Israel Aerospace to supply electro-optics to Philippine Navy

JERUSALEM, May 16 (Reuters) – Israel Aerospace Industries (IAI) said on Monday it won a contract to supply the Philippine Navy with its maritime electro-optics systems that will be integrated on Philippine patrol boats.

Financial terms of the deal were not disclosed.

The systems by state-owned IAI are lightweight and compact multi-sensors observation system built for maritime applications. They are designed to operate during both day and night, and meet harsh environmental conditions such as shock, vibration from waves, and extreme temperatures, IAI said.

The payload provides real-time imaging, automatic video tracking, and precise target geo-location capabilities that can be used as a stand-alone observation system on small and medium sized vessels, it added.

(Reporting by Steven Scheer; Editing by Ari Rabinovitch)

Philippines removes last hurdle for stalled Tampakan copper-gold project

MANILA, May 16 (Reuters) – A provincial government in southern Philippines has reversed its 12-year-old policy banning open-pit mining, removing the final regulatory hurdle for the stalled Tampakan copper-gold project, the industry regulator said on Monday.

The Tampakan project in South Cotabato province is the Southeast Asian country’s biggest stalled mining project with development cost previously estimated at USD 5.9 billion before it was hampered by the provincial ban imposed in 2010.

In 2016, President Rodrigo Duterte picked an anti-mining advocate as environment minister, who enforced a nationwide ban on open-pit mining the following year, adding to the challenges that dismayed investors and stalling other open-pit projects.

Duterte, who will end his six-year term next month, lifted the nationwide ban late last year, one of his two landmark policy reversals that sought to revitalise the mining industry.

“South Cotabato’s local legislative body has voted to lift the provincial ban, clearing the only hurdle remaining in developing one of the largest copper-gold reserves in Southeast Asia,” Wilfredo Moncano, director of the regulator, the Mines and Geosciences Bureau, told Reuters.

“All the major requirements to legally support the mining operation has been complied with,” he added.

The Tampakan project, in which commodities giant Glencore previously had a controlling stake before it decided to quit amid regulatory uncertainties, has estimated resources of 15 million tonnes of copper and 17.6 million ounces of gold, according to developer Sagittarius Mines Inc.

But Duterte’s former environment minister who had opposed mining – the late Gina Lopez – had described Tampakan as “a 700-football field open-pit mine on … agricultural lands, affecting four provinces and six rivers”.

Duterte’s successor, Ferdinand Marcos Jr., said in an interview with local media during the campaign that he was open to allowing “sustainable” mining but was wary about the open-pit method of mineral extraction.

(Reporting by Enrico Dela Cruz; Editing by Kanupriya Kapoor and Edmund Blair)

Japan’s Nikkei extends gains, though China’s slowdown fears weigh

TOKYO, May 16 (Reuters) – Japan’s Nikkei stock average gained for a second day on Monday, taking cues from previous session’s tech-driven rally on Wall Street, although gains were curbed as China’s economic data fueled slowdown worries.

The Nikkei ended 0.45% higher at 26,547.05. The benchmark jumped as much as 1.55% to a one-week high of 26,836.96 in early trading, but shed most of the early gains after data showed a sharper-than-expected slowdown at factories and shops in major trade partner China.

Tech was by far the Nikkei’s best-performing sector, up 0.88%, while basic materials led the losers with a 1.01% drop.

Losers handily outnumbered winners though, with 137 of the Nikkei’s 225 component stocks declining, compared with 86 that rose and two that were flat.

The broader Topix edged down 0.05% to 1,863.26 after opening the day about 1% higher.

The Nasdaq led gains in the US stock indexes on Friday with a 3.7% advance. The Philadelphia SE Semiconductor Index jumped 5% on the day.

However, the mood in global markets soured on Monday after shockingly weak data from China underlined the deep damage lockdowns are doing to the world’s second-largest economy.

“The risks from China’s slowdown are one of the main reasons for the poor sentiment in equity markets,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management in Tokyo.

“At the same time, we may be close to the peak in terms of China concerns,” he said, with the government now starting to ease COVID-19 restrictions.

Shanghai will gradually begin reopening businesses such as shopping malls and hair salons from Monday, following weeks of strict lockdowns.

Earnings results also divided Japan’s market sentiment, with Friday marking the climax of the corporate reporting season. For instance, precision parts maker NTN Corp. was the biggest percentage gainer with an 11.68% surge versus Dowa Holdings’ 13.06% tumble.

