US equity funds draw biggest weekly inflow in eight weeks

Aug 19 (Reuters) – US equity funds attracted their biggest weekly inflow in eight weeks in the week to Aug. 17 as strong earnings and hints of a slowing pace of inflation fanned optimism.

According to Refinitiv Lipper data, US equity funds drew USD 6.85 billion worth of net buying, the most since June 22.

During the reported week, data showed US producer prices declined last month and import prices dipped for the first time in seven months, indicating that US inflation may finally be coming off the boil.

Stronger-than-expected results from Walmart and Home Depot also bolstered views on consumers’ ability to spend and lifted sentiment.

US large- and small-cap funds pulled net inflows of USD 2.13 billion and USD 1.4 billion, respectively, but mid-cap funds recorded an 11th week of net outflows, this time for USD 391 million.

Financials and tech saw heavy buying, at a net USD 1.37 billion and USD 1.06 billion respectively, while consumer staples attracted a net USD 516 million.

Investors remained long on bond funds for a third straight week with net purchases of USD 2.87 billion.

Purchases of US taxable bond funds surged by about 64% from a week ago to a net USD 2.98 billion but municipal funds recorded a second weekly outflow, of USD 446 million.

US short/intermediate investment-grade, general domestic taxable fixed income, and high-yield bond funds attracted a net USD 1.41 billion, USD 1.26 billion, and USD 1.21 billion respectively.

Meanwhile, investors exited short/intermediate government & treasury funds to the tune of USD 1.67 billion.

Money market funds attracted USD 1.57 billion worth of net inflows after two consecutive weeks of outflows.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Kirsten Donovan)

European shares trip on recession fears as German producer prices surge

Aug 19 (Reuters) – European shares tumbled on Friday and tracked a weekly loss as the highest-ever jump in German producer prices in July added to gloom over the economic outlook for the region’s biggest economy and rekindled fears of a recession.

The pan-European STOXX 600 slid 0.6% in early deals, with travel stocks leading the declines.

Energy stocks were among the few outperformers on the day and week, inching 0.1% higher on Friday.

“Energy costs are only expected to go up as winter in the Northern Hemisphere kicks in… European energy is the sector that’s going to be able to ride through the current environment,” said Danni Hewson, financial analyst at AJ Bell.

Skyrocketing energy prices due to the Ukraine war pushed German producer prices in July to their highest ever increases both year-on-year and month-on-month. Energy prices as a whole jumped 105%, compared with July 2021.

Germany’s DAX lost 1% and the country’s 10-year yields rose to their highest in four weeks.

“The European Central Bank is going to have to keep raising rates, because otherwise people will begin to question their credibility even further… We’re likely going to see a hike of the same size as they have already done, but whether there would be a more aggressive move is anyone’s guess, since they are walking such a tightrope,” Hewson added.

Money markets are raising their bets on ECB hikes, moving to fully price in a 50 basis point (bps) hike in September, compared to the 50% chance of such a move priced in early August. They are also pricing in a small probability of a 75 bps move at the meeting.

The benchmark index is set to end the week about 0.3% weaker as investors weigh weak economic data, the impact of tighter monetary policy, fears of spiralling inflation and shrinking economies across the region. It gained more than 1% last week.

French catering and food services group Sodexo fell 2%, after Jefferies cut the stock to “hold” from “buy” to factor in a cautious recessionary scenario over fiscal year 2023-2024.

Just Eat Takeaway.com surged 25.9% to top the STOXX 600 after agreeing to sell 33% stake in Brazil’s iFood to technology investor Prosus for up to 1.8 billion euros (USD 1.8 billion). Prosus shares ticked up 0.1%.

FLSmidth jumped 10% after raising its annual sales outlook as the mining equipment and cement maker beat second-quarter earnings forecasts.

(Reporting by Anisha Sircar in Bengaluru; editing by Uttaresh.V and Sriraj Kalluvila)

Euro, sterling slip to month low on renewed growth fears

LONDON, Aug 19 (Reuters) – The euro and sterling slipped to a one-month low versus the safe-haven US dollar on Friday with investors worrying about further economic slowdown after Federal Reserve officials reiterated the need for higher rates.

