EUR/USD sold, havens bought on EU’s gas crisis pre-Fed

July 26 (Reuters) – The euro fell broadly Tuesday as euro zone recession risk ramped up as crucial supplies of natural gas to Europe from Russia fell enough to heighten fears of an energy crisis this winter, forcing EU ministers to agree to emergency gas cut plans.

Dutch natural gas prices gained almost 20% on Tuesday and are up 31.7% this week and 207% from a year ago.

EUR/USD fell 1% as Bund and other euro zone government debt yields slid more than Treasury yields amid risk-aversion flows. Two-year bund-Treasury yield spreads fell 7bps and tested July’s trend lows by -2.7%. That eventually got EUR/USD briefly below the 1.01155 daily tenkan support that had earlier marked Tuesday’s lows.

A grouping of mostly weaker-than-forecast US data, particularly consumer confidence and new home sales nAPN0OD4EK, didn’t stop Treasury yields from recovering intraday drops that were led by tumbling European yields, in part because the Fed remains priced to hike rates Wednesday by 75bps again and at least 50bps in September.

Wednesday’s Fed meeting will not provide economic projections or Fed fund dot plots, so unless the Fed does something other than a 75bp rate hike the focus will be on any change in the statement or Fed Chair Jerome Powell’s remarks that would shift rate hike expectation from September through December, when the market sees Fed funds peaking near 3.4%.

And despite euro zone inflation at 8.6% vs 9.1% in the US, the market isn’t convinced the ECB will hike rates by 50bps again in September and only sees rates rising about 110bps in total by mid-2023.

EUR/USD’s brief break below parity this month might foreshadow further weakness if the Fed doesn’t signal a willingness to slow rate hikes before there is a clear downtrend in inflation, and if Russia continues to use nat gas supplies as economic leverage against the EU.

Sterling was only down 0.1%, with the BoE much further along the rate-hiking path than the ECB, and because the UK is less directly at risk from Russian gas supply reductions.

But sterling needs help from a less hawkish Fed, or a more forceful BoE, to extend its rebound from July’s lows.

USD/JPY was about flat, with both the dollar and yen sought as havens. Early Treasury yield weakness reversed after holding key support and despite US data again proving disappointing, partly in advance of the 5-year auction and the Fed.

That got prices back up by the pivotal 21-day moving average and Tuesday’s high at 136.845 after the New York morning lows at 136.28 on EBS couldn’t break the overnight session low at 136.265.

The pandemic recovery rise in USD/JPY has been slowed by 2-year Treasury-JGB yield spreads remaining well below their June 14, pre-Fed June meeting peak.

The Canadian and Australian dollars were modestly weaker amid Tuesday’s risk aversion, as was the yuan.

Bitcoin and ether wilted further from recent recovery highs.

Ahead of Wednesday’s Fed event risk will be US durable goods orders, wholesale inventories and pending home sales, as well as EIA data that’s partly overshadowed by the Biden administration announcing Tuesday it will sell an additional 20 mln bbls of oil from the SPR.

(Editing by Terence Gabriel; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold stalls as pre-Fed verdict jitters grip investors

July 26 (Reuters) – Gold prices were stuck in a narrow range on Tuesday, as lower Treasury yields amid lingering recession woes offset a firmer dollar, while investors turned their attention to the US Federal Reserve’s two-day meeting.

Spot gold eased 0.1% to USD 1,716.91 per ounce by 1:50 p.m. EDT (1750 GMT). US gold futures settled down 0.1% at USD 1,717.70.

US Treasury yields fell sharply, as a looming gas supply crisis in Europe kept the markets on edge about global recession risks.

“The relief we’ve seen in yields is a good sign for gold… persistent fear in the equities market, geopolitical issues and if the energy squeeze intensifies, there will be strong demand for safe-haven,” Edward Moya, senior analyst with OANDA, said.

But “if investors feel the Fed is still ready to deliver another 75 bps hike in September, that’s going to be trouble for gold.”

The International Monetary Fund cut global growth forecasts again, warning that downside risks from high inflation and the Ukraine war were materializing.

But capping gold’s gains, the US dollar rose 0.7%, making bullion less appealing for overseas buyers.

Since gold in a non-interest yielding asset, rising interest rates make it less appealing. However, gold is widely regarded as an inflation hedge and safe-store of value amid economic uncertainties.

The market expects the Fed to increase rates by 75 basis points at the conclusion of its policy meeting on Wednesday. A hike of that magnitude would effectively close out pandemic-era support for the economy.

