Asian shares rise as hopes for audit deal boost China tech

SYDNEY, Aug 26 (Reuters) – Asian shares rose on Friday, buoyed by news of possible progress for China and the United States to hammer out an audit deal, while traders anxiously awaited a speech from Federal Reserve Chair Jerome Powell on rate-hike path later in the day.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.6% in early Asia trade, driven by Chinese tech shares listed in Hong Kong that surged 1.3%. Hong Kong shares of Alibaba were up 4%.

That helped the Asian index eke out a 0.4% gain for the week.

The Wall Street Journal reported on Thursday that Washington and Beijing are nearing an agreement that allows American accounting regulators to travel to Hong Kong to inspect audit records of US-listed Chinese companies.

Hong Kong’s Hang Seng Index .HSI rose 0.7%, Japan’s Nikkei advanced 0.9%, while South Korea gained 0.5%.

Overnight on Wall Street, stocks rose while US Treasury yields slipped, as investors digested comments from Fed officials who continued hammering the point they will drive rates up and keep them there until inflation has been squeezed from the economy.

The S&P 500 climbed 1.4% and the Nasdaq gained 1.67%, lifted by gains in Nvidia and other technology-related stock.

“So it is a fair bet that the Powell speech will take a similar turn today,” said Robert Carnell, regional head of Research, Asia-Pacific, at ING.

“If so, the most likely market reaction would be a rise in yields at both the front and back of the yield curve, a sell-off in equities and dollar strength as markets seem to have been positioning themselves for a more supportive set of comments.”

Investors have pared back expectations the Fed could tilt to a slower pace of rate hikes as US inflation remains at 8.5% on an annual basis, well above the Fed’s 2% target. But Powell’s speech due on Friday will be scrutinised for any indication that an economic slowdown might alter the Fed’s strategy.

Interest rate futures now imply a 60% chance of a 75 bp Fed hike in September FEDWATCH.

“The experience of Jackson Hole 2021 will make the Fed Chair cautious in making the same error twice. That itself argues against his messaging looking too far forward, or, erring on the dovish side,” said Alan Ruskin, macro strategist at Deutsche Bank.

“Markets have however largely taken this on board, which risks a small, short-lived ‘buy the rumour, sell the fact’ technical bond rally, sell the USD, and relief equity trade.”

In the currency markets, the dollar was little changed against a basket of major currencies. The commodity-exposed Australian and New Zealand dollars fell 0.4% versus the greenback after a strong rebound in the previous day.

The yield on benchmark 10-year Treasury notes were up slightly to 3.0425%, compared with its US close of 3.024% the previous day.

The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 3.3803%, compared with a US close of 3.374%.

Oil prices recovered some ground on Friday after slumping by about USD 2 a barrel in the previous session on the possible return of sanctioned Iranian oil exports and on worries from rising US interest rates. nL1N30105R

Brent crude LCOc1 rose 0.5% in early Asia trade to USD 99.87 per barrel and US crude was up by a similar margin to USD 96.01 a barrel.

Gold was slightly lower. Spot gold was traded at USD 1755.4698 per ounce.

(By Stella Qiu, Editing by Sam Holmes)

Hawkish Fed, strong US economy will keep dollar king of currencies

NEW YORK, Aug 25 (Reuters) – The US dollar surged this year to its highest in two decades and there are still plenty of bulls betting the greenback has legs to keep climbing thanks to a hawkish Fed and economic news that should keep America ahead of other major economies.

The dollar is up about 13.5% this year against a basket of peers, on pace for its strongest year in nearly 40 years, while the euro has been crushed about 12% to below parity, a level untouched in two decades.

Lifted by the US Federal Reserve aggressively hiking rates and buyers seeking a safe-haven asset from the Russia-Ukraine war and other areas of global uncertainty, the dollar has been a sure-fire bet for investors.

The greenback has risen against every G10 currency, up 19% against the Japanese yen and 15% versus the British pound.

“We have been structurally dollar bullish for something like the last 15 months … it feels a bit long in the tooth but we are never finding reasons to change,” said Credit Suisse Group AG’s Global Head of FX Strategy Shahab Jalinoos.

