2023-11-10 10:33

Nov 10 (Reuters) - Global equity funds saw a significant uptick in demand in the week through Nov. 8 as investor sentiment improved following the decision of major central banks to keep policy rates unchanged. A shift in rate hike expectations and a report from the U.S. Labor Department indicating a slowdown in job growth in October further eased treasury yields, loosening financial conditions. Investors poured a net $5.63 billion into global equity funds during the week, registering their biggest weekly net purchase since Sept. 13. European, and U.S. equity funds had purchases of $2.92 billion and $1.9 billion respectively. Asia drew just $708 million, the smallest amount since Aug. 16. The technology sector stood out, securing $1.3 billion in inflows, its highest since early July. Financials also saw positive movements with $354 million in inflows, but consumer staples experienced outflows of about $571 million. Money market funds continued to attract investors for the third consecutive week, with net inflows of about $53.75 billion. Global bond funds broke a three-week streak of outflows, registering $6.73 billion in net purchases. Reflecting improved risk appetite, high yield bond funds saw substantial inflows of around $6.43 billion, the biggest weekly gain since mid-June 2020. Government bond funds also experienced net purchases of about $2.76 billion. In contrast, global short-term bond funds faced approximately $4.44 billion in outflows. In the commodities sector, precious metal funds continued to attract interest, garnering $73 million in net purchases for a second consecutive week. Energy funds also maintained their appeal with $54 million in inflows, marking three weeks of consecutive gains. Emerging market data, encompassing 29,633 funds, indicated a net sell-off of $1.73 billion in EM equity funds, extending a 13-week withdrawal streak. In contrast, EM bond funds received $592 million - their first weekly inflow in 15 weeks. https://www.reuters.com/markets/global-markets-flows-graphic-2023-11-10/

2023-11-10 10:26

MOGADISHU, Nov 10 (Reuters) - The United Nations has described floods that uprooted hundreds of thousands of people in Somalia and neighbouring countries in East Africa following a historic drought as a once-in-a-century event. Around 1.6 million people in Somalia could be affected by the heavy seasonal downpours, which have been worsened by the combined impact of two climate phenomenons, El Niño and the Indian Ocean Dipole, the UN Office for the Coordination of Humanitarian Affairs (OCHA) said in a statement late on Thursday. The floods, which followed heavy rains that started in early October, have already killed at least 29 people and forced more than 300,000 from their homes in Somalia, and inundated towns and villages across northern Kenya. Camps for people displaced by an Islamist insurgency and the worst drought in four decades have also been flooded, causing people to flee for a second time, aid groups say. Large-scale displacement, increased humanitarian needs and further destruction of property remain likely, OCHA said, with some 1.5 million hectares (3.70 million acres)of farmland potentially being destroyed. "Extreme weather linked to the ongoing El Niño risks further driving up humanitarian needs in already-vulnerable communities in Somalia and many other places," said Martin Griffiths, Under-Secretary-General, the UN's Humanitarian Affairs and Emergency Relief Coordinator. "We know what the risks are, and we need to get ahead of these looming crises," he said. https://www.reuters.com/business/environment/once-in-a-century-flooding-swamps-somalia-after-historic-drought-un-2023-11-10/

2023-11-10 09:25

LONDON, Nov 10 (Reuters) - Sterling held at around a one-week low against the dollar on Friday, set for a weekly decline of 1.2%, as markets digested data showing Britain's economy failed to grow in the third quarter, though this was slightly above expectations. The pound was last up a fraction on the day at $1.2231 little changed compared to before the GDP data was released. Those numbers showed a 0% change in gross domestic product in the July-September period compared with a forecast for a 0.1% fall in a Reuters poll of economists, which many analysts said would likely represent the start of a recession. "The scale of outperformance is unlikely to prompt much change in market pricing (for the interest rate outlook)" MUFG analysts said in a morning note. "The market likely to consolidate into next week when we have the key CPI data." Changes in expectations of when and how quickly different central bank start cutting interest rates next year is a major consideration for currency markets at present. Markets are currently pricing in around 40 basis points of Bank of England rate cuts by September, less than for the U.S. Federal Reserve or the European Central Bank. BoE chief economist Huw Pill drew attention on Monday by saying that pricing which currently points to a first rate cut to Bank Rate in August 2024 - "doesn't seem totally unreasonable, at least to me." Those comments - unusual as most central bank policy makers are avoiding talking about rate cuts - contributed to the pound's 1.2% decline against the dollar this week. Pill said on Thursday it was essential interest rates stay at their current level in order to tame inflation. A rise in the greenback has also been a major factor in moves in the sterling/dollar pair - known as cable - and the dollar rose on Thursday after U.S. Federal Reserve officials including Fed Chair Jerome Powell said they were still not sure that interest rates are high enough. But the British currency has also dropped against the euro, which has gained 0.7% on the pound this week, its biggest weekly gain since mid September. The European common currency was last at 87.32 pence, little changed against the pound on Friday. https://www.reuters.com/markets/currencies/sterling-holds-near-one-week-low-uk-economy-fails-grow-q3-2023-11-10/

