European shares fall ahead of ECB decision

June 9 (Reuters) – European shares slipped on Thursday ahead of the European Central Bank’s meeting later in the day, with investors awaiting clues on the central bank’s policy tightening plans.

The pan-European STOXX 600 index fell 0.5% by 0709 GMT. The index is set to mark its third straight session of losses.

Money markets have now priced in 75 basis points of hikes from the ECB by October, from earlier expectations of 25 bps hikes at each meeting, as euro zone inflation hit record highs. Data showing strong first-quarter economic growth in the euro zone lent weight to the hawkish bets.

Markets globally weakened ahead of the decision, with new COVID-19 curbs in Shanghai adding to recession worries. Asian shares slipped, US Treasuries fell as did US stock futures, while the safe-haven dollar surged to two-decade highs.

The ECB decision is due at 1145 GMT, followed by a press conference at 1230 GMT.

Losses in Europe were largely broad-based and led by miners, while the energy sector was the sole gainer, up 0.4%. Oil prices cheered China’s stronger-than-expected exports in May but soon gave up gains.

Among stocks, British American Tobacco (BATS) rose 0.8% after it said it was confident in delivering its financial targets irrespective of how long it takes to offload its Russian unit.

(Reporting by Susan Mathew in Bengaluru; editing by Uttaresh.V)

Oil pares gains as new China lockdown measures emerge

SINGAPORE, June 9 (Reuters) – Oil prices gave up early gains on Thursday after parts of Shanghai imposed new COVID-19 lockdown measures, outweighing news of China’s stronger-than-expected exports in May.

Brent crude futures for August dipped 15 cents, or 0.1%, to USD 123.43 a barrel at 0630 GMT, while US West Texas Intermediate crude for July was at USD 121.91 a barrel, down 20 cents, or 0.2%.

Both benchmarks closed on Wednesday at their highest since March 8, matching levels seen in 2008.

China’s May exports jumped 16.9% from a year earlier as easing COVID curbs allowed some factories to restart, the fastest growth since January this year and more than double analysts’ expectations.

But while the Chinese trade figures were upbeat, they failed to lift oil prices for long.

“Of far greater importance is news that a district of Shanghai has been locked down today, reviving fears of another leg of China weakness due to its covid-zero policies. That is capping any gains in Asia today,” said Jeffrey Halley, OANDA’s senior market analyst for Asia Pacific.

Parts of Shanghai began imposing new lockdown restrictions on Thursday, with residents of sprawling Minhang district ordered to stay home for two days in a bid to control COVID transmission risks.

“The export performance is impressive in the context of the country’s multi-city lockdowns in the month,” Stephen Innes, managing partner at SPI Asset Management, said in a note Thursday.

“Still, the apparent negative feedback loop is there is less incentive for the authorities to move away from ‘zero COVID’ soon,” Innes said, adding that this was a bit of a saw-off for oil markets.

Meanwhile, peak summer gasoline demand in the United States continued to provide a floor to prices.

The US posted a record fall in strategic crude reserves even as commercial stocks rose last week, data from the Energy Information Administration (EIA) showed on Wednesday.

US gasoline stocks unexpectedly dropped, indicating resilience in demand for the motor fuel during peak summer despite sky-high pump prices.

“It’s hard to see significant downside in the coming months, with the gasoline market likely to only tighten further as we move deeper into driving season,” said ING’s head of commodities research Warren Patterson.

EIA’s data showed that apparent demand for all oil products in the United States rose to 19.5 million barrels per day (bpd) while gasoline demand rose to 8.98 million bpd, ANZ analysts said in a note.

(Reporting by Florence Tan and Jeslyn Lerh; Editing by Shri Navaratnam and Kim Coghill)

S&P 500, Dow fall as Intel slides

June 8 (Reuters) – The Dow and the S&P 500 index slipped in choppy trading on Wednesday, pulled lower by shares of Intel after a bearish brokerage report, while the Nasdaq was propped up by gains in Tesla and Apple.

Eight of the 11 major S&P sectors were lower, with industrials, real estate and consumer staples down between 0.7% and 0.9%, respectively.

