2024-05-06 10:01

LONDON, May 6 (Reuters) - The pound was higher on Monday before the Bank of England's policy announcement later this week, while markets took local election results in their stride after crushing defeats for the ruling Conservatives. Sterling was last up almost 0.3% against the dollar at $1.2580, having last week touched $1.2634, its highest level since April 10. The pound was also up 0.2% at 85.605 pence per euro . Britain is closed for a holiday on Monday, as was Japan, likely resulting in lower volumes. The BoE is widely expected to keep its key interest rate unchanged at 5.25% when it announces its policy on Thursday, as it has done since lifting to that level in August last year. Some analysts, however, see the central bank paving the way for a rate cut as soon as June. "We expect the MPC (Monetary Policy Committee) to soften its communication, priming the markets for an imminent start to a cutting cycle," said Danske Bank analyst Kirstine Kundby-Nielsen. Money markets are not fully pricing a rate cut until the August meeting, with around 50 basis points of easing priced in 2024, implying around two quarter-point cuts. That is down dramatically from the start of the year when traders had expected borrowing costs to be lowered earlier and as many as five 25 basis point moves in 2024. The repricing has also been evident in Europe and particularly the U.S., where markets expect the Federal Reserve to keep interest rates higher for longer on the back of sticky inflation and a robust labour market, even with signs of softening. "With hawkish policy repricing driving markets recently, the pro-cyclical backdrop for the currency is less supportive than it was earlier in the year," Goldman Sachs analysts say in a note. "It means that GBP is unfortunately caught in the middle," they add, cutting their forecast for sterling to trade at $1.24 from $1.30 over a three-month horizon. Currency traders had largely ignored results from local elections where the opposition Labour Party won mayoral polls in London and central England, dealing a blow to Prime Minister Rishi Sunak before a likely election this year. "The challenges facing current UK Prime Minister Sunak in the aftermath of local elections are unlikely to excite investors, who seem comfortable in their expectations around the forthcoming general election," said Paul Donovan, chief economist of UBS Global Wealth Management. Labour holds a lead over the Conservative Party of around 20 points in most recent opinion polls, putting the opposition party on track to gain a majority in the House of Commons for the first time since 2005. Sign up here. https://www.reuters.com/markets/currencies/pound-rises-before-boe-meets-ignores-conservatives-local-election-losses-2024-05-06/

2024-05-06 09:20

A look at the day ahead in U.S. and global markets from Dhara Ranasinghe. The relief across world markets as signs of a softening in the U.S. jobs markets strengthens the case for Federal Reserve rate cuts to start later this year remains palpable. Not only did U.S. 10-year Treasury yields end Friday down 17 basis points , in their biggest weekly drop of the year, but the S&P 500 stock index had its best day in over two months. Investors in Asia picked up the buy-baton on Monday, sending MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) New Tab, opens new tab to its highest in over a year and government bond yields in Europe are lower again . For sure, public holidays in Japan and Britain make for quieter trade, but there is little doubt the mood music in markets has changed after Friday's news that the U.S. economy created 175,000 new jobs in April, the lowest since October. Money markets are back to pricing in roughly two 25 bps Federal Reserve rate cuts this year. Last week, traders came close to no longer fully pricing in one cut for the year as nervous markets started to position again for higher for longer rates. Market attention now turns to the Fed's Senior Loan Officer Survey, a closely-watched indicator of credit conditions, expected later in the session. The last survey, released in February, showed U.S. banks anticipated an increase in demand for loans as rates fall this year. One key question is whether the improvement in bank lending conditions could be undermined by the rise in government borrowing costs this year, with two-year Treasury yields up 55 bps. It is also notable that the relief felt across world markets after the latest U.S. jobs data did not last long for some. While dollar/yen fell sharply after those numbers on Friday as markets renewed Fed rate-cut nets, the currency par is 0.5% firmer in early European trade not far off 154. That essentially means the Bank of Japan, which was suspected to have intervened in currency markets last week to shore up a weak yen, still has its work cut out. Given that Japanese authorities picked last week's quiet periods to intervene in the currency market, traders will be on high alert through the day. Elsewhere, China's yuan surged to a six-week high against the dollar, catching up on the first trading day after the long Labor Day holiday, as the central bank set a much strengthened midpoint fixing to track offshore movements. Apple shares (AAPL.O) New Tab, opens new tab, meanwhile, could be in focus after news at the weekend that Berkshire Hathaway (BRKa.N) New Tab, opens new tab significantly reduced its enormous stake in the iphone maker. Key diary items that may provide direction to U.S. markets later on Monday: * U.S. April employment trends, New York Fed's Global Supply Chain Pressure Index for April * New York Federal Reserve President John Williams, Richmond Fed President Thomas Barkin speak. Swiss National Bank Chair Thomas Jordan speaks * Chinese President Xi Jinping in France as part of week-long visit to Europe * U.S. corporate earnings: Tyson Foods, Loews, Microchip Technology, Axon, Vertex Pharmaceuticals, Realty Income, Simon Property, FMC, International Flavors & Fragrances, Progressive Corp, Williams * U.S. Treasury auctions 6-month bills Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-2024-05-06/