The dollar index rose 0.2% to 107.69, after earlier touching 107.74, its highest since July 18. The gauge is on track for a 1.9% rally this week, which would be its best weekly performance in ten weeks.

The euro was flat at USD 1.0084, after touching its lowest since July 15. Sterling sank 0.4% to a one-month low of USD 1.1882.

St. Louis Fed President James Bullard said he is leaning toward supporting a third straight 75-basis-point interest rate hike in September, while San Francisco Fed colleague Mary Daly said hiking rates by 50 or 75 basis points next month would be “reasonable.”

Kansas City Fed President Esther George said she and her colleagues will not stop tightening policy until they are “completely convinced” that overheated inflation is coming down.

“The US dollar is again on the front foot this morning supported by another round of hawkish Fed speak… the overall tone of Fed officials suggests that the Fed still has a lot of work to do to contain inflation,” said Jane Foley, head of FX strategy at Rabobank in London.

Weakening Chinese data this week and an energy crisis in Europe are raising fears of further economic slowdown, which also hit European currencies and supported safe-haven flows, Foley added. “We expect another break below parity,” she said.

The euro is on course to decline 1.7% since last Friday, which would be its worst week since July 8. Sterling is on track for its worst week in more than a year, set for a 2% drop.

British consumer sentiment in August fell to its lowest since at least 1974, a survey showed, as households feel “a sense of exasperation” about the soaring costs, as inflation hit double digits.

European Central Bank board member Isabel Schnabel fueled inflation worries by saying consumer prices could still accelerate in the short-term.

Interestingly, despite the Fed chorus on the need for higher rates, the odds of another supersized 75 basis point hike next month have receded to 45% in money markets.

Fed Chair Jerome Powell will update the market on his views at the annual Jackson Hole symposium on Aug. 25-27.

Against Asian currencies, the greenback rose to 136.76 yen JPY=EBS, its highest since July 27. China’s yuan slipped to a three-month low of 6.8150 per dollar in onshore trading after the central bank set a much-weakened midpoint guidance, with traders expecting further downside due to an economic slowdown.

“The USD/CNY fix today above 6.80 was the highest this year and suggests that the PBOC will not cap its gains in the face of the climbing USD,” said Alvin Tan, a strategist at RBC Capital Markets.

In cryptocurrencies, bitcoin BTC=BTSP fell 7% to USD 21,793. Ether was down 5.8% to USD 1,737.

(Reporting by Joice Alves, additional reporting by Kevin Buckland; Editing by Shri Navaratnam)

Stocks set to end 4-week winning streak on recession worries

Aug 19 (Reuters) – Emerging market stocks were on course to snap a four-week winning streak on Friday, while developing world currencies looked set for their worst week in nearly four months as recession worries bolstered the dollar.

The Chinese yuan slipped 0.4% and was on track for its worst weekly performance since April-end as weak data from the country forced an interest rate cut from the central bank this week.

That dulled sentiment in Asia, while monetary policy moves from central banks of Turkey and Egypt fanned inflation fears.

Citigroup strategists said they were bearish on EM currencies across regions.

“Sliding commodities, especially base metals and lately oil prices, are reflective of downside demand risks and the situation in China is not helping,” Citigroup strategists added.

The Turkish lira fell again on Friday, down 0.4%, leaving it less than 2% away from record lows of December, after the central bank cut the key lending rate to 13% despite inflation at 80%. The currency has weakened 26% this year.

In Egypt, the central bank kept the deposit rate unchanged at 11.25%, hours after Hassan Abdalla was appointed as the caretaker of the central bank following former governor Tarek Amer’s abrupt resignation on Wednesday.

Analysts had expected the deposit rate to be increased by 50 bps.

Egyptian dollar bonds which had slumped after Amer’s resignation recouped some losses on Thursday, only to turn lower again on Friday.

Signs of weakness in China and Europe fuelled recession worries, while hawkish Fed commentary signalling it intends to keep raising rates to tame inflation saw the dollar notch one-month highs.

Prospects of prolonged dollar strength pressured appetite towards risky currencies. EM bond spreads have also been rising again.

