Germany leads European shares lower on sentiment survey, Powell speech

Aug 26 (Reuters) – European shares tumbled on Friday, with Germany in the lead as investors fretted over downbeat consumer sentiment data in the continent’s biggest economy, while a reiterated hawkish stance from Federal Reserve Chair Jerome Powell added to fears.

The pan-European STOXX 600 slid 1.7%, closing down 2.6% for the week. Germany’s DAX index ended 2.3% lower, with a weekly fall of 4.2% making it its worst week in more than two months.

German consumer sentiment is set to hit a record low for the third month in a row in September, a new survey showed, as households brace for surging energy bills. In contrast, French consumer confidence unexpectedly rose in August.

“German recession fears just became more intense with the sentiment index falling to a new record low… Germany is particularly reliant on external energy producers, and people are saving at the highest in 11 years, showing consumers are taking precautions in case of the worst case scenario,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

Comments from Powell did not offer any respite to jittery stock markets as he noted the US economy would need tight monetary policy “for some time” before inflation was under control, which meant slower growth, a weaker job market and “some pain” for households and businesses.

“In less than nine minutes, Chair Powell jawboned the market to avoid discounting their steadfast resolve to move into very restrictive territory and stay there as long as necessary,” said Jeff Klingelhofer, co-head of investments at Thornburg Investment Management.

“Chair Powell threw cold water on the market’s belief that the Fed will move to marginally restrictive policy and then pause.”

Euro zone bond yields rose further following Powell’s comments. Borrowing costs across the bloc had already been pushed higher after a Reuters report that the European Central Bank could debate a 75 basis point rate hike in September.

Elsewhere, regulator Ofgem said British energy bills would rise an eye-watering 80% to an average of 3,549 pounds (USD 4,188) a year from October, calling it a “crisis” that needed to be tackled by urgent government action.

The retail and travel & leisure sectors fell about 3.5% each, the most among European sectors.

Danish brewery Carlsberg slipped 0.3% after saying its Poland subsidiary could cut or halt beer production due to a lack of carbon dioxide deliveries.

Germany’s Salzgitter Maschinenbau Group fell 2.0% after private equity firm Dymon Asia said it was buying the lifting equipment maker’s Singapore unit.

Shares of Britain’s Micro Focus nearly doubled after Canada’s OpenText agreed to buy the enterprise software maker in an all-cash deal for USD 6 billion.

(Reporting by Anisha Sircar and Shreyashi Sanyal in Bengaluru: Editing by Sriraj Kalluvila and Alex Richardson)

Japan’s Nikkei ends slightly higher ahead of Powell speech

TOKYO, Aug 26 (Reuters) – Japanese shares ended slightly higher on Friday after erasing some of their earlier gains, as cautious investors awaited a speech by Federal Reserve Chair Jerome Powell for fresh clues about the path of US monetary policy tightening.

The Nikkei share average ended up 0.57% at 28,641.38, well off the morning session’s high of 28,792.93.

The broader Topix also gave up some of its early gains to close 0.15% higher at 1,979.59.

The market were buoyed by a tech-led rally on Wall Street overnight, amid lower US bond yields as several Fed officials were non-committal about the size of interest rate hike they will approve at their meeting next month.

Powell will speak at the Fed’s annual symposium in Jackson Hole, Wyoming at 1400 GMT.

“The desire to close out positions may be strengthening,” a market participant at a domestic securities company said.

“It’s a difficult environment to take new positions,” a market participant at another securities firm said.

The Nikkei, however, still posted a 1% weekly drop, after a rally for three weeks.

Of the Nikkei’s 225 component stocks, 134 rose versus 83 that fell, while eight were flat.

Industrials made up the best performing sector, followed by basic materials and tech. Energy was the biggest loser, following an overnight decline in crude oil prices.

Chipmaking equipment maker Tokyo Electron was the biggest mover by index points, adding 35 points to the benchmark with a 2.23% gain.

Uniqlo store operator Fast Retailing contributed 33 points, with a 1.1% advance.

Startup investor SoftBank Group also rose 1.19%. That’s after major holding Alibaba rallied following a Wall Street Journal report that the United States and China were nearing an agreement allowing American accounting regulators to travel to Hong Kong to inspect audit records of US-listed Chinese companies.

(Reporting by Tokyo markets team; Editing by Subhranshu Sahu and Rashmi Aich)

Oil prices edge up on signs of improving demand

KUALA LUMPUR, Aug 26 (Reuters) – Oil prices rose as much as USD 1 on Friday on signs of improving fuel demand, although further gains were capped as the market awaited clues from the US Federal Reserve chairman on the outlook for rate hikes in a speech later in the day.

Brent crude futures climbed 87 cents, or 0.9%, to USD 100.21 a barrel by 0410 GMT. US West Texas Intermediate (WTI) crude futures also rose 88 cents, or 0.9%, to USD 93.40 a barrel. Both contracts jumped in early trade by as much as USD 1 after slumping about USD 2 on Thursday.

Despite uncertainty over the pace of rate hikes in the United States to tackle soaring inflation, worries about oil demand destruction eased this week, putting the benchmark oil contracts on track for gains of around 3% for the week.

ANZ Research analysts said comments from some US central bank officials ahead of Chairman Jerome Powell’s speech on Friday had cast a cloud over the economic backdrop.

“Nevertheless, signs of strong demand are emerging,” ANZ Research analysts said in a note, pointing to data on encouraging road traffic growth.

“The most recent Congestion Index data from TomTom shows Asia Pacific, European and North American traffic levels all posting strong weekly growth in the week to August 24.”

Congestion levels in China also rebounded, ANZ said, pointing to Baidu data.

The prospect of the Organization of the Petroleum Exporting Countries (OPEC) curbing output to offset production increases from Iran also supported prices.

Sources told Reuters that potential OPEC+ production cuts mooted this week by Saudi Arabia are likely to coincide with the return of Iran to oil markets should it clinch a nuclear deal with the West.

Crude markets may remain supported, said Tina Teng, an analyst at CMC Markets, as the supply cartel signalled it would cut output if oil prices weaken.

Tehran is reviewing Washington’s response to a European Union-drafted final offer to revive a nuclear deal, with the EU expecting a response soon. It is unclear, though, how quickly Iranian oil exports would resume if a deal is reached.

If sanctions are lifted against Iran, it could take around a year and a half for it to reach its full capacity of 4 million barrels per day, up 1.4 million bpd from its current output.

(Reporting by Sonali Paul in Melbourne and Emily Chow in Kuala Lumpur; Editing by Himani Sarkar and Tom Hogue)

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)

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