Wall Street falls as Fed, Ford forecasts give fright

Sept 20 (Reuters) – Wall Street ended Tuesday lower as the eve of a US Federal Reserve meeting expected to bring another large interest rate hike brought further evidence of the impact on corporate America from the inflation that the US central bank wants to tame.

The benchmark S&P 500 index has dropped 19.1% so far this year as investors fear aggressive policy tightening measures by the Fed could tip the US economy into a recession.

It closed for the third straight session below 3,900 points – a level considered by technical analysts as a strong support for the index – as last week’s dire outlook from delivery firm FedEx Corp. was repeated, this time by automaker Ford Motor Co.

Shares of Ford slumped 12.3%, the biggest one-day drop since 2011, after it flagged a bigger-than-expected USD 1 billion hit from inflation and pushed delivery of some vehicles to the fourth quarter due to parts shortages.

Rival General Motors Co. also sank 5.6%.

“We have seen some bellwethers talk about the pressures they are facing, so we could see some margin compression and some softening in the topline numbers in the third-quarter earnings,” said Greg Boutle, head of US equity & derivative strategy at BNP Paribas.

The US central bank is widely expected to hike rates by 75 basis points for the third straight time at the end of its policy meeting on Wednesday, with markets also pricing in a 17% chance of a 100 bps increase and predicting the terminal rate at 4.49% by March 2023.

Focus will also be on the updated economic projections and dot plot estimates for cues on policymakers’ sense of the endpoint for rates and the outlooks for unemployment, inflation and economic growth.

Adding to the mix, a Commerce Department report showed residential building permits – among the more forward-looking housing indicators – slid by 10% to 1.517 million units, the lowest level since June 2020.

The benchmark US 10-year Treasury yield hit 3.56%, its highest level since April 2011, while the closely watched yield curve between two-year and 10-year notes inverted further.

An inversion in this part of the yield curve is viewed as a reliable indicator that a recession will follow in one to two years.

“There are a lot of headwinds to prevent sustained rallies. It’s hard to have (price-to-earnings) expansion while the Fed is tightening,” said BNP’s Boutle.

The Dow Jones Industrial Average fell 313.45 points, or 1.01%, to 30,706.23, the S&P 500 lost 43.96 points, or 1.13%, to 3,855.93 and the Nasdaq Composite dropped 109.97 points, or 0.95%, to 11,425.05.

All of the 11 major S&P sectors declined, with economy-sensitive real estate and materials sectors the biggest fallers, dropping 2.6% and 1.9% respectively.

Meanwhile, in another sign of nerves around future corporate earnings, Nike Inc. fell 4.5% after the sportswear giant was downgraded by Barclays analysts to “equal weight” from “overweight”, citing volatility in the Chinese market due to pressures from COVID-related lockdowns in early September.

Another apparel maker, Gap Inc., closed 3.3% lower. It announced on Tuesday it was eliminating about 500 corporate jobs, having withdrawn its annual forecasts late last month due to an inventory glut and weak sales.

Volume on US exchanges was 9.90 billion shares, compared with the 10.71 billion average for the full session over the last 20 trading days.

The S&P 500 posted two new 52-week highs and 66 new lows; the Nasdaq Composite recorded 31 new highs and 408 new lows.

(Reporting by Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Editing by Shounak Dasgupta, Maju Samuel and Lisa Shumaker)

Here comes the main course

Sept 21 (Reuters) – The Federal Reserve’s highly anticipated policy decision arrives later on Wednesday, with markets bracing for another big dose of tightening. The lead-up to the US central bank event has been bumpy and could spell more volatility for Asian markets in the hours before the Fed’s statement.

Ahead of the rate decision, rates continued their ascent. Yields on the benchmark US 10-year Treasury note hit 3.6% on Tuesday, their highest since 2011. The 2-year Treasury yield, which tracks Fed rates closely, approached 4%, the highest since 2007.

Equity markets are struggling to digest the persistent move up in rates. The S&P 500 slid 1.1% and touched its lowest point in two months, as traders positioned ahead of the Fed. MSCI’s gauge of stocks across the globe also sank to a two-month low.

