2024-10-07 09:59

Oct 4 (Reuters) - U.S. exchange-traded funds (ETFs) that invest in dividend-paying stocks have enjoyed a rush of inflows since the Federal Reserve kicked off its rate cutting cycle last month, though a jump in U.S. Treasury yields could slow the deluge of investor funds. The group of 135 U.S. dividend ETFs tracked by Morningstar pulled in $3.05 billion in September, the same month the Fed cut interest rates by 50 basis points, its first reduction since 2020. That compares to average monthly inflows of $424 million in the first eight months of 2024. "The pivot in monetary policy translates into cash looking for new homes, and dividend-yielding stocks will be one of the beneficiaries," said Nick Kalivas, head of factor and equity ETF strategy at Invesco (IVZ.N) , opens new tab. Whether the trend continues remains to be seen: benchmark 10-year Treasury yields have shifted higher in recent weeks and hit two-month highs on Friday, after a blowout U.S. employment number pointed to a resilient economy that likely does not need the Fed to deliver more large cuts this year. Still, Josh Strange, founder and president of Good Life Financial Advisors of NOVA, said the revival of interest in dividend stocks is a reaction to rising valuations in sectors such as tech as well as in broader markets, in addition to shifts in monetary policy. At 21.5 times future 12-month earnings estimates, the S&P 500's valuation is near its highest level in three years and is well above its long-term average of 15.7, according to LSEG Datastream. "The S&P 500 has become increasingly concentrated in just a few names, and the momentum has all concentrated around AI, making these stocks look frothy," Strange said. Yields offered by dividend ETFs vary by strategy, but can range from just under 2% to as much as 3.6%. By comparison, benchmark 10-year Treasuries yield fell to around 3.6% in September. Energy and financial stocks often appear in dividend ETFs, including Chevron Corp. (CVX.N) , opens new tab, JP Morgan Chase (JPM.N) , opens new tab and Exxon Mobil (XOM.N) , opens new tab. But they also feature pharmaceutical companies like Proctor & Gamble (PG.N) , opens new tab, utilities such as Verizon (VZ.N> or Southern Co. (SO.N) , opens new tab and retailers like Home Depot . "If you seek out high dividend payouts, you're making a tradeoff: you also want to own companies that will grow and be capable of increasing those payouts," said Sean O'Hara, president of Pacer ETFs, discussing the outlook for dividend ETFs and related products in the latest edition of Inside ETFs. To lessen the risk of owning companies with deteriorating fundamentals, Pacer builds ETF portfolios based on companies' free cash flows, such as the $24.8 billion Pacer US Cash Cows ETF (COWZ.Z) , opens new tab, launched in 2016. It has attracted $7.1 billion in inflows in the last 12 months. Sign up here. https://www.reuters.com/markets/us/us-dividend-etfs-bask-investor-attention-after-jumbo-fed-rate-cut-2024-10-04/

2024-10-07 09:16

MUMBAI, Oct 7 (Reuters) - India's central bank has asked state-run and private lenders to refrain from betting heavily against the rupee in an effort to support the currency which has been teetering near record-low levels for the past three trading sessions, four sources said. The Reserve Bank of India (RBI) informally communicated the instructions to bankers via phone calls on Monday with the rupee at risk of breaching its record low of 83.9850 per U.S. dollar, the sources said. The RBI has asked banks to avoid large bets against the rupee and the instructions are a form of "oral intervention" by the central bank, a senior banker at a private bank said. The news has not been previously reported. The sources declined to be identified as they are not authorised to speak to the media. The RBI did not immediately respond to a mail requesting comment. Reuters could not ascertain the full list of banks the RBI called. The central bank steps in occasionally to support the rupee via moral suasion and had last done something similar in early August. The rupee has been under pressure because of a surge in portfolio outflows, higher oil prices and strength in the dollar after U.S. economic data diminished hopes of large rate cuts by the Federal Reserve. Overseas investors have pulled out about $4 billion from Indian stocks over the last four sessions while Brent oil prices have climbed to their highest since August, fuelled by concerns of a wider conflict in the Middle East. But the "central bank has made its intentions clear about defending 84 and is unlikely to allow a breach of it soon", a senior banker at a state-run bank said, referring to the central bank's instructions on Monday. The RBI has also intervened in the non-deliverable forwards and local spot market, traders said. The central bank's defence has meant the rupee has fallen 0.3% over last week while its Asian peers have declined between 0.6 to 2.7% in the same time period. "We expect RBI to remain an important player and cap any sharp moves in INR both ways," MUFG Bank said in a note on Monday. Sign up here. https://www.reuters.com/markets/currencies/india-cenbank-asks-banks-avoid-large-shorts-rupee-nears-record-low-sources-say-2024-10-07/

2024-10-07 09:16

Oct 7 (Reuters) - Goldman Sachs has raised its target for the benchmark S&P 500 (.SPX) , opens new tab index for the year-end and the next 12 months on expectations of higher margin growth for corporate companies and a steady macroeconomic outlook through 2025. The Wall Street brokerage on Friday lifted the index target for the next twelve months to 6,300 from 6,000 and raised the current year-end target to 6,000 from 5,600. Goldman's year-end target implies an upside of 4.32% from the index's last close of 5,751.07 on Friday. Goldman is also bullish on the earnings per share(EPS) growth of corporate America, raising its 2025 EPS estimate to $268 from $256, reflecting an 11% increase on an annual basis. The brokerage maintained its 2024 EPS forecast at $241. "Our forward EPS estimates reflect a steady macro outlook...(and) the primary driver of the upward revision to our 2025 EPS estimate is greater margin expansion," Goldman analysts led by David Kostin said in a note dated Friday. Data in August showed that the U.S. economy grew faster than initially expected in the second quarter, amid strong consumer spending, and corporate profits rebounded, which should help to sustain the expansion. "Macro backdrop remains conducive to modest margin expansion," Kostin said. A boost from mega-cap technology stocks and recovery in the semiconductor industry cycle will further support companies' EPS growth, the brokerage added. Sign up here. https://www.reuters.com/markets/us/goldman-sachs-lifts-sp-500-index-target-year-end-next-12-months-2024-10-07/

