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)

Philippines’ Marcos lays out ambitious policy agenda with farm sector in focus

MANILA, July 25 (Reuters) – Philippine President Ferdinand Marcos Jr on Monday outlined ambitious plans for his six-year term in office that focus on fiscal management, infrastructure upgrades and turning the long-neglected farm sector into an engine of growth.

The Philippines is beset with numerous challenges, from soaring prices, food shortages, poverty and inequities in education, but Marcos, the son of the strongman overthrown in a 1986 revolt, said he was optimistic.

“We live in difficult times brought about by some forces of our own making, but certainly, also by forces that are beyond our control. But we have, and we will continue, to find solutions,” Marcos said in a speech to Congress.

Marcos, who began his term on June 30, won a landslide victory in May capping off his wealthy family’s decades-long quest to regain the presidency and rehabilitate its image after it was driven out of power.

The elder Ferdinand Marcos ruled for two decades from 1965, almost half of it under martial law, during which time thousands of his opponents were jailed, killed or disappeared, and billions of dollars of state wealth were plundered. The Marcos family denies embezzlement.

Chanting “Never again to martial law!”, hundreds of activists held a rally a few blocks away from the parliamentary building ahead of Marcos’s address, demanding an end to a “crisis in wages, jobs and rights”.

Marcos, who has taken the agriculture portfolio, said he would create jobs and support growth by modernizing agriculture, to boost food production and cut imports in the face of a global food price crisis.

Among his first acts as president would be to suspend farmers’ debts, he said. Agriculture output currently accounts for a tenth of GDP.

In a 78-minute speech, Marcos promised to expand his predecessor Rodrigo Duterte‘s infrastructure program, with a renewed focus on building and upgrading the country’s aging rail transport systems.

He assured investors he would not suspend any of the projects that previous governments started, and that infrastructure spending would be sustained at 5% to 6% of GDP.

Marcos also said he was committed to boosting investments in renewable energy. He said he was also open to adding nuclear power in the mix of the country’s energy sources, a plan started by his late father in the 1970s.

Marcos Jr also promised the Philippines, a US defense ally that has recently become closer to China, would remain independent in its foreign policy even as he vowed he would not lose a square inch of Philippines territory to any foreign power, drawing lengthy applause.

His administration would implement sound fiscal policy management, including introducing new taxes, to help finance investments in technology, health care and education, as he sought to make the country an investment destination.

Marcos said his government would work towards keeping classrooms safe amid the pandemic so teachers and students could resume face-to-face classes, and he promised to improve education.

“Our children must be equipped with the best that we can provide,” he said.

(Reporting by Karen Lema, Neil Jerome Morales and Enrico dela Cruz; Editing by Ed Davies and Nick Macfie)

Philippines’ Marcos pledges tax and investment reforms in national address

MANILA, July 25 (Reuters) – Philippine President Ferdinand Marcos Jr pledged on Monday to make his country a destination for investment and change its tax system, while implementing solid fiscal policy management.

Speaking before Congress in his first state of the nation address, Marcos, who won a May election in a landslide, said the country was targeting 6.5 to 7.5% gross domestic product growth this year. He said growth momentum remained firm but the recovery from the pandemic was still ongoing.

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

Dollar supported by market caution as growth fears dominate

LONDON, July 25 (Reuters) – The dollar held firm in early trading on Monday as traders sought safer assets and braced for a sharp U.S. interest rate hike later this week.

European stock indexes opened in the red, with investors cautious about how company earnings will hold up in the face of a global economic slowdown and high inflation.

One sixth of Europe’s STOXX 600 will report second-quarter results this week, with earnings expected to have grown 22% year-on-year, according to Refinitiv forecasts.

The U.S. Federal Reserve has signalled a 75 basis point rate hike at its July 26-27 meeting, although data last week showing inflation hit 9.1% year-on-year in June raised the possibility of a larger 100 bps hike later this year.

The U.S. dollar strengthened against the Australian and New Zealand dollars during Asian trading, although this move eased as European markets opened. At 0715 GMT, the Australian dollar was flat against the greenback AUD=D3, while the New Zealand dollar was down 0.2% at $0.6242.

Versus the Japanese yen, the dollar was up 0.2% at 136.35.

The dollar index was at 106.760, having last week fallen from the two-decade high of 109.290 it hit in mid-July =USD and analysts expect it to remain in demand.

U.S. economic growth is slowing and inflation is “way too high”, U.S. Treasury Secretary Janet Yellen said on Sunday.