2023-11-10 07:56

LONDON, Nov 10 (Reuters) - Markets are keen to trade rate cuts and big central banks are pushing back, shining a new light on upcoming data in that tug of war. China continues to battle its property demons while it is Italy's turn to be in the eye of the ratings agencies after Moody's on Friday lowered its U.S. rating outlook to "negative". Here is your week-ahead primer from Lewis Krauskopf in New York, Kevin Buckland in Tokyo, Danilo Masoni in Milan and Alun John and Dhara Ranasinghe in London. 1/ INFLATION WATCH A slew of Federal Reserve policymakers including boss Jerome Powell say they are still not sure that rates are high enough to finish the battle with inflation. Traders, anticipating roughly three quarter-point Fed rate cuts next year, will now turn their attention to Tuesday's inflation data to confirm their view on the outlook. The October consumer price index is expected to have climbed 0.1% on a monthly basis, according to a Reuters poll. September's CPI rose 0.4% on a surprise surge in rental costs, but also showed a moderation in underlying inflation pressures. A sharper cooling could fan the peak rate talk, fuelled by October's employment report, which pointed to an easing in labor markets. A federal government shutdown meanwhile looms if lawmakers in Washington are unable to pass a measure to at least temporarily fund operations before a Nov. 17 deadline. Fresh wrangling could renew concerns about governance in the world's biggest economy. 2/ TROUBLE AT HOME The question of who will be left holding the bag filled with China's property mess may have gone some way to being answered - much to the chagrin of Ping An shareholders. Reuters reports that Beijing asked the insurer to take control of ailing Country Garden, China's biggest private developer. Ping An shares dived to one-year lows, in spite of the company's denials. Worries about the sector continue to weigh. Government measures to shore up the economy have repeatedly fallen flat this year, which has not deterred China's central bank from professing the 5% growth target can be achieved, a view the IMF shares. Data has pointed the other way, with more evidence of slowing factories and tepid consumption. Markets will see Wednesday if that trend continues, with October retail sales and industrial production data. 3/ ONCE BITTEN The robust dollar suddenly appears vulnerable to the push and pull in the market's Fed rate cut bets. A bounce thanks to Fed chief Powell pushing back on talk that rates have peaked may not last as dollar bears grow confident that rate cuts are likely next year. Take the latest Reuters poll: nearly two-thirds of analysts say the dollar is likely to trade lower by year-end. Long dollar positions are decreasing. SocGen reckons dollar/yen could fall back to around 145-150. It rose to a one-year high on Monday at 151.80. Rate-cut talk is dollar negative but a sharply slowing U.S. economy that hurts the world could quickly bring back demand for the safe-haven currency. 4/ SUNAK'S SCORECARD UK inflation has been stickier than in most developed economies. That is bad news for consumers, the Bank of England, and Prime Minister Rishi Sunak, who pledged at the start of 2023 to halve inflation, then running at over 10%, by year end. October CPI data, due on Wednesday, will show whether Sunak is starting to get close to that goal. A slowdown from September's 6.7% is likely, but by how much? The data could also help justify, or challenge, recent remarks from BoE chief economist Huw Pill that mid-2024 could be the time for rate cuts. Latest British jobs figures, retail sales and the producer price index are also on the calendar. Euro zone flash third-quarter GDP data out on Tuesday is in focus given signs of economic weakness in Germany, the bloc's largest economy, and described by some this year as the "sick man of Europe". 5/ ITALY RISK Italy is back on the worry list with many investors concerned about growing fiscal risks steering clear of big exposure to the euro zone's third-largest economy. Moody's, which rates Italy just one notch above junk with a negative outlook, reviews the sovereign on Nov. 17. Fitch's latest review is due after Friday's market close. A Moody's downgrade is the bigger risk given its Italy outlook and such a move could see the closely watched 10-year bond yield gap over Germany pop to 250 bps, with potential ramifications across the periphery. Italian stocks meanwhile are trading at a 50% discount to world stocks, the widest gap since 1988. There is a silver lining. Stronger balance sheets mean banks are less vulnerable to bond turmoil than in the past and with parts of the equity market so deeply discounted, some see a buying opportunity that cannot be ignored. https://www.reuters.com/business/take-five/global-markets-themes-takealook-graphic-2023-11-10/

