US stocks slip, crude slides as soft data feed recession jitters

NEW YORK, Aug 1 (Reuters) – Wall Street ended a three-day winning streak and crude prices plunged on Monday as economic data from the US, Europe and China showed demand weakening under inflation pressures, while the looming possibility of recession curbed risk appetite.

All three major US indexes ended the choppy session modestly lower on the first day of August, on the heels of the S&P 500’s and the Nasdaq’s largest monthly percentage gains since 2020.

“It’s a consolidation,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “Investors are waiting to see if we get follow through or continue it’s downward trend.”

The Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) showed US factory activity decelerated in July to its lowest level since August 2020, but remained in expansion territory and long-running supply restraints appeared to be easing.

The report follows a swath of data from Europe and Asia that showed factory activity slowing or contracting in the face of dampened global demand and persistent inflation.

“There seems to be a comfort level that economy is slowing but demand isn’t going to collapse,” Carlson said. “Is the Fed going to take its foot off the gas pedal and stop raising rates?” That would appear to be what the market is watching.”

“It’s a tug-of-war between those that think the market has already fully discounted the economic slowdown and those that feel it hasn’t,” Carlson added.

The Dow Jones Industrial Average .DJI fell 46.73 points, or 0.14%, to 32,798.4, the S&P 500 .SPX lost 11.68 points, or 0.28%, to 4,118.61 and the Nasdaq Composite .IXIC dropped 21.71 points, or 0.18%, to 12,368.98.

The energy sector pulled European stocks lower after disappointing data from the eurozone and China fueled fears of weakening demand and economic contraction. nL4N2ZD1M5

The pan-European STOXX 600 index lost 0.19% and MSCI’s gauge of stocks across the globe gained 0.06%.

Emerging market stocks lost 0.06%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.11% higher, while Japan’s Nikkei .N225 rose 0.69%.

Crude prices headed lower as global factory data weighed on the demand outlook, and as market participants braced for this week’s meeting of OPEC and other oil producers concerning world crude supply.

US crude fell 4.73% to settle at 93.89USD per barrel, and Brent settled at USD 100.03 per barrel, down 3.94% on the day.

US Treasury yields slid in choppy trading as economic data continued to hint at an impending slowdown which could prompt the Federal Reserve to slow the pace of interest rate increases.

Benchmark 10-year notes last rose 15/32 in price to yield 2.5893%, from 2.642% late on Friday.

The 30-year bond last rose 35/32 in price to yield 2.9206%, from 2.977% late on Friday.

The dollar touched its lowest level against the Japanese yen since June and the dollar index, which measures its performance against a basket of world currencies, was volatile in the wake of the PMI data.

The dollar index fell 0.47%, with the euro up 0.38% to USD 1.0257.

The Japanese yen strengthened 1.20% against the dollar to 131.64, while sterling was last trading at USD 1.2255, up 0.73% on the day.

Gold prices edged higher as the dollar softened, as investors looked to economic data for clues regarding the pace of interest rate hikes from the US Federal Reserve.

Spot gold added 0.4% to USD 1,771.89 an ounce.

(Reporting by Stephen Culp; Additional reporting by Carolyn Cohn in London; Editing by David Holmes, Tomasz Janowski, and Cynthia Osterman)

Wall Street ends down after biggest month since 2020

Aug 1 (Reuters) – Wall Street ended lower after a choppy session on Monday, with declines in Exxon Mobil (XOM) and other energy companies weighing against gains in Boeing (BA) as investors digested the US stock market’s biggest monthly gains in two years.

Stocks gave up some of a strong rally from last week that was driven by bets the Federal Reserve may not need to be as aggressive with interest rate hikes as some had feared.

Also helped by stronger-than-expected second-quarter results, the S&P 500 and the Nasdaq in July posted their biggest monthly percentage gains since 2020.

The S&P 500 bounced between gains and declines on Monday as some investors became more cautious in the wake of that recent rally.

The Federal Reserve says it aims to tame inflation and cool down demand with the interest rate hikes, but some investors and analysts worry that its aggressive moves could drive up unemployment and cripple the economy.

“There are still a lot of questions about whether we are really out of the woods economically, and we probably aren’t,” said Tom Martin, senior portfolio manager at GLOBALT Investments in Atlanta. “We’re not even close on the (economic) effects of the Fed raising interest rates.”

US manufacturing activity slowed-less-than-expected in July, with signs that supply constraints are easing, a report showed.