Automakers were also mixed, with Mazda rising 5.65%, but Honda slumped 4.37% on a disappointing earnings forecast and motorcycle-maker Yamaha sank 9.11%, having reported underwhelming results after the bell on Friday.

(Editing by Sherry Jacob-Phillips)

Oil settles higher on demand optimism, gasoline strength

NEW YORK, May 16 (Reuters) – Oil prices rose on Monday on optimism that China would see significant demand recovery after positive signs that the country’s coronavirus pandemic was receding in the hardest-hit areas.

Brent crude futures for July delivery rose USD 2.69 to settle at USD 114.24 a barrel, a 2.4% gain, while US West Texas Intermediate (WTI) crude rose USD 3.71, or 3.4%, to USD 114.20 a barrel.

Shanghai aims to reopen broadly and allow normal life to resume for the city’s 25 million people from June 1, a city official said on Monday, after declaring that 15 of its 16 districts had eliminated cases outside quarantine areas.

However, it is estimated that 46 cities in China are under lockdowns, hitting shopping, factory output and energy usage.

“We are seeing a lot of signals that demand will start returning in that region, supporting higher prices,” said Bob Yawger, director of energy futures at Mizuho.

In line with an unexpected sharp fall in industrial output in April, China processed 11% less crude oil, with daily throughput the lowest since March 2020.

US gasoline RBc1 futures set an all-time high again on Monday as falling stockpiles fuelled supply concerns.

Stockpiles in the Strategic Petroleum Reserve fell to 538 million barrels, the lowest since 1987, data from the US Department of Energy showed on Monday.

“Record high gasoline pricing has shown no sign of spurring demand destruction with the US economy appearing sufficiently strong to drive a robust kickoff to the heavy driving season in just a couple of weeks,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

Oil prices also found some support as the European Union’s diplomats and officials expressed optimism about reaching a deal on a phased embargo of Russian oil despite concerns about supply in eastern Europe.

However, EU foreign ministers failed on Monday in their effort to pressure Hungary to lift its veto of the proposed oil embargo, with Lithuania saying the bloc was being “held hostage by one member state”.

German Foreign Minister Annalena Baerbock said the bloc would need a few more days to find agreement.

“With a planned ban by the EU on Russian oil and slow increase in OPEC output, oil prices are expected to stay close to the current levels near USD 110 a barrel,” said Naohiro Niimura, a partner at Market Risk Advisory.

(By Laura Sanicola; Additional reporting by Bozorgmehr Sharafedin in London; Additional reporting by Yuka Obayashi in Tokyo; Editing by Mark Porter, Tomasz Janowski and Richard Pullin)

Signs of market bottom elude investors after steep selloff

NEW YORK, May 13 (Reuters) – Investors are studying an array of indicators for clues on how much further a brutal slide in U.S. stocks could run, with some signs suggesting the tumble in equities may not be over.

The S&P 500 extended its decline to nearly 20% from January’s record peak on Thursday before an end-of-week bounce, approaching the cusp of a bear market amid concerns that persistently high inflation will prompt more aggressive Federal Reserve interest rate increases that could undermine the economy. Declines have been even steeper in the tech-heavy Nasdaq Composite, which is down 24.5% year-to-date.

Despite those losses, many widely followed indicators do not yet show the pervasive panic, supercharged volatility and outright pessimism that have emerged in past market bottoms – a potentially worrisome signal for those looking to step in and buy on the cheap after the most recent selloff in stocks.

Indeed, stocks ripped higher on Friday, with some pandemic era favorites such as the ARK Innovation ETF showing double-digit percentage gains, albeit from depressed levels.

“I don’t think we are out of the woods yet on a near-term basis,” said Mark Hackett, chief of investment research at Nationwide. “That being said, investor expectations have been reset dramatically.”

For instance, the Cboe Volatility Index, known as “Wall Street’s fear gauge,” now hovers around 30 compared with a long-term median of nearly 18. Past market bottoms, however, have coincided with an average level of 37, and the VIX climbed above 80 in March 2020 during a COVID-19-fueled market plunge after which the S&P 500 more than doubled from its lows on the back of unprecedented Fed stimulus.

Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas, is looking for a one-day spike to a level of at least the mid-40s as likely “where you actually see panic.”

“If I don’t see panic … it might mean we are not at the bottom yet,” he said.

