2024-10-22 06:03

Fed's tempered interest rate cut path boosts dollar U.S. Treasury yields rise amid positive economic data Trump's election prospects influence market expectations NEW YORK, Oct 22 (Reuters) - The U.S. dollar rose to a fresh 2-1/2-month high on Tuesday, continuing its recent ascent on expectations the Federal Reserve will temper its interest rate cut path, while investors positioned ahead of an apparently tight U.S. presidential election. The greenback has risen for three straight weeks and is on track for its 15th gain in 17 sessions as a run of positive economic data has diminished expectations about the size and speed of rate cuts from the Fed, which has pushed U.S. Treasury yields higher. The yield on the benchmark 10-year U.S. Treasury note reached 4.222% on Tuesday, its highest since July 26. Markets are pricing in an 89.6% chance for a cut of 25 basis points at the Fed's November meeting, with a 10.4% chance of the central bank holding rates steady, according to CME's FedWatch Tool , opens new tab. The market was completely pricing in a cut of at least 25 bps a month ago, with a 50.4% chance of a 50 bps cut. "If the data had not been strong in the U.S., certainly had not been strong relative to the rest of the world, there would not have been this divergence between what the Fed is moving towards and what the other central banks are moving towards, which is opposite directions, at least tonally, rhetorically, and that is what is driving the dollar higher," said Thierry Wizman, global FX and rates strategist at Macquarie in New York. The dollar index , which measures the greenback against a basket of currencies, including the yen and the euro, rose 0.12% to 104.08, after hitting 104.10, its highest since Aug. 2. The index is up about 3.3% on the month, on pace for its strongest month since April 2022. Sterling edged down 0.04% to $1.2979. The upcoming U.S. presidential election also continues to drive currency moves, as market expectations have grown in recent days for a victory by Republican presidential candidate and former President Donald Trump, which would likely bring about inflationary policies like tariffs. "As Trump's prospects have done better in winning the election, the market starts to price in more inflation in the U.S. too, because his core policy agenda is associated with more inflation, at least certainly more than you would associate with (Democratic presidential candidate Kamala) Harris' core policy agenda," said Wizman. The euro dipped 0.15% to $1.0798. A flurry of European Central Bank policymakers spoke on Tuesday to warn about the risk of inflation falling below the central bank's 2% target, signaling a change in their focus after years of excessive price growth. Against the Japanese yen , the dollar strengthened 0.17% to 151.08 after climbing to 151.19, its highest since July 31. The Bank of Japan is carefully looking at the upside risks from rising import prices as the yen weakens, Executive Director Takeshi Kato was quoted as saying by Jiji Press on Tuesday. Japan is set to conduct a general election on Oct. 27. Several recent opinion polls have shown the possibility of the ruling coalition losing its majority in parliament, which could cost premier Shigeru Ishiba his job or force his Liberal Democratic Party to look for an additional coalition partner to stay in power, raising concerns the Bank of Japan could face complications as it attempts to slowly wean the nation off decades of monetary stimulus. In cryptocurrencies, bitcoin shed 0.49% to $67,392.55. Sign up here. https://www.reuters.com/markets/currencies/dollar-steady-august-high-us-rates-view-election-2024-10-22/