Stocks slid too, with Hong Kong shares .HSI losing 2% this week. The broader EM stock index’s 0.4% decline on Friday set it on course to end the week down more than 1%.

While EM bond fund inflows for the latest week were the largest since early April, year-to-date flows were likely to be the lowest since at least 2005, JPMorgan data showed.

Hungary’s forint was among the big decliners this week as energy supply worries owing to the Russia-Ukraine war have dampened economic view and prompted an outlook credit revision to “negative” from S&P.

The currency slipped 0.3%, taking weekly losses to about 3.7%, its worst week in five months. Hungarian stocks logged their sharpest five-day fall in two months.

(Reporting by Susan Mathew in Bengaluru; Editing by Vinay Dwivedi)

Philippines to launch retail T-bond offer at Aug. 23 auction

MANILA, Aug 19 (Reuters) – The Philippines’ Bureau of the Treasury will offer a minimum of 30 billion pesos (USD 536.58 million) worth of peso-denominated retail bonds at a rate-setting auction on Aug. 23, the first such issue under the new administration, it said on Friday.

The offer consists of five-year and 5-1/2-year fixed-rate bonds which will be made available to the public and to swap with some existing bonds maturing this year and in 2023, it said in a notice on its website.

The public offer period begins on Aug. 23 and ends on Sept. 2, with issue date set for Sept. 7.

The government, which last issued retail bonds in February, raising 457.5 billion pesos through the sale of five-year notes, has set a 75-25 borrowing mix for this year, relying mostly on the domestic market for funding requirements.

This year’s record 5.024 trillion pesos national budget programme is geared toward sustaining economic recovery and managing COVID-19 outbreaks.

The 2028 bonds will be available to retail investors at a minimum amount of 5,000 pesos.

Holders of retail bonds maturing in September and December this year, and in February next year can swap their holdings with the new issue.

($1 = 55.91 Philippine pesos)

(Reporting by Enrico Dela Cruz; Editing by Kanupriya Kapoor)

Oil headed for weekly loss as recession fears cloud demand outlook

LONDON, Aug 19 (Reuters) – Oil prices slipped on Friday after two days of gains and are heading for weekly losses as a strong dollar and worries about a global economic slowdown weigh.

Brent crude futures were down 97 cents, or 1%, at USD 95.62 a barrel by 0826 GMT. US West Texas Intermediate crude was at USD 89.59 a barrel, down 91 cents or 1%.

Both benchmark contracts were headed for weekly losses of close to 3%.

A strong dollar has made oil more expensive for holders of other currencies, while Asian and European equities dropped.

In a sign of easing oil supply tightness, the price gap between prompt and second-month Brent futures narrowed by about USD 5 a barrel from the end of July.

“Global recession and demand destruction are front and centre of current concerns given weak data out of the US, euro zone and China. Signs of slowing economic growth are pervasive and could dent oil demand,” PVM analysts said.

Giving a floor to prices, US crude inventories fell sharply as the nation exported a record 5 million barrels of oil a day in the most recent week, with oil companies finding demand from European nations looking to replace crude from Russia.

Haitham Al Ghais, the new secretary general of the Organization of the Petroleum Exporting Countries, told Reuters he was optimistic about oil demand into 2023.

OPEC is keen to ensure Russia remains part of the OPEC+ group, Al Ghais said ahead of a Sept. 5 meeting.

Supplies could tighten again when European buyers start seeking alternative supplies to replace Russian oil ahead of European Union sanctions which take effect from Dec. 5.

“We calculate the EU will need to replace 1.2 million barrels per day of seaborne Russian crude imports with crude from other regions,” consultancy FGE said in a note.

(Additional reporting by Florence Tan in Singapore and Yuka Obayashi in Tokyo; Editing by Jan Harvey)

Philippine central bank to delay further cut in banks’ reserve ratio

Aug 19 (Reuters) – The Philippine central bank will postpone a plan to further reduce banks’ reserve requirement ratio by the end of the year, Governor Felipe Medalla told Bloomberg News on Friday.

“We don’t want to confuse the market” as Bangko Sentral ng Pilipinas (BSP) is still in a tightening cycle, Bloomberg quoted Medalla as saying.

