Yen bulls have the edge

Yen bulls are gathering momentum, no matter the outcome of the US elections.

Election risks are significant. Breakevens for overnight options suggest USD/JPY can easily test 150 or 154 once voting outcomes become clearer. Conventional thinking suggests a Kamala Harris victory is negative for USD/JPY and a Donald Trump win is positive.

That said, there is a slight bearish bias in option activity and pricing, with some traders seeing USD/JPY slumping below 150 should the “Trump trade” and yen shorts unravel. Turnover in USD/JPY options with strikes set below current spot is outpacing those with higher strikes about 3 to 1, DTCC data shows. Part of the turnover is likely hedging short yen positions built up since USD/JPY topped 150.

But there are other potentially yen-positive factors at play outside the election outcome. First, the Fed will likely deliver a 25 basis point cut this week. Second, a post-election drop in volatility should buoy US equites, weighing on the dollar. Third, political uncertainty in Japan may ease if a new ruling coalition is formed prior to Monday’s special session of Parliament. Finally, the odds of a December Bank of Japan rate hike are edging up.

Technically, a USD/JPY close below its 200-DMA of 151.60 would open up a test of the key 150 psychological level. A further drop below the 149.09 Oct. 21 low would put the focus on the pair’s thinning Ichimoku cloud.

(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

China stocks end at 4-week high as Premier expresses confidence in economic recovery

SHANGHAI – Mainland China stocks closed at a four-week high on Tuesday, after Chinese Premier Li Qiang expressed confidence in the country’s economic recovery, while recent data showed signs of improvement.

Li told the opening ceremony of the annual China International Import Expo that he was confident China will meet this year’s growth target, and that authorities had fiscal and monetary tools at their disposal.

Market sentiment also improved after a private survey showed that China’s services activity expanded at the fastest pace in three months in October.

But the US presidential election remained the key focus of markets globally, with opinion polls showing Vice President Kamala Harris and former President Donald Trump virtually even.

** The Shanghai Composite index closed up 2.32% at 3,386.99 points, while the blue-chip CSI 300 jumped 2.53% to 4,044.57 points. Both indexes finished at the highest level since Oct. 8.

** Hong Kong’s benchmark Hang Seng index gained 2.14% at 21,006.97 points, its strongest closing level since Oct. 14. The Hang Seng China Enterprises index advanced 2.56% to 7,556.62 points.

** As part of his pitch to boost American manufacturing, Trump has promised voters he will impose tariffs of 60% or more on goods from China. Trump’s proposed tariff and tax policies are seen as inflationary, and therefore, likely to keep US interest rates high and undermine currencies of trading partners.

** “Direct US tariffs on imports from China may have less impact than in 2018, but further tightening of the supply chain measures introduced by the Biden administration or indeed sweeping tariffs against intermediary countries have the potential to cause greater damage to China’s economy,” said Jon Harrison, managing director for EM macro strategy at TS Lombard.

** “At the same time, Beijing’s change of direction on stimulus, including a focus on supporting equities and boosting consumption, will help to cushion the market impact.”

** Separately, Chinese lawmakers reviewed a cabinet bill that would raise ceilings on local government debt to replace existing hidden debt as the standing committee of China’s top legislature started their meeting on Monday, state media Xinhua reported.

(Reporting by Shanghai Newsroom; Editing by Sherry Jacob-Phillips and Varun H K)

Eerie pre-US election calm, RBA sets rates

A look at the day ahead in Asian markets.

As investors make last-minute position adjustments ahead of the US presidential election, a flood of top-tier economic indicators and a major policy decision could kick trading activity in Asian markets up a couple of gears on Tuesday.

Inflation numbers from South Korea, the Philippines and Thailand, third-quarter GDP from Indonesia, a services purchasing managers index report from China, and an interest rate decision from Australia all land before polling stations open across the US.

Japanese markets are open after Monday’s Cultural Day holiday, which should boost yen trading volume. The dollar slipped as low as 151.50 yen on Monday as U.S. yields retraced some of last week’s steep rise, and as investors unwound some of their so-called ‘Trump trades’ of recent weeks.

There was an eerie sense of a calm before the storm on Monday – world stocks were flat, Wall Street gave back some of Friday’s gains, Treasury yields dipped, and US bond market volatility likely eased off Friday’s one-year high.