Intel (INTC) fell 3.8% and was the biggest drag on the blue-chip and benchmark indexes after Citi Research analysts cautioned that the chipmaker could pre-announce weaker-than-expected earnings for the second quarter.

Altria MO.N, which was also a big drag on the S&P 500, slid 6.7% after a report that Morgan Stanley cut the tobacco company’s stock to “underweight” on competition concerns.

The energy sector was among the gainers, as Brent crude hovered near USD 122 a barrel. The sector has soared 65% this year and is on track for a bumper 2022.

“Investors are concerned with where energy prices are headed. All you’re seeing is people rearranging some positions and to some extent waiting for a better indication that perhaps inflation will come off in recent times,” said Rick Meckler, a partner at Cherry Lane Investments.

“You are just going to see more choppiness, there isn’t really any breakthrough news in the market, both in terms of earnings and economics.”

Against the backdrop of rising borrowing costs, focus this week will be squarely on consumer price index data due on Friday.

A hot reading would likely spook markets already worried about how the US Federal Reserve will balance growth and inflation as it withdraws its pandemic-era policy support to the economy.

The benchmark S&P 500 index has climbed 9% since May 20 after falling as much 20.05% so far this year. It was last down 12.9% for the year. The blue-chip Dow is down 9% and the tech-heavy Nasdaq has shed 22%.

The CBOE volatility index was last trading at 24.20 points, above its long-term average of about 20 points.

At 10:02 a.m. ET, the Dow Jones Industrial Average was down 103.37 points, or 0.31%, at 33,076.77 and the S&P 500 was down 8.79 points, or 0.21%, at 4,151.89.

The Nasdaq Composite was up 28.08 points, or 0.23%, at 12,203.31, boosted by a 4.3% rise in Tesla Inc. (TSLA) shares.

Apple Inc. (AAPL) rose 0.6%, up for the third straight session.

Western Digital Corp (WDC) gained 1.6% after the memory storage devices maker said it was reviewing options, including splitting its flash-memory and HDD businesses.

Declining issues outnumbered advancers for a 1.88-to-1 ratio on the NYSE. Advancing issues outnumbered decliners by a 1.20-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and 29 new lows, while the Nasdaq recorded 21 new highs and 31 new lows.

(Reporting by Devik Jain and Mehnaz Yasmin in Bengaluru; Editing by Arun Koyyur)

UPDATE 6-U.S. SEC chief unveils plan to overhaul Wall Street stock trading

Adds Wall Street reaction

By Katanga Johnson and John McCrank

WASHINGTON/NEW YORK, June 8 (Reuters) – The top U.S. securities regulator on Wednesday unveiled a planned overhaul of Wall Street retail stock trading rules, aiming to boost competition for handling orders by commission-free brokerages to ensure mom-and-pop investors get the best price for trades.

U.S. Securities and Exchange Commission chair Gary Gensler told an industry audience he wants to require trading firms to directly compete to execute trades from retail investors.

The Wall Street watchdog plans to scrutinize growth in recent years of the payment for order flow (PFOF) practice, which is banned in Canada, the UK and Australia.

Some brokers, such as TD Ameritrade, Robinhood Markets and E*Trade, accept these payments from wholesale market makers for orders. In December 2020, Robinhood actually paid a fine related to the practice, which the SEC said raised costs for investors using the online brokerage. nL1N2IX1CG

A ban on the PFOF practice is not off the table, Gensler has said. On Wednesday, he said the practice has “inherent conflicts,” while noting some zero-commission brokerages operate without PFOF.

“I asked staff to take a holistic, crossmarket view of how we could update our rules and drive greater efficiencies in our equity markets, particularly for retail investors,” Gensler said.

Investor advocates praised the SEC’s plan, which would be the biggest shake-up of U.S. equity market rules in over a decade. But financial industry executives quickly blasted the plans, saying they could hinder commission-free brokerages from serving more investors.

“Too many in the financial industry today get rich from anti-competitive and predatory practices in highly fragmented markets that result in retail investors being mistreated if not ripped off,” said Dennis Kelleher, the chief executive of Washington-based advocacy group Better Markets, who supports the SEC’s plans.