2024-05-06 07:40

JOHANNESBURG, May 6 (Reuters) - The South African rand was stronger in early trade on Monday, after private sector activity rose marginally in April. At 0724 GMT, the rand traded at 18.4650 against the dollar , about 0.3% stronger than its previous close. The dollar traded near its previous close of 105.17 against a basket of global currencies. South African private sector activity rose marginally in April as an improvement in business confidence encouraged companies to expand purchasing activity and staffing levels, the S&P Global South Africa Purchasing Managers' Index (PMI) showed on Monday. This week, markets will keep a close eye on a host of speeches by Federal Reserve officials for hints on the future interest rate path in the world's biggest economy. The rand often takes cues from global drivers like U.S. economic data in addition to local data points. On the stock market, both the Top-40 (.JTOPI) New Tab, opens new tab and the broader all-share (.JALSH) New Tab, opens new tab indexes were up around 0.7% in early trade. South Africa's benchmark 2030 government bond was stronger in early trading, with the yield down 2 basis points to 10.585%. Sign up here. https://www.reuters.com/markets/currencies/south-african-rand-gains-stronger-pmi-data-2024-05-06/

2024-05-06 07:05

COPENHAGEN, May 6 (Reuters) - Denmark's Tyra natural gas field will only reach peak production in the fourth quarter of this year instead of mid-year due to technical issues with a power transformer, operator TotalEnergies (TTEF.PA) New Tab, opens new tab said on Monday. While the repair work is ongoing, different options to deliver additional gas volumes to Denmark are being explored, TotalEnergies said. The commissioning of the facilities and gas exports from Tyra continue at present levels, but gas volumes may be redirected to Den Helder, the Netherlands, during remediation, the group added. The technical issue relates to a transformer delivering power to the intermediate pressure gas compressor. "We are in close dialogue with our supplier of the IP compressor transformer and the whole Tyra team is working diligently to resolve and mitigate the issue as fast as possible," TotalEnergies said. BlueNord (BNOR.OL) New Tab, opens new tab, a partner in the development, has put its production guidance between the second and fourth quarter this year under review as a result of the delay, it said in a separate statement on Monday. BlueNord expects to give an update on its revised guidance in connection with its first quarter earnings report on Tuesday, it added. Sign up here. https://www.reuters.com/business/energy/denmarks-tyra-gas-field-faces-delay-2024-05-06/