“We expect a further lift to real interest rates this year, particularly as inflationary risk fades in the second half of 2022. As such, additional liquidation of exchange-traded funds can be expected,” UBS analyst Giovanni Staunovo said, forecasting gold to fall to USD 1,600 by year-end.

Spot silver rose 1.1% to USD 18.61 per ounce, platinum was down 0.7% at USD 872.63.

Palladium fell 0.2% to USD 2,004.00.

(Reporting by Ashitha Shivaprasad and Arundhati Sarkar in Bengaluru; Editing by Shailesh Kuber and Andrea Ricci)

Nascent US stock rally hangs in balance as Wall St awaits megacap earnings

NEW YORK, July 26 (Reuters) – Results from the four largest US companies by market value highlight a busy week of corporate earnings and could help determine whether the stock market can sustain its recent rally.

Microsoft Corp. (MSFT) and Google-parent Alphabet Inc. (GOOGL) are set to report after the market closes on Tuesday, with Apple Inc. (AAPL) and Amazon.com Inc. (AMZN) due on Thursday, in a week that will see reports from about 170 companies representing some 47% of the S&P 500’s market value, according to Credit Suisse.

Those four companies, which have helped power gains for the benchmark S&P 500 for the past decade, account for nearly one-fifth of the weigh in the index.

What they forecast is “pretty representative of how the economy is doing,” said King Lip, chief strategist at Baker Avenue Asset Management in San Francisco. “If Microsoft comes in and says things are ok, if Google says things are ok, then that represents a significant weight in not just market cap but the overall economy.”

The heart of the second-quarter earnings period is overlapping with Wednesday’s decision from the Federal Reserve on interest rates. The central bank is expected to hike by 75 basis points as it seeks to fight the worst inflation in 40 years.

With inflation surging and rate hikes weighing on risk sentiment this year, the S&P 500 is down about 17% in 2022, but has rebounded 7% since its closing low for the year in June.

“This week could be very critical to whether we can continue to recover or whether this is just some kind of bear market rally on the way back down towards lows,” said Rick Meckler, partner at family investment office Cherry Lane Investments.

The S&P 500 was down 0.6% early Tuesday after retailer Walmart (WMT) slashed its profit forecast as rising prices for food and fuel prompted customers to cut back on discretionary purchases.

Investors’ expectations for second-quarter results were downbeat heading into the period, given concerns about a potential recession as well as inflation raising costs for businesses and consumers.

With 107 S&P 500 companies reported so far, about 75% have posted earnings above analysts’ expectations, according to Refinitiv IBES data as of Monday. However, that trails the 81% beat rate for the past four quarters.

Earnings are expected to have climbed 6.1% for the second quarter from the year-ago period, according to Refinitiv. Tech sector earnings are projected to rise 2.4%.

The four megacap companies plus Facebook owner Meta Platforms (META) — which reports on Wednesday — are projected in aggregate to increase revenues by 6.7% but see earnings fall by 14.4%, according to Credit Suisse strategists.

When Alphabet and Meta report, focus will be on advertising spending after Twitter Inc. (TWTR) and Snapchat’s owner Snap Inc. (SNAP) last week signaled advertisers had tightened their purse strings in response to a darkening economic outlook.

Investors will be keen for insight on consumer demand from Apple, maker of iPhones and MacBooks, and online retail giant Amazon.

Microsoft has already warned of financial headwinds from currency effects from the strong dollar, a factor that is expected to loom over an array of companies this period.

Overall, investors will want to learn how these companies are “navigating what has really become a difficult economic environment for them,” marked by supply chain snags, rising costs and slowing demand, Meckler said.

“The megacaps have historically proven incredibly resilient,” Meckler said.

(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Nick Zieminski)

Nikkei inches lower while traders wait on Fed

SINGAPORE, July 26 (Reuters) – Japan’s Nikkei .N225 notched a small decline on Tuesday, while the broader Topix was flat, as investors kept to the sidelines ahead of Wednesday’s US Federal Reserve meeting.

The Nikkei closed 0.16% lower, its second straight daily drop. Turnover, as on Monday, was light.

“Markets are definitely in a wait-and-see mode, what you’re seeing is gentle position adjusting,” said Jeffrey Halley at brokerage OANDA in Singapore, ahead of the Fed, US growth data and a slew of US earnings. “It’s the calm before the storm.”