Hackett, of Nationwide, is watching options trading for a spike in the ratio between puts, which are typically bought for downside protection, and calls.

“Most of these indicators, put/call being one of them, are already very bad historically,” Hackett said. However, he said, “we haven’t seen that capitulation where everything is flashing red.”

Meanwhile, analysts at BofA Global Research on Friday shared their “capitulation” checklist, which showed that while some indicators, such as investor cash amounts, have hit critical territory, others have not met levels attained during the peak of past selloffs.

“Fear & loathing suggest stocks prone to imminent bear market rally but we do not think ultimate lows have been reached,” they wrote.

Next week, investors will focus on earnings results from major retailers including Walmart Inc. (WMT) and Home Depot Inc. (HD) as well as a report on monthly U.S. retail sales.

Whether clear signs of a bottom emerge or not, stock sentiment could also be swayed by market expectations of how aggressively the Fed will need to raise interest rates in the remainder of the year. The central bank has already raised rates by 75 basis points since March and has signaled that a pair of 50 basis-point increases may be coming in its next two meetings.

“I think you are going to have to at least wait for two or three 50 basis-point rate hikes before you start to see any real signs of people coming back in,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.

Rather than looking for signs of a bottom, Willie Delwiche, an investment strategist at market research firm All Star Charts, is focused on clearer indications that stocks can mount a sustained rally.

Among the factors he watches is whether the net number of 52-week highs versus lows on the New York Stock Exchange and Nasdaq combined turns positive, from current negative levels. Another is the percentage of S&P 500 stocks making 20-day highs rising to at least 55% from less than 2% at last count.

“Too many people right now are trying to pick a bottom and that’s proving to be futile and expensive,” Delwiche said. “This is a risk-off environment … Moving to the sidelines, letting the volatility play out, makes a lot of sense for investors.”

(Reporting by Lewis Krauskopf in New York; Editing by Ira Iosebashvili and Matthew Lewis)

Dollar dips to end trading week but set for weekly gain

NEW YORK, May 13 (Reuters) – The dollar slipped on Friday as a rally in equities contributed to a risk-on mood, but was still set for a sixth straight week of gains as investors remained concerned about slowing global growth and Federal Reserve policy tilting the United States into a recession.

High inflation and the Fed’s rate hike path have fueled worries of a policy error that could cause recession or a stagflation scenario of slowing growth and high prices. Readings this week showed some signs that inflation was beginning to ebb, although at a slow pace.

The dollar showed little reaction on Friday to data showing US import prices were unexpectedly flat in April as a decline in petroleum costs offset gains in food and other products, a further sign that inflation has probably peaked.

Other data from the University of Michigan showed its preliminary reading of consumer sentiment for early May deteriorated to its lowest level since August 2011 as concerns about inflation persisted.

Even with the recent inflation readings, Cleveland Fed president Loretta Mester said it would need to move lower for “several months” before the Fed can safely conclude it has peaked, and she would she would be ready to consider faster rates hike by the September Fed meeting if the data do not show improvement.

“The issue is where are we looking for recovery, how are we going to negotiate what seems to be coming down the pike. You have a Fed that is not ready to cut rates and help the economy – you have a Fed that is raising rates, that is a very unusual situation,” said Joseph Trevisani, senior analyst at FXStreet.com in New York.

But the greenback weakened as equities rallied after a steep decline that recently put the S&P 500 on the cusp of confirming a bear market as investors looked for signs stocks had bottomed.

“I don’t think you have seen a capitulation in equities… I just don’t sense the kind of panic that you usually see at the end,” said Trevisani.

Investors have flocked to the safe-haven on concerns about the Fed’s ability to dampen inflation without causing a recession, along with worries about slowing growth arising from the Ukraine crisis and the economic effects of China’s zero-COVID-19 policy amid rising infections.

The dollar index fell 0.143% at 104.610 against a basket of major currencies after earlier reaching 105.01, its highest since Dec. 2002. The US currency is on track for its sixth straight week of gains, its longest weekly streak of the year and has climbed more than 9% for 2022.

The euro was up 0.18% to USD 1.0398, reversing course after dipping to 1.0348, its lowest since Jan 3, 2017.

The single currency was on track for its fifth weekly drop in six and has been hurt by both fears resulting from Russia’s invasion of Ukraine stymieing the economy and the dollar rally.

While the European Central Bank is widely anticipated to begin hiking rates in July, the central bank is expected to adopt a less aggressive pace than the Fed.

