Oil extends gains as risk appetite improves, U.S. inventories fall

SINGAPORE, July 28 (Reuters) – Oil rose more than USD 1 a barrel on Thursday, extending gains from the previous session, buoyed by improved risk appetite among investors as lower crude inventories and a rebound in gasoline demand in the United States supported prices.

Brent crude futures for September rose USD 1.13, or 1.1%, to USD 107.75 a barrel by 0619 GMT, after gaining USD 2.22 on Wednesday.

US West Texas Intermediate crude (WTI) was at USD 98.53 a barrel, up USD 1.27, or 1.3%, after rising USD 2.28 in the previous session.

“Risk sentiment has recovered from recession fears due to the ongoing US earnings optimism and less aggressive Fed rhetoric on rate hikes, which supported a rally in the crude market,” CMC Markets analyst Tina Teng said, adding that a weakened US dollar has also lifted commodities prices.

The US Federal Reserve raised its benchmark overnight interest rate by three-quarters of a percentage point, in line with expectations, to cool inflation, while the dollar fell on hopes for a slower hiking path.

A weaker dollar makes oil, priced in dollars, cheaper for buyers in other countries to purchase.

On supplies, US crude oil stockpiles fell by 4.5 million barrels last week, against expectations of a 1 million-barrel drop, while US gasoline demand rebounded by 8.5% week on week, data from the Energy Information Administration showed.

“The US consolidated its position as the world’s largest petroleum exporter,” Citi analysts said in a note, as combined gross exports of crude oil and refined products stood at a record 10.9 million barrels a day.

US crude exports reached a record 4.5 million bpd as WTI traded at a steep discount to Brent, making purchases of US crude grades more attractive to foreign buyers.

Prices also found support as the Group of Seven richest economies aims to have a price-capping mechanism on Russian oil exports in place by Dec. 5, a senior G7 official said on Wednesday.

US crude oil production growth could also be limited by the availability of fracking equipment and crews, as well as capital constraints, executives said this week.

Russia has cut gas supply via Nord Stream 1, its main gas link to Europe, to just 20% of capacity. That could lead to switching to crude from gas and prop up oil prices in the short term, analysts said.

“We increase our total estimates for additional oil demand from gas to oil switching by 700,000 bpd from October 2022 through March 2023,” JP Morgan analysts said in a note.

However, this is offset by normalizing Libyan supply, leading to a largely balanced global oil market in the fourth quarter, followed by a 1 million bpd stockbuild in the first quarter of 2023, they added.

“We keep our price forecast unchanged and see global oil price in the low-USD 100s in 2H22 and high USD 90s in 2023,” the bank said.

(Reporting by Florence Tan in Singapore and Arathy Somasekhar in Houston; Editing by Stephen Coates and Clarence Fernandez)

Nasdaq has biggest one-day jump since 2020 after Fed rate hike

NEW YORK, July 27 (Reuters) – The Nasdaq jumped more than 4% on Wednesday in its biggest daily percentage gain since April 2020 as the Federal Reserve raised interest rates as expected and comments by Fed Chairman Jerome Powell eased some investor worries about the pace of rate hikes.

Quarterly reports from Microsoft Corp. (MSFT), Alphabet Inc. (GOOGL) and others added to the day’s upbeat tone.

The S&P 500 growth index jumped 3.9% and also registered its biggest one-day percentage gain since April 2020. Tech and growth stocks, whose valuations rely more heavily on future cash flows, have been among the hardest hit this year.

The S&P 500 closed at its highest level since June 8, with the technology sector giving the index its biggest boost.

The Fed, in a statement following its two-day meeting, raised the benchmark overnight interest rate by three-quarters of a percentage point. The move came on top of a 75 basis points hike last month and smaller moves in May and March, in an effort by the Fed to cool inflation.

Powell’s comments in a news conference after the statement gave some investors hope for a slower pace of rate hikes.

Equity investors have been worried that aggressive hikes by the Fed could tip the economy into recession.

