2024-10-10 10:38

Oct 10 (Reuters) - (This Oct. 10 story has been corrected to clarify the context and quote about U.S. imposing asset limit on TD Bank in paragraphs 5 and 6) Canada's main stock index touched a record high on Thursday, led by gains in commodity-linked stocks, while TD Bank (TD.TO) , opens new tab dropped on a report that the lender is expected to pay a $3 billion penalty under a U.S. settlement. The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) , opens new tab was up 32.39 points, or 0.13%, at 24,257.29. The heavyweight energy (.SPTTEN) , opens new tab and materials (.GSPTTMT) , opens new tab sectors gained over 1% each as they tracked higher oil and gold prices. Healthcare (.GSPTTHC) , opens new tab was the biggest decliner, while financials (.SPTTFS) , opens new tab fell 0.7% led by a 5.3% fall in shares of TD Bank (TD.TO) , opens new tab. Canada's second-largest lender was expected to pay about $3 billion in penalty over charges it failed to curb money laundering by drug cartels, with U.S. regulators also expected to impose an asset limit barring it from growing above a certain level in the country, the Wall Street Journal reported. "I think that's a much bigger deal" because "it's preventing them from perhaps growing or running their business the way that they would like to," said Josh Sheluk, portfolio manager at Verecan Capital Management, referring to the asset limit. Markets are now awaiting Canadian unemployment data due on Friday for more insights on Bank of Canada's policy move later this month. Traders also added to their bets of a quarter-point rate cut by the U.S. Federal Reserve in November after latest data showed the annual increase in consumer prices was the smallest in more than three-and-a-half years. Markets now see a 93.3% chance of a 25-basis-point cut at the Fed's policy meeting next month, compared to 82.8% earlier in the day. "We're not overreacting to one specific data point, but (the inflation numbers are) something to pay attention to. It seems like a bit of a repricing on the Federal Reserve's rate path," said Kevin Headland, co-chief investment strategist at Manulife Investment Management. The U.S. weekly jobless claims for last week surged, partially boosted by Hurricane Helene and furloughs at Boeing (BA.N) , opens new tab. Sign up here. https://www.reuters.com/markets/tsx-futures-slip-investors-await-us-inflation-report-2024-10-10/

2024-10-10 10:26

MUMBAI, Oct 10 (Reuters) - The Indian rupee ended nearly flat on Thursday after oscillating in a tight band, as likely intervention by the Reserve Bank of India helped the unit withstand pressure from foreign banks' dollar bids and weakness in Asian currencies ahead of the U.S. inflation data. The rupee closed at 83.9675 against the U.S. dollar, almost unchanged from its close at 83.9625 in the previous session. The currency hovered in a 2 paisa band during the session Two large U.S. headquartered banks dominated dollar bids while "at current levels, state-run banks are constantly on offer (on USD/INR)," most likely on the RBI's behalf, a senior trader at a foreign bank said. Outflows from local equities have kept the currency on the backfoot with foreign investors pulling out about $7 billion from stocks over the last eight trading sessions. The U.S. dollar and bond yields have been boosted by investors pricing a less aggressive monetary easing cycle from the Federal Reserve. The 10-year U.S. Treasury yield rose to a peak of 4.08% on Thursday, its highest since July 30. Dollar-rupee forward premiums have declined as a result of bets on shallower Fed rate cuts alongside the RBI changing its policy stance to "neutral," on Wednesday. The 1-year implied yield is down 19 bps over October so far and last quoted at 2.20%, its lowest in a month. Asian currencies were mostly lower by 0.1% to 0.4% while the dollar index was at 102.9, hovering close to its highest level in about two months. The dollar index "could make a bid for the 103.35 area should the US core CPI (consumer price index) surprise on the upside today. Geopolitical uncertainty should also help the dollar," ING Bank said in a note. Sign up here. https://www.reuters.com/markets/currencies/rupee-ends-flat-after-lingering-narrow-band-us-inflation-data-tap-2024-10-10/