2024-10-22 05:57

S&P 500, Dow finish down US yields hit three-month high Crude prices settle up 2% Dollar index rises Gold reaches all-time high NEW YORK, Oct 22 (Reuters) - Global stocks dropped for the second straight session while U.S. yields rose on Tuesday amid market uncertainty ahead of the U.S. election as well as the outlook on interest rate cuts. Democratic Vice President Kamala Harris held a marginal lead of 46% to 43% over Republican former President Donald Trump, according to a Reuters/Ipsos poll, as both candidates vie to capture swing states ahead of Nov. 5. The benchmark S&P 500 and the Dow finished lower in choppy trading driven by losses in industrials, materials and utilities stocks. The Nasdaq ended higher as investors digested corporate results from companies across sectors in the U.S. economy. The Dow Jones Industrial Average (.DJI) , opens new tab fell 0.02% to 42,924.89, the S&P 500 (.SPX) , opens new tab fell 0.05% to 5,851.20 and the Nasdaq Composite (.IXIC) , opens new tab rose 0.18% to 18,573.13. The pan-European STOXX 600 index (.STOXX) , opens new tab finished down 0.21%. MSCI's gauge of stocks across the globe (.MIWD00000PUS) , opens new tab fell 0.29% to 851.14. "Yields being up is a big headwind," said David Spika, chief markets strategist at Turtle Creek Wealth Advisors in Dallas. "We've seen the largest increase post a rate cut in the 10-year in the last 30 years ... I think the bond market is telling us don't be pricing in a whole bunch of rate cuts anytime soon. To expect the Fed to just be cutting rates 50 basis points every meeting is not realistic." The odds that the Fed will deliver a quarter-point cut at its Nov. 7 meeting are at 92%, while the chance of no rate cut is at 8%, according to CME's FedWatch tool. Benchmark 10-year Treasury yields were up 2.2 bps at 4.204%, after earlier reaching 4.222%, the highest level since July 26. The U.S. dollar rose to a fresh 2-1/2-month high amid Fed rate cut expectations. The dollar index , which measures the dollar against a basket of currencies, including the yen and the euro, rose 0.13% to 104.09, after hitting 104.10, its highest since Aug. 2. Against the Japanese yen , the dollar strengthened 0.21% to 151.14. Sterling weakened 0.05% to $1.2978, while the euro was down 0.17% at $1.0797. "Some people have been speculating that there's a Trump trade going on or as Trump's election odds increase, the 10-year yield and long term bond yields have increased as well as stocks. I don't really buy that quite yet," said Eric Wallerstein, chief markets strategist at Yardeni Research in Santa Monica, California. "I think the election odds are fairly split between Trump and Harris, and broadly, it's a story of stronger economic growth." Oil prices rose for the second consecutive session, as traders downplayed hopes of a Middle East ceasefire and focused on a tightening global supply and demand balance. Brent crude futures for December settlement rose 2.36% to $76.04 per barrel. U.S. West Texas Intermediate futures for November delivery, which expire after Tuesday's settlement, rose 2.17% to $72.09 a barrel. Gold hit an all-time peak. Spot gold rose 1.03% to $2,747.56 an ounce. U.S. gold futures settled 0.8% higher at $2,759.8. "You have an election coming where both candidates are looking to spend more and it's not good for deficits," said Eric Beyrich, co-chief investment officer at Sound Income Strategies in New York. "It's also an environment where people don't expect the kind of interest rate cut as they did before." Sign up here. https://www.reuters.com/markets/global-markets-wrapup-1-2024-10-22/

2024-10-22 05:56

Equinor submitted bid with Japanese partners, sources say Government, industry discuss possible changes to bidding rules Industry wants to use installation ships from outside Japan TOKYO, Oct 22 (Reuters) - Norwegian energy company Equinor (EQNR.OL) , opens new tab has submitted a bid to develop an offshore wind farm together with other companies in the latest round of Japan's state auctions, two sources said, as it seeks a foothold in the fledgling market. Equinor's bid underscores the focus some wind players are putting on Japan even as they scale back elsewhere, despite some international players' frustration with strict bidding rules and an earlier auction round having been won by Japanese companies. A latecomer to offshore wind, Japan wants to build up to 45 GW of capacity by 2040 from less than 1 GW now, which would make it a top-five offshore wind market. Equinor recently decided against pursuing offshore wind opportunities in Vietnam, Spain, Portugal and France, while Germany's RWE has said it is focusing on Japan and South Korea while not pursuing further developments in India and Taiwan. Japan offered two sites totalling 1 gigawatt (GW) in the northern prefectures of Aomori and Yamagata in its third round of auctions. Bidding closed in July, and winners are to be announced by year-end. Equinor's bid is in a consortium with Japanese companies, the sources said, without naming them or which of the two sites they bid on. Other foreign companies also submitted bids, according to the sources, who declined to be named as the bids were confidential. Equinor and Japan's industry ministry, METI, which oversees the auctions, declined to comment. The push in Japan by Equinor comes even as it acquired a 10% stake this month in Danish offshore wind power giant Orsted (ORSTED.CO) , opens new tab, which earlier this year announced it was deprioritising Japan. Orsted told Reuters it decided to close its offices in Japan. Last year, Orsted urged Japan to auction off much larger projects - 10 GW to 15 GW at a time - to make it a more attractive market and address cost efficiency for renewable energy developers. In the country's first auction in 2021, consortiums led by Japanese trading company Mitsubishi Corp (8058.T) , opens new tab won all the bids, prompting grumbles from foreign bidders, along with many local participants, that were shut out. Like several others, Equinor lost in that round and did not bid in last year's second round, when partnerships involving RWE and Spain's Iberdrola (IBE.MC) , opens new tab were among those winning sites. While METI has yet to publicly address calls from foreign companies to scale up the auctions, discussions are underway to relax other rules constraining development, industry players say. Kiyoshi Doi, head of Eneos' (5020.T) , opens new tab offshore wind division, told a conference last week that industry experts and the government are discussing changes to the bidding rules, potentially allowing turbine supplier shifts and inflation adjustments for energy sale prices, among other changes. The industry is also pushing for a change in laws to allow non-Japan-flagged installation ships to operate at offshore wind sites, according to two developers, in order to bring ships from elsewhere, including from Europe. Sign up here. https://www.reuters.com/business/energy/norways-equinor-tries-again-japan-offshore-wind-lease-sources-say-2024-10-22/