The weekend produced a flurry of polls that both Republicans and Democrats could point to as evidence they are on track to win the White House, the most notable perhaps being the Des Moines Register/Mediacom Iowa Poll which showed Kamala Harris has a surprise 3-point lead over Trump in the typically Republican-leaning state.

Even if that is the case, it still shows a very tight race. As Deutsche Bank’s Jim Reid highlights, RealClearPolitics data shows polling averages put Trump at 48.5% and Harris at 48.4%.

On this measure, the two candidates have been within two percentage points of each other since mid-August.

In terms of the popular vote, this could be the closest election on record, Reid notes.

Before that, however, Tuesday’s Asia & Pacific calendar is brimming with key releases, chief among them the Reserve Bank of Australia’s policy decision.

The RBA is widely expected to leave its cash rate on hold at 4.35%, where it has been since November last year, in the face of solid economic growth and sticky core inflation.

Traders reckon the RBA will be one of the most hawkish G10 central banks, cutting rates by little more than 50 basis points by the end of next year. That compares with cumulative cuts of 100 bps or more from their counterparts in the US, Euro zone, Britain, Canada and New Zealand.

Annual inflation in South Korea is expected to have cooled to 1.4% in October, which would be the lowest since February 2021, while Indonesia’s economy expanded at an annual rate of 5% in the July-October period, according to a Reuters poll.

If China’s manufacturing PMI figures are any guide, the Caixin services PMI on Tuesday could show the sector recorded modest growth in October.

Here are key developments that could provide more direction to markets on Tuesday:

– US presidential election

– Australia central bank decision

– China Caixin services PMI (October)

(Reporting by Jamie McGeever, editing by Bill Berkrot)

Dollar dips as US election outcome remains uncertain, Fed rate cut looms

SYDNEY – The dollar slipped in Asia on Monday as investors braced for a potentially pivotal week for the global economy as the United States chooses a new leader and, probably, cuts interest rates again with major implications for bond yields.

The euro rose 0.4% to USD 1.0876 but faces resistance around USD 1.0905, while the dollar dipped 0.3% on the yen to 152.45 yen. The dollar index eased 0.3% to 103.94.

Democratic candidate Kamala Harris and Republican Donald Trump remain virtually tied in opinion polls and the winner might not be known for days after voting ends.

Analysts believe Trump’s policies on immigration, tax cuts and tariffs would put upward pressure on inflation, bond yields and the dollar, while Harris was seen as the continuity candidate.

Dealers said the early dip in the dollar might be linked to a well-respected poll that showed Harris taking a surprise 3-point lead in Iowa, thanks largely to her popularity with female voters.

“It is widely considered that a Trump win will be positive for the USD, though many feel this outcome has been discounted,” said Chris Weston, an analyst at broker Pepperstone. “A Trump presidency with full control of Congress could be most impactful, as one would expect a solid sell-off in Treasuries resulting in a spike higher in the USD.”

“A Harris win and a split Congress would likely result in ‘Trump trades’ quickly reversed and priced out,” he added. “The USD, gold, bitcoin and U.S. equity would likely head lower.”

Uncertainty over the outcome is one reason markets assume the Federal Reserve will choose to cut rates by a standard 25 basis points on Thursday, rather than repeat its outsized half-point easing.

Futures imply a 99% chance of a quarter-point cut to 4.50%-4.75%, and an 83% probability of a similar-sized move in December.

“We are pencilling in four more consecutive cuts in the first half of 2024 to a terminal rate of 3.25%-3.5%, but see more uncertainty about both the speed next year and the final destination,” said Goldman Sachs economist Jan Hatzius.

“Both our baseline and probability-weighted forecasts are now a bit more dovish than market pricing.”

The Bank of England also meets Thursday and is expected to cut by 25 basis points, while the Riksbank is seen easing by 50 basis points and the Norges Bank is expected to stay on hold.

The Reserve Bank of Australia holds its meeting on Tuesday and again is expected to hold rates steady.

The BoE’s decision has been complicated by a sharp sell-off in gilts following the Labour government’s budget last week, which also dragged the pound lower.

Early Monday, sterling had regained some of its losses to stand at USD 1.2963, some way from last week’s trough at USD 1.2841.

More stimulus is also expected from China’s National People’s Congress, which is meeting from Monday through Friday.