2024-10-10 10:01

A look at the day ahead in U.S. and global markets from Mike Dolan With U.S. stocks at new records and devastating Hurricane Milton now weakening as it passes over Florida, the shifting U.S. interest rate horizon is back in focus with September's key inflation update due on Thursday. Despite the stormy weather and Middle East anxiety, U.S. economic soundings remain robust and Federal Reserve easing expectations continue to be dialled back - sending the dollar (.DXY) , opens new tab to near two month highs in the process. With the U.S. economy estimated to be still expanding at more than 3%, markets now seeing little more than an 80% chance of another Fed rate cut next month and the whole rate futures curve has backed up some 50 basis points over the past month. That puts a notional Fed 'terminal rate' closer to 3.5% - well above the 2.9% long-term 'neutral' rate Fed policymakers indicated at their last meeting. Minutes of that meeting late Wednesday showed a "substantial majority" of officials supported a half-point rate cut to start the easing cycle, but there appeared to be agreement the first move would not commit the Fed to any particular pace thereafter. A stream of Fed speakers this week seem to back that up. "Two more cuts this year, or one more cut this year, really spans the range of what is likely in my mind," San Francisco Fed boss Mary Daly said overnight. After a lacklustre 10-year Treasury note auction on Wednesday, 10-year yields climbed to their highest since July and both two and 10-year yields have now got a foothold back above 4%. Perhaps more concerning for the Fed is creeping market inflation expectations, with so-called 'breakeven' expectations from the 10-year inflation-protected securities markets rising to near three-month highs at 2.3% - nearly 30 basis points higher than they were a month ago. And more worryingly ahead of next month's election, the U.S. Treasury 10-year term premium, a measure of the compensation investors demand to hold long-term government debt securities, moved back into positive territory this week. That spins attention into today's critical consumer price report, where headline annual CPI inflation is expected to ease to 2.3% - its lowest in more than three years - but with 'core' inflation stickier around 3.2%. "I continue to see a meaningful risk that inflation could get stuck above our 2% goal," Dallas Fed chief Lorie Logan said on Wednesday, adding that the Fed "should not rush to reduce the fed funds target to a 'normal' or 'neutral' level". Even though energy markets remain nervous about widely-expected Israeli retaliation against Iran for its recent rocket attacks on the country, oil prices have stayed relatively calm on Thursday and U.S. crude hovered just above $74 per barrel. Oil prices continue to track year-on-year losses of more than 10%, a powerful base effect weighing on headline inflation, and U.S. retail pump prices remain at 8-month lows. With the third-quarter U.S. earnings season about to unfold with the big banks reporting on Friday, there was little in the Fed rethink that seemed to hold U.S stocks back and the S&P500 (.SPX) , opens new tab raced 0.7% higher on Wednesday to new highs. Emboldened by the higher interest rate horizon alongside much reduced fears of recession, banks and financial stocks led the latest leg higher and corporate credit spreads tightened. With the S&P500 now up 21.4% for the year to date, Deutsche Bank analysts point out that this is strongest performance for the index at this point of any year since 1997. Stock futures held the bulk of the latest gains on Thursday ahead of the CPI report, only marginally in the red ahead of today's bell. Overseas markets were similarly buoyant, with China's recently volatile stock indexes catching a break after the early week retreat on doubts about the efficacy of the Beijing's latest economic stimulus measures. Mainland (.CSI300) , opens new tab and Hong Kong (.HSI) , opens new tab markets advanced between 1-3% as the People's Bank of China kicked off a swap programme aimed at supporting the stock market, while investors await directions from further detailed fiscal policy announcements this weekend. With one eye on the French government's 2025 budget later on Thursday - which is set to deliver some 60 billion euros ($65.68 billion) worth of tax hikes and spending cuts to tackle the fiscal deficit - European stocks (.STOXXE) , opens new tab underperformed and dropped 0.5%. The euro fell to its lowest in a month. With weak sales being reported in China, European automakers continue to suffer. Japan's Nikkei (.N225) , opens new tab pushed higher, however, with the yen briefly hitting its weakest level against the dollar since early August. Warren Buffett's Berkshire Hathaway (BRKa.N) , opens new tab, meantime, has raised 281.8 billion yen ($1.9 billion) in a yen-denominated bond offer, a move analysts say lays the ground for the U.S investment company to increase its exposure to Japanese assets. In company news, GSK GSK.L jumped about 6% in London after the British drugmaker agreed to pay up to $2.2 billion to settle U.S. lawsuits that claimed its discontinued heartburn drug Zantac caused cancer. The figure was smaller than what some analysts had feared. Key developments that should provide more direction to U.S. markets later on Thursday: * US September consumer price inflation, weekly jobless claims * Federal Reserve Board Governor Lisa Cook, New York Fed President John Williams and Richmond Fed chief Thomas Barkin all speak * US corporate earnings: Delta Airlines, Domino's Pizza * US Treasury auctions $22 billion of 30-year bonds Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-pix-2024-10-10/