JPMorgan analysts pointed to “encouraging” recent US economic data on inflation and payrolls, compared with “vulnerability” growing in Europe and China, as a key reason for the dollar’s continued rise.

The US consumer price index rose at an annual rate of 8.5% in July, a decline from the 9.1% reported for June, while an unexpected acceleration in job growth in July diminished fears the economy was in recession.

The same cannot be said about other major economies.

The Bank of England forecasts that Britain will enter recession later this year as surging energy bills help drive inflation higher into the double digits.

Europe is also now approaching double digit inflation, driven in large part by the continuing Russia-Ukraine conflict and resulting energy crisis. Economists see risks that the continent could get embedded in a hard-to-break wage-price spiral, making investors reluctant to buy the euro even after its steep decline.

“The biggest concern in Europe is energy … that is keeping the dollar up and the European currencies under pressure,” said Ugo Lancioni, head of currency management at Neuberger Berman.

Meanwhile, China’s central bank this month cut key lending rates in a surprise move to revive demand as the economy unexpectedly slowed in July, with factory and retail activity squeezed by Beijing’s zero-COVID policy and a property crisis.

In the rest of the world, a strong dollar can help some other countries with exports and their balance of trade, but it exacerbates other problems: Oil and other dollar-denominated commodities cost more for buyers using other currencies and it becomes harder for companies and governments to service dollar debt.

“Much of the dollar’s dominance is due to simply seeing how the US is able to cushion itself from all the negativity that has developed,” said Juan Perez, director of trading at Monex USA in Washington.

RATE HIKES

Aggressive Fed rate hikes aimed at stamping out inflation have made the dollar more attractive, pushing yields on US debt higher than those in many developed countries – a trend that is likely to continue, said Rob Haworth, senior investment strategy director at US Bank Wealth Management.

“We just don’t see a change in this fundamental paradigm which is that the Federal Reserve is probably still the most aggressive of the major central banks,” he added.

Fed officials at the central bank’s annual meeting in Jackson Hole, Wyoming on Thursday reiterated that they will drive rates up and keep them there until inflation has been squeezed from the economy.

Investors remain bullish on the dollar even at its elevated levels.

Speculators’ net long positioning on the currency rose in the latest week to USD 13.37 billion, broadly in line with how large that position has been since July 2021, according to calculations by Reuters based on US Commodity Futures Trading Commission data released on Friday.

While Lancioni believes the dollar is over-valued in the long run, he is hesitant to bet against it. “It’s very difficult to go against the dollar right now,” he said.

Investors will listen carefully to Fed Chair Jerome Powell at the Jackson Hole conference on Friday for a clearer picture of his thinking on the economic outlook.

“If Powell even hints inflation is easing and supply chain challenges are easing … any words like that, combined with stronger rhetoric from the ECB, could weigh on the dollar,” said Quincy Krosby, Chief Global Strategist for LPL Financial.

(Reporting by Saqib Iqbal Ahmed; editing by Megan Davies, Michelle Price and David Gregorio)

Dollar pauses rally vs yen to see if Fed delivers on hawkish hype

Aug 10 (Reuters) – USD/JPY weakened on Thursday as it consolidated August’s 130.40-137.705 gains, and it could resume the rise toward July’s 24-year peak at 139.38 if Fed Chair Jerome Powell and other officials convince markets on Friday that more tightening than already expected is on the way.

Coming on the heels of back-to-back 75bp rate hikes in July and June — and the possibility of a third such move in September — the bar for a dollar-bullish surprise has been raised, with futures projecting rates will peak at 3.75% in March.

A stream Fed policymaker comments has begun and will culminate in Powell’s 1000 a.m. EDT speech at the Jackson Hole symposium on Friday. It follows consistent messaging since the July meeting that taming inflation is the bank’s primary focus, leading markets to expect more of the same.

A growing consensus that inflationary pressures may be structurally persistent due to de-globalization, demographics and geopolitical risks feeding supply shortages reinforces those expectations.