“He did not commit to any specific rate hike in the September meeting,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, said it was “a calming statement, coming on the heels of a day where you saw some earnings and revenues that were better than expectations, albeit expectations that were very tempered.”

The Dow Jones Industrial Average .DJI rose 436.05 points, or 1.37%, to 32,197.59, the S&P 500 gained 102.56 points, or 2.62%, to 4,023.61 and the Nasdaq Composite added 469.85 points, or 4.06%, to 12,032.42.

Wednesday’s hike was widely anticipated by investors.

Microsoft rose 6.7% after it forecast double-digit growth in revenue this fiscal year on demand for cloud computing services.

Alphabet jumped 7.7%, a day after it reported better-than-expected sales of Google search ads, easing worries about a slowing ad market.

T-Mobile US Inc. (TMUS) added 5.2% after it raised its subscriber growth forecast for the second time this year and exceeded quarterly profit expectations.

Volume on US exchanges was 10.56 billion shares, compared with the 10.88 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 5.27-to-1 ratio; on Nasdaq, a 3.15-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and 30 new lows; the Nasdaq Composite recorded 50 new highs and 107 new lows.

(Additional reporting by Shreyashi Sanyal, Sruthi Shankar and Aniruddha Ghosh in Bengaluru and Sinead Carew in New York; Editing by Anil D’Silva, Jonathan Oatis and Aurora Ellis)

Dollar falls after Fed hike, Powell comments

NEW YORK, July 27 (Reuters) – The dollar fell on Wednesday against a basket of major currencies after the US Federal Reserve raised interest rates by 75 basis points, as was widely anticipated, and comments from Fed Chair Jerome Powell spurred hopes for a slower hiking path.

The central bank raised rates by three-quarters of a percentage point for the second straight meeting as it attempts to rein in inflation, but noted that while the labor market remains strong, other economic indicators have softened.

“You certainly can view the policy statement as hawkish but it is pretty consistent with what they have been saying for the last couple of meetings – they are going to continue to hike – estimates had them going into restrictive territory, they are at neutral now and they continue to think they are going to need to go into restrictive territory,” said Marvin Loh, senior global market strategist at State Street in Boston.

“Theoretically, the dollar should be stronger in an environment where it is hawkish but it was as expected and we have had a lot of movement in the dollar so far this month.”

The greenback initially moved higher after the statement but quickly reversed course, and weakened further along with Treasury yields while US stocks rallied as comments from Fed Chair Jerome Powell after the policy statement were seen as dovish.

“Hopes for a slower pace of rate hikes pushed expectations for additional rate hikes lower, bond yields lower, credit spreads tighter and stock prices higher,” said George Bory, chief investment strategist for fixed income with Allspring Global Investments.

“Despite the initial pop in risk assets, much still hinges on inflation and the Fed’s ability to return ‘inflation to its 2% objective.'”

Expectations for a 50 basis point hike at the Fed’s September meeting grew to 60.9%, according to CME’s Fedwatch Tool, up from 50.7% on Tuesday, while projections for a 75 basis point hike fell to 35.2% from 41.2%.

The dollar index fell 0.756% to 106.310, with the euro EUR= up 0.97% to USD 1.0212. The greenback was on pace for its biggest one-day percentage drop since July 19.

Bets on oversized rate hikes helped push the dollar index to a two-decade high earlier this month at 109.29, but the greenback has eased lately as economic data has hinted at a possible recession.

But on Wednesday, data showed the US trade deficit narrowed sharply in June as exports jumped, while orders for non-defense capital goods excluding aircraft, seen as a proxy for business spending plans, rose 0.5% last month, potentially soothing some concerns about the economy.

The euro recouped nearly all of prior session’s decline, which was the biggest one-day percentage drop for the currency in two weeks, but fears of a European recession remain high as Russia further slowed gas supplies to Europe through the Nord Stream 1 pipeline.

The gas crisis, along with political woes in Italy, will push the region into a mild recession by early next year and limit the European Central Bank’s path of interest rate hikes, analysts at JPMorgan said.

The Japanese yen strengthened 0.26% versus the greenback to 136.58 per dollar, while Sterling was last trading at USD 1.2175, up 1.25% on the day.

