White House expects OPEC+ oil production hike after Middle East trip

WASHINGTON, July 18 (Reuters) – The White House on said Monday it anticipates major oil producers in the OPEC+ alliance to increase crude production following President Joe Biden’s trip to the Middle East.

“We will measure success in the next couple of weeks,” said White House spokesperson Karine Jean-Pierre at a press briefing. “We anticipate [it] to be an increase in production, but it’s going to take the next couple of weeks, and that will be up to OPEC+.”

Biden traveled to Saudi Arabia last week where he met with that country’s leadership and other members of the Gulf Cooperation Council in the oil-rich Middle East.

The Biden administration has come under pressure to cut gas prices and other consumer costs ahead of the Nov. 8 mid-term elections where his Democratic Party is seeking to retain control of Congress.

Oil prices rocketed to their highest levels since 2008, climbing above USD 139 a barrel in March, after the United States and Europe imposed sanctions on Russia over its invasion of Ukraine, which Moscow calls a “special military operation.” Prices have slipped since then.

OPEC+, which includes both Saudi Arabia and Russia, meets next on Aug. 3.

(Reporting by Jeff Mason and Trevor Hunnicutt; Editing by Leslie Adler and Sam Holmes)

Japan, China cut holdings of US Treasuries to multi-year lows -data

NEW YORK, July 18 (Reuters) – Japan and China pared back holdings of US Treasuries in May to multi-year lows, data from the US Treasury department showed on Monday.

Japan’s holdings fell to USD 1.212 trillion, the lowest since January 2020, when the country’s stash of Treasuries was USD 1.211 trillion. In April, Japan’s holdings were at USD 1.218 trillion.

China’s hoard of US government debt dropped as well to USD 980.8 billion in May, still the lowest since May 2010 when its holdings were at USD 843.7 billion, data showed. In April, China had USD 1.003 trillion in Treasuries.

The world’s second largest economy has reduced holdings Treasuries for six straight months.

Although China and Japan sold Treasuries in May, US Treasury yields slid. The benchmark 10-year Treasury yield started the month of May at 2.996%, down about 15 basis points to 2.844% by the end of the month.

Overall, foreign holdings of Treasuries slid to USD 7.421 trillion in May, the lowest since May 2021, from USD 7.455 trillion in April.

“It’s another month of selling by foreign investors. But it seems like the selling is starting to slow because in May, the move higher in interest rates faded a little bit,” said Gennadiy Goldberg, senior rates strategist at TD Securities in New York.

“Japan and China were selling which is real a continuation of recent trends. We got another month of selling from Japan, but if you look at the pace, there was certainly a deceleration. Nothing like we saw in March at the end of Japan’s fiscal year.”

On a transaction basis, US Treasuries saw net foreign inflows of USD 99.84 billion in May, the largest since March 2021, from outflows of USD 1.153 billion in April.

The Federal Reserve raised benchmark interest rates by 50 basis points in May and in June lifted rates by a hefty 75 basis points to curb stubbornly strong inflation.

Investors have priced in another 75 basis point rate hike at the Fed meeting later this month.

In other asset classes, foreigners sold US equities in May for a fifth straight month amounting to USD 9.15 billion, from outflows of USD 7.04 billion in April. The S&P 500 has been down nearly 20% since the beginning of the year.

US corporate bonds posted inflows in May of USD 4.46 billion, compared with inflows of USD 22.5 billion the previous month. Foreigners were net buyers of US corporate bonds for five straight months.

The data also showed US residents once again reduced their holdings of long-term foreign securities, with net sales of USD 22.8 billion in May from sales of USD 36.7 billion in April.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Jonathan Oatis and Sam Holmes)

US yields rise but off highs as stocks end lower

NEW YORK, July 18 (Reuters) – US bond yields rose on Monday as upbeat economic data last week and a quiet period from the Federal Reserve set the stage for risk taking, but ended below session highs as stocks sold off into the close.

US economic data on Friday showed stronger-than-expected retail sales, an uptick in consumer sentiment and lower inflation expectations.

Markets had all but priced in a 100 basis points rate hike during the Fed’s upcoming meeting, but the US central bank on Friday signaled a 75 basis points increase that would mirror its June decision.

Jim Barnes, director of fixed income at Bryn Mawr Trust, said the early gains in stocks pressured bond prices lower, as did the idea that the Fed wouldn’t raise a full percentage point. “As we entered into the quiet period, the Fed seems to be leaning more towards 75 basis points than to 100 basis points,” he said.

But stocks were volatile in afternoon trading, with the Dow industrials up over 350 points at the session high but dropping over 500 points to close down more than 200, after a report said Apple was preparing for an economic downturn.