Joseph Mecane, head of execution services at Citadel Securities warned against broad plans to revamp the market.

“We talk about how our markets are the envy of the world,” said Mecane. “We need to be very careful about … unintentionally taking us back to a period that looks worse that how it looks today.”

“Let’s keep our eye on the retail investor who has never had it better as far as liquidity and low cost trading,” said Kirsten Wegner, who leads the Modern Markets Initiative, a Washington-based group that represents high-speed trading platforms.

Gensler said if PFOF is still allowed, the SEC wants rules to mandate market makers disclose more data around fees these firms earn and the timing of trades.

Gensler’s announcement would generate any formal proposals in the fall. The public could then weigh before the SEC votes on whether to adopt them.

Dan Gallagher, Robinhood’s chief legal, compliance and corporate affairs officer, said his firm “looks forward to reviewing the Commission’s eventual rule proposal and engaging with the SEC during a meaningful notice and comment rulemaking process.”

The intended changes would fundamentally alter the business model of wholesalers. They could also affect brokers’ ability to offer commission-free trading to retail investors. Reuters first flagged the reforms in March.nL2N2V72H1

PFOF came under regulatory scrutiny last year when an army of retail investors went on a buying spree of “meme stocks” like GameStop and AMC, squeezing hedge funds that had shorted the shares. Many investors purchased shares using commission-free brokers such as Robinhood.

To enhance order-by-order competition, the new rules would call for “open and transparent” auctions aimed at providing investors better prices. They would also require dealers executing trades to ensure the best price for investors and to improve transparency around the procedural standards brokers must meet when handling and executing orders.

They would also require broker dealers and market centers to disclose more data including a monthly summary of price improvement and other statistics, Gensler said.

The rules would seek to shrink the minimum pricing increment or so-called tick size to ensure all trading occurs in the minimum increment.

WHOLESALE OVERHAUL

Currently, retail brokerages can send customer orders directly to a wholesale broker to be executed, as long as the broker is matching or bettering the best price available on U.S. exchanges. Large market-makers typically improve on the best price by a fraction of a cent. Gensler has criticized this model as limiting competition for retail orders.

“It’s great to see the SEC taking a holistic approach to this problem – there’s not a single answer, we need changes to different parts of the market,” said Dave Lauer, CEO of financial platform Urvin Finance.

ANALYSIS-U.S. mulls shaking up stock trading rules to aid small investorsnL2N2V72H1

(Reporting by Katanga Johnson in Washington and John McCrank in New York;
Editing by David Gregorio, Carmel Crimmins and Matthew Lewis)

((Katanga.Johnson@tr.com; 202-579-4165; Reuters Messaging: @kjspeakstruth))

Philippine billionaire to build world’s largest solar power facility

MANILA, June 8 (Reuters) – Philippine billionaire Enrique Razon’s infrastructure investment arm said on Wednesday it plans to construct what will be the world’s largest solar power facility, joining a growing number of local companies embracing development of renewables.

Unlisted Prime Infrastructure Holdings Inc said the facility will have a capacity of 2,500-3,500 megawatts combined with a 4,000MWh to 4,500MWh battery energy storage system.

The project will be undertaken by Terra Solar Philippines, a unit of Prime Infrastructure’s subsidiary Terra Renewables Holdings Inc, in partnership with Solar Philippines Power Project Holdings Inc.

Further details of the project, including cost and timetable, were not immediately available.

Terra Solar will sell 850 MW of the facility’s output to Manila Electric Company (MER), the country’s largest power utility.

The Southeast Asian country has made a big push for renewable energy projects as it seeks to lessen its dependence particularly on coal in power generation, in line with its goal to reduce greenhouse gas emissions.

The government aims to increase the share of renewables in the power mix to 35% by 2030, from 21% in 2020, and to 50% by 2040. Coal accounted for nearly 60% of the 2020 mix.

Solar Philippines Nueva Ecija Corp., which raised 2.7 billion pesos (USD 51 million) from an initial public offering late last year, said it was aiming to build the largest solar farm in Southeast Asia with an initial capacity of 500 MW.