That data came on the heels of surveys indicating factories across Asia and Europe struggled for momentum in July as flagging global demand and China’s strict COVID-19 curbs slowed production.

Oil prices fell on demand concerns, which in turn weighed on the energy sector. The S&P 500 energy index tumbled and was the deepest decliner among 11 sectors.

Exxon Mobil slid 2.5% and was among the stocks contributing the most to the S&P 500’s decline.

A monthly US jobs report on Friday will be parsed for clues about the Fed’s next moves in its fight against decades-high inflation.

The US central bank has raised interest rates by 2.25 percentage points so far this year and has vowed to be data-driven in its approach toward future hikes.

Boeing Co. (BA) gained 6.1% after Reuters reported the US aviation regulator approved the planemaker’s inspection and modification plan to resume deliveries of 787 Dreamliners.

The S&P 500 is down about 14% in 2022. However, recent quarterly reports have shown companies’ profits were far more resilient than estimated. Of 283 S&P 500 companies that have reported results, 78% have topped profit estimates, as per Refinitiv data. The long-term average is 66%.

The S&P 500 declined 0.28% to end the session at 4,118.59 points.

The Nasdaq declined 0.18% to 12,368.98 points, while Dow Jones Industrial Average declined 0.14% to 32,798.60 points.

US House of Representatives Speaker Nancy Pelosi was set to visit Taiwan on Tuesday. China warned that its military would never “sit idly by” if she visited the self-ruled island claimed by Beijing.

PerkinElmer Inc. (PKI) jumped after the medical diagnostic firm said it will sell some of its businesses along with the brand name to private equity firm New Mountain Capital for up to USD 2.45 billion in cash.

Across the US stock market, declining stocks outnumbered rising ones by a 1.1-to-one ratio.

The S&P 500 posted 5 new highs and 31 new lows; the Nasdaq recorded 68 new highs and 98 new lows.

Volume on US exchanges was relatively light, with 10.3 billion shares traded, compared to an average of 10.8 billion shares over the previous 20 sessions.

(Reporting by Aniruddha Ghosh, Devik Jain and Bansari Mayur Kamdar in Bengaluru, and by Noel Randewich in Oakland, Calif.; Editing by Aurora Ellis)

US Treasury raises Q3 borrowing estimate

NEW YORK, Aug 1 (Reuters) – The US Treasury said on Monday it expects to borrow USD 444 billion in the third quarter, more than the May estimate of a USD 182 billion, due to changes in projections of fiscal activity and the estimated impact of redemptions in the Federal Reserve System Open Market Account.

The third-quarter estimate assumes an end-of-September cash balance of USD 650 billion.

It expects to borrow USD 400 billion in privately held net marketable debt in the October to December quarter, assuming an end-of-December cash balance of USD 700 billion.

The Treasury said it issued USD 7 billion in net debt in the second quarter, ending the three-month period with a cash balance of USD 782 billion.

(Reporting by Karen Brettell)

Global thematic funds see big outflows as growth stocks falter

Aug 1 (Reuters) – Global thematic funds are facing heavy outflows this year as investors’ fascination fade with such assets, most of which are closely correlated with economic growth.

Investors had piled into such funds over the past couple of years as they allocated money to high-growth sectors and stocks tied to trending themes such as work-from-home, climate change, and artificial intelligence.

However, growth stocks have slumped this year, due to a rapid rise in interest rates around the world, and that has reduced the demand for thematic funds.

According to Morningstar, thematic funds witnessed a record outflow of USD 6.3 billion in the first half of this year, compared with an inflow of USD 142.9 billion in the same period last year.

Their net assets also dropped to USD 616.9 billion at the end of June, a 24% drop over the past year.

These declines have prompted fund houses to launch just 65 thematic funds in the first half of this year, compared with a record 234 in the same period last year.

“Thematic funds are known to be among the most risky categories of mutual funds, in part because it restricts the opportunities available. It prohibits the fund from investing in stocks that are not related to the theme,” said Richard Gardner, chief executive officer at financial services firm Modulus Global.

“In a bear market, investors tend to be incredibly risk averse. So, it is only natural that thematic funds would see lessened interest.”

POPULAR THEMES

The ETF All-Stars Thematic Composite index, which consists of stocks that align with popular themes such as fintech, sustainability and healthcare innovation, has declined 28.76% this year, compared with the MSCI World index’s fall of 15%.

The Global Robotics Automation index has slumped 26.84% this year, after delivering an average return of 30% in the last three years.