2024-10-22 05:05

MUMBAI, Oct 22 (Reuters) - The Indian rupee was nearly unchanged on Tuesday as likely intervention by the Reserve Bank of India supported the currency amid pressure from the rise in U.S. bond yields, which prompted declines in most Asian currencies. The rupee was nearly unchanged at 84.0675 against the U.S. dollar as of 10:30 a.m. IST, compared with its close at 84.0725 in the previous session. The currency had touched its all-time low of 84.0775 last week. Foreign banks and local oil companies were spotted bidding for dollars, while state-run banks, likely on behalf of the RBI, were present on offer, traders said. The RBI has routinely intervened via state-run banks to support the currency amid sustained pressure due to the dollar's strength and the outflows of foreign funds from local stocks. Overseas investors have pulled out nearly $10 billion, on a net basis, from local stocks over October so far, on track for a record monthly outflow. Benchmark Indian equity indices, the BSE Sensex (.BSESN) , opens new tab and Nifty 50 (.NSEI) , opens new tab were down about 0.2% each on the day. Meanwhile, the dollar index is up over 3% this month boosted by rising odds of a victory for Donald Trump in the upcoming U.S. presidential election. The 10-year U.S. Treasury yield has risen 38 basis points this month and was last quoted at 4.18%. "U.S. election risks are dominating markets amid a resurgent Trump ... this is propelling U.S. yields higher and lifting the USD," DBS Bank said in a note. Asian currencies were mostly weaker on the day with the Malaysian ringgit and Indonesian rupiah down 0.4% each and leading losses. Sign up here. https://www.reuters.com/markets/currencies/rupee-shielded-by-cenbank-intervention-higher-us-bond-yields-weigh-asia-fx-2024-10-22/

2024-10-22 04:35

A look at the day ahead in European and global markets from Tom Westbrook Markets are facing a bumpy ride in the final stretch to the U.S. elections, with bonds turning volatile and gold signalling at least some investors hunkering down. While gold hits record highs, a confluence of strong U.S. economic data, the so-called "Trump trade" and a renewed focus on the fiscal outlook has pushed 10-year yields to three-month highs. Notwithstanding a broad selloff in gilts and European sovereigns on Monday, U.S. yields are moving faster than global peers and driving markets as strong U.S. labour indicators have traders losing confidence in Federal Reserve rate cuts. Since data earlier this month showed a surprising surge in U.S. hiring, gilts and bunds have outperformed along the curve with far less selling than Treasuries. The 10-year spread between Treasuries and bunds is now the widest since July and the UST-gilts spread turned positive last week. The volatility is already showing signs of cooling primary debt markets, which have slowed down considerably in places such as Australia. Goldman Sachs thinks a strong U.S. economy and a dovish central bank in Europe will open spreads wider, with a target of 205 basis points for the gap between bunds and Treasuries and said the election - along with fundamentals - is in focus. A light calendar of economic releases - save for a U.S. jobs report on Nov. 1 - leaves investors starting to hunker down ahead of the Nov. 5 polling day. Republican candidate Donald Trump is seen as negative for bonds since his tax, tariff and immigration policies are likely to be inflationary - though Democrat Kamala Harris is also likely to spend heavily. Corporate earnings, especially where companies can describe economic conditions, can also capture attention. Recruiter Randstad (RAND.AS) , opens new tab and aerospace and defence firm Saab (SAABb.ST) , opens new tab report in Europe on Tuesday. Texas Instruments (TXN.O) , opens new tab, 3M (MMM.N) , opens new tab, General Motors (GM.N) , opens new tab, Freeport-McMoRan (FCX.N) , opens new tab, Lockheed Martin (LMT.N) , opens new tab, General Electric (GE.N) , opens new tab and Verizon (VZ.N) , opens new tab are among the U.S. companies reporting. Trade was fairly subdued in Asia, with most markets lower. U.S. Secretary of State Antony Blinken arrives in Israel on Tuesday, the first stop of a wider Middle East tour aimed at reviving Gaza ceasefire talks. However, oil prices rose sharply on Monday as expectations evaporated that the death of Hamas leader Yahya Sinwar, may prove a breakthrough for peace. Key developments that could influence markets on Tuesday: - IMF annual meetings - Earnings: Randstad, Saab, Texas Instruments, General Motors, General Electric, Freeport McMoRan, Lockheed Martin, Verizon, Philip Morris, Kimberly-Clark Sign up here. https://www.reuters.com/markets/europe/global-markets-view-europe-2024-10-22/