The caveat to the bullish USD/JPY view is the diminishing returns for those who bought after the last two rate hikes.

(Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold firms as dollar eases in run-up to Jackson Hole event

Aug 25 (Reuters) – Gold rose on Thursday as the dollar slipped from recent highs, while investors awaited the Jackson Hole symposium for cues on the Federal Reserve’s monetary policy.

Spot gold rose 0.3% to USD 1,756.55 per ounce by 14:20 p.m. ET.

US gold futures settled 0.6% higher at USD 1,771.4.

Focus will be on US Federal Reserve Chair Jerome Powell’s speech at the central banks’ conference in Wyoming on Friday for hints on the Fed’s interest rate hike strategy.

“Gold is just seeing a corrective bounce from recent selling pressure. The dollar has backed off from its highs and there is some positioning ahead of Powell’s speech,” said Jim Wyckoff, senior analyst at Kitco Metals.

“In the near term, gold charts are still bearish. But in the longer-term, there is still upside potential for gold as there will be some safe-haven demand any time the economy is wobbly.”

The dollar index fell 0.2%, making gold cheaper for overseas buyers.

Gold is considered a safe investment amid economic turbulence. However, interest rate hikes increase the opportunity cost of holding bullion.

Investors also took stock of data showing the US economy contracted at a moderate pace than initially thought in the second quarter.

In the physical market, top consumer China’s net gold imports via Hong Kong hit a nine-month high in July.

Spot silver rose 0.2% to USD 19.19 per ounce, platinum gained 0.3% to USD 879.11 per ounce.

Palladium bounced 5.4% to USD 2,144.07 per ounce.

UBS raised its palladium price outlook on “renewed robust imports by China”, forecasting prices at USD 1,900 per ounce in December, but retained a negative outlook on the metal over slowing growth in Europe and North America.

(Reporting by Ashitha Shivaprasad and Rahul Paswan in Bengaluru; Editing by Krishna Chandra Eluri and Vinay Dwivedi)

Tesla shares close lower after 3-1 stock split

Aug 25 (Reuters) – Tesla Inc’s shares closed 2% lower on Thursday as a three-for-one stock split announced by the world’s most valuable automaker to woo retail investors came into effect.

The stock opened at USD 302 and closed at USD 296.07 as the split allowed investors to get two additional shares for each they owned as of Aug. 17. It had closed at USD 891.29 before the split on Wednesday.

This is the second stock split by Tesla in as many years and follows similar moves by high-growth companies such as Amazon.com and Google-parent Alphabet to address the growing need to diversify investor base.

Stock splits “certainly have a higher appeal to retail investors and makes their options more affordable as well,” said Art Hogan, chief market strategist at B. Riley.

“Retail investors are a very important cohort for Tesla and today’s stock split is an acknowledgment of that fact.”

Austin-based Tesla debuted in 2010 at USD 17 and in a decade surged to a peak price of USD 2,000, becoming one of the highest priced shares on Wall Street and making it difficult for small investors to bet on the high-growth stock.

The company decided to split its stock on a five-for-one basis in August 2020 and breached USD 1 trillion in market capitalization in 2021.

The EV maker is the sixth company in the S&P 500 index to split its shares this year, according to Howard Silverblatt, senior index analyst for S&P and Dow Jones indices.

Tesla’s ticker was trending on social media stocktwits.com, indicating increased chatter among individual investors. The shares have lost about 11% of their value since March when the company announced plans to increase its number of shares.

“In typical buy-the-rumor, sell-the-news style, investors tend to drastically scale back purchases of splitting stocks in the weeks ensuing the effective split date, causing price momentum to slow,” analysts at Vanda Research said in a note.

A stock split does not affect the fundamentals of a company, but makes it easier for individual investors to do small trades. The benefits of such splits, however, are becoming less clear as brokerages let customers buy parts of a company’s share.

Tesla’s shares have fallen about 16% so far this year amid a selloff in high-growth stocks due to worries over aggressive interest rate hikes and geopolitical uncertainties.

