concerns that interest rate hikes and COVID-19 curbs in parts of China, the world’s top crude importer, may slow global economic growth and cool oil demand.

At their meeting later on Monday, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, may decide to keep current output levels or even cut production to bolster prices, despite supplies remaining tight.

“While we expect the group to keep output unchanged, the rhetoric may be bullish as it looks to arrest the recent fall in prices,” ANZ analysts said in a note.

Russia does not support an oil production cut at this time and it is likely OPEC+ will keep its output steady when it meets Monday, the Wall Street Journal reported on Sunday, citing unidentified people familiar with the matter.

Meanwhile, negotiations dragged on in attempts to revive the revival the West’s 2015 nuclear deal with Iran. An agreement to do so could allow Tehran to increase exports and improve global supplies.

The White House on Friday rejected linking the deal with the closure of investigations by the U.N. nuclear watchdog a day after Iran reopened the issue, according to a Western diplomat.

(Reporting by Florence Tan; Editing by Kenneth Maxwell)

Investors flock fixed maturity funds on lofty yields, economic concerns

SINGAPORE, Sept 2 (Reuters) – Fixed maturity funds are drawing some of their heaviest flows since the pandemic started as investors, nervous about the global outlook, seek to lock in income at some of the most attractive yields in years.

Such funds, which bundle corporate and government bonds of similar maturities, drew nearly USD 3 billion between May and July, according to Refinitiv data, marking three straight months of net inflows.

While preliminary data showed about USD 1 billion of net outflows in August, money managers sound confident that the heavy outflows of 2021 and early 2022 are reversing.

Yield is the primary drawcard and it has increased as central banks around the world have lifted interest rates to tame rising inflation.

Fixed maturity funds are also considered relatively safe as they offer a predictable income stream over a fixed horizon and a diversified portfolio which reduces credit risk.

With US dollar investment grade yields at about 4.8% on three-year debt, compared with three-year Treasuries at 3.5%, investors feel the price is right.

“Inflationary pressures and recent Fed moves have finally put an end to an extended period of declining interest rates, putting interest rates nearer to the higher end within the last decade since the Global Financial Crisis,” said Doreen Saik, a senior credit analyst at global fund manager M&G Investments in Singapore.

“Coupled with a weaker macro and credit outlook and a clear Fed path, we have seen a flight to quality in IG fixed maturity funds, which are relatively more attractive vis-a-vis other asset classes.”

Turmoil in stock markets – with world shares and emerging market shares each down about 20% this year – also makes a decent steady income more alluring.

“I think as we move into the current interest rate environment, we could possibly see more fixed maturity products offered to investors,” said Benny Gay, Vontobel Asset Management’s Asia head of intermediary clients.

“Investors could get yields that are more attractive than two years ago,” he added.

“STRONG CASE”

Part of the reason investors wish to lock in yields now is that they could fall in future if inflation slows down, of which there are some tentative signs in the United States.

Of course that is not yet clear and there are no such signs in Europe yet — so both runaway inflation and the likelihood that any economic slowdown could lead to companies defaulting on their debt present risks to fixed maturity funds.

Still, the flows suggest a degree of comfort.

“You can create a portfolio of higher quality and shorter duration,” said Marcelo Assalin, head of emerging markets debt at asset manager William Blair who has noticed an uptick in client enquiries about fixed maturity funds, especially in Asia.

“The critical thing is to run a diversified portfolio with concentration to a minimum and there’s a strong case for that type of product now,” he said.

For most, that has meant buying into bundles of global bonds though there are some willing to take on more risk in Asia’s emerging markets, where some managers expect a rally once markets price a stable peak for US rate expectations.

“We … see value outside of China in both investment grade and high yield following the recent sell off,” said Luke Chua, senior investment manager at Pictet Asset Management’s emerging corporate bonds team.

“When US Treasuries stabilise, we can rebound here.”

(Reporting by Rae Wee; Additional Reporting by Tom Westbrook and Gaurav Dogra in Bengaluru; Editing by Ana Nicolaci da Costa)

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