“Recession fears should continue to prevent a solid recovery in risk sentiment, which should incidentally give some extra support to safe-havens (including USD) and may keep the path uneven for high-beta commodity currencies,” wrote ING FX analysts in a note to clients.

The euro was boosted to a two-week high last week by the European Central Bank raising rates for the first time since 2011. But it then fell after disappointing business activity data from France and Germany. On Monday, it was down 0.2% on the day at $1.01930.

ING’s FX analysts said the euro’s moves suggest that expectations around the European Central Bank’s policy plans will be driven more by market data in future, highlighting euro zone inflation data due on Thursday and Friday.

“We think 1.0200 could prove to be an anchor for EUR/USD for the remainder of the summer, but re-testing parity is a tangible risk in the current high-volatility environment,” ING said.

Soaring energy costs and fears of gas shortages in Europe are also weighing on the euro, with Germany largely dependent on Russian gas to fuel its export-led economy.

A survey on Sunday showed that 16% of industrial companies in Germany are cutting production in reaction to soaring energy prices.

Top Western energy companies are expected to see record-breaking profits for the second quarter running.

The British pound was down 0.1% against the dollar at $1.1993 GBP=D3, while euro-sterling was steady at 85.07 pence per euro.

British Foreign Secretary Liz Truss and former finance minister Rishi Sunak set out plans over the weekend in their campaigns to be Britain’s next prime minister.

(Reporting by Elizabeth Howcroft; Editing by Catherine Evans)

Japan bond yields bounce off months-long lows

July 25 (Reuters) – Japanese government bond yields recovered after plunging to their lowest in months on Monday, as investors pared their bets on policy tightening at home and hedged the risk of a global economic slowdown.

The benchmark 10-year JGB yield fell 3.5 basis points to 0.178% in morning trading, its lowest since March 14, before settling at 0.200%.

The five-year yield fell into negative territory, dropping 1 basis point to minus 0.005%.

Yields have dropped steadily since mid-June, when bets that the Bank of Japan will be forced to join its hawkish global peers and tweak its yield-curve-control policy were at their extreme. Ten-year yields breached the BOJ’s target to rise as far as 0.265% in June, forcing the central bank to spend a record amount of yen defending the band.

“We are still holding our short position in JGBs – yields have edged away from the upper band and the yen has had some respite,” said Kellie Wood, deputy head of fixed income for Australia at Schroders.

“However, such relief could be short-lived as sticky and broad-based inflation will likely put a floor under global interest rates, and risks of renewed upward pressure on yields remain,” Wood added. “We maintain our short duration bias for longer maturity JGBs.”

Demand for JGBs heightened as Japan’s Nikkei share average snapped last week’s winning streak after data showed US business activity had contracted for the first time in nearly two years.

“The PMI results contradicted expectations that a shift in demand to services was a reason behind the weakness in goods,” said Toru Moritani, chief market economist at Sumitomo Mitsui Banking Corp.

“The expectations that consumption would bounce back at least for the summer leisure season have also retreated.”

Yields on longer-term notes fell across the board.

The 20-year yield fell 1 basis point to 0.850%, the 30-year yield fell 2.5 basis points to 1.200%, and the 40-year yield fell 1.5 basis points to 1.410%.

The two-year yield was flat at -0.080%.

Benchmark 10-year JGB futures 2JGBv1 rose 0.35 point to 150.1.

(Reporting by Sam Byford and Tokyo markets team;; Additional reporting by Tom Westbrook in Singapore)

Philippines sells $245 million T-bills; 91-day yield down

MANILA, July 25 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction of T-bills on Monday:

* BTr awards 13.75 billion pesos ($244.66 million) worth of T-bills, below its 15 billion pesos offer

* Tenders total 38.844 billion pesos

* BTr awards 5 billion pesos of 91-day T-bills at avg rate of 2.273% versus previous auction avg of 2.323%

* BTr awards 5 billion pesos of 182-day T-bills at avg rate of 3.143% versus previous auction avg of 3.083%

* BTr awards 3.75 billion pesos of 364-day T-bills at avg rate of 3.356% versus previous auction avg of 3.258%

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

($1 = 56.20 Philippine pesos)

(Reporting by Enrico Dela Cruz; Editing by Martin Petty)

Oil rises $2 as dollar eases, market wary of Fed

HOUSTON, July 25 (Reuters) – Oil prices rose about USD 2 on Monday, bolstered by supply fears, a dip in the US dollar and early strength in equity markets, but prices seesawed as some worried fuel demand could weaken if the Federal Reserve raises US interest rates too aggressively.