Global cannabis stocks tracker MJ ETF has fallen 46.8% this year.

The Morningstar data showed robotics and automation funds faced USD 1.6 billion worth of outflows in the first half of this year, while fintech and digital economy funds had net sales of about USD 1.3 billion each.

The net assets of cannabis funds declined to USD 1.3 billion at the end of June, a 68% drop over last year, while the assets of fintech funds dropped to USD 8.6 billion, a 60% decline.

Though thematic funds are lucrative investments, investors often tend to pile into them after their initial big run-ups, exiting at losses, some analysts said.

“Since every theme focuses on different aspects, it is possible that some have already lived their time,” said Kunal Sawhney, CEO at independent research firm Kalkine.

A Morningstar report showed that over the past 10 years, nearly 60% of US thematic funds had shuttered, and just 22% survived and outperformed the broader global markets index.

“In 2021, more than two-thirds of thematic funds underperformed the Morningstar Global Markets Index,” Morningstar said. “This is a sharp reversal from their stellar showing in 2020, highlighting the volatility that goes hand in hand with thematic investing.”

(Reporting by Patturaja Murugaboopathy; Editing by Vidya Ranganathan and David Holmes)

Gold hits near one-month high on dollar weakness

Aug 1 (Reuters) – Gold neared a one-month high on Monday on the back of a decline in the US dollar, with investors awaiting economic data that could influence the path of Federal Reserve policy tightening.

Spot gold was up 0.2% at USD 1,768.44 per ounce by 2:31 p.m. EDT (1831 GMT), having earlier hit its highest since July 5 at USD 1,774.95.

US gold futures settled 0.3% higher at USD 1,787.70.

Gold has more room to the upside given “major issues with Russia, Ukraine and China” and as the dollar runs into some resistance, said Daniel Pavilonis, senior market strategist at RJO Futures.

He added that interest rates are still the biggest factor for gold and even if the Fed is not done raising rates, it is taking a pause. “That is a buying signal,” Pavilonis said.

The Fed raised interest rates by an expected 75-basis-points on Wednesday, but comments from Chair Jerome Powell spurred hopes of a slower hiking path, hitting the dollar.

A weaker dollar makes gold less expensive for buyers holding other currencies.

“Bullion bulls are waiting to see if the coast is clear for another leg up, making sure expectations for a less-aggressive Fed are indeed rooted in reality,” said Han Tan, chief market analyst at Exinity.

Safe-haven gold has also found some support from weak economic data recently, including an unexpected contraction in the US economy over the second quarter and slower euro zone manufacturing activity.

The monthly US jobs report on Friday will be closely scanned as it could influence the Fed’s rate hike plans.

Elsewhere, spot silver fell 0.4% to USD 20.24.

Platinum gained 0.7% to USD 903.49 and palladium jumped more than 3% to USD 2,196.65.

(Reporting by Arundhati Sarkar in Bengaluru; editing by Jason Neely, Aditya Soni, and Nick Zieminski)

EUR/USD looks like it wants to rally despite downside risks

Aug 1 (Reuters) – EUR/USD has struck a seven-session high, and despite some downside risks, interest rates and technical factors provide an upside bias.

Global PMI data indicate risks for slower economic growth are increasing, which would certainly weigh on eurozone exports. With this, Eurozone interest rates have been trending down as investors rein in their expectations for the terminal ECB rate.

EUR/USD is reacting bullishly, however, as investors are likely more focused on the possibility of the Fed pivoting to a less aggressive rate hiking path which is helping to weigh down the dollar.

Meanwhile, EUR/USD technicals highlight upside potential. Dips below the 10-DMA are becoming more short-lived, while daily and monthly RSIs are rising. Reinforcing these bullish signals is EUR/USD’s ongoing consolidation of its gain off the July 14 daily low. The consolidation phase should resolve with new highs being set.

A sustained thrust above the 38.2% Fibo of 1.0787-0.9952 and the July 21 high would be an indication the corrective phase is complete and the rally is resuming.

EUR/USD longs are then likely to target the 55-DMA and 1.0450/1.0490 resistance.