(Reporting by Enrico Dela Cruz; Editing by Kanupriya Kapoor)

Beijing’s drive for looser lending raises fears of bank margin squeeze

SHANGHAI, June 8 (Reuters) – Beijing’s mandate to aid virus-hit sectors has left China’s banking sector lagging behind a broader market rally as the economy reopens, with investors fearful a cash splash by lenders will increase bad loans and squeeze already wafer-thin margins.

China’s easing of monetary conditions – at odds with the policy direction in most countries – is designed to revive growth and has triggered a robust rebound in stocks.

Over the last month, as COVID-19 rules were relaxed in Shanghai and Beijing, blue chip index rose nearly 8%, while the tech-focused STAR 50 Index jumped more than 18%.

However, the CSI300 Bank Index, which tracks the “Big Four” state banks and other lenders, including local government-controlled Shanghai Pudong Development Bank 600000.SS, has lost 0.7% over the same period amid concerns over the financial health of lenders.

The China Banking and Insurance Regulatory Commission (CBIRC) last week urged banks to boost support to companies affected by COVID, allowing a higher tolerance for bad loans.

Chinese lenders face “an increasingly apparent trade-off between remaining profitable and supporting the economy,” said Natixis economist Gary Ng. The mandate to help the economy will mean banks will need to “sacrifice their profitability … to help corporate and households.”

Banks’ net interest margin already fell to 2.04% in the first quarter, from 2.1% in 2020, and will likely be squeezed further, he said.

In late May, the People’s Bank of China (PBOC) urged banks to “raise political standing” by implementing stimulus measures, and called for an incentive mechanism that would enable loan officers “willing” and “daring” to lend to small companies.

The regulators’ calls come amid signs risk-averse banks are parking money in low-risk, short-term financial instruments, pushing such yields toward zero.

LOW VALUATIONS

Xie Chen, a fund manager at Shanghai Jianwen Investment Management Co, says monetary easing is a double-edged sword for banks.

While credit expansion increases revenues, “if you slash lending rates without proportionate cuts in deposit rates, profitability will naturally go down,” Xie said.

Banks’ very low valuations show the market expects write-offs from non-performing loans, he added.

China-listed lenders trade at 5.18 times earnings and 0.65 times book value, making banking the cheapest sector in China, where consumer staples trade at an earnings multiple of 38.4.

Chinese banks are also much cheaper than the average 9.74 times earnings and 1.03 times book value for global banks in the Refinitiv Global Banks Price Returns Index ..

As a result, some investors say the pessimism toward Chinese banks is overdone.

“The current valuation of banks is so low that it seems to be pricing in large-scale bankruptcies in the sector,” said Dong Baozhen, fund manager at Lingtong Investment, who deemed such a scenario unlikely.

Despite the recent rebound, “China’s tech stock bubble is bursting, and money will eventually flow into lowly-valued banking shares,” he added.

(Reporting by Samuel Shen, Jason Xue and Andrew Galbraith; Editing By Vidya Ranganathan and Jamie Freed)

Oil prices advance on low oil inventories expectation

SINGAPORE, June 8 (Reuters) – Oil prices drifted higher on Wednesday, anticipating a report of low US oil stocks, while expectations of solid demand in the upcoming driving season also lent support.

Brent crude futures for August were up 40 cents, or 0.3%, at USD 120.97 a barrel at 0649 GMT after closing on Tuesday at the highest since May 31.

US West Texas Intermediate crude CLc1 for July was at USD 120.01 a barrel, up 60 cents, or 0.5%, after reaching its highest settlement since March 8 in the previous session.

Analysts polled by Reuters expect data for last week to show another drawdown of US crude inventories, although gasoline and distillates stocks could edge higher.

“The oil market is expected to remain tight as the supply side will continue to tell a story of low inventories. Crude oil inventories will likely post more draws as driving season and vacationing heats up,” OANDA analyst Edward Moya said in a note.

However, figures from the American Petroleum Institute showed that US crude and oil products inventories rose last week.