The Japanese yen weakened 0.76% versus the greenback at 129.32 per dollar, while Sterling was last trading at USD 1.2227, up 0.23% on the day.

The safe-haven yen has also begun to strengthen against the greenback, and was on track for its first weekly gain versus the dollar after nine straight weeks of declines.

In cryptocurrencies, Bitcoin last rose 3.95% to USD 29,670.89. Bitcoin earlier this week fell to its lowest level since December 2020 as cryptocurrencies have been rattled by the collapse of TerraUSD, a so-called stablecoin.

(Reporting by Chuck Mikolajczak; Editing by Alexander Smith and Nick Zieminski)

EUR/USD hits new low but averts bigger break as risk improves

May 13 (Reuters) – The safe-haven dollar and yen backed off this week’s risk-off highs on Friday as beleaguered equity and risk markets recovered from recent losses, while EUR/USD narrowly averted a break of 2017’s 1.0340 low, its weakest since 2003, before bouncing into the black.

The yen, a big favorite earlier in the week as stocks sank along with Treasury yields, fell the most against the dollar and other rebounding currencies on Friday, as Treasury yields and stocks rebounded from key support levels.

Whether EUR/USD’s 2017 lows and the technical rebounds in Treasury yields and stocks will hold is the question. Nasdaq’s low on Thursday came near the 50% Fibo of the entire pandemic range.

There remains no end in sight for the expanding palette of risks emanating from the war in Ukraine, Chinese growth and COVID lockdown risks nL5N2X501I and the impact that Fed tightening to tame inflation may have on domestic and global growth prospects.

In Friday’s absence of fresh global derisking flows, the bounce in Treasury yields failed to help the dollar because the market is having trouble pricing in much more than a 3% fed funds peak and another 2% of hikes before year-end.

The other dollar restraint is the 2018 prior Fed tightening cycle highs in 2-year and 10-year yields at 2.98% and 3.26% that were nearly reached earlier this week.

EUR/USD was up 0.15% after making its 1.0349 trend low on EBS, but couldn’t get above Friday’s 1.04195 high from early in the day, largely because Bund-Treasury yield spreads remained nearer to session lows and the options market continues to favor euro puts versus calls.

USD/JPY rebounded 0.8% amid the rebound in Treasury-JGB yields spreads and the reversal of risk aversion flows that boosted the yen far and wide earlier this week.

The rebound from Thursday’s correction low by the daily kijun has been slowed by the tenkan, just below the 129.455 Friday EBS high at Wednesday’s low.

USD/JPY will need a bigger rebound in Treasury yields and Fed rate hike pricing to clear the 131.35 20-year highs from Monday.

Sterling gained 0.2% after making a fleeting new 2-year low at 1.2156, aided by the recovery in risk acceptance and oversold pressures, with lofty net spec sterling shorts only second to yen shorts among the majors.

Nonetheless, the 1.36% spread between 2-year Treasury and Gilts yields and the UK’s more daunting macroeconomic issues nL2N2X513N suggest sterling rebounds are selling opportunities.

Aussie and other high-beta currencies won back much of Thursday’s losses, but barely dented April-May losses.

USD/CNH fell 0.35%, with some glimmer of hopes that China’s COVID lockdowns might soon be reduced.

Bitcoin and ether were up about 2.5% and 5.5%, trimming huge May losses aggravated by the recent stablecoin collapse.

Tuesday’s US retail sales and impact from rising prices are next week’s focus.

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

US tells Southeast Asian leaders summit marks ‘new era’ for ties

WASHINGTON, May 13 (Reuters) – US President Joe Biden said on Friday a first summit in Washington with leaders from the Association of Southeast Asian Nations (ASEAN) marked the launch of a “new era” in the relationship between the United States and the 10-nation bloc.

Addressing the second day of a two-day meeting, Biden said “a great deal of history of our world in the next 50 years is going to be written in the ASEAN countries, and our relationship with you is the future, in the coming years and decades.”

The summit marks the first time that ASEAN leaders gathered as a group in Washington and their first meeting hosted by a US president since 2016.

The Biden administration hopes the effort will show that Washington remains focused on the Indo-Pacific and the long-term challenge of China, which it views as its main competitor, despite the crisis in Ukraine.

“We’re launching a new era – a new era – in US-ASEAN relations,” Biden said.