Brent crude futures for September settled up USD 1.95, or 1.9%, at USD 105.15 a barrel, while US West Texas Intermediate (WTI) crude futures rose USD 2, or 2.1%, to settle at USD 96.70 a barrel.

“A slightly weaker US dollar and improving equity markets are supporting oil,” UBS oil analyst Giovanni Staunovo said. After early strength, US stocks moved lower in afternoon trading, with investors cautious about the Fed meeting this week and earnings from several growth companies.

Oil futures have been volatile in recent weeks, pressured by worries that rising interest rates could slow economic activity and fuel demand but supported by tight supply, especially since Russia’s invasion of Ukraine and Western sanctions on Moscow.

“The US and European economies are slowing and with the Federal Reserve set to raise interest rates again this week, traders remain very cautious,” said Dennis Kissler, senior vice president of trading at BOK Financial.

Fed officials have indicated the US central bank would likely raise rates by 75 basis points at its July 26-27 meeting.

China, the world’s second-biggest economy, narrowly missed a contraction in the second quarter, growing just 0.4% year-on-year.

But a steep front-month premium over the second month continues to signal near-term supply tightness. The spread settled at USD 4.82/bbl on Friday, an all-time high when excluding expiry-related spikes in the two previous months.

Libya’s National Oil Corporation (NOC) said it aimed to bring back production to 1.2 million barrels per day (bpd) in two weeks, from around 860,000 bpd.

But analysts expect Libya’s output to remain volatile as tensions remained high after clashes between rival political factions over the weekend.

Prices drew support from “expectations that Russian oil supply will edge lower in the months ahead as widely-expected plans for a price cap on Russian oil may have the opposite effect on oil prices than hoped for,” said Warren Patterson, head of commodities strategy at ING.

The European Union said last week it would allow Russian state-owned companies to ship oil to third countries under an adjustment of sanctions agreed by member states last week aimed at limiting the risks to global energy security.

On Friday, Russian Central Bank Governor Elvira Nabiullina said Russia would not supply oil to countries that imposed a price cap on its oil.

Russia’s Gazprom said flows through Nord Stream 1, Russia’s single biggest gas link to German, would fall to 33 million cubic meters per day, just 20% of capacity, from 0400 GMT on Wednesday.

That could lead to additional switching to crude from gas, supporting oil prices, said Andrew Lipow of Lipow Oil Associates in Houston.

(Additional reporting by Rowen Edwards in London, Yuka Obayashi in Tokyo; Editing by Marguerita Choy and David Gregorio)

Philippines’ Udenna pays debt to stem share slide across its network

MANILA, July 25 (Reuters) – Philippine conglomerate Udenna Corp, owned by a close associate of the country’s former president, said on Monday its subsidiary had paid a debt to avert a default on other loans, helping shares in its related firms to stem huge earlier losses.

Udenna, one of the country’s fastest growing companies, said its subsidiary, a land lease firm at the site of a former US military base, had on Monday paid a USD 4 million liability to a government agency and a consortium of banks.

Under existing loan terms, Udenna’s default in one debt could mean a default in other liabilities.

“Udenna settled the matter today, prior to the mandated deadline, and to the satisfaction of the majority lender and the consortium banks,” it said in a statement.

Udenna’s total liabilities rose by nearly half to 254 billion pesos (USD 4.5 billion) in 2020 from 171 billion pesos in 2019, according to the latest available data from the corporate regulator.

Monday’s debt settlement helped shares in Udenna’s four listed firms to recoup some losses, after DITO CME (DITO) fell as much as 9%, Chelsea Logistics (C) sank 16%, Phoenix Petroleum (PNX) dropped 10% and PH Resorts (PHR) retreated as much as 7.5% in Monday morning trades, versus a 1.6% decline of the wider index.

The broader debt was accumulated during a rapid expansion and acquisition binge by owner Dennis Uy after his hometown ally Rodrigo Duterte won the presidency in 2016. Uy was a key campaign donor.

Over the following four years Udenna quadrupled its portfolio to more than 100 firms, in sectors from gaming, shipping, education and construction to fast food, ferries, tourism, telecoms and sports cars.

Udenna and Uy have insisted they received no preferential treatment from Duterte and complied with all laws.

The company has sold some of the assets, including a controlling stake in a South China Sea gas field, to trim debts.

(Reporting by Neil Jerome Morales; Editing by Ed Davies, Martin Petty)

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