Archives: Reuters Articles

TOKYO – US West Texas Intermediate (WTI) crude futures rose by USD 1.09, or 1.56%, to USD 70.92 per barrel at 2254 GMT on fears of oil supply disruptions in the Middle East after Iran fired ballistic missiles at Israel.

Brent futures will resume trading at 0000 GMT on Wednesday. Brent gained USD 1.86, or 2.6%, on Tuesday to settle at USD 73.56 a barrel.

Iran fired more than 180 ballistic missiles at Israel on Tuesday, Israel said, in retaliation for Israel’s campaign against Tehran’s Hezbollah allies in Lebanon.

Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), is a major oil producer in the region.

“The direct involvement of Iran, an OPEC member, raises the prospect of disruptions to oil supplies,” ANZ Research said in a note, referring to the conflict.

Iran’s oil output rose to a six-year high of 3.7 million barrels per day in August, ANZ added.

Israeli Prime Minister Benjamin Netanyahu promised Iran would pay for its missile attack against Israel, while Tehran said any retaliation would be met with “vast destruction”, raising fears of a wider war.

US President Joe Biden expressed full US support for Israel, its longtime ally, and the U.N. Security Council scheduled a meeting on the Middle East for Wednesday.

(Reporting by Katya Golubkova; Editing by Jamie Freed)

 

The final quarter of the year is underway, and the sense of caution that characterized its open on Tuesday could not be further removed from the ebullience and optimism that marked the end of the third quarter 24 hours earlier.

Investors fled risky assets like stocks for the safety of US Treasuries, gold, and the dollar as Iran fired a salvo of ballistic missiles at Israel on Tuesday in retaliation for Israel’s campaign against Tehran’s Hezbollah allies in Lebanon.

The S&P 500 and global stocks had their worst day in a month, the 10-year US bond yield registered its steepest fall in a month, and oil rose 3%, after being up 5% at one stage.

On top of the escalation of tensions between Israel and Iran, the sense of gloom hanging over markets on Tuesday was heightened by the steep decline in a closely-watched tracking model estimate of US GDP growth.

The Atlanta Fed’s GDPNow model estimate for third quarter US GDP growth on Tuesday was cut to 2.5% from 3.1% last week. The fall of six-tenths of one percent was the biggest decline since the Q3 tracking estimates was launched in late July.

This will set the tone on Wednesday for markets across Asia. Chinese markets are closed for Golden Week, and the major economic releases will be inflation and manufacturing purchasing managers index data from South Korea, and consumer confidence from Japan.

Although oil spiked sharply on Tuesday, the deeply negative year-on-year price of oil is a major reason why inflation around the world is cooling, and much faster than many economists and policymakers had expected.

In many cases, like the eurozone, inflation is already at or even below the 2% target that many central banks aim for. Figures on Wednesday from Seoul are expected to show that annual consumer inflation in South Korea eased to 1.9% in September from 2.0% in August.

That would be the lowest, and also the first time below that 2% threshold, since March 2021.

Japan’s markets should be a little calmer on Wednesday, even though Nikkei futures point to a fall of more than 1% at the open, as the dust begins to settle on the major political upheaval of recent days.

Investors are getting used to what they might expect from new Prime Minister Shigeru Ishiba, once considered a monetary policy hawk who now appears to have softened his stance.

He said on Tuesday that he hoped the Bank of Japan would maintain loose monetary policy “as a trend”, and that his administration will carry over the economic policy of former Prime Minister Fumio Kishida and “ensure Japan fully emerges from deflation.”

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

– South Korea inflation (September)

– South Korea manufacturing PMI (September)

– Japan consumer confidence (September)

(Reporting by Jamie McGeever)

Investors in Asia kick off the new quarter on Tuesday catching their breath from an astonishing end to the third quarter that saw Chinese stocks clock their best day since 2008 and Japanese stocks register one of their biggest falls in years.

On top of that, Fed Chair Jerome Powell on Monday dampened some of the more fervent hopes for future rate cuts, saying his base case is for a further 50 basis points easing this year and that the central bank will reach its neutral rate “over time.”

This pushed Treasury bond yields higher – most notably at the short end of the curve where the two-year yield leaped 10 basis points – and traders shifted expectations for November’s Fed meeting closer to a 25 bps cut from 50.

Tuesday’s economic calendar is packed with top-tier releases including Japanese unemployment, Indonesian inflation, South Korean trade, and a raft of purchasing managers index reports from across the Asia and Pacific region.