“We had a reversal with the Dow plunging and bond yields were lower as a result,” said Tom di Galoma, managing director at Seaport Global Holdings.

“It seems to be we are reversing to lower yields rather than higher yields due to the fact that we might be approaching a recession as we get closer to the (Northern Hemisphere) fall.”

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 3.7 basis points at 3.172%.

The yield on 10-year Treasury notes was up 5.7 basis points at 2.987%.

The yield on the 30-year Treasury bond was up 6.2 basis points at 3.156%.

The gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at -18.8 basis points.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.66%, after closing at 2.614% on Friday.

(Reporting by Rodrigo Campos; Editing by Richard Chang and Jonathan Oatis)

Wall Street closes down on slide in Apple shares, bank stocks

July 18 (Reuters) – Wall Street ended lower on Monday after bank stocks erased earlier gains and Apple (AAPL) shares fell on a report saying the company plans to slow hiring and spending growth next year.

After posting solid gains to start the session following earnings from Bank of America Corp. (BAC) and Goldman Sachs Group Inc. (GS), the S&P financial sector weakened into the close.

Apple shares reversed course to close down 2.1% at USD 147.1 on a Bloomberg report that said the company plans to slow hiring and spending growth next year in some units to cope with a potential economic downturn.

Goldman Sachs advanced 2.5% as it reported a smaller-than-expected 48% slump in second-quarter profit, helped by strength in its fixed-income trading.

Worries about a larger one percentage point rate hike at the end of July eased following remarks from Fed officials last week that the policymakers could stick to a 75 basis point hike.

“It’s really hard to sustain upward momentum,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “And that’s kind of the story of bear markets.”

The Dow Jones Industrial Average fell 215.65 points, or 0.69%, to 31,072.61, the S&P 500 lost 32.31 points, or 0.84%, to 3,830.85 and the Nasdaq Composite dropped 92.37 points, or 0.81%, to 11,360.05.

Nine of the 11 major sectors of the S&P 500 lost ground, with healthcare and utilities suffering the largest percentage drop, while energy took the biggest gain.

Earnings from big technology companies next week will be closely watched, after their shares came under immense selling pressure through much of this year.

Among other tech stocks, Google parent Alphabet fell 2.5%. IBM declined 1.3%.

Volume on US exchanges was 10.63 billion shares, compared with the 12.15 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.20-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and 31 new lows; the Nasdaq Composite recorded 30 new highs and 78 new lows.

(Reporting by Echo Wang in New York; Additional reporting by Shreyashi Sanyal, Bansari Mayur Kamdar and Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta, Anil D’Silva and Deepa Babington)

Stocks edge up, dollar dips as Fed hike expectations lessened

NEW YORK, July 18 (Reuters) – A gauge of global stocks edged higher on Monday as a late-session sell-off in US equities trimmed earlier gains while the dollar slipped as investors tamped down expectations that the Federal Reserve will take a more aggressive approach in hiking interest rates next week.

Expectations for a 100 basis points rate hike by the Fed at its policy meeting next week stood at about 29%, according to CME’s FedWatch Tool after reaching as high as 80% last week.

Recent readings on inflation came in above expectations but showed tentative signs that higher prices may be starting to ease, giving the US central bank a possible cushion to raise rates at a smaller 75 basis points increment.

“As we as we entered into the quiet period, the Fed seems to be leaning more towards 75 basis points than to 100 basis points,” said Jim Barnes, director of fixed income at Bryn Mawr Trust.

“The more recent economic data that we got on Friday was more upbeat and today’s rising Treasury yields seem to be catching up with the market’s activity from Friday, as well as the equity market from today.”

A strong start to the trading session for stocks on Wall Street fizzled out, however, as a drop in Apple Inc. (AAPL) weighed following a Bloomberg report that the iPhone maker plans to slow hiring and spending growth next year in some units to cope with a potential economic downturn.

“We were starting to slide a little before then, just a little bit, and when that hit, obviously Apple slid a little quicker than the market did, so maybe it was an excuse to sell off,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

US equities initially rose in part due to gains in bank stocks .SPXBK, which had risen about 3% on the heels of earnings from Goldman Sachs (GS), up 2.5% and Bank of America, up 0.05%, before fading.

The Dow Jones Industrial Average fell 216.51 points, or 0.69%, to 31,071.75; the S&P 500 lost 32.34 points, or 0.84%, to 3,830.82; and the Nasdaq Composite dropped 92.37 points, or 0.81%, to 11,360.05.