2024-10-10 09:26

Forint hit by Middle East conflict, higher Fed rate outlook Currency hovers at key 400 mark, off recent 18-month-lows Hungarian CPI falls to 3% target for first time since 2021 Volatile forint seen constraining pace of rate easing BUDAPEST, Oct 10 (Reuters) - Hungarian central bank Deputy Governor Barnabas Virag flagged a likely pause in the bank's interest rate cuts on Thursday after an escalation of the conflict in the Middle East and a shift in the U.S. rate outlook pushed the forint to 18-month-lows. Falls in the forint forced the bank into emergency rate hikes in late 2022 to shore up the currency, which Goldman Sachs economists have described as the "binding constraint" on the pace of further rate cuts due to its high volatility. Central Europe's worst-performing currency with a loss of more than 4% versus the euro this year plumbed weaker levels last week than at any point since the NBH started cutting rates from the European Union's highest level in May 2023. "The developments which have unfolded since the end of September justify that in this environment the scope for decisions has definitely shifted towards pausing the rate cut cycle," Virag told Reuters in an interview. "On the one hand, the intensity of geopolitical conflicts has increased. On the other hand, expectations for the Fed's interest rate path have shifted higher, which has hit risk appetite in emerging markets." At 0905 GMT, the forint traded at the psychological 400 mark versus the euro, slightly off from its session lows as well as 18-month-lows hit last week. The bank's next policy meeting is due on Oct. 22. Although data published earlier on Thursday showed Hungarian inflation hitting the central bank's 3% target in September, Virag said there were reasons for caution. "The increase in commodity prices and the deterioration in emerging market risk appetite are factors which have an influence on the inflation path," he said. "The central bank assigns these developments a key role in its decisions." Inflation scaled the EU's highest levels of more than 25% in the first quarter of last year. Asked whether the bank can make any policy commitment for the remainder of the year, Virag said: "the scope for decisions has definitely narrowed." "To what extent it has narrowed, we can only tell when we see how lasting the recent shifts in the geopolitical space and the changes in expectations regarding the Fed's interest rate path are and how they affect emerging market sentiment." Sign up here. https://www.reuters.com/markets/rates-bonds/hungary-central-banker-flags-likely-pause-rate-cuts-after-forint-falls-2024-10-10/

2024-10-10 09:17

BOJ not on 'pre-set course' in raising rates, Himino says Data to focus shift over time, list 'constantly evolving' Pass-through of FX moves, wages, on inflation key, Himino says TOKYO, Oct 10 (Reuters) - Bank of Japan Deputy Governor Ryozo Himino said on Thursday the central bank will consider raising interest rates if the board has "greater confidence" that its economic and price forecasts will be realised. Himino said the BOJ's decision on when to raise interest rates will be made by looking at the "totality" of data presented at each policy meeting. "We are not on a pre-set course," Himino said, adding the BOJ will "carefully assess incoming data, the evolving outlook, and the balance of risks at each meeting." The type of data the BOJ focuses on in setting monetary policy varies and changes over time, Himino said, noting that U.S. employment and consumption data, as well as Chinese consumption, may now deserve more attention than before "Later in the year, we will have more data on the pass-through of this year's wage hike to service prices, and qualitative and quantitative information related to the 2025 wage negotiations," Himino said in a seminar. The BOJ will also have more data on how exchange rate moves could affect inflation via import prices, he said, adding that the list of data to look at is "constantly evolving." While statistics for the full fiscal year won't be available until after the year ends, the BOJ would not necessarily wait until then in judging whether the economy is ready for further rate hikes, Himino said. "More importantly, we monitor data to detect developments that are not already covered in our risk scenarios. Looking at data outside the current priority list is equally important," he said. The BOJ ended negative interest rates in March and raised short-term borrowing costs to 0.25% on the view Japan was making progress towards durably achieving its 2% inflation target. Governor Kazuo Ueda has signaled the BOJ's readiness to keep raising interest rates if the economy and prices move in line with the central bank's projections. But he has also said the BOJ can afford to spend time scrutinising risks, such as U.S. economic uncertainties and unstable market moves, in deciding when to raise rates again. The BOJ is widely expected to keep interest rates steady at its next meeting on Oct. 30-31, though improving economic conditions and receding U.S. recession fears are likely to bring prospects of a December or January rate hike back into view. Sign up here. https://www.reuters.com/markets/asia/boj-will-hike-rates-if-it-has-more-confidence-forecasts-says-deputy-governor-2024-10-10/

2024-10-10 08:31

LONDON, Oct 10 (Reuters) - The pound was flat on Thursday, hovering near its lowest level against the dollar in a month, as traders maintained a cautious stance and waited for potentially market-moving U.S. inflation data due later in the day. Sterling held its ground at $1.3076, up marginally from Wednesday's trough of $1.3057, its lowest since Sept. 12. The U.S. economy and the dollar have been driving global markets over the last week or so, after a much stronger-than-expected September employment report caused investors to scrub out their bets on another outsized interest rate cut from the Federal Reserve. As markets have recalibrated, U.S. bond yields have climbed relative to other countries, boosting the appeal of the dollar. "(The market's expectations of) the Fed's terminal rate for this easing cycle has been repriced 50 basis points higher over the last few weeks," said Chris Turner, global head of markets at ING. "And short-dated yields have moved significantly in the dollar's favour." The pound has fared better against the euro - a reflection of the relative strength of the British economy compared with the euro zone. Germany's economy is likely to contract by 0.2% in 2024, the economy ministry said on Wednesday, which would be its second consecutive year of shrinking output. The euro has fallen around 1% against the pound over the last month, and was trading lower again on Thursday at 83.60 pence. Currency markets were subdued ahead of U.S. consumer price index data for September, due at 1230 GMT, which is likely to show that inflation eased to 2.3% from 2.5% in August, according to economists polled by Reuters. Sign up here. https://www.reuters.com/markets/currencies/sterling-hovers-near-one-month-low-ahead-us-inflation-print-2024-10-10/