Tesla shares since its first stock split in August 2020https://tmsnrt.rs/3pPFYuh

(Reporting by Akash Sriram and Medha Singh in Bengaluru; Additional reporting by Devik Jain; Editing by Sriraj Kalluvila and Arun Koyyur)

Energy, tech stocks keep European shares afloat amid recession worries

Aug 25 (Reuters) – European shares ended higher on Thursday as oil and tech stocks rose, although gains were capped by mounting concerns over a possible recession induced by an energy crisis.

The pan-European STOXX 600 rose 0.3%. Energy shares jumped 1.2% to near 12-week highs as crude prices climbed on mounting supply concerns.

Russia will halt natural gas supplies to Europe via Nord Stream 1 for three days from Aug. 31, piling pressure on the region as it seeks to refuel ahead of winter.

“Our year-end target for the STOXX 600 is 410, but the downside risks are growing with higher natural gas prices and increased probability that Europe will fall into a recession,” said Sutanya Chedda, an equity strategist at UBS.

A Reuters poll is indicating that the STOXX 600 may fall to 425 points by year-end.

Technology stocks rose 1.0%, taking cues from their peers across the Atlantic as megacap growth stocks boosted Wall Street, with focus squarely on Federal Reserve’s annual Jackson Hole symposium.

“Stocks are ticking higher after a largely indecisive day that has seen European indices tread water while US tech giants provide a positive influence on the other side of the pond,” said Joshua Mahony, senior market analyst at online trading platform IG.

“Ultimately, markets await the views of one man, with Jerome Powell due to appear in Wyoming tomorrow to bring clarity over how he sees the Fed policy reacting to the economic crisis.”

Germany’s DAX rose 0.4% as data showed its economy expanded by 0.1% in the second quarter, beating expectations. A separate survey showed the economy was set to shrink in the third quarter, while business morale fell in August.

The benchmark STOXX index has lost about 11% this year as markets assess the impact of rapidly rising interest rates and raging inflation on consumer spending and company earnings amid the energy crisis.

Minutes from the European Central Bank’s meeting last month showed policymakers appeared increasingly concerned that high inflation was getting entrenched at a time the bloc risks a recession.

Money markets are now pricing in 100 bps of ECB rate hikes by October. A 50 bps hike is fully priced in for September, plus a small probability of a 75 bps move.

Among individual stocks, Norwegian Air Shuttle fell 7.4% following downbeat second-quarter numbers, while Finnish utility Fortum shed 1.7% after posting a net loss of 7.4 billion euros (USD 7.4 billion).

Shares in Swiss group Novartis, which plans to spin off its generics unit, Sandoz, ended 0.8% lower.

(Reporting by Anisha Sircar and Shreyashi Sanyal in Bengaluru; Editing by Krishna Chandra Eluri, Anil D’Silva and Vinay Dwivedi)

Euro bounces back above parity as investor sentiment improves

LONDON, Aug 25 (Reuters) – The euro rebounded back above parity with the dollar on Thursday as the US currency’s recent rally ran out of steam and investors waited to see whether Federal Reserve Chair Jerome Powell would sound a more hawkish tone at a meeting this week.

A more bullish mood across markets also helped the euro, as well as currencies linked to broad investor sentiment such as the Australian dollar, which rallied nearly 1%.

Investors have also been bracing for the Fed to double down on its commitment to crushing inflation at its annual gathering in Jackson Hole, Wyoming, where Powell is due to speak.

The euro/dollar’s direction this week has largely been driven by soaring natural gas prices, which are correlated with a weaker euro because of the region’s dependence on gas for its energy needs. Worries about the global economy had sent investors into dollars earlier this week.

“The main driver of US dollar weakness overnight has been a temporary easing of global growth concerns,” said Lee Hardman, an analyst at MUFG, citing media reports that Chinese authorities are stepping up economic support measures with more planned funding for infrastructure.

The US dollar index, which measures the greenback against six counterparts, eased 0.4% to 108.17, but remained not far from its highest since September 2002 at 109.29, touched in mid-July.

The euro was 0.4% higher at USD 1.001 after this week hitting a 20-year low below parity.

