Oil steadies after rally on symbolic OPEC+ output cut

LONDON, Sept 6 (Reuters) – Oil steadied on Tuesday after a two-day rally as OPEC+’s decision to cut output in October was balanced by concern about a weak economic outlook and the prospect of more interest rate hikes.

The Organization of Petroleum Exporting Countries and allies led by Russia, known as OPEC+, decided to cut output targets by 100,000 barrel per day after Saudi Arabia voiced concern about a slump in prices since June.

Brent crude LCOc1 was down 26 cents, or 0.3%, to USD 95.48 at 0815 GMT. US West Texas Intermediate (WTI) CLc1 inched up from Monday to USD 89.19, up USD 2.32 or 2.7% from Friday’s close. There was no settlement on Monday, the US Labor Day holiday.

“The decision to reverse the 100,000 barrel per day increase in September was more symbolic than fundamentally significant,” said Craig Erlam, analyst at brokerage OANDA. “But it will make traders think twice about driving prices lower in the way they have recently.”

As a result of the US holiday, weekly US inventory reports from the American Petroleum Institute and Energy Information Administration will be released on Wednesday and Thursday, a day later than usual.

Oil soared close to an all-time high of USD 147 in March after Russia’s invasion of Ukraine exacerbated supply concerns. Concern of a recession in the West, soaring inflation and interest rate hikes have since weighed.

The European Central Bank will meet on Thursday to discuss interest rate actions. A US Federal Reserve meeting will follow on Sept. 21.

Also lending oil some support were signs that an agreement to resurrect Iran’s nuclear deal with world powers was less imminent, delaying any return of around 1 million bpd of Iranian crude to the market.

The European Union’s foreign policy chief said on Monday he was less hopeful about a quick revival of the deal.

(Additional reporting by Sonali Paul in Melbourne and Isabel Kua in Singapore; editing by Jason Neely)

Oil sinks as demand fears take steam out of OPEC-led rally

NEW YORK, Sept 6 (Reuters) – Oil prices fell on Tuesday as concern returned about the prospect of more interest rate hikes and COVID-19 lockdowns weakening fuel demand, reversing a two-day rally on OPEC+’s first output target cut since 2020.

Brent crude settled at USD 92.83 a barrel, losing USD 2.91, or 3%. US West Texas Intermediate (WTI) fell from Monday’s trading to settle at USD 86.88 a barrel, up 1 cent from Friday’s close.

The US benchmark had been trading since Sunday without settlement due to the Labor Day holiday. WTI prices are down more than 2% from the usual time of settlement on Monday, Refinitiv Eikon data show.

“The OPEC+ news is now in the market and the focus has temporarily shifted to economic and inflationary concerns amongst which the two relevant factors are the extended COVID lockdowns in China and Thursday’s ECB rate decision,” said Tamas Varga of oil broker PVM.

China has eased some COVID-19 curbs but extended lockdowns in Chengdu, which added to worries that high inflation and interest rate hikes will hit oil demand. The European Central Bank is widely expected to lift rates sharply when it meets on Thursday.

A stronger US dollar, which was up about 0.6% on better-than-expected US services industry data, also put pressure on oil prices.

The reading on services sector activity fed into expectations that the Federal Reserve will keep raising interest rates, which could trigger a recession and bring down fuel demand.

“Basically, it’s all about tight supplies and concerns about an economic slowdown that might happen in the future,” said Phil Flynn, an analyst at Price Futures group in Chicago. “This has created a lot of uncertainty in the market.”

On the supply side, signs that an agreement to resurrect Iran’s nuclear deal with world powers was less imminent challenged crude prices by reducing the odds that OPEC+ would move forward with its output reduction plan, said Bob Yawger, director of energy futures at Mizuho.

The European Union’s foreign policy chief said on Monday he was less hopeful about a quick revival of the deal.

“You might not get an OPEC production cut if the Iranians don’t bring barrels to the market,” Yawger said.

The Organization of Petroleum Exporting Countries and allies led by Russia, known as OPEC+, decided on Monday to cut their October output target by 100,000 barrels per day (bpd). Prices rose on Friday ahead of the meeting and after the decision.