On Tuesday, Sweden provided the appetizer for the feast of central bank action to follow the rest of the week. The country’s central bank caught markets off-guard in hiking interest rates by a larger-than-expected full percentage point.

Will Sweden prelude a similar outcome in the US? Markets are bracing for the Fed to raise rates by 75 basis points, but since inflation data came in hot last week, they have been pricing in a chance of a full percentage point hike. Such odds were around 16% late on Tuesday.

Beyond Wednesday’s rate move, what Fed Chair Jerome Powell has to say in a press conference following the decision will be critical for investors seeking to gauge the rate trajectory going forward. How Powell is thinking about the threat to the economy from higher rates is also top of mind.

Central banks in England, Switzerland and Japan will have their say later in the week.

Key developments that could provide more direction to markets on Wednesday:

Federal Reserve policy statement/press conference

Bank of Japan meeting begins

Korea 20-day exports

Speech by Reserve Bank of Australia’s deputy governor

(Reporting by Lewis Krauskopf in New York; editing by Jonathan Oatis)

US recap: EUR/USD suffers as Fed, Ukraine top the agenda

Sept 20 (Reuters) – The dollar index rose on Tuesday on hawkish Fed hike expectations and resurgent safe-haven buying after reports that Russian-installed leaders in occupied areas of four Ukrainian regions set out plans for referendums between Sept. 23-27 on joining Russia.

As it neared the US close, the dollar index was up 0.65% at 110.25, slightly below its 2022 high of 110.79, as markets awaited this week’s main event: Wednesday’s Fed policy announcement.

Futures have fully factored in a 75bp hike and see a 17% chance of 100bp increase.

Higher US rates remain key support for dollar strength, with futures projecting fed funds will close 2022 near 4.2%, well above the 2% foreseen in the euro zone, zero percent in Japan and even the 3.7% discounted for Britain.

EUR/USD traded near its session lows in late-US dealings, down 0.56% at 0.9968.

Safe-haven dollar buying on heightened Ukraine-Russia tensions added to weakness in EUR/USD, which moved further below the 10-day moving average — at 1.0012 — that it has straddled in recent sessions.

USD/JPY headed toward the close on the high side of its recent range, up 0.3% at 143.62, with diverging US-Japan rates keeping the yen on the back foot.

Tuesday’s geo-political angst lifted USD/JPY closer to 145, a level seen increasing the threat of Japanese intervention.

Recent trading ranges near 100-pips hint that traders may be engaging in gamma trading ahead of 145.

GBP/USD neared its 2022 lows in late trade, slipping 0.56% to 1.1368, just above the Sept. 16, 2022 low 1.1351.

Expectations that the Fed will hike by 75bp on Wednesday weighed on cable even with futures assigning a 75% chance of the BoE delivering a similar rate increase at its meeting on Thursday IRPR.

Equities remained soft, with the S&P 500 dipping to one-month lows by 3,827 amid hawkish Fed expectations and Ukraine-related risk selling. June’s low of 3,637 is coming into sharper focus.

US Treasury yields extended higher, with the two-year reaching a 15-year peak at 3.99% before moving lower after a strong 20-year auction.

Cryptocurrencies slid amid rising global rates and broadly negative risk markets, Bitcoin ending NorAm 3.5% lower at USD 18.8k, ETH down 2.8% at USD 1,337,

(Editing by Burton Frierson; Paul Spirgel and Christopher Romano are Reuters market analysts. The views expressed are their own.)

Gold retreats as dollar, yields firm ahead of Fed rate hike verdict

Sept 20 (Reuters) – Gold prices dropped as much as 1% on Tuesday as the dollar and Treasury yields firmed, and investors squared positions ahead of a widely expected large interest rate hike by the US Federal Reserve this week.

Spot gold was down 0.7% at USD 1,664.19 an ounce by 1:46 p.m. ET (1746 GMT), lingering near a 29-month low hit last week.