2024-10-07 09:15

Oct, 7 (Reuters) - Sterling dropped versus the euro and the dollar on Monday, with geopolitical risks and central banks' monetary policy path still in focus. The pound recorded its biggest daily fall last week since April after Bank of England Governor Andrew Bailey was quoted as saying the central bank might move more aggressively to lower borrowing costs. Analysts said Bailey's remarks triggered a substantial unwinding of stretched pound net longs, and that speculative positioning makes the British currency more vulnerable to shifts in sentiment. The U.S. dollar edged down on Monday after a rally sparked by Friday's strong U.S. jobs data and an escalation in the Middle East conflict. Sterling dropped 0.2% to $1.3090. It hit $1.3066 on Friday, its lowest level since September 12. Britain's jobs market showed more signs of cooling in September, according to a survey likely to reassure the BoE as it considers whether to cut borrowing costs again. The data calendar is not particularly busy in the UK this week, but market-moving releases, including jobs data and the consumer price index report, are due next week. The euro has halved its post-Bailey gains on Friday and was last up 0.28% at 83.81 pence per euro . "Sterling may experience volatility against the U.S. dollar given the uncertainty about the timing of rate cuts, but this is likely to be a short-term phenomenon," said Dean Turner, chief eurozone and UK Economist at UBS Global Wealth Management. "Dollar weakness is likely to reassert itself in time as the U.S. currency loses its yield advantage amid falling U.S. interest rates," he added. In the near term, sterling's outlook is still clouded, as geopolitical headwinds will likely affect price action, weighing on sterling, which is seen as a risky currency compared to the safe-haven dollar. Investors expected the BoE to cut rates more slowly than the U.S. Federal Reserve and the European Central Bank, but that view was challenged late last week after Bailey's comments and strong U.S. jobs data. While most economists think Bailey's view represents the majority on the BoE's nine-member Monetary Policy Committee, some flagged that he appeared to be sitting in the dovish contingent of the MPC after recent comments from Chief Economist Huw Pill, and rate setter Catherine Mann. Sign up here. https://www.reuters.com/markets/currencies/sterling-drops-versus-euro-dollar-geopolitics-focus-2024-10-07/

2024-10-07 08:35

BERLIN, Oct 7 (Reuters) - Investor morale in the euro zone unexpectedly rose in October after three consecutive months of decline, boosted by rising expectations even as dissatisfaction with the current situation hit a new low this year, a survey showed on Monday. The Sentix index for the euro zone rose to -13.8 in October from -15.4 in September, beating the forecast from analysts polled by Reuters of a decline to -15.9 this month. The survey of 1,150 investors from Oct. 3-5 showed that expectations were on the rise, at -3.8 points this month from -8.0 in September, with the European Central Bank's rate cuts, and stimulus recently provided in China cited for the increase. The current situation score for the currency union, on the other hand, dropped for a fourth month in a row to its lowest level this year, to -23.3 in October from -22.5 last month. "The downward economic trend has been halted for the time being," Sentix said. "The eurozone economy is thus starting its next attempt to find its way out of recession/stagnation." Investor morale in Germany, Europe's largest economy, also rose this month for the first time since June, increasing to -31.5 from -34.7 in September, as expectations were up despite its current situation index remaining close to this year's lows. Sign up here. https://www.reuters.com/markets/europe/euro-zone-investor-morale-rises-october-brighter-expectations-2024-10-07/

2024-10-07 07:33

MILAN, Oct 7 (Reuters) - Italy's biggest gas distributor Italgas (IG.MI) , opens new tab expects double-digit growth in net income and core profit under a new plan to 2030, after signing a 5.3 billion euro deal to acquire smaller rival 2i Rete Gas on Saturday. The group said on Monday it would ensure its dividends grew 5% annually until 2026, starting from the payout for 2023, compared to a previous minimum of 4%, while confirming it would pay out 65% of adjusted net income per share. It pledged to invest 15.6 billion euros ($17.11 billion) over the next seven years to complete the acquisition of 2i Rete Gas, develop gas distribution in Italy and Greece and strengthen its presence in the water sector. As well as consolidating Italy's gas distribution sector, the acquisition of 2i Rete Gas, the country's second-biggest gas distributor, will create a leading player in Europe. The group said it would launch a rights issue of 1 billion euros to fund the deal, which will likely require antitrust remedies. Italgas expects to save 200 million euros in cost efficiencies after the deal. In addition, it anticipates an increase in revenue due to investment for the complete digital overhaul of the 2i Rete Gas network. Turnover is forecast to reach 3.6 billion euros, with core earnings of 2.8 billion euros by 2030. This represents an average growth rate of 13% for earnings before interest, taxes, depreciation and amortisation (EBITDA) and net profit, and about 10% for earnings per share. ($1 = 0.9115 euros) Sign up here. https://www.reuters.com/business/energy/italgas-invest-156-bln-euros-sees-double-digit-income-growth-new-plan-2030-2024-10-07/