Tech investor SoftBank Group Corp. rose 3.2% – its biggest daily gain in about a month – after Hong Kong shares rose for one of its holdings, Chinese tech giant Alibaba. Alibaba plans to add a primary listing in Hong Kong.

Other gainers included insurer Tokyo Marine Holdings Inc., up 1.6%, engineering firm JGC Holdings 1963.T, and oil and gas exporter Inpex, up 3.3%. Supply concerns in Europe are lifting global energy and gas prices.

Japan also upgraded its overall view on the economy for the first time in three months in July, with the government turning more positive on consumption and jobs.

Minutes from last month’s Bank of Japan meeting underscored policymakers resolve to keep interest rates low.

Underperformers among the Topix 30 were Nidec Corp., down 1.57%, followed by Nintendo Co. Ltd., losing 1.20%.

The dollar traded firmly at 136.68 yen. Traders expect a 75 basis point US rate hike on Wednesday, but there are doubts around the future path for rates amid signs of a few wobbles in the US economy.

The volume of shares traded on the Tokyo Stock Exchange’s main board was 0.91 billion, compared to the average of 1.21 billion in the past 30 days.

(Reporting by Tom Westbrook and Vidya Ranganathan in Singapore; Additional reporting by Junko Fujita in Tokyo; Editing by David Holmes)

Philippines raises $629 million from 2035 T-bond re-issue

MANILA, July 26 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction of re-issued 2035 T-bonds on Tuesday:

* BTr fully awards 35 billion pesos (USD 628.59 million) offer

* Tenders total 93.998 billion pesos

* Average yield at 6.894%

* Bonds were originally issued in December, 2010

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

(USD 1 = 55.68 Philippine pesos)

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

Oil settles down on lower US consumer confidence, coming SPR release

July 26 (Reuters) – Oil prices reversed early gains and settled lower on Tuesday, as investors worried about lower consumer confidence and braced for another 20 million barrels of crude oil to be released from the US Strategic Petroleum Reserve.

Brent crude futures fell 75 cents, or 0.7%, to settle at USD 104.40. US West Texas Intermediate (WTI) crude fell USD 1.72 cents, or 1.8%, to USD 94.98.

The Biden administration said it will sell an additional 20 million barrels of SPR crude oil as part of a previous plan to tap the facility to calm oil prices boosted by Russia’s invasion of Ukraine in February and recovery in demand that cratered early in the pandemic.

In late March, the administration said it would release a record 1 million barrels per day of SPR crude oil for six months.

“The market reacts to these SPR announcement and has helped keep a lid on things, to an extent,” said John Kilduff, partner at Again Capital LLC in New York.

US consumer confidence dropped to nearly a 1-1/2-year low in July on nagging worries about inflation and rising interest rates, a Conference Board survey showed. It also showed consumers were less optimistic about the labor market.

Prices got an early boost from news that Russia was tightening its gas squeeze on Europe. On Monday, Gazprom (GAZP) said supplies through the Nord Stream 1 pipeline to Germany would drop to only 20% of capacity.

Germany, Europe’s biggest economy, may have to ration gas to industry to keep its citizens warm during the winter months.

“The announcement revived fears that Russia, despite its cynical denial, will not shy away from using its energy as a weapon in order to gain concessions in its war against Ukraine and … could probably expect short-term success,” said Tamas Varga at oil brokerage PVM.

European Union energy ministers approved a proposal for all EU countries to cut gas use voluntarily by 15% from August to March.

Europe’s crude, oil product and gas supplies have been disrupted by Western sanctions and payment disputes with Russia since the Feb. 24 invasion of Ukraine, which Moscow calls a “special military operation”.

The EU has repeatedly accused Russia of energy blackmail. The Kremlin has blamed shortfalls on maintenance issues and sanctions.

High fuel prices have already begun to curb demand, and investors are bracing for higher US interest rates. The Federal Reserve is expected to raise rates by 75 basis points at the conclusion of its policy meeting on Wednesday.

“Volatility will likely be stepped up as this week progresses with tomorrow’s Fed decision and associated comments likely determining the course of oil trade through the rest of this week,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

(Additional reporting by Ahmad Ghaddar in London, Yuka Obayashi in Tokyo and Muyu Xu in Singapore; Editing by Kirsten Donovan, David Goodman, Marguerita Choy and David Gregorio)

S&P 500 ends choppy session nearly flat; investors eye Fed, earnings

NEW YORK, July 25 (Reuters) – The S&P 500 see-sawed on Monday and ended close to unchanged as investors girded for an expected rate hike at a Federal Reserve meeting this week and earnings from several large-cap growth companies.