In cryptocurrencies, bitcoin last rose 8.65% to USD 22,792.02.

(Reporting by Chuck Mikolajczak; Editing by Kirsten Donovan and Nick Zieminski)

Gold bounces over 1% as dollar retreats post Fed verdict

July 27 (Reuters) – Gold jumped more than 1% as the dollar and Treasury yields retreated after the US Federal Reserve hiked interest rates by 75 basis points as expected.

Spot gold rose over 1% to USD 1,735.49 per ounce by 3:36 p.m. EDT (1936 GMT). US gold futures settled 0.1% higher at USD 1,719.1.

The Fed raised rates by three-quarters of a percentage point in an effort to cool the most intense breakout of inflation since the 1980s.

Fed Chair Jerome Powell said the lack of clear visibility into the future trajectory of the economy means the central bank can provide reliable guidance about where its policy is headed only on a “meeting by meeting” basis.

“If the market now believes interest rates might not move as high (and) as fast, that is relatively a positive environment for the gold market moving forward and the reason why we’re seeing a positive move after the Fed meet,” said David Meger, director of metals trading at High Ridge Futures.

The dollar’s retreat bolstered gold’s appeal among overseas buyers, while benchmark US Treasury yields also slipped.

“However, gold price risks look to be skewed to the downside as the market continues to take its cue from the USD amid a seasonally slow period for demand as the market prices in rate hike expectations for the September FOMC meeting,” Standard Chartered analyst Suki Cooper said.

Rate hikes to fight soaring inflation tend to raise the opportunity cost of holding bullion, which yields no interest.

The Fed’s aggressive rate hikes and the dollar’s recent rally have overshadowed bullion’s appeal as a safe-haven despite recession risks of late.

Reflecting sentiment, holdings of the SPDR Gold Trust GLD exchange-traded fund touched their lowest since January, to about 32,321,124 ounces.

Other metals latched on to gold’s run. Spot silver rose 2.6% to USD 19.09 per ounce, platinum added 1.4% to USD 886.09, while palladium gained 0.6% to USD 2,023.55.

(Reporting by Ashitha Shivaprasad and Kavya Guduru in Bengaluru; Editing by Will Dunham, Aditya Soni and Krishna Chandra Eluri)

Microsoft, Alphabet earnings lift futures ahead of Fed decision

July 27 (Reuters) – US stock index futures rose on Wednesday as better-than-feared quarterly reports from technology giants Microsoft and Alphabet calmed investors ahead of a key US interest rate decision later in the day.

The results lifted sentiment after markets closed sharply lower on Tuesday on a profit warning from top US retailer Walmart (WMT) and weak consumer confidence data.

Microsoft Corp. (MSFT) rose 3.8% in premarket trading on Wednesday after it forecast revenue would grow by double digits this fiscal year, driven by demand for cloud computing services.

Alphabet Inc. (GOOGL) added 3.5% as better-than-expected sales at Google search ads brought relief after social media firm Snap Inc.’s (SNAP) warning last week raised fears of a sharp ad market slowdown.

“A positive reaction from the latest quarterly numbers has been incredibly hard-won given the negative market sentiment surrounding broader tech,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

Shares of other high-growth stocks including Amazon.com Inc. (AMZN), Meta Platforms Inc. (META) and Apple Inc. (AAPL) also got a boost ahead of their earnings this week.

Megacap growth stocks have been hammered this year as the Federal Reserve raised interest rates aggressively to tame decades-high inflation. Future cash flows on which valuation of these companies rests are discounted heavily when rates rise.

Investors widely expect the US central bank to increase interest rates by another 75 basis points later on Wednesday, with focus likely to shift to how deeply signs of an economic slowdown have registered with its policymakers.

Money market traders were even placing about a one-in-four chance the Fed would surprise markets with a larger 1-percentage-point increase, as per CME Group’s Fedwatch tool.

The decision is due at 2:00 pm ET (1800 GMT) and Fed Chair Jerome Powell’s news conference half an hour later should elaborate on how the central bank views the recent economic data and at least hint at its next steps.