Of the 40 S&P 500 companies that have reported earnings through Monday morning, 80% have been above estimates, per Refinitiv data, tracking slightly below the 81% rate over the past four quarters.

The pan-European STOXX 600 index rose 0.93% and MSCI’s gauge of stocks across the globe gained 0.06%. European stocks closed off a three-week high hit earlier in the day on worries about the impact of an energy shortage in the region.

Benchmark 10-year US Treasury notes US10YT=RR last fell 12/32 in price to yield 2.9725%, from 2.93% late on Friday.

Before the Fed meeting next week, the European Central Bank is poised to raise rates for the first time in more than a decade on Thursday, with a hike of 25 basis points expected.

As the region deals with its own inflationary pressures, Russia’s Gazprom (GAZP) told customers in Europe it cannot guarantee gas supplies because of ‘extraordinary’ circumstances, according to a letter from Gazprom that will add to European fears of fuel shortages.

In light of the shifting view of next week’s Fed meeting, the US dollar retreated from the 20-year high hit last week, helping the euro move away from parity against the greenback.

The dollar index fell 0.38%, with the euro EUR= up 0.56% to USD 1.0143.

Oil prices jumped, boosted by mounting concerns over gas supply from Russia and the lower dollar, offsetting demand fears brought on by a possible recession and China lockdowns.

US crude settled up 5.13% at USD USD 102.60 per barrel and Brent settled at USD 106.27, up 5.05% on the day.

(Additional reporting by Rodrigo Campos; editing by Jonathan Oatis)

US equity funds’ net assets shrank by $2 trillion in second quarter

July 18 (Reuters) – US equity funds witnessed a record erosion in their net assets in the second quarter of this year, as stocks slumped due to soaring inflation and rising expectations of aggressive rate hikes by major central banks.

Data from Refinitiv Lipper showed US equity funds’ net assets shrank by USD 2.1 trillion to USD 9.2 trillion in the quarter ended June, the biggest quarterly drop ever.

The decliners were led by Vanguard Total Stock Market Index Fund and SPDR S&P 500 ETF Trust SPY which lost USD 77.5 billion and USD 70.5 billion of their net assets respectively, while Vanguard 500 Index Fund gave up USD 69.3 billion.

The tech-heavy Nasdaq Composite and the broader S&P 500 Composite index declined 22.4% and 16.45% respectively in the second quarter, marking their biggest January-June percentage drop since the financial crisis.

US equity mutual funds also registered an average fall of 15.3% in their net assets values between April and June this year.

The Federal Reserve has already lifted interest rates three times this year, and is expected to do another 75 basis points later this month.

Those expectations of aggressive rate hikes have given rise to fears of a global recession as corporates are hit by higher borrowing costs and lower profit margins.

Goldman Sachs said in a note a recession could cause the S&P 500 index to fall by 19% to 3,150 by the end of 2022, and a sharp contraction in the price-earnings ratio.

“This peak to trough price decline of 34% would be slightly more severe than the historical average recession decline of 30%.”

The weekly data from Lipper showed US equity funds witnessed outflows for the third week in a row in the week ended July 13.

(Reporting By Patturaja Murugaboopathy; Editing by Vidya Ranganathan)

Yellen: US talks with India on price cap on Russian oil ‘encouraging’

SEOUL, July 18 (Reuters) – US Treasury Secretary Janet Yellen described as “encouraging” talks with India about a proposed price cap on Russian oil that Washington is pushing to drive down oil prices and make it harder for Moscow to fund its war in Ukraine.

Yellen, who arrived in Seoul on Monday evening, told Reuters in an interview en route to the South Korean capital that she was feeling generally positive about the initiative.

“We’ll see where they come out. The conversations I’ve had have generally been encouraging,” Yellen said aboard a military aircraft on her way from Indonesia to South Korea.

A senior Treasury official said India had made no promises on the oil price cap, but was working with the United States and had not “expressed hostility to this idea”.

Yellen told reporters on Saturday that she had held productive bilateral meetings about the proposed price cap with more than six counterparts on the sidelines of a meeting of Group of 20 finance officials on the Indonesian island of Bali.

The Treasury said she met there with officials from Saudi Arabia, Australia, South Africa, Turkey and Singapore.

Yellen spoke with her Indian counterpart before leaving for Asia, but did not meet him in Bali, a senior Treasury official said. Other senior US Treasury officials have been in touch with lower-level Indian officials as well, the official said.

(Reporting by Andrea Shalal; Editing by Mark Heinrich)

Chinese central bank support boosts EM stocks; FX gain as dollar rally fades

July 18 (Reuters) – Emerging market shares rose nearly 2% on Monday, buoyed by Chinese central bank support pledges that sent the country’s mainland stocks leaping, while currencies saw modest gains as the greenback relaxed from multi-year highs.