Sources told Reuters last week that Beijing is considering approving next week the issuance of more than 10 trillion yuan (USD 1.40 trillion) in extra debt in the next few years to revive its fragile economy.

(Reporting by Wayne Cole; Editing by Lisa Shumaker)

Nvidia to take Intel’s spot on Dow Jones Industrial Average

Intel will be replaced by Nvidia on the blue-chip Dow Jones Industrial Average index after a 25-year run, underscoring the shift in the chipmaking market and marking another setback for the struggling semiconductor firm.

Nvidia will join the index next week along with paint-maker Sherwin-Williams, which will replace Dow, S&P Dow Jones Indices said on Friday.

Once the dominant force in chipmaking, Intel has in recent years ceded its manufacturing edge to rival TSMC and missed out on the generative artificial intelligence boom after missteps including passing on an investment in ChatGPT-owner OpenAI.

Intel’s shares have declined 54% this year, making the company the worst performer on the index and leaving it with the lowest stock price on the price-weighted Dow.

Shares of Intel fell 1.6% in extended trading on Friday, while those of Nvidia were up 2.2%.

This development comes a day after Intel expressed optimism about the future of its PC and server businesses, projecting current-quarter revenue above estimates but warning that it had “a lot of work to do.”

“Losing the status of Dow Jones inclusion would be another reputational blow for Intel, as it grapples with a painful transformation and loss of confidence,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“It would also mean that Intel is not included in exchange-traded funds (ETFs) which track the index, which could impact the share price further.”

Launched in 1968, the Silicon Valley pioneer sold memory chips before switching to processors that helped launch the personal computer industry.

In the 1990s, “Intel Inside” stickers turned commodity electronic components into premium products, and eventually became ubiquitous on laptops.

Intel’s revenue was $54 billion in 2023, down nearly one-third from 2021, when Pat Gelsinger took over as CEO. Analysts expect Intel to report its first annual net loss this year since 1986.

The company is worth less than $100 billion for the first time in 30 years.

That pales in comparison to Nvidia, which is sitting at a USD 3.32 trillion valuation, making it the world’s second-most valuable company.

Nvidia’s AI lead

Nvidia has emerged as a cornerstone of the global semiconductor industry, thanks to the essential role its chips play in powering generative AI technologies which has driven a seven-fold surge in its shares over the past two years.

The company’s shares have risen more than two-fold this year alone.

Once popular only among gamers who hunted for PCs with Nvidia’s graphics processors, it is now seen as a barometer for the AI market.

The company’s 10-for-one stock split that took effect in June also helped pave the way for its addition to the index, making its soaring shares more accessible to retail traders.

Intel, on the other hand, has struggled to gain share in the AI chip market dominated by Nvidia, with the front-runner’s chips hard to get and even harder to replace in AI datacenters, owing to the processors’ technological edge and the high costs of replacing them.

(Reporting by Akash Sriram, Arsheeya Bajwa, Deborah Sophia and Sourasis Bose in Bengaluru; Editing by Maju Samuel)

Gold at record high as global political uncertainty boosts safe-haven demand

Gold prices rose to a record high on Wednesday as uncertainty over the US presidential election boosted safe-haven demand, with traders also awaiting economic data for cues on the Federal Reserve’s policy path.

Spot gold rose 0.5% to $2,788.87 per ounce by 9:55 a.m. ET (1355 GMT), after reaching an all-time high of USD 2,789.73 earlier in the session.

U.S. gold futures settled 0.7% higher at USD 2,800.8.

“We have elections coming up, the political climate here is just very uncertain, the Fed is cutting interest rates, prospects of Russia, Ukraine,” said Daniel Pavilonis, senior market strategist at RJO Futures.

“There’s just so much out there to push gold higher, and all the negative news out there is what gold is really looking for. The next step higher is probably USD 2,850,” Pavilonis said.

The US Presidential election season is reaching its climax on Nov. 5, with tight polling between Republican former President Donald Trump and Democratic Vice President Kamala Harris.

Gold, traditionally a hedge during geopolitical instability, has surged 35% this year, on course for its best annual performance since 1979. Low interest rates have further supported the rally.

Gold may reach USD 3,000 by 2025 amid emerging market concerns, gold ETF inflows, and post-election market adjustments, said Dominik Sperzel, head of trading at Heraeus Metals Germany. GOL/ETF

Meanwhile, data showed US private payrolls growth surged by a higher-than-expected 233,000 jobs in October, despite fears of temporary disruptions from hurricanes and strikes. The US gross domestic product increased at a 2.8% annualized rate.