As a result of the Labor Day holiday, weekly US inventory reports from the American Petroleum Institute and Energy Information Administration will be released on Wednesday and Thursday, a day later than usual.

(Additional reporting by Alex Lawler in London, Sonali Paul in Melbourne and Isabel Kua in Singapore; Editing by Jason Neely, Mark Potter, Jonathan Oatis and Tomasz Janowski)

Philippine inflation slows, but more tightening expected

MANILA, Sept 6 (Reuters) – Philippine headline inflation slowed for the first time this year as the increase in food and transport costs eased, but a higher core inflation and weak currency would likely prompt the central bank to continue hiking interest rates.

The consumer price index (CPI) rose 6.3% in August, the Philippine Statistics Authority said on Tuesday. It matched the median forecast in a Reuters poll and was within the central bank’s projected range of 5.9% to 6.7% for the month.

Core inflation, however, which strips out volatile food and fuel items, accelerated to 4.6% from July’s 3.9%.

“The (Bangko Sentral ng Pilipinas) is prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term,” the BSP said in a statement, adding upside risks continue to dominate the inflation outlook.

Inflation in the January-August period averaged 4.9%, exceeding this year’s BSP target band of 2% to 4%. The BSP expects inflation to average 5.4% this year, and ease to average 4.0% next year and 3.2% in 2024.

The BSP has raised interest rates by a total of 175 basis points this year, taking the benchmark overnight reverse repurchase facility rate to 3.75%, in efforts to bring inflation back within target and support a sagging peso.

The peso has further lost ground against the bullish dollar, however, hitting a record low of 56.99 on Monday, as the greenback surged ahead of the Federal Reserve’s widely expected interest rate hike later this month.

Ahead of the BSP’s Sept. 22 policy-setting meeting, its governor, Felipe Medalla, on Friday told a Reuters Newsmaker event the magnitude of a US rate hike will be a big factor in the BSP’s decision on whether to tighten policy further.

“We see the (Fed) decision to be the biggest influence on their (BSP’s) September meeting, as failure to keep up will translate to an even faster CPI surge,” said Emilio Neri, lead economist at Bank of the Philippine Islands.

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

Philippines August inflation at 6.3% y/y

MANILA, Sept 6 (Reuters) – Philippine annual inflation eased to 6.3% in August PHCPI=ECI, slowing for the first time in six months as increments in food prices also slowed, the statistics agency said on Tuesday.

The headline figure, slower than July’s 6.4%, matched the median forecast in a Reuters poll. It was, however, within the central bank’s projected range of 5.9% to 6.7% for the month.

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

Euro plunges to new 20-year low after Russian gas halt

LONDON, Sept 5 (Reuters) – The euro sank below USD 0.99 to a new 20-year low on Monday after Russia’s halt to gas supplies down its main pipeline to Europe heightened fears about a deepening energy crisis across the region.

The euro has been increasingly correlated with natural gas prices in recent months, with the former falling when prices of the energy source rise.

Europe is scrambling to wean itself off Russian supplies and build up reserves before the cold winter months, but investors reckon the hit to its economy will be huge.

Russia scrapped a Saturday deadline for flows down the Nord Stream pipeline to resume, citing an oil leak in a turbine. It coincided with the Group of Seven finance ministers announcing a price cap on Russian oil.

The euro slid to as low as USD 0.9876 in early European trade, the lowest level since 2002, before recovering to USD 0.9939, still 0.2% lower on the session.

“Gas flows have been curtailed even more than expected and we have already seen evidence of demand destruction weighing on activity,” said Michael Cahill, a strategist at Goldman Sachs.

“We now expect the Euro to fall further below parity (USD 0.97) and remain around that level for the next six months,” he added.

Other currencies vulnerable to spiralling energy prices also fell. In early trading, sterling dropped half a percent to a new 2-1/2 year low of USD 1.1444, with traders also eyeing the announcement of a new British prime minister due around 1130 GMT.

The dollar index, which measures the greenback against a basket of currencies, briefly hit 110.27, its strongest since June 2002 as the euro tumbled. It later fell back and was last down 0.2% at 109.74.

ECB MEETING

In what is a huge week for the euro, investors are also preparing for Thursday’s European Central Bank (ECB) meeting and markets have priced a near 80% chance of a supersized 75 basis point (bp) interest rate hike.