The US Energy Information Administration (EIA) will report last week’s stock levels at 10:30 a.m. EDT (1430 GMT) on Wednesday.

The World Bank on Tuesday slashed its global growth forecast for 2022 by nearly a third, warning that Russia’s invasion of Ukraine had compounded damage from the COVID-19 pandemic, and that many countries now faced recession.

Meanwhile, global crude and oil products supplies remain tight, boosting Asian refiners’ diesel margins to record levels, as Western sanctions hamper exports from major producer Russia.

The CEO of global commodities trader Trafigura said oil prices could soon hit USD 150 a barrel and go higher this year, with demand destruction likely by the end of the year.

Most refineries globally are already running close to capacity to meet rising demand from pandemic recovery and to replace lost Russian supplies.

JP Morgan analysts estimate that Russia has cut about 500,000 to 700,000 barrels per day of oil products exports, because it now finds marketing fuel harder than marketing crude.

“Unless new Middle East capacity comes online more quickly than we expect or China decides to lift its products export caps, the shortage of clean products will only get worse as demand for transport fuels picks up during the northern hemisphere summer,” they said in a note.

On Tuesday, China topped up its first batch of product export quotas aimed at reducing high domestic inventories, which have risen as pandemic lockdowns have dented demand. Despite the latest additions to the quotas, their volumes remain much lower than last year, however.

“We do not see a meaningful impact to ease the current diesel tightness but will watch for the start-up progress of new refiners like Petronas RAPID and Kuwait Al-Zour,” Citi analyst Oscar Yee said in a note.

(Reporting by Florence Tan and Muyu Xu; Editing by Richard Pullin and Bradley Perrett)

Gold investors in wait-and-see mode before US CPI data

June 8 (Reuters) – Gold prices were little changed on Wednesday as investors awaited the US inflation report this week for further cues on the economy as central banks worldwide seek to cool surging prices.

FUNDAMENTALS

* Spot gold= was down 0.1% at USD 1,850.41 per ounce, as of 0037 GMT, while US gold futures added 0.1% to USD 1,853.30.

* The World Bank on Tuesday slashed its global growth forecast by nearly a third to 2.9% for 2022, warning that Russia’s invasion of Ukraine has compounded the damage from the COVID-19 pandemic, and many countries now faced recession.

* The US trade deficit narrowed by the most in nearly 9-1/2 years in April as exports jumped to a record high, putting trade on course to contribute to economic growth this quarter.

* Japan’s economy shrank an annualised 0.5% in the first quarter, slightly better than the initial estimate of a 1.0% contraction, revised government data showed on Wednesday.

* US Treasury Secretary Janet Yellen told senators on Tuesday that she expected inflation to remain high and the Biden administration would likely increase the 4.7% inflation forecast for this year in its budget proposal.

* The Treasury Department also made clear that gold-related transactions involving Russia may be sanctioned, and is closely monitoring any efforts to circumvent US sanctions through the use of gold, Yellen said.

* Newmont’s Africa unit NEM.N has sold 3,500 ounces of gold to the Bank of Ghana under a central bank domestic gold purchasing program launched in June 2021, the company said in a statement on Tuesday.

* In other metals, platinum fell 0.1% to USD 1,009.84 an ounce and palladium rose 0.4% to USD 1,991.97. Silver eased 0.1% to USD 22.19.

DATA/EVENTS (GMT)

0600 UK Halifax House Prices MM May

0600 Germany Industrial Output MM April

0645 France Reserve Assets Total May

0900 EU GDP Revised QQ, YY Q1

(Reporting by Swati Verma in Bengaluru; Editing by Shailesh Kuber)

Oil prices inch higher ahead of US inventories data

SINGAPORE, June 8 (Reuters) – Oil prices edged up on Wednesday ahead of data on US oil inventories, with crude futures supported by tight supplies and recovering fuel demand as China’s top cities relax COVID-19 curbs.

Brent crude futures for August rose 22 cents, or 0.2%, to USD 120.79 a barrel by 0012 GMT after closing at the highest since May 31 on Tuesday.