BSP raised its benchmark interest rates by half a percentage point on Thursday, and kept the door open for further hikes to bring inflation back within its target range.

(Reporting by Jahnavi Nidumolu in Bengaluru; Editing by Muralikumar Anantharaman)

Gold falls to three-week low on robust dollar, Fed rate-hike fears

Aug 19 (Reuters) – Gold prices slipped to a three-week low on Friday and were set for their first weekly drop in five, as a stronger dollar and prospects of more rate hikes by the US Federal Reserve dented bullion’s appeal.

Spot gold was down 0.2% at USD 1,753.97 per ounce, as of 0706 GMT, after falling to its lowest since July 28 at USD 1,751.01 earlier in the session. For the week, bullion was down 2.6%.

US gold futures eased 0.1% to USD 1,768.90.

“Markets are expecting interest rates to go further up and of course the strong dollar is definitely weighing on gold prices at the moment,” said Brian Lan, managing director at dealer GoldSilver Central.

“Many are staying on the sidelines expecting gold prices to go further down. Also, we’ve seen quite a bit of liquidation on the ETF (exchange-traded fund) side.”

The dollar surged to a one-month high against its rivals, making gold more expensive for buyers holding other currencies.

The Fed needs to keep raising borrowing costs to bring high inflation under control, several US central bank officials said on Thursday.

St. Louis Fed President James Bullard said he was currently leaning toward supporting a third straight 75-basis-point rate hike in September.

Gold is highly sensitive to rising US interest rates, as they increase the opportunity cost of holding non-yielding bullion.

In the July meeting minutes released on Wednesday, Fed officials said the pace of future rate hikes would depend on incoming economic data.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell last week, suggesting labour market conditions remain tight.

On the technical front, spot gold may fall to USD 1,744 per ounce, as it has broken a support at USD 1,759, according to Reuters analyst Wang Tao.

Spot silver fell 0.9% to USD 19.34 per ounce and was on track for its biggest weekly percentage fall since late-January.

Platinum fell 0.4% to USD 906.96 per ounce and palladium slipped 0.6% to USD 2,142.47.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu and Vinay Dwivedi)

Shares choppy, US yields fall as investors digest Fed minutes

NEW YORK, Aug 18 (Reuters) – Global equity markets were choppy and US Treasury yields fell on Thursday, as uncertainty over the pace of interest rate hikes prevailed among investors after the Federal Reserve’s meeting minutes showed officials were determined to curb rising prices.

Markets have been volatile amid concerns about a looming recession, even though Fed officials indicated in the minutes of their July meeting released on Wednesday that they would adopt a less aggressive stance if inflation starts to recede.

“The markets are still trying to figure out the Fed minutes,” causing volatility, said Charles Self, chief investment officer at Tandem Wealth Advisors in Appleton, Wisconsin.

“The minutes were uniformly hawkish in our view,” Self added. “It’s clear that among all the voting members that curing inflation is the No. 1 choice and they’re going to do whatever is necessary as far as raising rates to get there. We think they’re using the labor market as cover.”

MSCI’s gauge of stocks in 50 countries across the globe .MIWD00000PUS rebounded from earlier losses and was up 0.05%. The pan-European STOXX 600 index closed higher at 0.39%.

US Treasury yields edged lower as investors continued to digest the Fed meeting minutes. A string of Fed officials, including St. Louis Fed President James Bullard and San Francisco Fed President Mary Daly, reiterated on Thursday that the US central bank needs to keep raising interest rates to rein in inflation.

Benchmark 10-year notes were down to 2.8859%, from 2.895% on Wednesday. Two-year notes retreated to 3.2057%, from 3.295%.

The yield curve between two- and 10-year Treasury notes, widely viewed as an indicator of impending recession, remained inverted at minus 38 basis points on Thursday.

“Since the Fed’s July 27 meeting, the two-year yields have been up 43 basis points, meaning that the bond market thinks they’re going to raise rates higher for a longer period of time, whereas the stock market has been up 5%, meaning the market thinks they’ll raise rates relatively quickly and maybe even decrease rates next year,” Self added.

“Well, I think the bond market is usually right.”