The Nasdaq ended lower, and S&P 500 technology and consumer discretionary led declines among major S&P sectors. The energy sector gained along with oil prices.

“Right now we’re just in a holding pattern waiting for all those developments to play out,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.

The Fed is expected to announce a 75 basis-point rate hike at the end of its two-day monetary policy meeting on Wednesday, effectively ending pandemic-era support for the US economy.

Comments by Fed Chairman Jerome Powell following the announcement will be key, as some investors worry that aggressive rate hikes could tip the US economy into recession.

This week is expected to be the busiest in the second-quarter reporting period, with results from about 170 S&P 500 companies due. Microsoft Corp. (MSFT) and Google-parent Alphabet (GOOGL) are due to report Tuesday. Apple Inc. (AAPL) and Amazon.com Inc. (AMZN) are set for Thursday.

“It’s a crucial earnings season for the market, especially given the (recent) attempt by Nasdaq to climb higher,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

The Nasdaq, which has led declines among major sectors this year, gained more than 3% last week.

The Dow Jones Industrial Average rose 90.75 points, or 0.28%, to 31,990.04, the S&P 500 gained 5.21 points, or 0.13%, to 3,966.84 and the Nasdaq Composite dropped 51.45 points, or 0.43%, to 11,782.67.

After the closing bell, shares of Walmart (WMT) were down more than 8% after the retailer said it was cutting its forecast for full-year profit and blamed food and fuel inflation.

S&P 500 earnings are expected to have climbed 6.1% for the second quarter from the year-ago period, according to IBES data from Refinitiv. Along with inflation and rising interest rates, investors have been concerned about the impact of currency headwinds and lingering supply chain issues for companies this earnings season.

Tuesday brings reports on two housing indicators – the S&P Case-Shiller’s 20-city composite and the Commerce Department’s new home sales number.

Recent housing data has suggested the sector may be a harbinger of a cooling economy.

Newmont Corp. (NEM) fell 13.2% after the miner raised its annual cost forecast and missed its second-quarter profit, hurt by lower gold prices and inflationary pressures.

Volume on US exchanges was 9.34 billion shares, compared with the 11.0 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.55-to-1 ratio; on Nasdaq, a 1.05-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 29 new lows; the Nasdaq Composite recorded 50 new highs and 105 new lows.

(Reporting by Caroline Valetkevitch; additional reporting by Shreyashi Sanyal and Aniruddha Ghosh in Bengaluru and Sinead Carew in New York; Editing by Sriraj Kalluvila, Anil D’Silva and David Gregorio)

Dollar falls for third straight session with Fed eyed

NEW YORK, July 25 (Reuters) – The dollar was lower against a basket of major currencies on Monday, as investors weighed the implications of a rate hike by the US Federal Reserve in an economy that may be on the verge of a recession.

The central bank is widely expected to raise interest rates by 75 basis points at the conclusion of its policy meeting on Wednesday. A hike of that magnitude would effectively close out pandemic-era support for the economy.

Expectations for a hike of 75 basis points from the Fed stand at about 75%, according to CME’s Fedwatch Tool, with a 25% chance of a 100 basis point hike.

Recent data has shown signs of an economic slowdown while inflation remains stubbornly high, with claims for jobless benefits rising to its highest in eight months last week and regional manufacturing gauges slumping.

Later in the week, investors will also eye the advance reading for second-quarter gross domestic product, which could show negative growth and meet a traditional definition of recession. On Friday, personal consumption expenditures, the Fed’s preferred inflation measure, will be released.

“Everybody is expecting a 75 percent increase, a recession essentially the day after with a negative GDP so I don’t think you are going to get anything changing right now,” said Joseph Trevisani, senior analyst at FXStreet.com.

“But right now, equities are going nowhere, the dollar has remained strong but has given back, the traders who went long the dollar took some profits which is perfectly normal.”

The dollar index fell 0.244% at 106.420, with the euro EUR= up 0.14% to USD 1.0224.

Last week, the greenback saw its biggest weekly percentage decline in two months, as a rally in equities helped dent the appeal of the safe-haven dollar and a 50 basis point rate hike by the European Central Bank helped buoy the euro to a two-week high.

On Monday, Latvian central bank Governor Martins Kazaks said in an interview with Bloomberg News that the ECB may not be done with big rate hikes.

US equities gave up early gains with a slew of corporate earnings on deck for the week, including those from mega-cap names such as Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN). Investors are eyeing the earnings season for signs of a slowdown in the economy as well as the impact of a strong dollar on profits.