The Australian dollar rose 1.1% to USD 0.6983, while the Japanese yen rallied 0.4% and sterling by half a percent.

The stronger Aussie dollar came as China’s yuan rebounded from a two-year low, helped by firmer-than-expected official guidance, which traders took as a sign that authorities are becoming increasingly uncomfortable with rapid losses in the currency.

“In terms of the sharp AUD bounce today, an obvious catalyst appears to be the bounce in CNH on the stronger than expected fixing,” said Sean Callow, a strategist at Westpac in Sydney.

“The positive equity mood in much of the region does help the Aussie in the background.”

Key data releases on Thurday in Europe include the German IFO numbers on the business climate and the release of the minutes of the European Central Bank’s July meeting, when it hiked interest rates by 50 basis points.

(Reporting by Tommy Reggiori Wilkes; Additional reporting by Kevin Buckland; Editing by Gareth Jones)

Oil prices rise on potential OPEC+ supply cuts; BP shuts US refinery units

SINGAPORE, Aug 25 (Reuters) – Oil prices rose on Thursday on mounting supply tightness concerns amid disruptions to Russian exports, the potential for major producers to cut output, and the partial shutdown of a US refinery.

Brent crude rose 45 cents, or 0.4%, to USD 101.67 a barrel, while US West Texas Intermediate crude was up 32 cents, or 0.3%, at USD 95.21 a barrel.

Both crude oil benchmark contracts touched three-week highs on Wednesday after the Saudi energy minister flagged the possibility that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, will cut production to support prices.

“Brent crude oil prices rebounded above the USD 100/barrel mark following Saudi officials showing willingness to defend prices via an OPEC+ production cut if necessary,” Citi analysts said in a note.

Discussions on an agreement on Iran’s nuclear programme remain stalled, calling into question any resumption of its exports.

Talks between the European Union, the United States and Iran to revive the 2015 nuclear deal are continuing, with Iran saying it had received a response from the United States to the EU’s “final” text to resurrect the agreement.

ANZ analysts Daniel Hynes and Soni Kumari said that if a deal eventuates, it will likely weigh on sentiment and lower prices in the short term as the deal raises the prospect of 1 million barrels per day of Iranian oil hitting the market.

“Nevertheless, the market will remain tight as the deal will not offset the fall in Russian supply and the ongoing recovery in demand,” they added.

In the United States, the world’s biggest oil consumer, BP reported shutting some units at its Whiting refinery in Indiana after an electrical fire on Wednesday. The 430,000 barrel-per-day plant is a key supplier of fuels to the central United States and the city of Chicago.

Falling US crude and product stockpiles also added to the upward pressure on prices. Oil inventories fell by 3.3 million barrels in the week to Aug. 19 at 421.7 million barrels, steeper than analysts’ expectations in a Reuters poll for a 933,000-barrel drop.

The bullish impact was countered by a drawdown in gasoline inventories that was less than expected, reflecting tepid demand.

US gasoline stocks fell by 27,000 barrels in the week to 215.6 million barrels, compared with earlier expectations for a 1.5 million-barrel drop.

(Reporting by Jeslyn Lerh in Singapore; Additional reporting by Laura Sanicola in Washington; Editing by Sam Holmes, Christian Schmollinger and Ana Nicolaci da Costa)

BOJ policymaker vows to keep ultra-low rates, dovish guidance

TOKYO, Aug 25 (Reuters) – The Bank of Japan must maintain massive monetary stimulus and its dovish policy guidance until wages show clearer signs of increasing, one of its board members said, reinforcing the central bank’s outlier status in a global wave of monetary tightening.

Board member Toyoaki Nakamura also ruled out the chance of tweaking Japan’s ultra-low interest rates to stem the yen’s falls against the dollar, saying there was not much the BOJ can do to reverse a trend largely driven by US rate hikes.

“We’re not quite there yet,” Nakamura told a news conference, when asked whether the BOJ sees scope to adjust its dovish forward guidance that project interest rates will move at “current or lower levels.”

The BOJ must look at winter bonus payments and next year’s wage negotiations to determine whether it can tweak the guidance to a more neutral one, he said.