2024-05-06 06:31

LONDON, May 6 (Reuters) - Central banks in Australia, Britain and Sweden will meet this week, as markets assess how much leeway the U.S. Federal Reserve has to cut rates this year. Traders are on alert for Japanese currency intervention, while weighing up the effects of U.S. market turbulence. And the around-the-world election tour makes a pit-stop in Panama. Here's what is in store for global markets in the week ahead from Rae Wee in Singapore, Ira Iosebashvili in New York, Andy Bruce in Manchester, and Naomi Rovnick and Marc Jones in London. 1/ DISTURBING GOLDILOCKS U.S. consumers are in focus as the University of Michigan's preliminary reading on consumer sentiment in May gives a snapshot of their inflation expectations and economic outlook. Months of stubborn inflation have threatened to disrupt the so-called Goldilocks narrative of resilient growth and cooling consumer prices that have helped drive stocks higher. Any signs in the May 10 report that higher prices are weighing on sentiment could encourage the Fed to keep rates elevated, adding to recent pressure on stocks and bonds. The Fed on Wednesday acknowledged a recent lack of progress on inflation, although Chair Jerome Powell reiterated that rates are likely to fall in 2024 and Friday's soft jobs numbers supported that view. Economists polled by Reuters expect the consumer sentiment index to rise to 77.9 from 77.2 in April. 2/ RUN FOR SHELTER Investors are scouring the globe for shelter from turbulence in U.S. markets shaken by the Fed's reluctance to cut rates. The S&P 500 dropped more than 4% in April, while Treasuries had their worst month since September. Investors are trying to diversify. London's FTSE 100, considered a hedge against tech-dominated S&P weakness because of its large crop of companies in so-called value sectors like oil and mining, is near record highs. Stocks in high-growth India have logged three months of gains. But insulating a portfolio from Wall Street's swings is tough. The long-term correlation rate between Europe's Stoxx 600 and the S&P is almost 90%, investment bank Baird estimates. Barclays calculates that a one percentage point rise for Treasury yields commonly pulls global yields up 56 bps. 3/ WAITING GAME Flashes of illumination rather than fireworks are likely to emerge from the Bank of England on Thursday, when it publishes its May rate decision and new quarterly forecasts. While earlier this year rate-setters talked openly about the possibility of rate cuts, hard data and business surveys have painted a pretty mixed picture of price pressures in Britain's economy, much like in the United States. With scant fresh data scheduled between now and Thursday, investors are increasingly betting the BoE could even wait until September before cutting rates. The results of local elections - which look set to pile yet more pressure on Prime Minister Rishi Sunak - are due from Friday, with monthly economic growth data due on May 10. Elsewhere in Europe, Sweden is seen as likely to start cutting rates on May 8 as inflation falls faster than expected. 4/ UP, NOT DOWN The Reserve Bank of Australia meets on May 7 and it's poignant timing after Q1 inflation were hotter than expected, after the RBA in March watered down a tightening bias. No policy change is expected but markets will watch any comments from Governor Michelle Bullock closely. Having been spooked by the inflation figures, markets narrowed the odds on the RBA having to raise rates once more. Note, some of those bets were pared after Australian retail sales fell unexpectedly in March. Even so, the risk of another rate hike has done little to help the Aussie , which continues to struggle below the $0.66 level against the dollar. 5/ WHAT NEXT, MULINO? Panama's former security minister Jose Raul Mulino on Sunday stormed to victory in a presidential poll dominated by his old boss, the popular ex-leader Ricardo Martinelli, who buttressed his campaign despite being holed up in Nicaragua's embassy. Now comes the challenge of governing. The Central American country is at serious risk of losing its coveted 'investment grade' status, having already been chopped to 'junk' by Fitch. Its business-friendly reputation has been tarnished by a decision to close the huge Cobre Panama copper mine that provides some 5% of its GDP. All this while the drought-hit Panama Canal's contribution to state coffers is expected to fall nearly 3% this year. Mulino will need to improve the finances to win over ratings firms. He said his government would be pro-investment and pro-business and that Panama would honor its debt, but also vowed not to forget the poor. Sign up here. https://www.reuters.com/business/take-five/global-markets-themes-takealook-2024-05-03/

2024-05-06 05:11

MUMBAI, May 6 (Reuters) - The Indian rupee was little changed on Monday as dollar demand from importers hurdled gains even as U.S. bond yields declined after weak US economic data raised hopes of a September rate cut by the Federal Reserve. The rupee was at 83.4425 against the U.S. dollar as of 09:50 a.m. IST, barely changed from its close at 83.4225 in the previous session. Asian currencies were mixed with the offshore Chinese yuan down 0.3%, while the Korean won rose 0.9%. The dollar index was steady at 105.1 after dipping to a near one-month low on Friday after data showed that U.S. employers added fewer jobs than expected in April and the unemployment rate rose. The data raised expectations that the Fed would cut rates twice in 2024 with markets currently pricing in about 45 basis points of rate cuts. Demand to buy dollars at the daily fixing rate also pressured the rupee in early trading, a foreign exchange trader at a state-run bank said. "Don't think it will move much lower from here ... 83.40-83.50 seems safe for the day," the trader added. Meanwhile, dollar-rupee forward premiums ticked up with the 1-year implied yield up 2 basis points (bps) at 1.68%, aided by a decline in U.S. bond yields. The 1-year Treasury yield fell 4 bps to 5.13% on Friday. "Expect the rupee to remain rangebound as the RBI may step in to buy dollars at lower levels," Anindya Banerjee, head of foreign exchange research at Kotak Securities said. The Reserve Bank of India's (RBI) foreign exchange reserves slipped to a seven-week low of $637.92 billion as of April 26, data showed. Investors now await remarks from Fed officials scheduled to speak later in the day for cues on policymakers' thinking about the future path of interest rates. Sign up here. https://www.reuters.com/markets/currencies/rupee-little-changed-wedged-between-importers-dollar-demand-lower-us-bond-yields-2024-05-06/