2024-10-22 03:54

Recent poll shows risk of ruling coalition losing majority New coalition could include party favouring easy policy Messy election outcome could hurt Ishiba's hawkish streak Political disorder risks causing delay in BOJ rate hikes TOKYO, Oct 22 (Reuters) - The risk of Japan ending up with a minority coalition government after the upcoming general election is raising concerns that the central bank could face complications in its quest to gradually wean the nation off decades of monetary stimulus. Several recent polls have shown the possibility of the ruling coalition losing its majority in parliament, which could cost premier Shigeru Ishiba his job or force his Liberal Democratic Party (LDP) to look for an additional coalition partner to stay in power. Such a prospect could deprive the BOJ of the political stability needed to steer a smooth lift-off from near-zero interest rates, some analysts say. It will also cause uncertainty in markets as attention is drawn to the policy stance of opposition parties that could become a potential coalition partner, many of which favour maintaining low interest rates. "Many opposition and ruling parties are calling for steps to boost wages, which could make it hard for the BOJ to hike rates until there is more clarity on next year's wage developments," said Naoya Hasegawa, chief bond strategist at Okasan Securities. "If the ruling coalition loses, markets will start to price in the chance of aggressive fiscal spending and a delay in further interest rate hikes," he said. Expectations of a rate hike delay could push down short-term interest rates, potentially making it even harder for the BOJ to smoothly execute its plans for exiting accommodative policy, analysts say. When Ishiba dissolved parliament on Oct. 9 and called a snap election to be held on Oct. 27, many analysts expected the ruling coalition to comfortably win a majority and give the new premier a freer hand on policy. That would have allowed Ishiba to meet his pledge, made in a book he published in August, to roll back former premier Shinzo Abe's "Abenomics" radical stimulus measures that included the BOJ's ultra-easy policy. "Extraordinary monetary policy cannot cure Japan's ills," Ishiba wrote in the book, blaming Abenomics and ultra-low rates for causing excessive yen falls, hurting commercial banks' profits and eroding fiscal discipline. The BOJ ended negative interest rates in March and raised short-term rates to 0.25% in July on the view Japan was making progress towards durably achieving its 2% inflation target. BOJ Governor Kazuo Ueda has signalled readiness to keep raising rates if the economy moves in line with its projections. A slim majority of economist polled by Reuters saw the BOJ forgoing a hike this year, with most expecting the central bank to raise rates again by March next year. NEW COALITION RISK Recent media polls, however, have dashed hopes among policymakers that Ishiba will solidify his standing in the ruling party after the election and support the central bank's gradual exit from ultra-low interest rates. While earlier polls projected the LDP and its coalition partner Komeito would maintain their majority, a weekend poll by the Asahi newspaper showed they may struggle, with the LDP potentially losing 50 of the 247 seats it now has. Such a huge loss could make Ishiba vulnerable to attack from proponents of aggressive monetary easing like Sanae Takaichi, whom Ishiba narrowly beat in the party's leadership race. If the LDP is forced to court opposition parties to stay in power, that will increase challenges for further rate hikes by heightening uncertainty over the new administration's monetary policy stance. The biggest opposition, Constitutional Democratic Party of Japan, has called for modifying the BOJ's inflation target from the current 2% to one "exceeding zero" - a move that will leave scope for rate hikes even when inflation slides below 2%. But the party's leader, Yoshihiko Noda, has ruled out the chance of forming a coalition with the LDP. That leaves smaller opposition parties Japan Innovation Party and Democratic Party for the People, as potential coalition partners. The former wants to revise the law giving BOJ independence over monetary policy, and add maximum job creation and sustained economic growth to its mandate. The latter favours expansionary fiscal and monetary policies to achieve higher wage growth. "The hurdle for additional BOJ rate hikes will heighten if such proposals are taken into account in economic policy-making after the election," said Yasunari Ueno, chief market economist at Mizuho Securities. Even if the current coalition retains a majority and keeps Ishiba at the helm, the premier will face the challenge of pushing up his low approval ratings which partly took a hit with his flip-flop on topics including monetary policy. A day after becoming premier, Ishiba stunned markets by saying the economy was not ready for further rate hikes, an apparent about-face from his previous support for the BOJ unwinding decades of extreme monetary stimulus. If the LDP-Komeito coalition loses a majority, the newly created coalition will likely be forced to pledge big fiscal spending backed by ultra-loose monetary policy to appease voters ahead of next year's upper house election, said Takuji Aida, chief economist at Credit Agricole Securities. "It will become nearly impossible for Ishiba to fulfil his goal of shifting to anti-Abenomics, tighter fiscal policy." Sign up here. https://www.reuters.com/world/japan/japans-general-election-outcome-could-muddle-boj-plans-2024-10-22/