Oil falls on concerns economic slowdown may dent fuel demand

TOKYO, Aug 22 (Reuters) – Oil prices fell on Monday, ending three days of gains, on fears aggressive US interest rate hikes may lead to a global economic slowdown and dent fuel demand.

Brent crude futures for October settlement declined USD 1.17, or 1.2%, to USD 95.55 a barrel by 0054 GMT, with concerns over slowing demand in China because of a power crunch in some areas also weighing on prices.

US West Texas Intermediate (WTI) crude futures for September delivery, due to expire on Monday, was down USD 1.12, or 1.2%, at USD 89.65 a barrel. The more active October contract was at USD 89.29, down USD 1.15, or 1.3%.

Both Brent and WTI climbed for a third straight day on Friday, but fell about 1.5% for the week on a stronger dollar and demand fears.

“Investors were worried that a possible steep rate hike by the Fed would cause an economic slowdown and sap fuel demand,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

“China’s power restriction in some regions is also a concern as it could affect economic activity,” he added.

China’s southwestern province Sichuan began limiting electricity supply to homes, offices and malls last week because of a severe power crunch driven by extreme heat waves and drought, according to state media and one power company.

Strength in the US dollar, which was hovering at around a five-week high, also weighed on crude prices because it makes oil more expensive for buyers in other currencies.

Investors will be paying close attention to comments by Fed Chair Jerome Powell when he addresses an annual global central banking conference in Jackson Hole, Wyoming, on Friday.

US central bank officials have “a lot of time still” before they need to decide how large an interest rate increase to approve at their Sept. 20-21 policy meeting, Richmond Federal Reserve President Thomas Barkin said on Friday.

The Fed is seen as having more room to hike rates than central banks of other large economies which are more fragile.

Meanwhile, the leaders of the United States, Britain, France and Germany discussed efforts to revive the 2015 Iran nuclear deal, the White House said on Sunday, though no further details were provided.

The European Union and United States said last week they were studying Iran’s response to what the EU has called its “final” proposal to revive the deal, under which Tehran curbed its nuclear program in return for economic sanctions relief.

(Reporting by Yuka Obayashi; Editing by Jamie Freed)

Summer rebound in US stocks gains fans among chart-watching investors

NEW YORK, Aug 19 (Reuters) – The rebound in US stocks is gaining believers among investors who study market trends, bolstering hopes for equities in the second half of 2022.

After notching its worst first half since 1970, the S&P 500 has bounced some 15% from its mid-June low, fueled by stronger-than-expected corporate earnings and hopes the economy can avoid a recession even as the Federal Reserve raises rates to tame inflation.

Past rallies in stocks have been short-lived this year and many market participants believe it is too early for optimism. Federal Reserve officials have gone out of their way to emphasize that the central bank has plenty of work to do in bringing down inflation, and the coming week’s symposium in Jackson Hole, Wyoming, could see them once again push back on expectations of a dovish monetary policy pivot, one narrative that has helped lift stocks.

The S&P 500 closed down about 1.29% on Friday, ending a streak of four straight weekly gains.

Still, those who look to market phenomena such as breadth, momentum, and trading patterns to inform their investment decisions see a more optimistic picture, and are growing convinced the recent gains in equities are unlikely to fade.

Several indicators “really suggest that that low we had in June is certainly more durable than the low we had in May or March,” said Willie Delwiche, an investment strategist at market research firm All Star Charts. “It’s a rally that can be leaned in to, not one that needs to be feared at this point.”

Among these are measures that show the “breadth” of a market move, or whether a significant amount of stocks are rising or falling in unison. A period of narrowing breadth late last year came as a worrying sign to some investors and preceded the start of a decline in the S&P 500 in which stocks fell nearly 21% in the first half of 2022.

That trend has reversed recently. The number of new highs on the New York Stock Exchange and Nasdaq surpassed new lows last week for the first time this year on a weekly basis – an encouraging sign to Delwiche and other strategists.

“The beginning of sustainable rallies usually starts with a large percentage of stocks rallying together,” said Ed Clissold, chief US strategist at Ned Davis Research. The firm recently increased its recommended exposure to US equities to “neutral” from “underweight” as some indicators turned positive.

Additionally, the number of S&P 500 stocks above their 50-day moving average recently hit 90%. The signal has preceded big moves in the S&P 500, with the index gaining an average of 18.3% in the year after the 90% threshold is hit, data from Bespoke Investment Group showed.

“The probability that we are higher in a year is much higher with that flashing,” said Todd Sohn, technical strategist at Strategas.

A market that is galloping higher also tends to sustain its momentum. A rise of 15% or more in the S&P 500 within 40 trading days has been followed by an additional average gain of 15.3% over the next year, Delwiche said.

One important technical indicator was hit earlier this month, when the S&P 500 recovered 50% of its bear market price decline. Since World War Two, the index has not gone on to make a new low after such a move, according to Sam Stovall, chief investment strategist at CFRA Research.

Some indicators do not support more gains. Analysts at BofA Global Research said that stocks have historically bottomed when the sum of inflation and trailing price/earnings was less than 20. That number currently stands at 28.5, the bank wrote on Wednesday.

At the same time, the US Treasury yield curve typically steepens around market bottoms, according to Strategas’ Sohn. The current shape of the curve, however, shows yields for shorter-dated bonds exceeding those for many longer-dated ones, a sign that has preceded past recessions.

“We would say that tactically selling into further strength is justified,” Citi strategists wrote earlier this week, noting that the S&P 500 had already rallied through its year-end target of 4,200.

Indeed, three previous bounces in the S&P 500 this year have reversed to result in the index marking new lows.

But Delwiche, of All Star Charts, believes this move may be different.

“It’s more likely that we see strength beget strength,” he said.

(Reporting by Lewis Krauskopf in New York; Editing by Ira Iosebashvili and Matthew Lewis)

Dollar strength sets gold on its longest losing streak since November

Aug 19 (Reuters) – Gold prices slipped for a fifth consecutive session on Friday, in its longest losing run since November last year, as the bullion’s appeal waned with a stronger dollar and more US interest rate hikes on the horizon.

Spot gold dropped 0.6% to USD 1,748.58 per ounce by 1:47 p.m. ET (1747 GMT), having hit its lowest since July 28 earlier in the session. US gold futures settled down 0.5% at USD 1,762.9.

After posting gains in the previous four weeks, prices are down 2.9% so far this week, the most since the week of July 8.

“The main element pressuring gold and silver market is the resurgent dollar… Gold and dollar compete as safe-haven assets, higher US interest rates suggest a stronger dollar, which will add further downside to gold,” said Jim Wyckoff, senior analyst at Kitco Metals.

The dollar index surged and was on track for a weekly gain. Stronger dollar makes gold less attractive to overseas buyers.

The Fed needs to keep raising rates 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.

The reality check on the trajectory of future Fed rate rises has brought an abrupt reversal in gold’s attempts to climb back above USD 1,800, Rupert Rowling, a market analyst at Kinesis Money, wrote in a note.

Investors will be looking downwards to below USD 1,700 as the next significant support rather than at any upward landmarks, Rowling added.

A drop in domestic prices led to improved gold buying in major consumer India.

Spot silver fell 2.2% to USD 19.09 per ounce, en route to a fall of 8.3% this week, possibly its worst since September 2020.

Slower economic growth and a Fed that keeps tightening provide an unfavorable mix for silver, UBS analysts said.

Platinum fell 1.9% to USD 893.30, while palladium was down 1.6% to USD 2,121.23, both set for weekly drops.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri and Shailesh Kuber)

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)

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