“Earnings may play second fiddle to the FOMC meeting tonight if the Fed surprises with more hawkishness than the market is pricing,” Peter Garnry, head of equity strategy at Saxo Bank said in a note.

At 06:40 a.m. ET, Dow e-minis were up 136 points, or 0.43%, S&P 500 e-minis were up 34.75 points, or 0.89%, and Nasdaq 100 e-minis were up 175.25 points, or 1.45%.

PayPal Holdings Inc. (PYPL) jumped 5.7% after a report said activist investor Elliott Investment Management is building a stake in the fintech giant to push it to ramp up its cost-reduction efforts.

(Reporting by Sruthi Shankar and Aniruddha Ghosh in Bengaluru; Editing by Sriraj Kalluvila)

Dollar creeps lower as large Fed rate hike looms

LONDON, July 27 (Reuters) – The dollar edged further away from recent 20-year highs on Wednesday ahead of the US Federal Reserve policy meeting, at which the central bank is expected to raise rates by another 75 basis points to tame soaring inflation.

But moves in currency markets were modest as traders await the policy announcement at 1800 GMT.

Money markets are betting that the Fed will raise rates by 75 basis points (bps), with an outside chance of a larger 100 bps hike. Traders expect the Fed to take the rate to as high as 3.4% by year-end to help bring inflation back to target.

Bets on oversized rate hikes helped push the dollar index, which measures the dollar against a basket of six currencies, to its highest level in almost 20 years earlier this month at 109.29, with the greenback currently up 2.1% in July.

At 1055 GMT, the dollar index was down 0.2% at 106.93.

“Markets are taking a bit off the table before tonight’s Fed meeting,” said Simon Harvey, head of FX analysis at Monex Europe. “Barring any imminent headlines on European energy or political developments I think we will see very limited ranges.”

The euro edged 0.33% higher to USD 1.0149 but failed to recoup much of Tuesday’s 1.0% slide, its biggest fall in over two weeks, after fears of a European recession escalated when Russia further cut gas supplies to Europe through the Nord Stream 1 pipeline.

Analysts said it remained premature to short the dollar given the gas situation in Europe and rising yields in the European periphery, particularly Italy.

Italy’s yields rose further on Wednesday after rating agency S&P Global revised its outlook on Italy’s rating to stable from positive, pushing the closely watched spread between German and Italian 10-year yields to as wide as 250 bps.

“Most factors are still in favour of the dollar,” said Vincent Manuel, chief investment officer at Indosuez Wealth Management. He cited the macro backdrop between the US and euro zone, peripheral spread widening, the European energy crisis and the relative pace of monetary policy normalization.

The Australian dollar was up 0.12% to USD 0.69455 as Australian inflation sped to a 21-year high in the last quarter, although the figure was not as high as some investors feared and some rate hike bets were pulled back.

Traders are now pricing in an around 86% chance of a 50 bps rate hike by the RBA next week, and a 14% chance of a more modest 25 bps hike.

The dollar was down 0.2% to 136.69 yen. Against the safe-haven Swiss franc, the dollar was also down 0.2% at USD 0.9612.

In cryptocurrencies, bitcoin was steady at USD 21,301.

(Reporting by Samuel Indyk, additional reporting by Sujata Rao; editing by Kim Coghill and Mark Heinrich)

Gold ticks up on softer dollar as investors eye Fed strategy

July 27 (Reuters) – Gold inched up on Wednesday helped by a fall in the dollar, but caution over the Federal Reserve’s policy tightening plan kept bullion prices range-bound.

Spot gold rose 0.2% to USD 1,720.57 per ounce by 1100 GMT. US gold futures were little changed at USD 1,719.60.

The dollar eased, increasing gold’s appeal among buyers holding other currencies.

The US central bank is expected to raise interest rates by another 75 basis points (bps) at the conclusion of its two-day policy meeting later on Wednesday.