2023-11-10 07:02

LONDON, Nov 10 (Reuters) - After Hamas' incursion into Israel on Oct. 7 jolted world markets, an oil surge has reversed, global stocks are now broadly flat and bets on a humanitarian crisis spiraling into a wider regional conflict seem to have faded. Israel agreed on Thursday to pause operations in northern Gaza for four hours a day according to the U.S White House but risks remain and heavy trading in a range of asset classes from weapons stocks to niche Middle East debt insurance suggest markets have not moved on from fear quite yet. As investors debate a range of scenarios, here are some assets flashing warning signals and those that may have wild swings ahead. 1/ OPTIONS OPEN Oil prices are below where they were before Oct. 7. Derivatives markets tell a different story. Bets on oil prices moving up from here are at their highest level since Russia's 2022 invasion of Ukraine, CME options market volatility data shows. Average daily volumes in energy options of the CME exchange overall are the highest since an all-time record in 2018. "The aftermath of the attacks and rising Middle East tensions did not impact oil prices as many investors expected, including ourselves," Unigestion multi-asset portfolio manager Sandrine Perret said. "The market is telling you that it's much more concerned about the next $10 rise in oil and the next $50 up move in gold than it is the next $10 or $50 move down," CME's head of commodities, options and international markets, Derek Sammann. Gold has dropped more than $50 an ounce after hitting $2,000 last week. 2/ DEBT DANGERS Signs so far that the conflict is contained have helped Israel's bonds and those of neighbours Jordan and Egypt recover from post-attack falls. Israel credit default swaps (CDS)- which traders use to insure their exposure to the country - express more pessimism. The price of these illiquid instruments matches that typically paid to insure against default by a country on the cusp of being downgraded to a junk credit rating. Israel's AA-rating is 6 notches above what CDS pricing implies. "Are we out of the woods in terms of the risk of a tail event? I would say no," Aegon Asset Management's head of emerging market debt Jeff Grills said. 3/ DEFENCE STOCKS A gauge of defence stocks compiled by index provider MarketVector (.MVDEF) is 8% higher in the four weeks since the conflict began. This is a sector that, like gold, could well fall out of favour if Middle East hostilities cease but having outperformed global stocks since China stepped up military pressure on Taiwan in May, remains viewed as a long-term winner. "We would be prepared to tolerate some volatility," said Mikhail Zverev, a portfolio manager at Amati Global Investors, who has around 13% of his fund in defence and security stocks and said he plans to back innovative companies in this industry long term. "Defence spending has to increase," added Ron Temple, chief market strategist at Lazard Asset Management. "It's hard for me to see anything other than a positive revenue trajectory for these (defence) companies." 4/ SAFEST CURRENCY? The safe haven Swiss franc has been the best performing major currency against the dollar since Oct. 7. It's also near eight-year highs versus the euro and therefore another asset class attracting questions about how it would perform if Middle East tensions are resolved. A bid in its favour: Switzerland's central bank is selling foreign currency reserves to shrink its vast balance sheet. "From a longer-term perspective the Swiss franc is very expensive," said Francesca Fornasari, head of currency at Insight Investment. "In the shorter term, the safe-haven bid and balance sheet reduction are a big support." If war escalates, Fornasari said, the euro's performance against the dollar is worth watching. "A flight to safety bid helps the dollar and you have the fact the euro area is an energy importing region." 5/ EURO CREDIT The resilience of corporate bonds, already tested by aggressive rate hikes and slowing growth, could be challenged further if oil rises again -- especially in a Europe reliant on energy imports. "U.S. credit should prove more resilient over EU credit in a more pronounced war scenario," said Generali Investments senior credit strategist Elisa Belgacem. The perceived riskiness of European junk debt, shown by the additional income yield investors demand to lend to the weakest borrowers (.MERHE00) over risk-free assets, often tracks Brent crude . https://www.reuters.com/world/middle-east/global-markets-geopolitics-pix-2023-11-10/