ECB officials will be keen to see the euro, which has lost around 8% of its value in the past three months, stabilise. That will feed into the desire to try to tame inflation through tightening policy.

“Should the ECB push back so prematurely on market pricing, it will likely draw the curtains for the euro’s burial,” said Simon Harvey, head of FX analysis at Monex Europe.

“While this would come as welcome news to the German manufacturing sector, which has seen new export orders continue to shrink, it would only fan the current energy related inflation pressures, making the ECB’s goal of price stability even harder to reach.”

Other currencies that tend to perform badly when market confidence is shaken also fell on Monday. The risk-sensitive Australian dollar slid as much as 0.5% towards a seven-week low at USD 0.6773

The dollar’s appeal as the go-to currency this year helped it to rise even against safe-haven currencies. It rose to 140.59 Japanese yen.

The offshore yuan fell to a new two-year low of 6.9543 per dollar, as worries linger over COVID-19 lockdown measures in China.

China’s southern tech hub of Shenzhen said it would adopt tiered anti-virus restriction measures beginning on Monday, while Chengdu announced an extension of lockdown curbs, as the country grapples with fresh outbreaks.

(Reporting by Tommy Reggiori Wilkes; Additional reporting by Rae Wee in Singapore and Kevin Buckland in Tokyo; Editing by Ed Osmond and Mark Potter)

Gold firms above $1,700/oz on hopes of less aggressive Fed

Sept 5 (Reuters) – Gold prices held above the key USD 1,700 per ounce level on Monday, as hopes that the Federal Reserve might slow the pace of rate increases after mixed US jobs data helped offset pressure from a robust dollar.

Spot gold was up about 0.1% at USD 1,712.89 per ounce by 1302 GMT. US gold futures rose 0.1% to USD 1,724.10.

However, trading is expected to be thin with most US markets closed for Labor Day holiday.

Gold had its best day in nearly a month on Friday after US data showed moderate wage growth in August and a rise in the unemployment rate to 3.7% suggested the labour market was starting to loosen.

“Expectations around future Fed rate hikes have softened slightly but the jobs report will have to be paired with a good inflation reading to have any material impact,” said Craig Erlam, senior market analyst at OANDA.

“We may see some support for gold above USD 1,700 for now but with the dollar so favoured and central banks not easing off the brake, further downside pressure may still come and a break below USD 1,680 looks very possible.”

The European Central Bank is due to meet later this week, where it is expected to deliver a 75 basis-point interest rate hike to tame record high inflation.

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

Limiting gold’s advance, the dollar index notched a 20-year high against its rivals, making bullion expensive for holders of other currencies.

European shares tumbled after Russia extended a halt on gas flows down the Nord Stream 1 pipeline to Europe, sparking worries over energy prices.

Spot silver rose 0.4% to USD 18.10 per ounce, platinum XPT= gained 1.4% to USD 846.83, while palladium eased 0.1% to USD 2,021.43.

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 Brijesh Patel in Bengaluru; Editing by Maju Samuel and Jane Merriman)

Dollar free to climb as biggest rival takes a dive

Sept 5 (Reuters) – FX speculators seem to have the room to take the bullish US dollar even higher in the weeks ahead, especially as the euro looks set to drop much deeper under parity.

Commodity Futures Trading Commission data showed that for the week ended Aug. 30 the value of the net USD position held by speculators rose to USD 14.21 billion long, from USD 13.79 billion a week earlier. As the current long remains well below July’s USD 18.98 billion peak, however, there is room for the greenback to climb further.

The USD index, which tracks the dollar versus a basket of currencies, registered a weekly close above the broken 109.14 Fibo, a 76.4% retrace of the 121.02 to 70.698 (2001 to 2008) drop. That has increased the odds for much bigger gains to the 111.00 psychological level. Fourteen-week momentum remains positive, reinforcing the underlying bullish market structure.

The euro — the biggest component of the USD index — sank to a new 20-year low on Monday and below 0.9900 after Russia’s halt to gas supplies down its main pipeline to Europe heightened fears about a deepening energy crisis across the region.

(Martin Miller is a Reuters market analyst. The views expressed are his own, editing by Ed Osmond)

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)

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