Of the 107 companies in the S&P 500 that have reported earnings through Monday morning, 74.8% have topped analyst expectations, below the 81% beat rate over the past four quarters, but above the 66% rate since 1994, per Refinitiv data. Earnings growth is currently estimated to be 6.1%, up from 5.6% at the start of July.

The Ifo business sentiment survey showed on Monday that business morale in Germany fell more than expected in July to its lowest in more than two years.

The Japanese yen weakened 0.44% versus the greenback at 136.65 per dollar, while Sterling was last trading at USD 1.2047, up 0.37% on the day.

British industrial output grew at the slowest pace in over a year in the three months to July, but there are tentative signs that some challenges around inflation and investment are easing, a Confederation of British Industry survey showed on Monday.

In cryptocurrencies, bitcoin last fell 4.05% to USD 21,687.61.

(Reporting by Chuck Mikolajczak, editing by Ed Osmond and Marguerita Choy)

Gold dips on uptick in yields ahead of expected Fed rate hike

July 25 (Reuters) – Gold prices gave up initial gains to slip on Monday as US Treasury yields edged back up, while investors positioned themselves for an expected 75-basis-point interest rate hike by the Federal Reserve later this week.

Spot gold was down 0.4% to USD 1,719.49 per ounce by 1:46 p.m. ET (1746 GMT). US gold futures settled 0.5% lower at USD 1,719.10.

The biggest factor influencing gold is the anticipation of the Fed meeting, with US second-quarter GDP numbers on Thursday also likely to be a significant driver, said Daniel Pavilonis, senior market strategist at RJO Futures.

“Usually, ahead of the Fed, you see a sell-off in the metals and that’s just normal.”

The Fed is expected to lift its benchmark overnight interest rate by another 75 basis points at its July 26-27 meeting rather than by a percentage point to quell stubbornly high inflation as the likelihood of a recession over the next year rises to 40%, a Reuters poll found.

Rising US interest rates reduce the appeal of non-yielding gold, even though it is considered a hedge against inflation.

Gold retreated on Monday despite a pullback in the dollar, which usually makes bullion more attractive for overseas buyers.

Unless the Fed hikes rates by 100 basis points, there is a possibility we will see further weakness in the dollar and gains for gold, said Fawad Razaqzada, market analyst at City Index.

In physical markets, top consumer China’s net gold imports via Hong Kong jumped almost fivefold in June as banks stepped up purchases and COVID curbs were relaxed.

Spot silver fell 0.8% to USD 18.44 per ounce.

While growing recessionary fears favour fund flows into the dollar rather than gold, silver is struggling due to recent challenges in the electronics sector, ANZ said in a note.

Platinum rose 0.8% to USD 880.24 per ounce, while palladium slipped 1.1% to USD 2,009.64.

The use of platinum as a substitute for more costly palladium is likely to accelerate amid concerns about supply from top palladium producer Russia and a drive among carmakers to cut costs, Anglo American Platinum said.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Shailesh Kuber, Paul Simao and Krishna Chandra Eluri)

Philippines’ Marcos vows farm and tax overhauls in address to nation

MANILA, July 25 (Reuters) – Philippine President Ferdinand Marcos Jr pledged on Monday to overhaul his country’s tax system and make it a destination for investment and tourism, promising also a big agriculture overhaul to boost output and reduce its heavy import reliance.

Speaking before Congress in his first state of the nation address, Marcos, who won a May election in a landslide, said it was vital to implement reforms to bring in tourism and investment and maintain what was currently firm growth momentum.

His administration would implement solid fiscal policy management and was targeting 6.5 to 7.5% gross domestic product growth this year, he said, while warning of challenges ahead in keeping prices stable.

Marcos, the son of the late strongman ousted from power in a 1986 uprising, said it was critical that the Philippines, a major importer of rice and other commodities, can boost its farm output and become more resilient to climate change.

Among the measures he would introduce was a moratorium on farmers’ debts to allow them to channel resources into improving output.

“It will unburden farmers of their dues and be able to focus on improving farm productivity,” he said, while stressing the need for an “infusion of fresh and new blood”, and use of scientific farming by a new breed of farmers.

Marcos also promised to improve education, healthcare and working conditions for doctors and nurses and boost infrastructure in the nation of more than 7,000 islands, including modernising airports.

(Reporting by Karen Lema and Neil Jerome Morales; Writing by Martin Petty; Editing by Ed Davies)

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