US gold futures settled 0.4% lower at USD 1,671.10.

“Gold can’t shake off any of these aggressive Fed tightening concerns … yields continue to skyrocket, especially in the short end of the curve — that’s just been consistently putting pressure on gold,” said Edward Moya, senior analyst with OANDA.

The Fed is expected to hike interest rates by at least 75 basis points at the conclusion of its two-day policy meeting on Wednesday.

Other central banks are also expected to keep tightening monetary policy in the face of surging inflation. Sweden lifted interest rates by a full percentage point on Tuesday. Britain, Norway, Switzerland and Japan also hold monetary policy meetings this week.

“A 100 bps hike would likely pressure gold prices lower, whereas a widely anticipated 75bps could see some short-covering activity amid a relief rally,” Standard Chartered said in a note.

High interest rates usually dim bullion’s appeal as they translate to an increased opportunity cost of holding the asset, which pays no interest.

The dollar held firm near a two-decade high, making bullion more expensive for other currency holders. The US two-year yield hit an almost 15-year high.

Although, “when global recessionary fears really become the focal point for markets as everyone has become more aggressive with their tightening cycles, that’s when gold will have an opportunity,” Moya said.

In other precious metals, spot silver XAG= slipped 2.2% to USD 19.17 per ounce, platinum gained 0.1% to USD 918.55 and palladium dropped 3.6% to USD 2,145.44.

(Reporting by Kavya Guduru in Bengaluru; Editing by Susan Fenton, Vinay Dwivedi and Maju Samuel)

Philippines’ new nickel miner completes maiden ore shipment to China

MANILA, Sept 20 (Reuters) – The Philippines’ second-biggest nickel ore exporter, Global Ferronickel Holdings Inc FNI.PS, said on Tuesday its affiliate Ipilan Nickel Corp has completed a maiden shipment of 54,700 wet metric tonnes (WMT) of medium-grade ore to China.

Ipilan’s inaugural shipment from its mine in the western Philippine province of Palawan was sold to Guangdong Century Tsingshan Nickel Industry Co Ltd, a long-standing customer of Global Ferronickel’s subsidiary, Platinum Group Metals Corp.

Ipilan aims to extract 500,000 WMT of ore this year from the Palawan mine and scale up annual output of medium to high-grade material to 1.5 million WMT, Global Ferronickel Chairman Joseph Sy said.

Estimated mine life is at least 10 years, he said in a statement.

About 12 new metallic mines in the Philippines should begin commercial operations this year, mostly nickel projects, according to industry regulator Mines and Geosciences Bureau. nL2N2VE09L

Nickel ore from the Southeast Asian country, which is among China’s key suppliers of the material, is used mainly in producing nickel pig iron, a cheaper alternative to pure nickel for stainless steel production.

(Reporting by Enrico Dela Cruz; Editing by Emelia Sithole-Matarise)

Dollar firm as markets brace for another big Fed rate hike

TOKYO, Sept 20 (Reuters) – The dollar remained firm near a two-decade high versus major peers on Tuesday as investors braced for another aggressive rate hike by the Federal Reserve as it battles to rein in overheated inflation.

The dollar index, which measures the greenback against six counterparts, edged 0.09% higher to 109.64, stable for the moment after pulling back from as high as 110.79 earlier this month, a level not seen since June 2002.

Providing additional support, the two-year US Treasury yield, which is extremely sensitive to policy expectations, rose as high as 3.970% overnight for the first time since November 2007. The 10-year yield reached a high of 3.518%, a level not seen since April 2011.

Investors have fully priced another 75 basis point bump by the Federal Open Market Committee (FOMC) on Wednesday, and lay 19% odds for a super-sized full percentage point increase.

While still elevated, those bets have come down from around 38% on Wednesday, when they were shocked higher by a surprise acceleration in US consumer prices for August.

The dollar added 0.07% to 143.29 yen, continuing a week-long consolidation following two attempts at 145 this month that took it as high as 144.99 on Sept. 7 for the first time in 24 years. The dollar-yen currency pair tends to track the long-term yield spread between US and Japanese government bonds.