MAJOR INDEXES

On Wall Street, major indexes reversed early session losses and ended higher, driven partly by upbeat sales forecast from networking giant Cisco Systems (CSCO) that helped to lift the technology sector. Equities in industrials and energy sectors were also among the top gainers.

The Dow Jones Industrial Average rose 0.06% to 33,999.04, the S&P 500 gained 0.23% to 4,283.74 and the Nasdaq Composite added 0.21% to 12,965.34.

Oil prices gained nearly 3% as robust US fuel consumption data and an expected drop in Russian supply later in the year offset concerns that slowing economic growth could undercut demand.

Brent futures rose 3.09% to settle at USD 96.59 a barrel, while US West Texas Intermediate (WTI) crude rose 2.7% to USD 90.50.

The US dollar index surged to a one-month high after the comments from the Fed officials reaffirming the need for further rate hikes.

The dollar index rose 0.797%, with the euro up 0.01% to USD 1.0089.

Gold reversed earlier gains and was lower on a firmer dollar, as investors looked for more economic cues that could influence rate hikes. Spot gold dropped 0.2% to USD 1,758.20 an ounce, while US gold futures fell 0.28% to USD 1,755.40 an ounce.

(Reporting by Chibuike Oguh in New York; Editing by David Holmes and Matthew Lewis)

Dollar jumps as Fed officials say more rate hikes needed

NEW YORK, Aug 18 (Reuters) – The US dollar index surged to a one-month high on Thursday as Federal Reserve officials spoke of the need for further rate hikes, and investors reevaluated Wednesday’s minutes from the US central bank’s July meeting as being more hawkish than originally thought.

The Fed needs to keep raising borrowing costs to bring high inflation under control, a string of US central bank officials said on Thursday, even as they debated how fast and how high to lift them.

St. Louis Fed President James Bullard said he is leaning toward supporting a third straight 75-basis-point interest rate hike in September.

San Francisco Fed President Mary Daly said hiking rates by 50 or 75 basis points next month would be a “reasonable” way to get short-term borrowing costs to “a little bit above” 3% by the end of this year, and on their way to a little bit higher in 2023.

“The Fed’s rhetoric has been very steadfast from almost everybody – we’re got to raise rates, we’ve got to raise rates, rates are going higher,” said Joseph Trevisani, senior analyst at FXStreet.com in New York.

The dollar pared gains on Wednesday after the Fed’s July meeting minutes showed central bank officials were concerned they could raise rates too far in their commitment to get inflation under control, which was interpreted as modestly dovish.

The minutes also flagged an important dimension of the Fed’s debate in coming months: when to slow down the rate increases.

But analysts said it was wrong to focus on these parts of the minutes instead of the overriding view that rates need to keep heading higher.

“Except for the part about slower pace of rate hikes, the rest of the minutes read very hawkish,” Win Thin, global head of currency strategy at Brown Brothers Harriman, said in a report.

The dollar index was last up 0.71% at 107.39, after reaching 107.57, the highest since July 19.

The euro reached USD 1.0078, the weakest since July 18. The dollar gained to 135.90 against the yen, the weakest level for the Japanese currency since July 28.

Sterling slipped as far as USD 1.1920 the lowest since July 22.

The odds of a 75 basis-point hike in September have dropped to 42% since the meeting minutes, from 52% earlier on Wednesday, with a 50 basis-point hike now assigned a 58% probability.

However, consumer price inflation and jobs data for August, due before the Fed’s September meeting, will likely affect the size of a rate hike.

The September meeting will also offer new information on how far Fed officials expect rates to rise. Traders see the benchmark rate peaking at 3.66% in March.

Trevisani said he expected the Fed to go up to around 4%, adding that even that is unlikely to be enough to tame prices rising at an annual pace of 8.5%.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell last week and the prior period’s data was revised sharply lower, while a separate report from the Philadelphia Fed on Thursday revealed a measure of employment at factories in the Mid-Atlantic region surged in August.

A report from the National Association of Realtors, however, showed existing home sales dropped 5.9% to a seasonally adjusted annual rate of 4.81 million units in July, the lowest level since May 2020.

(Additional reporting by Alun John in Hong Kong; Editing by Tomasz Janowski and Richard Chang)

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