Fed policymakers are expected to cut rates by a quarter-point next week. Markets are also focused on US Personal Consumption Expenditures and payrolls data, due Thursday and Friday.

Palladium dropped 5.8% to USD 1,151.75 per ounce, after reaching a 10-month high on Tuesday.

According to a trader, there are bets that there are going to be no sanctions on Russian palladium if Trump wins next week. This is creating space for the market to pay more attention to signals that the situation is easing for Sibanye Stillwater

Spot silver lost 1.7% to USD 33.87 per ounce, while platinum slid 2.8% to USD 1,014.10.

(Reporting by Anjana Anil and Anushree Mukherjee in Bengaluru; Editing by Tasim Zahid and Shreya Biswas)

OPEC+ could delay December oil output hike, sources say

LONDON/MOSCOW – OPEC+ could delay December’s planned increase to oil production by a month or more, four sources close to the matter told Reuters on Wednesday, citing concern about soft oil demand and rising supply.

The OPEC+ group combining the Organization of the Petroleum Exporting Countries plus Russia and other allies is scheduled to raise output by 180,000 barrels per day in December. It had already delayed the increase from October because of falling prices.

However, prices remain under pressure in part from weak demand, raising concern in the group about adding more supply. A decision to delay the increase could come as early as next week, two of the sources said.

“The December hike could be postponed as the market is not healthy enough,” one of the sources said.

The prospect of a further delay to the OPEC+ increase helped to lift oil prices by more than 2% on Wednesday. Even so, Brent crude is trading around USD 72 a barrel, not far above its lows for the year, reached in September.

OPEC and the Saudi government communications office did not respond immediately to requests for comment.

The office of Russian Deputy Prime Minister Alexander Novak declined to comment. Novak said this month that it was too early to judge whether the market would need more oil.

Three of the sources, who are people familiar with OPEC+ talks, said the December increase could be delayed for a month at least, while the fourth, an OPEC+ delegate, did not specify a time frame. All declined to be identified by name.

The planned increase of 180,000 bpd is a fraction of the 5.86 million bpd of output OPEC+ is holding back, equal to about 5.7% of global demand. OPEC+ agreed those cuts in separate steps since 2022 to support the market.

The December increase is due to come from the eight OPEC+ members who agreed in September to start a gradual unwinding of the group’s most recent layer of output cuts – a cut of 2.2 million bpd – from December 2024 into next year.

The remaining OPEC+ cuts of 3.66 million bpd will remain in place until the end of 2025.

OPEC+ ministers hold a full meeting of the group to decide policy on Dec. 1.

(Reporting by Alex Lawler, Olesya Astakhova and Dmitry Zhdannikov
Additional reporting by Maha El Dahan
Editing by Tomasz Janowski, David Evans and David Goodman)

US recap: Euro rises versus peers after data, ECB comments

The euro rose as expectations for European Central Bank rate cuts were scaled back following a stronger-than-expected Q3 growth reading for the euro zone and rise in German inflation.

French central bank chief Francois Villeroy de Galhau said the European Central Bank should retain its focus on getting inflation to 2% in the medium-term, while ECB board member Isabel Schnabel argued for gradual rates cuts. Bundesbank President Joachim Nagel said “price stability is not far off.”

The greenback was mostly lower as long-term Treasury yields eased after a Treasury refunding announcement and a batch of U.S. data including Q3 GDP.

The U.S. economy grew at a softer-than-expected annualized rate of 2.8% in the third quarter though ADP data showed U.S. private payrolls surged 233,000 in October and pending home sales jumped the most in more than four years in September.

The pound fell after Britain’s finance minister Rachel Reeves, in her first budget, announced the biggest tax increases in three decades and a new fiscal target to have government debt falling.

China has told its automakers to halt big investment in European countries that support extra tariffs on Chinese-built electric vehicles, two people briefed about the matter said.

Oil rose 1.8% after a report that OPEC+ could delay a planned hike in oil production scheduled to take effect in December by a month or more.

Treasury yields were mixed as the curve flattened. The 2s-10s spread fell about 5 basis points to +10.5bps.

The S&P 500 was little changed with gains in financials offset by weaker tech shares.