US West Texas Intermediate crude for July was at USD 119.65 a barrel, up 24 cents, or 0.2%, after reaching its highest settlement since March 8 on Tuesday.

Analysts polled by Reuters expect another drawdown of US crude inventories in data for last week although gasoline and distillates stocks could edge higher.

However, figures from the American Petroleum Institute showed that US crude and oil products inventories rose last week.

The US Energy Information Administration (EIA) reports at 10:30 a.m. EDT (1430 GMT) on Wednesday.

Global crude and oil products supplies remain tight, boosting Asian refiners’ diesel margins to record levels, as Western sanctions hamper exports from major producer Russia.

The CEO of global commodities trader Trafigura said oil prices could soon hit USD 150 a barrel and go higher this year, with demand destruction likely by the end of the year.

Most refineries globally are already running at close to their maximum capacities to meet rising demand from pandemic recovery and replace lost Russian supplies.

JP Morgan analysts estimate that Russia has cut about 500,000 to 700,000 barrels per day of oil products exports as it has been more difficult for Moscow to market its fuel than crude.

On Tuesday, China topped up its first batch of product export quotas aimed at easing high domestic inventories after demand was dented by COVID-19 lockdowns, although volumes remained much lower than last year.

(Reporting by Florence Tan; editing by Richard Pullin)

Wall Street jumps with tech, energy; Target news weighs on retailers

NEW YORK, June 7 (Reuters) – US stocks rallied late on Tuesday to end higher for a second straight day as technology and energy shares gained, while Target Corp.’s warning about excess inventory weighed on retail stocks for much of the session.

Apple Inc. (AAPL) shares climbed 1.8% despite news earlier in the day that the company must change the connector on iPhones sold in Europe by 2024 after EU countries and lawmakers agreed to a single charging port for mobile phones, tablets and cameras.

The S&P 500 technology index rose 1% and gave the benchmark index its biggest boost. Microsoft Corp. (MSFT) shares added 1.4%.

The S&P 500 energy sector index jumped 3.1% to end at its highest level since 2014, with oil prices sharply higher.

At the same time, shares of Target Corp. (TGT) fell 2.3% after the retailer said it would have to offer deeper discounts and cut back on stocking discretionary items.

Equity trading was choppy, with indexes down early in the day, but the market has been recovering from recent steep losses.

Recently, “we’ve had a nice bounce … and in general investors are feeling better right now. But we are very much in a seesaw market as we’ve seen all year,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“At some point, we will put in a bottom, and the market will move higher. We have a hard time believing that’s any time soon, given a number of fundamental issues overhanging the market,” he said. “Certainly what we’ve seen today from Target isn’t good news in terms of the consumer.”

Long-dated US Treasury yields tumbled after the Target news, however, as it fueled some speculation that the worst of inflation may be in the past.

The Dow Jones Industrial Average rose 264.36 points, or 0.8%, to 33,180.14, the S&P 500 gained 39.25 points, or 0.95%, to 4,160.68 and the Nasdaq Composite added 113.86 points, or 0.94%, to 12,175.23.

Shares of Walmart (WMT) fell 1.2%, and the S&P retail index was down 1%.

Consumer price data on Friday is expected to show that inflation remained elevated in May, though core consumer prices, which exclude the volatile food and energy sectors, likely ticked down on an annual basis.

Not all retailers were in the red. Kohl’s Corp. (KSS) shares jumped 9.5% after news the department store chain entered exclusive talks with retail store operator Franchise Group Inc. (FRG) over a potential sale that would value it at nearly USD 8 billion.

Advancing issues outnumbered declining ones on the NYSE by a 2.36-to-1 ratio; on Nasdaq, a 1.69-to-1 ratio favored advancers.

The S&P 500 posted 3 new 52-week highs and 30 new lows; the Nasdaq Composite recorded 35 new highs and 121 new lows.

Volume on US exchanges was 10.38 billion shares, compared with the 12.50 billion average for the full session over the last 20 trading days.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Devik Jain, Susan Mathew, Mehnaz Yasmin in Bengaluru; Editing by Maju Samuel and Matthew Lewis)

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