(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Philippines fully awards $271-million T-bill offer at auction

MANILA, Aug 1 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction of T-bills on Monday:

* BTr fully awards 15 billion pesos (USD 270.76 million) offer

* Tenders total 43.306 billion pesos

* BTr awards 5 billion pesos of 91-day T-bills at avg rate of 2.090% versus the previous auction avg of 2.273%

* BTr awards 5 billion pesos of 182-day T-bills at avg rate of 3.188% versus the previous auction avg of 3.143%

* BTr awards 5 billion pesos of 364-day T-bills at avg rate of 3.480% versus the previous auction avg of 3.356%

* Details are on the BTr’s website www.treasury.gov.ph

(USD 1 = 55.40 Philippine pesos)

(Reporting by Enrico Dela Cruz; Editing by Ed Davies)

Dollar sinks to 6-week low to yen on bets for less aggressive Fed

TOKYO, Aug 1 (Reuters) – The dollar sank to a fresh six-week low to the yen on Monday as markets continued to wager that the Federal Reserve has less tightening to do with the US economy at risk of recession.

The dollar dipped as low as 132.07 yen for the first time since June 16, and was last 0.45% lower at 132.605.

The currency pair is extremely sensitive to changes in US long-term Treasury yields, with the benchmark 10-year hovering around 2.67% after sliding to the lowest since early April at 2.618% at the end of last week.

The dollar index – which measures the currency against six counterparts, including the yen – edged down 0.18% to 105.80, slipping back toward Friday’s low of 105.53, a level not seen since July 5.

“US interest rate expectations appear to have peaked (for now) in June,” Jefferies strategists wrote in a research note.

“On all our measures, the dollar appears over-valued.”

Data at the end of last week tossed the greenback in both directions, with it rising initially after the personal consumption expenditures (PCE) price index showed the fastest inflation since 2005, only to sink after the final University of Michigan report – closely watched by Fed policymakers – showed slipping consumer inflation expectations.

The big economic focus for this week will be the monthly US jobs report on Friday.

Traders currently price about 31% probability that the Fed will keep its current 75 basis-point pace of rate hikes at its next meeting on Sept. 21, with 69% odds for a smaller half point increase.

“Markets look to be betting the Fed has done the lion’s share of its task on inflation and will be receptive to slowing activity data,” Taylor Nugent, a markets economist at NAB in Sydney, wrote in a client note.

The euro was little changed at USD 1.02235, continuing its consolidation near the middle of its range over the past week and a half.

Sterling was flat at USD 1.2183, after hitting the highest since June 28 at USD 1.2245 on Friday. Markets are laying 67% odds for a half-point rate hike by the Bank of England on Thursday, compared to 33% probability of a quarter-point increase.

The Reserve Bank of Australia sets policy on Tuesday, and is expected to deliver another half point increase, with traders seeing just a 16% chance of a smaller quarter point tightening.

The Aussie dollar slipped 0.1% to USD 0.6984 on Monday, retreating after touching a six-week high of USD 0.7032 in the previous session.

Data from top trading partner China showed factory activity expanded at a slower pace in July.

“Should the market continue to hear what it wants from the Fed, the Aussie can readily spend more time above USD 0.70,” NAB’s Nugent said.

“But USD 0.65-0.70 is still seen containing most of the price action in coming months.”

(Reporting by Kevin Buckland; Editing by Simon Cameron-Moore & Shri Navaratnam)

Oil drops as weak China factory data fan demand concerns

SINGAPORE, Aug 1 (Reuters) – Oil prices dropped on Monday, as weak manufacturing data from China and Japan for July weighed on the outlook for demand, while investors braced for this week’s meeting of officials from OPEC and other top producers on supply adjustments.

Brent crude futures were down 82 cents, or 0.8%, at USD 103.15 a barrel at 0608 GMT. US West Texas Intermediate crude was at USD 97.44 a barrel, down USD 1.18, or 1.2%.

Fresh COVID-19 lockdowns snuffed out a brief recovery seen in June for factory activity in China, the world’s largest crude oil importer. The Caixin/Markit manufacturing purchasing managers’ index (PMI) eased to 50.4 in July from 51.7 in the previous month, well below analysts’ expectations, data showed on Monday.

Japanese manufacturing activity expanded at its weakest rate in 10 months in July, data showed on Monday.

“China’s disappointing manufacturing PMI is the primary factor that pressed on oil prices today,” CMC Markets analyst Tina Teng said.

“The data shows a surprising contraction of economic activities, suggesting that the recovery of the world-second-largest economy from the covid lockdowns may not be as positive as previously expected, which darkened the demand outlook of the crude oil markets.”

Brent and WTI ended July with their second straight monthly losses for the first time since 2020, as soaring inflation and higher interest rates raise fears of a recession that would erode fuel demand.