“It’s not right for Japan to join the global rate hike competition now,” Nakamura said, stressing the BOJ’s resolve to keep supporting the economy.

The BOJ has refrained from joining a flurry of rate hikes by central banks battling record surges in prices, as it focuses on supporting Japan’s delayed recovery from the pandemic’s hit.

The BOJ has deployed a massive amount of stimulus for nearly a decade to fire up inflation to its 2% target, and continues to cap long-term interest rates around zero to support the economy.

It also maintains a dovish bias on the future monetary policy path. Some analysts speculate the BOJ could tweak the guidance to a more neutral one as inflation creeps up.

In a speech delivered before the news conference, Nakamura said the outlook for Japan’s economy was clouded by a renewed spike in pandemic cases, supply constraints and persistent rises in global commodity prices.

Market jitters over aggressive rate hikes by major central banks to rein in rampant inflation could also trigger an outflow of capital from emerging economies, and hurt global growth, Nakamura added.

Such risks, and the fact Japan’s output gap remains negative, justify keeping monetary policy ultra-loose, he said.

Japan’s consumer inflation, at 2.4%, is much lower than the rate of over 8% seen in the United States and Europe due largely to sluggish wage growth, Nakamura said.

With recent price gains driven mostly by rising raw material costs, Japan must deal with the impact through targeted fiscal measures rather than monetary tightening, he added.

On the yen, Nakamura said the currency’s declines have been “quite sharp” this year and the high volatility likely has had a significant impact on Japan’s economy.

“The pros and cons of a weak yen vary depending on changes in the economic environment,” he added.

(Reporting by Leika Kihara; Editing by Himani Sarkar, Shri Navaratnam and Kim Coghill)

US recap: EUR/USD holds off new lows before ECB, Fed events

Aug 24 (Reuters) – The dollar index hung onto small gains on Wednesday but surrendered most of its earlier advance after attempts to test 20-year highs at 109.27/29 met with rejection before the London close, with markets hesitant to push for a breakout ahead of Friday’s Jackson Hole central bankers symposium.

That rejection unraveled the broad dollar bid resulting from Minneapolis Fed President Neel Kashkari’s comments late on Tuesday, which supported more rate hikes to quash inflation and avoid the possibility of a more persistent strain of elevated price growth.

Markets have positioned for Fed Chair Jerome Powell to echo those sentiments in his Jackson Hole speech, though mixed and mediocre economic data — including Wednesday’s US durable goods and pending home sales — raise the risks of a more nuanced message that investors interpret as dovish.

EUR/USD encountered a strong bid at Wednesday’s 0.9910 low by Tuesday’s nearly 20-year trough at 0.99005 on EBS, but offers at parity squelched the spike higher, with the recent rebound in 2-year bund-Treasury yields spreads unsupportive in the face of soaring European energy prices and ECB hesitance to fight inflation more forcefully.

EUR/USD must break and close below 0.9900 to embark toward support by 0.9600.

Investors will scrutinize Thursday’s release of minutes from the ECB’s July 21 meeting, which resulted in a 50bp rate hike. Another 50bp hike is favored at the Sep. 8 meeting, but the terminal rate is currently priced in just below 2%, seemingly short of neutral or restrictive with euro zone inflation at 8.9%.

Sterling fell 0.35%, deriving no support from the 24.4bp surge in 2-year gilt yields to their highest since 2008 — up an incredible 139bp just since Aug. 2 — with UK inflation expected to peak at least three times as high as the 4.3% terminal policy rate markets are projecting next year.

The technical objective for sterling’s slide from its pandemic peak is right by the March 2020 pandemic nadir at 1.1413.

USD/JPY gained 0.2% on the back of higher Treasury yields, but it will need Powell’s hawkish help to have a go at its 24-year highs.

The dollar was broadly higher against high-beta currencies.

Reports that a Chinese regulator has warned banks against yuan selling had little immediate impact, as it was perceived as aimed at slowing, rather than reversing, USD/CNH gains.

German August Ifo readings and US jobless claims are also among Thursday’s events.

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

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