More than the rate hike, the focus is on the guidance from Fed chairman Jerome Powell, and gold is likely to retest lows in the absence of a dovish pivot, said Michael Hewson, chief market analyst at CMC Markets UK.

Although considered a hedge against inflation, higher interest rates to tame the rising prices increase the opportunity cost of holding non-yielding bullion.

“Everyone now wants to know what other tools the Fed is going to use to support the economy or if it is just going to be focused on bringing down the high inflation,” said Brian Lan, managing director at dealer GoldSilver Central.

Gold has lost more than USD 300, since climbing past the USD 2,000-per-ounce level in early March, due to the Fed’s rapid rate hikes and the dollar’s recent rally, overshadowing bullion’s appeal as a safe-haven despite recession risks.

The International Monetary Fund cut global growth forecasts on Tuesday, warning downside risks from inflation and the Ukraine war could push the economy to the brink of recession if left unchecked.

Should the Fed chairman acknowledge the headwinds facing the economy and hint at a pause in its tightening drive, the dollar could weaken and offer support to gold, said Ricardo Evangelista, senior analyst at ActivTrades.

Spot silver rose 0.8% to USD 18.75 per ounce, platinum added 0.4% to USD 877.52, while palladium gained 1.1% to USD 2,031.65.

(Reporting by Arundhati Sarkar and Eileen Soreng in Bengaluru; editing by Mark Potter and Jason Neely)

Stocks, currencies sweat as EM growth fears, more US Fed tightening loom

July 27 (Reuters) – Emerging market equities slid on Wednesday as investors braced for a potentially sharp US rate hike later in the day, while regional currencies struggled as the dollar hovered just below a 20-year high on support from safe-have flows.

A 75 basis point (bps) hike by the US Federal Reserve is priced in, with a 13% chance of a super-sized 100 bps raise. The focus will also be on a news conference at 1830 GMT for hints on whether Fed policymakers’ resolve to hike further is waning as growth slows.

“EM (emerging markets) faces weak external demand alongside tighter US monetary conditions – this generates a strong dollar environment, which weighs on global trade, while FX pass-through limits the room for accommodative policies,” said Michel Nies, EM economist at Citigroup.

Stocks have lost 1.5% this month, while currencies are down 1% as rising inflation, political uncertainty and growing concerns about a global recession sapped investor confidence in July.

The International Monetary Fund cut global growth forecasts again on Tuesday, warning that risks from high inflation and the Ukraine war could push the world economy to the brink of recession.

“EM will eventually face a more favourable combination of external demand and US monetary conditions again, but getting there might take longer than usual: the Fed might seek to re-establish its credibility and China’s structural shift towards a less EM-friendly business model is likely to continue,” Nies said.

EM stocks fell 0.3%, with China shares, slipping up to 0.5% amid broader market caution.

China’s industrial firms’ profits bounced back to growth in June after two months in the red, but fears of a COVID-19 resurgence cast a shadow over future factory output.

Currencies were mixed, with the yuan and India’s rupee little changed, while South Africa’s rand and Mexico’s peso added 0.4% and 0.2% respectively, and Turkey’s lira was off 0.2%.

The dollar held at 107.08, not far below mid-July’s 20-year high of 109.

Egypt’s pound traded at 18.87 to the dollar. The IMF said the country needed to make “decisive progress” on fiscal and structural reform as Cairo seeks a new round of support from the fund.

(Reporting by Anisha Sircar and Susan Mathew in Bengaluru)

Philippines scraps Russian helicopter deal – AP

July 27 (Reuters) – The Philippines has scrapped a deal to buy 16 Russian military transport helicopters because of fears of US sanctions, the Associated Press reported on Wednesday, citing Philippine officials.

A former Philippine defence secretary, Delfin Lorenzana, said late on Tuesday the 12.7 billion peso (USD 227 million) deal to acquire the Mi-17 helicopters had been cancelled. The decision to buy the helicopters was approved last month by former President Rodrigo Duterte, before their terms in office ended on June 30, the news agency reported.

“We could face sanctions,” the news agency quoted Lorenzana as saying in an interview.

Philippine government officials were not immediately available for comment.