The Bank of Japan decides policy on Thursday, and is widely expected to keep its ultra-easy stimulus settings unchanged — including pinning the 10-year yield near zero — to support a fragile economic recovery.

That’s despite data on Tuesday showing core consumer inflation quickened to an eight-year high of 2.8% in August, exceeding the central bank’s 2% target for a fifth straight month.

“CPI was very strong, but the BOJ will likely keep policy unchanged, so expectations about Fed policy are more important” for currency markets, said Tohru Sasaki, a strategist at J.P. Morgan in Tokyo.

“Dollar-yen will eventually break above 145, but the speed depends on how hawkish the Fed is, and developments in interest rate differentials.”

The euro was little changed at USD 1.00235, after grinding slowly higher over the past week and strengthening its position above parity. It dropped as low as USD 0.9864 on Sept. 6 for the first time in two decades.

Sterling was slightly lower at USD 1.14245, finding its feet after a drop to a 37-year low of USD 1.13510 at the end of last week.

The Bank of England will decide policy on Thursday, and investors are split over whether a 50 or 75 basis point hike is on the way.

“With expectations split, the prospect of GBP volatility is unsurprisingly elevated,” Chris Weston, head of markets research at Pepperstone, wrote in a client note.

“Given the heavy trend lower in the GBP, one can easily assume that the speculative part of the market is already heavily short GBP. This should cushion the downside on a 50bp hike but see a pronounced move higher should we see a 75bp hike.”

Meanwhile, minutes of the Reserve Bank of Australia’s meeting this month showed that policymakers see a case for slowing the pace of hikes as rates approached more normal levels.

The Australian dollar slipped 0.11% to USD 0.67195. Its Antipodean peer, the New Zealand dollar, fell 0.24% to USD 0.59425.

Leading cryptocurrency Bitcoin eased 0.59% to USD 19,422, after swinging between a two-month low of USD 18,540 and a 3 1/2-week high of USD 22,781 over the past two weeks.

(Reporting by Kevin Buckland; Editing by Bradley Perrett and Kim Coghill)

Oil prices little changed on expectations that Fed rate hike will curb demand

SINGAPORE, Sept 20 (Reuters) – Oil prices steadied on Tuesday on concerns that further US interest rate hikes this week to tame inflation will curb economic growth and fuel demand in the world’s biggest oil consumer.

Brent crude futures for November settlement fell 7 cents, or 0.1%, to USD 91.93 a barrel by 0659 GMT.

US West Texas Intermediate crude for October delivery was at USD 85.60 a barrel, down 13 cents, or 0.2%. The October contract will expire on Tuesday and the more active November contract was at USD 85.15, down 21 cents, or 0.3%.

The dollar remained firm below a two-decade high versus major peers on Tuesday, ahead of a slew of central bank meetings around the world this week led by the US Federal Reserve, which is likely to raise interest rates by another 75 basis points to rein in inflation.

The stronger greenback makes dollar-denominated oil more expensive for buyers using other currencies and the expected rate increases have increased concerns that the tightening could trigger a global recession.

“Oil prices have been sliding in a downtrend since mid-June, and recession fears and a slowdown in growth in China are still the major bearish factors in general,” said Tina Teng, an analyst at CMC Markets.

While other major economies are tightening, China, the world’s second-largest oil user, on Tuesday left its benchmark lending rates unchanged as it tries to balance supporting its sluggish economic growth against the weakening yuan.

Fears of aggressive central bank tightening are still driving concerns for a “quickly weakening global economy” and pressuring crude prices, said Edward Moya, a senior market analyst at OANDA, in a note.

US crude oil stocks are estimated to have risen last week by around 2 million barrels in the week to Sept. 16, a preliminary Reuters poll showed on Monday.

The US Energy Department will sell up to 10 million barrels of oil from the Strategic Petroleum Reserve for delivery in November, extending the timing of a plan to sell 180 million barrels from the stockpile to tame fuel prices.