ANZ analysts said fuel sales to drivers in Britain were waning, while gasoline demand remained below its five-year average for this time of the year.

Reflecting this, analysts in a Reuters poll reduced for the first time since April their forecast for 2022 average Brent prices to USD 105.75 a barrel. Their estimate for WTI fell to USD 101.28.

The Organization of the Petroleum Exporting Countries (OPEC)and allies including Russia, a group known as OPEC+, will meet on Wednesday to decide on September output.

Two of eight OPEC+ sources in a Reuters survey said a modest increase for September would be discussed at the Aug. 3 meeting, while the rest said output would likely be held steady.

The meeting comes after US President Joe Biden visited Saudi Arabia last month.

“While President Biden’s visit to Saudi Arabia produced no immediate oil deliverables, we believe that the Kingdom will reciprocate by continuing to gradually increase output,” RBC Capital analyst Helima Croft said in a note.

The start of August sees OPEC+ having fully unwound record output cuts in place since the COVID-19 pandemic took hold in 2020.

The group’s new secretary general, Haitham al-Ghais, reiterated on Sunday that Russia’s membership in OPEC+ is vital for the success of the agreement, Kuwait’s Alrai newspaper reported.

Meanwhile, US oil production continued to climb as the rig count rose by 11 in July, increasing for a record 23rd month in a row, data from Baker Hughes showed.

A break for Brent prices below key support level of USD 102.68 could trigger a drop into the range of USD 99.52 to USD 101.26, Reuters technical analyst Wang Tao said.

(Reporting by Florence Tan; Editing by Kenneth Maxwell and Bradley Perrett)

Philippine ex-President Ramos, warrior and survivor, dies at 94

MANILA, July 31 (Reuters) – Former Philippine President Fidel Valdez Ramos, who died on Sunday, was a fighter during wars in Korea and Vietnam and a survivor in the political arena, emerging from a high-ranking security role during the dictatorship of Ferdinand Marcos Sr to win the vote for the nation’s highest office. He was 94.

Ramos became a hero to many for defecting from Marcos’ government, where he led the national police force, spurring the dictator’s downfall during the 1986 popular uprising against his rule.

Others, though, would not forgive or forget his role in enforcing martial law under the Marcos regime.

Ramos, famous in later years for holding unlit cigars, narrowly won a contested election in 1992 to replace the People Power leader Corazon Aquino who unseated Marcos. Though he gained less than 23% of the vote, Ramos soon polled at 66% support and his presidency was remembered for a period of peace, stability and growth.

“Our family shares the Filipino people’s grief on this sad day. We did not only lose a good leader but also a member of the family,” Marcos’ son, the recently elected President Ferdinand Marcos Jr, said in a statement.

“The legacy of his presidency will always be cherished and will be forever enshrined in the hearts of our grateful nation.”

Known as FVR, Ramos attended the U.S. Military Academy at West Point and fought in the Korean War in the 1950s as a platoon leader. He served in the late 1960s in Vietnam as a leader of the Philippine Civil Action Group.

Ramos held every rank in the Philippine army from second lieutenant to commander-in-chief. He never lost his military bearing and swagger, bragging many times “No soft jobs for Ramos.”

The former diplomat’s son became the only Methodist leader of the mainly Roman Catholic country.

His six-year administration opened the country’s economy to foreign investment through deregulation and liberalisation policies.

Ramos broke up monopolies in the transportation and communications sectors. Through special powers granted by Congress he restored the ailing electricity sector, ending debilitating 12-hour power outages that plagued the country.

During his tenure, the economy surged and poverty rates fell to 31% from 39% through his Social Reform Agenda.

Ramos fought right-wing, leftist and Islamic rebels during his time in the military, but later held peace talks with all “enemies of the state”, including rogue soldiers who attempted nearly a dozen times to unseat Aquino during her tenure.

He signed a peace agreement with the Islamic separatists of the Moro National Liberation Front in 1996 and succeeded in shrinking the number of Maoist-led guerrillas to more than 5,400 rebels from a high of 25,000 in early 1986.

Ramos was a multi-tasking workaholic and athletic leader. When he was military chief, he would play golf and jog at the same time, running after his ball. His early morning jog was legendary among his staff officers and even at 80, he would jump to reenact what he did during the revolt in 1986.

(Reporting by Enrico Dela Cruz and Karen Lema; Editing by Christian Schmollinger, Lincoln Feast and Nick Macfie)

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