US security officials were aware of the decision and could offer similar heavy-lift helicopters for the Philippine military, Lorenzana said.

(Reporting by Akriti Sharma in Bengaluru; Editing by Robert Birsel)

Investors gauge US stocks rebound: ‘suckers’ rally’ or market bottom?

NEW YORK, July 27 (Reuters) – As investors await another jumbo-sized rate increase from the Federal Reserve, they are taking the temperature of a weeks-long US stock market rally that followed a vicious first-half selloff.

Even after Tuesday’s sharp fall, the S&P 500 remained up 7% from its June 16 low, buoyed in part by expectations that the Fed will pause its aggressive rate hikes early next year and a recent decline in commodity prices that investors hope will help ease inflation.

So far, the bounce has its share of doubters. Three rallies of comparable magnitude have already wilted this year, with stocks sliding to new lows each time. Blackrock, the world’s largest asset manager, on Monday warned investors that more volatility lay ahead and said it was underweight developed market equities on expectations that inflation will stay tenacious.

“We think this is a bear market suckers’ rally,” said Steve Chiavarone, senior portfolio manager at Federated Hermes, who believes the Fed will remain hawkish longer than expected and has reduced his equity exposure as the S&P pushed higher over the last few weeks.

Expectations that the Fed will end its market-bruising rate hikes sooner than forecast have helped power stocks higher. Nearly two-thirds of investors now believe the Fed funds rate will stand at 3.5% or lower by March 2023, up from just a third a month ago with that view, according to CME.

Investors expect the Fed to deliver another 75 basis points of tightening Wednesday, after already raising rates by 150 basis points so far this year. Hopes for moderation after that could be dashed if consumer prices remain stubbornly high in coming weeks – repeating a scenario that dragged stocks lower this year, Blackrock’s strategists wrote.

“Inflation data could surprise to the upside – and cause markets to rapidly price a higher rate path once again. Result: another equities sell-off,” BlackRock strategists wrote.

Data from the Wells Fargo Investment Institute showed the severity of the current bear market – which saw the S&P 500 fall as much as 23.6% below its January high – may depend on whether the economy is in a recession.

Bear markets accompanied by a recession have lasted an average of 18 months, during which stocks fell an average of 35.8%. Without a recession, bear markets lasted an average of 5.9 months with an average decline of 27.9%, the bank’s data showed.

On Sunday, US Treasury Secretary Janet Yellen acknowledged the risk of a recession but said it was not inevitable. Still, parts of the market have continued to reflect investor unease, even as broader averages have bounced.

More stocks have posted new lows than new highs on the Nasdaq Composite Index for 76 straight days, the longest such stretch in 20 years, said Willie Delwiche, investment strategist at All Star Charts. The index is up nearly 9% from its June low.

“Until that relationship changes, it’s premature to say that a bottom is in place,” Delwiche said.

More optimistic investors point to an array of signals indicating bearish sentiment may have reached a crescendo in recent weeks, potentially exhausting sellers and making it easier for stocks to rebound.

A fund manager survey from BoFA Global Research last week showed expectations for global growth and profits at all-time lows and cash levels at their highest in two decades, two contrarian indicators the banks’ strategists said could indicate greater stock gains ahead.

Short interest in the S&P 500, meanwhile, recently stood at its highest level since the depths of the coronavirus selloff in 2020, a signal that has occurred during past market bottoms, the bank’s strategists wrote.

“We think it’s possible that the S&P 500 has already bottomed, and if it hasn’t, will find a bottom during the third quarter,” said Lori Calvasina, head of US equity strategy at RBC Capital Markets, in a note to investors.

Calvasina recently added stock exposure, betting that a possible recession has already been baked into prices.

Christopher Murphy, co-head of derivatives strategy at Susquehanna International Group, believes this week’s earnings reports – which include results from heavyweights such as Apple Inc and Meta Platforms– could play a key part in determining whether stocks can continue rallying.

For the time being, “the risks to the market are very well known right now” and already reflected in prices, he said.

(Reporting by David Randall; Editing by David Gregorio)

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