Signs that major producers are unable to meet their output quotas did give prices some support.

An internal document from the Organization of Petroleum Exporting Countries and allies led by Russia, known as OPEC+, showed the group fell short of its oil production target by 3.583 million barrels per day (bpd) in August. In July, the group missed its target by 2.892 million bpd.

The impasse over a revival of the Iran nuclear deal is also continuing to keep that country’s exports from fully returning to the market.

Russia said on Monday that unresolved issues remained in the negotiations while France’s foreign minister said that it was up to Tehran to make a decision as the window to find a solution was closing.

However, they are signs that higher oil prices this year are curbing demand. US vehicle travel in July fell 3.3% from a year earlier, dropping for a second month.

(Reporting by Isabel Kua; editing by Christian Schmollinger)

Asian bonds see meagre inflows as US rate-hike bets weigh

Sept 20 (Reuters) – Foreigners were net purchasers of emerging Asia ex-China bonds for a second successive month in August, although the buying was measured on concerns over soaring inflation and expectations of a more aggressive stance from the US Federal Reserve.

Overseas investors last month purchased a net total of USD 1.05 billion worth of bonds in Indonesia, Thailand, Malaysia, South Korea, and India, according to data from regulatory and bond market associations.

Foreigners bought USD $618 million as regional bonds in July, after disposing of a total $15.45 billion between March and June.

“The sustainability of the inflows will be challenged by growing external headwinds,” Khoon Goh, head of Asia research at ANZ, said in a report last week.

“The US Federal Reserve is set to continue tightening monetary policy aggressively, sending the USD and US yields higher, which tend to be negative for flows into Asia.”

The US 10-year Treasury yield on Monday hit its highest in more than a decade and the dollar strengthened due to soaring expectations that the Fed would deliver a hefty rate hike this week to tackle inflation.

Malaysian bonds lured USD 1.25 billion as foreign inflows last month, the highest since December, while Indonesian bonds obtained about USD 600 million.

Indian bonds also received USD 483 million on reports saying J.P.Morgan was in talks with investors over a possible inclusion in its emerging markets index.

Meanwhile, South Korean bonds faced outflows of USD 1.38 billion, the biggest monthly withdrawal by foreigners since December 2019, on worries over slowing semiconductor exports.

A Barclays report said foreign holdings as a percentage of total government bonds outstanding declined across Asia in August, with the exception of Malaysia and India.

The brokerage said structural long-term allocations should partially offset still-defensive non-resident demand for Asian bonds, “but risks are for larger outflows if global rates rise further.”

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Sherry Jacob-Phillips)

Wall Street ends choppy session higher with focus firmly on Fed

Sept 19 (Reuters) – Wall Street’s main indexes ended a seesaw session higher on Monday, as investors turned their attention to this week’s policy meeting at the Federal Reserve and how aggressively it will hike interest rates.

Even more so than the Ukraine war or corporate earnings, the actions of the US central bank are driving market sentiment as traders try to position themselves for a rising interest rate environment.

The S&P 500 and the Nasdaq rebounded from logging their worst weekly percentage drop since June on Friday, as markets fully priced in at least a 75 basis point rise in rates at the end of Fed’s Sept. 20-21 policy meeting, with Fed funds futures showing a 15% chance of a whopping 100 bps increase.

Unexpectedly hot August inflation data last week also raised bets on increased rate hikes down the road, with the terminal rate for US fed funds now at 4.46%.

“This is all about what’s going to happen on Wednesday, and what comes out of the Fed’s hands on Wednesday, so I think people are just going to wait and see until then,” said Josh Markman, partner at Bel Air Investment Advisors.

“We had a poor print when the CPI came in, so the Fed – who is behind the 8-ball – is now trying to get ahead of the curve and curb inflation, and that (awareness) is driving equity markets.”

Reflecting the caution for new bets ahead of the Fed meeting, just 9.58 million shares traded on US exchanges on Monday, the sixth lightest day for trading volume this year.