Earlier, US Vice President Kamala Harris told ASEAN leaders the United States would remain in the region for generations and stressed the need to maintain freedom of the seas, which Washington says is challenged by China.

“The United States and ASEAN have shared a vision for this region, and together we will guard against threats to international rules and norms,” she said.

Neither she nor Biden mentioned China, which Washington accuses of using coercion against its neighbors, by name.

“We stand with our allies and partners in defending the maritime rules-based order, which includes freedom of navigation and international law,” Harris said.

Harris said the United States would continue to respond with ASEAN to the threat of COVID-19, having already donated more than 115 million vaccines to the region.

“As long as COVID is present in any one country, it affects us all,” she said. She also said the United States and ASEAN needed to show collective ambition on the climate issue, accelerate the transition to clean energy, and meet infrastructure needs in a sustainable matter.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, though Myanmar’s leader was excluded from the summit over a coup last year and US treaty ally the Philippines is in transition after an election and is represented by its foreign minister.

Biden opened the meeting on Thursday by hosting a dinner for the leaders at the White House, and his administration promised $150 million to help improve infrastructure, security, pandemic preparedness and on other projects in ASEAN.

However, US spending pales in comparison to that of China, which in November alone pledged $1.5 billion in development assistance for ASEAN over three years to fight COVID and fuel economic recovery, and US officials concede Washington needs to step up its game.

On Friday Biden announced he was nominating a new ambassador to ASEAN, Yohannes Abraham, currently chief of staff on his National Security Council, to fill a post vacant since the start of the Trump administration in 2017.

New US commitments will include deployment of a US Coast Guard vessel to the region to help counter what Washington and regional countries have described as China’s illegal fishing.

Biden is working on more initiatives, including “Build Back Better World” infrastructure investment and an Indo-Pacific Economic Framework (IPEF). But neither is finalized.

Russia’s invasion of Ukraine will be on the agenda with ASEAN, with the United States hoping to persuade ASEAN countries to do more to push back against Moscow.

CONCERN OVER CHINA

ASEAN countries share many of Washington’s concerns about Chinese assertiveness, including Beijing’s claim of sovereignty over vast swathes of the South China Sea where Vietnam, the Philippines, Brunei and Malaysia have rival claims.

But they also remain cautious about siding more firmly with Washington, given their predominant economic ties with Beijing and limited US economic incentives.

They have also been frustrated by a US delay in detailing plans for economic engagement since former President Donald Trump quit a regional trade pact in 2017.

At a virtual summit with ASEAN last October, Biden said Washington would start talks about developing what has since been dubbed IPEF to engage more with the Indo-Pacific economically.

However, analysts and diplomats say only two of the 10 ASEAN countries – Singapore and the Philippines – are expected to be among the initial group to sign up for negotiations under IPEF, which does not currently offer the expanded market access Asian nations crave given Biden’s concern for American jobs.

Malaysian Prime Minister Ismail Sabri Yaakob said on Thursday Washington should adopt a more “active” trade and investment agenda with ASEAN.

(Reporting by Jeff Mason, David Brunnstrom, Michael Martina, Steve Holland, Trevor Hunnicutt, and Simon Lewis; Editing by Angus MacSwan, Nick Zieminski and Daniel Wallis)

PRECIOUS-Gold set for fourth weekly loss on dollar strength, Fed hike bets

Gold hits lowest level since Feb. 4 at $1,798.86/oz

Silver prices dip about 6% so far this week

Platinum, palladium also set for weekly losses

Updates prices

By Ashitha Shivaprasad

May 13 (Reuters) – Gold fell more than 1% on Friday and is set for its fourth straight weekly decline, as the dollar’s strong run with more aggressive U.S. interest rates on the horizon sapped appetite for bullion.

Spot gold XAU= fell 0.7% to $1,808.89 per ounce by 01:54 p.m. EDT (1754 GMT), after hitting its lowest since Feb. 4 at $1,798.86. It has declined nearly 4% this week.

U.S. gold futures GCv1 settled down 0.9% at $1,808.20.

U.S. Federal Reserve Chair Jerome Powell said on Thursday that the battle to control inflation would “include some pain”, as the impact of higher interest rates is felt. nS0N2UR07B

“Gold is being weighed down as the Fed has been committed to raise interest rates at a fast pace and in addition, the dollar has been extremely strong,” said David Meger, director of metals trading at High Ridge Futures.

“Going forward, the inflation numbers are what the market will closely watch.”