China’s central bank stepped up cash injections by offering 12 billion yuan ($1.8 billion), while also vowing to increase implementation of prudent monetary policy to support the economy. Heavyweight stocks added more than 1% and Hong Kong’s Hang Seng index leaped 2.6%.

China’s yuan firmed 0.2%, its biggest jump in nearly a month.

“Investments in China – both direct investment and portfolio investments – are under pressure due to factors that were perceived as less relevant in the past,” said Ulrich Leuchtmann, head of FX and commodity research at Commerzbank.

“Free-flowing export revenue is supporting CNY, but if that eases, or when the West slides into a recession, the renminbi is likely to get under increasing pressure.”

MSCI’s index of emerging market (EM) stocks jumped 1.7% after dropping nearly 4% last week as worries over a looming downturn, China’s economic strains and faster U.S. interest rate hikes dented the appeal for riskier assets.

“It is unclear what the ‘new normal’ will look like following this inflation shock,” Leuchtmann added.

With U.S. Federal Reserve officials signalling a 75-basis-point rate hike at the upcoming meeting, rather than the 100 bps some feared, risk sentiment improved, and the safe-haven dollar nudged down to 107.86 from last week’s two-decade high of 109.290.

After selling off for six straight weeks, emerging market currencies got a breather, rising 0.3% with Mexico’s peso and South Africa’s rand rising upto 0.8%.

Russia’s rouble hit a near two-week high against the dollar, supported by a favorable tax payment period and capital controls as participants look ahead to a central bank rate decision this week where it is widely expected to cut the key rate from 9.5%.

Sri Lanka President Wickremesinghe declared a state of emergency in the country, according to a government notice.

Sovereign dollar bonds dipped up to 0.5 cents, after dropping to record lows last week.

At large, crashing currencies, 1,000 basis point bond spreads and burned forex reserves point to a record number of developing nations now in trouble.

Emerging market local currency bond funds suffered their 20th consecutive week of outflows last week in the longest streak since 2014, according to analysts at JPMorgan.

(Reporting by Anisha Sircar in Bengaluru; Editing by Rashmi Aich)

BSP ready to use available tools in inflation fight

MANILA, July 18 (Reuters) – The Philippine central bank is ready to use available tools to bring inflation back within the official 2%-4% target range, its governor said on Monday, after last week’s surprise 75 basis points hike in key interest rates.

Bangko Sentral ng Pilipinas Governor Felipe Medalla also said the domestic economy, aside from red-hot inflation, also faces a risk from possible reimposition of COVID-19 restrictions.

(Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Martin Petty)

Oil jumps as soft dollar and tight supply supports

LONDON, July 18 (Reuters) – Oil prices extended gains on Monday, propped up by a weaker dollar and tight supplies that offset concerns about recession and the prospect of widespread COVID-19 lockdowns in China again reducing fuel demand.

Brent crude futures for September settlement rose USD 2.44, or 2.4%, to USD 103.60 a barrel by 0900 GMT, having advanced by 2.1% on Friday.

US West Texas Intermediate (WTI) crude futures for August delivery gained USD 2.17, or 2.2%, to USD 99.76 after rising by 1.9% in the previous session.

The US dollar retreated from multi-year highs on Monday, supporting prices of commodities ranging from gold to oil. A weaker dollar makes dollar-denominated commodities more affordable for holders of other currencies.

Both Brent and WTI last week registered their biggest weekly declines for about a month on fears of a recession that would hit oil demand. Mass COVID-testing exercises continue in parts of China this week, raising concerns over oil demand from the world’s second-largest oil consumer.

However, oil supplies remain tight. As expected, US President Joe Biden’s trip to Saudi Arabia failed to yield any pledge from the top OPEC producer to boost oil supply.

Biden wants Gulf oil producers to step up output to help to lower oil prices and drive down inflation.

Global markets are focused this week on the resumption of Russian gas flows to Europe via the Nord Stream 1 pipeline, which is scheduled to end maintenance on July 21. Governments, markets and companies fear the shutdown could be extended because of the war in Ukraine.

“Brent crude will find support at the end of the week if Russia does not turn the gas back on to Germany after Nord Stream 1 maintenance,” said OANDA senior analyst Jeffrey Halley.

Loss of that gas to Germany, the world’s fourth-largest economy, would hit it hard and heighten the risk of recession.

(Reporting by Noah Browning; Additional reporting by Sonali Paul in Melbourne and Florence Tan in Singapore; Editing by David Goodman)

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