Of course, Powell’s remarks weren’t hawkish. But they were a reminder that perhaps some of the rate expectations built into market pricing had gotten a little extreme.

Wall Street closed in the green on Monday, rounding off a solid quarter that saw the S&P 500 reach multiple new peaks and increased rotation out of Big Tech into beaten down sectors and small cap stocks.

Investors in Asia on Tuesday will digest this and the remarkable market moves in the continent’s two biggest economies the day before.

Chinese markets are now closed until Tuesday next week as the country celebrates Golden Week. The market break could not have been better timed.

Monday’s 8% surge means Chinese stocks have risen by around a quarter since Sept. 23, when Beijing unveiled the first of a series of stimulus measures to support the economy and markets. A 25% increase, in a week, is nothing less than extraordinary.

Blackrock, the world’s largest asset manager, has raised its tactical asset allocation for China to “modestly overweight” from “neutral.”

Unsurprisingly, the equity market’s historic rebound is pouring fuel on the burning question of whether China’s stimulus will revive the economy. On that score, far more uncertainty abounds.

A fundamental issue is that lower borrowing costs and more ample market liquidity won’t increase consumer demand in an economy dealing with a monumental property sector bust, the deleveraging that goes with that, and deflation.

Japanese stocks, meanwhile, will be looking to bounce back from a near-5% slump on Monday, as investors gear up for an Oct. 27 election. That was the biggest fall since the Aug. 5 volatility shock, and the third biggest since the early days of the COVID-19 pandemic in March 2020.

The yen’s slide back towards 144.00 per dollar should help.

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

– Japan unemployment (August)

– Indonesia inflation (August)

– PMIs – Australia, India, and others (September)

(Reporting by Jamie McGeever; Editing by Bill Berkrot)

 

Assets in actively managed exchange-traded funds (ETFs) worldwide hit a record USD 1 trillion at the end of August, according to data provider ETFGI, boosted by easier regulations and a wave of product innovation.

Active ETFs seek to outperform the indexes they are benchmarked to, including the S&P 500, the Nasdaq 100 and the Russell 1000 Growth Index. Bear Stearns launched the first active ETF in 2008.

While they make up just 7% of all global ETFs, active ETFs have accounted for 30% of all inflows into the funds as a whole for the last several years, Matthew Bartolini, head of SPDR Americas Research at State Street Research, told Reuters in the latest episode of Inside ETFs.

A key growth catalyst, analysts said, was the 2019 regulation popularly known as the “ETF rule,” which streamlined the complex process of winning approval for active ETFs from the US Securities and Exchange Commission. Assets in the active ETF category have grown about 10-fold since 2019, according to data from ETF.com.

Growth has continued this year. As of Aug. 31, active ETF assets soared 42%, data from ETFGI showed.

The more relaxed regulations have also fueled innovation, Bartolini said, encouraging issuers to take novel approaches to products as they vie for investor dollars.

Active ETFs run the gamut from the plain vanilla, such as the BlackRock Large Cap Value ETF to more niche offerings, like the AdvisorShares Vice ETF, which invests in shares of companies involved in the alcohol, tobacco and cannabis industries.

“These regulatory rule changes have actually accelerated some of the more novel approaches that ETF issuers can bring to the marketplace,” Bartolini said.

Active ETFs include products that have been wildly volatile, such as Ark Innovation ETF ARKK.P, which soared 152% in 2020, only to slump 23% the following year. So far in 2024, it has lost 9.74%, compared with a 20% gain in the S&P 500. Some can also magnify risk, such as leveraged ETFs tied to the performance of individual stocks like Nvidia.

Nor are all active ETF issuers faring well.

The 10 largest issuers accounted for 75% of active ETF assets, according to a Morningstar report from earlier this year. The bottom half of active equity ETFs have only 3% of all the group’s assets.

“ETFs that repackage old-fashioned stock-picking have struggled to attract assets,” said Jack Shannon, manager research analyst at Morningstar, in a report published on Tuesday.

Tim Huver, senior vice president of ETF Servicing at Brown Brothers Harriman, said active ETFs may require investors to do more due diligence. Nonetheless, he believes the category has reached a turning point.

A Brown Brothers survey found that more than 90% of ETF investors intended to increase their allocation to active ETFs, Huver said.

“I think the second trillion is going to arrive much more rapidly than it took us to get to the first trillion,” Huver said.

(Reporting by Suzanne McGee; Editing by Ira Iosebashvili and Leslie Adler)