The dollar index .DXY was set for a sixth consecutive weekly gain, hovering near a 20-year high. USD/

Although seen as an inflation hedge, bullion yields no interest and is sensitive to rising U.S. short-term interest rates and bond yields.

“A rebound in global stock markets amid less risk aversion in the marketplace to end the trading week is also a negative for the safe-haven metals,” said Kitco senior analyst Jim Wycoff in a note.

Growth stocks led a rebound in Wall Street’s main indexes. .N MKTS/GLOB

Spot silver XAG= rose 1.6% to $20.98 per ounce, but has fallen about 6% this week, the most since late January.

Platinum XPT= fell 0.8% to $936.51. Palladium XPD= gained 1.5% to $1,936.83, after falling over 8% on Thursday.

“Overwhelming concerns about supply disruptions in Russia take precedence in palladium market and there is active buying into dips as prices have come down dramatically,” added Meger.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Rashmi Aich and Shailesh Kuber)

((Ashitha.Shivaprasad@thomsonreuters.com;))

Wall Street ‘fear gauge’ offers no silver lining as bear market looms

NEW YORK, May 13 (Reuters) – A surprising lack of panic in the U.S. stock market as measured by Wall Street’s “fear gauge” is keeping some investors from calling a bottom on an already bruising equity selloff.

Since 1990, the Cboe Volatility Index .VIX has hit an average level of 37 at market bottoms, compared with its most recent level of around 32.

Some investors believe that means stocks are yet to see the crescendo of fearful selling that has sometimes accompanied past market bottoms, even though the S&P 500 has already fallen nearly 20% from its record high, a level that would confirm a bear market.

“Sentiment is negative out there but there is no real fear, there is no sense of panic,” said Kris Sidial, a co-founder at volatility arbitrage fund The Ambrus Group. “The one thing that you are not seeing is capitulation.”

The VIX – which measures the expectation of stock-market volatility as expressed by options prices – stands far above its long-term median level of 17.6.

Many investors believe volatility is likely to remain elevated as markets digest a hawkish Federal Reserve, soaring inflation and geopolitical uncertainty stemming from the war in Ukraine.

While it’s not necessary for the VIX to shoot higher before calm returns to markets, the index’s failure to climb well above the mid-30s may be a sign that selling in stocks is not yet washed out, making it more dangerous for those looking to buy on weakness, market participants said.

“I just don’t think we have seen that sort of event that marks a bottom,” said Steve Sosnick, chief strategist at Interactive Brokers.

The VIX had logged a high close of 82.69 during the March 2020 COVID-19 driven selloff, after which the S&P 500 more than doubled as the Fed slashed rates and implemented other easy money policies to support the economy. The index hit 36.07 in 2018, when stocks stopped a hair short of entering a bear market on worries over tighter Fed policy, and topped out at 80.86 during the Great Recession.

“I would love to see more panic and absolute flushing of this market,” said Mike Vogelzang, chief investment officer at CAPTRUST. “I’d love to see VIX at 40 or 45.”

One reason why the VIX – which is calculated based on S&P 500 options contracts – may be relatively subdued is that the gradual grinding selloff has left investors lighter on their allocation to equities.

Investors’ aggregate equity positioning has slipped to the levels lowest since the 2020 COVID-19 selloff, analysts at Deutsche Bank estimate.

Meanwhile, options positioning in S&P 500 and the VIX show a market that is very well hedged against declines, said Brent Kochuba, founder of analytic service SpotGamma. With defensive positions in place, investors see little hurry to buy more put options even as the market grinds lower, Kochuba said.

The VIX is far from the only sign investors look at when trying to determine whether markets have bottomed, and at least one volatility measure – one month historical volatility – shows markets may be closer to a turning point than indicated by the VIX.

That measure of choppiness stands at 29, its highest since July 2020 and about 4 points above where it stood on the day the S&P 500 bottomed during the last 54 instances of corrections and bear markets going back to 1928, a Reuters analysis showed.

Still, some believe that any recovery in stocks is unlikely to last without a big “crash-up” in volatility.

“What you have now is people hanging on and hoping for a bounce,” said Patrick Kaser, portfolio manager at Brandywine Global Investment Management.

To mark the end of the selling, however, the market needs a “a moment of high profile failure and pain,” Kaser said

(Reporting by Saqib Iqbal Ahmed; Additional reporting by Davide Barbuscia; Editing by Ira Iosebashvili and Sam Holmes)

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