2023-11-10 06:57

Wall Street rebounds on doubts rates will go higher Dollar, yields little changed as market awaits data Oil set for third weekly decline as demand weighs Gold poised for worst week in a month NEW YORK/LONDON, Nov 10 (Reuters) - The dollar eased and global equities rebounded on Friday as Wall Street rallied on doubts that interest rates will go higher even after Federal Reserve Chair Jerome Powell cautioned that tighter monetary policy might be needed to tame inflation. Powell's remarks on Thursday that the fight to restore price stability "had a long way to go" at first roiled markets. But a softer labor market as seen in last week's unemployment report and speculation that next week's consumer prices index (CPI) will show slower inflation spurred bulls into action. "Even with Powell's commentary yesterday, for the most part that's been shrugged off as sounding too hawkish. People are not really convinced that the Fed is going to be raising rates going forward," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. "Too many people were far too over their skis on the short side, both of equities and bonds, and you've seen that reverse in a huge way in the course of the last week." Many investors embraced the notion that U.S. rates have peaked after the Fed kept its overnight lending rate steady last week, a move that bolstered speculation the tightening cycle was over and spurred a rally in risky assets until Thursday. Thierry Wizman, global FX and interest rates strategist at Macquarie in New York, said with the decline in gasoline prices the CPI data could surprise to the downside. "We could also see some downside surprises in the core components of rents, for example, air fares, new cars, etc," he said. "If we were to get a low CPI next week, yields can come down around that number and we may get some weakening in the dollar." Core CPI month-over-month is expected to have risen 0.3% in October, with a year-over-year increase of 4.1%, a Reuters poll showed. Both estimated gains are the same as in September. But U.S. consumer sentiment fell for a fourth straight month in November and households' expectations for inflation rose again, with their medium-term outlook for price pressures at the highest in more than a dozen years, the University of Michigan's preliminary reading of consumer sentiment showed on Friday. MSCI's gauge of global equity performance (.MIWD00000PUS) closed up 0.76%, while Wall Street's main indices surged 1% or more. The Dow Jones Industrial Average (.DJI) rose 1.15%, the S&P 500 (.SPX) gained 1.56% and the Nasdaq Composite (.IXIC) added 2.05%, its biggest percentage jump since May. For the week, the Dow rose 0.7%, the S&P 500 gained 1.3% and the Nasdaq advanced 2.4%. Earlier in Europe, the pan-regional STOXX 600 index (.STOXX) closed down 1.0%. U.S. Treasury yields rose sharply on Thursday after a weak 30-year bond auction. The extra yield needed to get the issue sold was the largest in several years as was the amount dealers were forced to absorb, said Dec Mullarkey, managing director for investment strategy and asset allocation at SLC Management in Boston. "The market continues to struggle with what is the right premium or clearing level to fund the large pipeline of government debt issuance," he said. "Investors are worried about the prospects of higher rates for longer and the price volatility that may invoke," he said, reflecting a variance of views between bond and equity investors about rates. The two-year Treasury yield, which reflects interest rate expectations, rose 3.2 basis points to 5.054%, while the benchmark 10-year yield slid 0.6 basis points at 4.624%. Futures show about a 35% probability the Fed will cut its overnight lending rate by 25 basis points by next May, according to the CME's FedWatch tool, but the market expects that rate to stay above 5% through June. Asian stocks closed the day down as worries over China, the world's second-biggest economy, resurfaced after data on Thursday showed Chinese consumer prices dipped again. Tapas Strickland, head of market economics at NAB, said the data keeps the pressure on Beijing to continue with its incremental easing in monetary and fiscal policy. In currency markets, the dollar index fell 0.11% to 105.79, with the euro up 0.16% to $1.0683. The Japanese yen weakened as traders remained on watch for possible intervention to shore up the struggling currency. The yen weakened 0.12% at 151.51 per dollar. The dollar touched one-week highs against the Australian and New Zealand dollars. Oil prices gained almost 2% as some speculators kept taking profits on short positions, but remained on track for a third week of losses on signs of slowing demand. U.S. crude rose $1.43 to settle at $77.17 a barrel, while Brent settled up $1.42 at $81.43 a barrel. Gold fell more than 1%, heading for a second straight weekly decline, as safe-haven demand eased. U.S. gold futures settled down 1.6% at $1,937.70 an ounce. https://www.reuters.com/markets/global-markets-wrapup-1-2023-11-10/