Gold rose 0.49% and touched a new record high amid safe-haven demand for the metal.

Copper fell 0.13% in a largely range bound trading.

Heading toward the close: EUR/USD +0.48%, USD/JPY -0.11%, GBP/USD -0.25%, AUD/USD +0.32%, DXY -0.32%, EUR/JPY +0.37%, GBP/JPY -0.37%, AUD/JPY +0.21%.

(Editing by Terence Gabriel
Reporting by Robert Fullem)

((robert.fullem@thomsonreuters.com;))

Oil prices steady on shrinking US crude inventories

Oil prices stabilised on Wednesday on industry data showing a surprise drop in US crude and gasoline inventories, following two previous sessions of losses on the prospect of hostilities easing in the Middle East.

Brent crude futures gained 21 cents, or 0.3%, to USD 71.33 a barrel by 0002 GMT. US West Texas Intermediate crude futures rose 22 cents, or 0.3%, to USD 67.43 per barrel.

US crude oil and fuel stocks fell last week, market sources said on Tuesday, citing American Petroleum Institute figures.

Crude stocks dipped by 573,000 barrels in the week ended Oct. 25, the sources said on condition of anonymity. Gasoline inventories lost 282,000 barrels, and distillate stocks fell by 1.46 million barrels, the sources said.

Nine analysts polled by Reuters had expected a 2.2 million-barrel rise in crude inventories.

Official US government data is scheduled to be released later on Wednesday.

The API report helped turn the tide on prices following a more than 6% drop in the combined previous two sessions.

Prices fell on Tuesday when an Axios reporter said on X that Israeli Prime Minister Benjamin Netanyahu would hold an imminent meeting with several ministers, the heads of the military and intelligence community about talks on a diplomatic solution to the war in Lebanon.

On Monday, prices lost about 6% after Israel’s retaliatory strike on Iran over the weekend missed Tehran’s oil infrastructure.

(Reporting by Laila Kearney in New York; Editing by Sonali Paul)

Gold touches record peak on US election jitters, Middle East woes

Gold prices hit a record high on Tuesday, as uncertainties surrounding the US presidential election and the Middle East conflict, along with expectations of an interest rate cut by the Federal Reserve, boosted bullion’s appeal.

Spot gold was up 1% at USD 2,769.25 per ounce as of 10:17 a.m ET (1417 GMT), after hitting a record high of USD 2,772.42 earlier in the session.

US gold futures settled 0.9% higher at USD 2,781.1.

Bullion thrives in a low interest-rate environment and is considered a hedge against market volatilities. Gold prices have surged more than 34% so far this year.

Gold is supported by safe-haven bets as geopolitical tensions and political uncertainty continue, with Japan now being added into the mix on the political uncertainty front after the weekend election, said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Republican former US President Donald Trump and Democratic Vice President Kamala Harris are also caught in a tight race for the White House.

On the geopolitical front, at least 93 Palestinians were killed or missing in an Israeli strike in northern Gaza, the Gaza health ministry said.

Investors await a series of economic data, including ADP employment, US Personal Consumption Expenditures, and payrolls report to further gauge the Fed’s policy stance, with its next rate decision on Nov. 7.

Markets are currently pricing in a 98% chance for a 25-basis-point rate cut by the Fed in November.

“Gold should retain its upward bias and may even flirt with $2,800 in the days ahead, as long as U.S. election risks continue weighing on market sentiment, while Fed rate cut expectations remain intact,” said Han Tan, chief market analyst at Exinity Group.

Gold prices’ rally is set to extend into 2025, as a favourable U.S. interest rate backdrop and geopolitical tensions continue to burnish its appeal, a Reuters poll showed.

However, buyers in India brushed off record high prices, making purchases for the Dhanteras and Diwali festivals.

Spot silver rose 1.9% to USD 34.32 per ounce. Platinum rose 1.6% to USD 1,049.10. Palladium rose 0.2% to USD 1,221.00, after hitting a 10-month high on sanction concerns on top producer Russia.

(Reporting by Anjana Anil and Anushree Mukherjee in Bengaluru; Additional reporting by Sherin Varghese, Editing by Shilpi Majumdar and Shailesh Kuber)

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Monthly Recap: BSP to outpace the Fed in rate cuts

Quarterly Economic Growth Release: 5.4% Q12025