Focus will also be on new economic projections, due to be published alongside the Fed’s policy statement at 2 p.m. ET (1800 GMT) on Wednesday.

Worries of Fed tightening have dragged the S&P 500 down 18.2% this year, with a recent dire earnings report from delivery firm FedEx Corp. (FDX), an inverted US Treasury yield curve and warnings from the World Bank and the IMF about an impending global economic slowdown adding to the woes.

Goldman Sachs cut its forecast for 2023 US GDP late on Friday as it projects a more aggressive Fed and sees that pushing the jobless rate higher than it previously expected.

“The Fed will continue to plough along, we’ll get 75 (bps) on Wednesday, but what comes next and whether they are going to pause or not after Wednesday, that is going to be the interesting part,” said Bel Air’s Markman.

The Dow Jones Industrial Average rose 197.26 points, or 0.64%, to 31,019.68, the S&P 500 gained 26.56 points, or 0.69%, to 3,899.89 and the Nasdaq Composite added 86.62 points, or 0.76%, to 11,535.02.

A majority of the 11 S&P 500 sectors rose. One exception was healthcare, down 0.6% as it was weighed by a fall in shares of vaccine maker Moderna Inc. (MRNA) a day after President Joe Biden said in a CBS interview that “the pandemic is over”.

Industrial stocks rebounded 1.4% after a sharp drop on Friday, while banks gained 1.9%. Tech heavyweights Apple Inc. (AAPL) and Tesla Inc. (TSLA) rose 2.5% and 1.9%, respectively, to provide the biggest boost to the S&P 500 and the Nasdaq.

Take-Two Interactive Software Inc. (TTWO) closed up 0.7%, having recovered from a slump earlier in the day caused by confirmation that a hacker had leaked the early footage of Grand Theft Auto VI, the next installment of the best-selling videogame.

Meanwhile, Knowbe4 Inc. (KNBE) jumped 28.2% to USD 22.17, its highest close since May 4, after the cybersecurity firm said that Vista Equity Partners had offered to take it private for USD 24 per share, valuing the company at USD 4.22 billion.

The S&P 500 posted one new 52-week high and 28 new lows; the Nasdaq Composite recorded 29 new highs and 378 new lows.

(Reporting by Devik Jain and Shreyashi Sanyal in Bengaluru and David French in New York; Editing by Shounak Dasgupta, Anil D’Silva and Lisa Shumaker)

Not so calm before the storm

Sept 20 (Reuters) – Investors do not appear to be waiting for the barrage of central bank meetings this week before making moves.

While holidays in Tokyo and London may have meant global trading was somewhat subdued, that did not stop rates from continuing to ascend to new peaks on Monday.

The yield on the US benchmark 10-year note hit its highest level since 2011, touching 3.518% although it then pulled back. Despite the fresh milestone for bonds, stocks managed gains, with the S&P 500 lodging a 0.7% increase and bouncing back after shedding 4.8% last week.

Euro Zone bond yields also were rising with the German 10-year yield hitting its highest since June.

Investors are girding for central bank action. The Fed’s meeting starts Tuesday, although the big news will come on Wednesday with its statement and Chair Jerome Powell’s press conference. A rate hike of 75 basis points is expected, with markets pricing in roughly one-in-five odds of a full percentage point hike.

Meanwhile in Japan, the BoJ is seen keeping its loose policy when it meets later this week, which could further pressure the weakening yen. The currency has recently slid to 24-year lows against the dollar.

Focus in Asia on Tuesday turns to China, where a decision is due on benchmark lending rates. In a Reuters poll, 75% of market participants predicted no change to either the one-year loan prime rate or the five-year.

Authorities are seen holding off monetary easing in order to avoid more depreciation pressure on the yuan. The currency ended at a fresh 26-month low on Monday and traded below the psychologically critical 7-per-dollar level.

Key developments that should provide more direction to markets on Tuesday:

China 1-yr, 5-yr loan prime rate decision

Japan CPI (August)

Taiwan Export orders (August)

US housing starts (August)

(Reporting by Lewis Krauskopf in New York)

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