2023-11-02 10:01

A look at the day ahead in U.S. and global markets from Mike Dolan World markets lapped up a combination of steady U.S. interest rates, rejigged Treasury borrowing and lower oil prices - with an eye on Thursday's earnings update from America's most valuable company Apple. The Federal Reserve left rates on hold again as expected - with an equivocal stance on further tightening as financial conditions generally remain tight. The Treasury, meantime, followed up on Monday's forecast of a lower borrowing tally for the final quarter with plans to ease back somewhat on share of long-term debt it's selling. Along with signs of fresh weakness in U.S. manufacturing last month and further retreat in crude oil prices to their lowest since August, 10-year Treasury yields dialled back yet again as low as 4.70% on Thursday - the lowest in more than two weeks and now 32 basis points below recent highs. With Apple (AAPL.O) up on the earnings slate after the bell later, S&P500 futures are rising further ahead of the open - setting Wall Street on course for a fourth straight day of gains for the first time in almost a month. More than half way through the earnings calendar, third quarter annual profit estimates for the S&P500 are tracking a gain 5% - more than twice pre-season forecasts - and 80% of firms have beaten forecasts and tallying with the 4.9% economic growth reading for the same three-month period. That then makes October economic soundings all the more important for both investors and the Fed to assess. Emerging softness in the ISM's October manufacturing survey may be a marker in that regard - although the employment picture will dominate the view of consumption going forward. And there was a mixed picture on the extent of loosening in the labor market on Wednesday. Job openings fell by less than expected in September, but ADP's private sector payroll tally for last month came in below forecasts again. With weekly jobless data watched like a hawk again later, Friday's national employment report now hoves into view. Fed futures now show less than a 30% chance of another Fed hike in the cycle, with a first cut coming by June and some 70bps of easing pencilled in by the end of next year. For now at least, S&P500 futures are up another 0.5% after the index clocked another gain of 1% on Wednesday. The ViX volatility gauge (.VIX) fell to as low as 16.4 today. With mainland Chinese shares the notable outlier yet again, other global bourses climbed rose n Wall Street's slipstream. Japan's Nikkei (.N225) added another 1% even as the yen regained some more lost ground after the early-week swoon on only a modest rowback from the Bank of Japan on its yield capping policy. BOJ Governor Kazuo Ueda will continue to dismantle the central bank's ultra-easy monetary policy settings only gradually and look to exit the decade-long accommodative regime sometime next year, Reuters reported on Thursday, based on interviews with six sources familiar with the BOJ's thinking. The Bank of England is the next major central bank decision due later on Thursday. Like the Fed, it is expected to hold rates unchanged with a likely 6-3 vote on its policymaking council for steady rates. Most market players now think BoE rates have peaked for this cycle. In China, financial regulators are investigating a month-end liquidity crunch that saw short-term money rates surge to as much as 50% earlier this week, asking institutions to explain why they borrowed at extremely high rates, three sources said. In other U.S. corporate news, automaker Tesla (TSLA.O) delivered 72,115 China-made electric vehicles last month, down 2.6% from a month earlier, the China Passenger Car Association (CPCA) said. Key developments that should provide more direction to U.S. markets later on Thursday: * Bank of England policy decision and monetary policy report * U.S. weekly jobless, Sept durable goods orders, Q3 unit labor costs * St Louis Interim Federal Reserve President Kathleen O'Neill speaks; European Central Bank chief economist Philip Lane, and ECB board members Isabel Schnabel and Edouard Fernandez-Bollo all speak * U.S. corporate earnings: Apple, Expedia, Booking, Starbucks, Cigna, Molson Coors, S&PGlobal, Eli Lilly, ConocoPhillips, Pioneer Natural Resources, Duke Energy, Alliant Energy, Moderna, Monster Beverage, EOG, SBA, ICE, Stryker, Motorola Solutions, Live Nation, Consolidated Edison, Federal Realty, Paramount Global, Rockwell, Microchip, Fortinet, Skyworks, Regency, Insulet, Ventas, AES, NRG, Borgwarner, PPL, Howmet, Huntington Ingersolls, Ball, Cencora, Cummins, Fox, Baxter, Teleflex etc * U.S. Treasury auctions 4-week bills https://www.reuters.com/markets/global-markets-view-usa-2023-11-02/

2023-11-02 09:55

Governor has raised rates sharply in policy U-turn Getting inflation under control a long process, Erkan says Inflation seen peaking at 70%-75% in May Lira little moved by comments ANKARA, Nov 2 (Reuters) - Turkey's central bank raised its year-end inflation forecasts for this year and next to 65% and 36% respectively, Governor Hafize Gaye Erkan said on Thursday, vowing to continue gradual monetary tightening. The bank's previous inflation report three months ago forecast year-end inflation of 58% in 2023 and 33% next year. Inflation hit a 24-year peak of 85% last year and surged again in recent months as the lira weakened for a third year in a row in the wake of an unorthodox rate-cutting policy backed by President Tayyip Erdogan despite soaring prices. Since Erkan was appointed governor in June, the bank has implemented an abrupt U-turn in policy, raising interest rates (TRINT=ECI) by 2,650 basis points as part of a wider policy shift towards greater orthodoxy after May elections. "Getting high and volatile inflation under control will be a long and difficult process. We will continue to use all tools available in a determined way to ensure disinflation," Erkan said in a speech. She told a press conference to present the central bank's (CBRT) inflation report that disinflation would start after it peaked at around 70%-75% in May and that monetary tightening would continue until there was a visible improvement in inflation. "Pretty consistent message being sent now from the CBRT," said Timothy Ash, senior strategist at BlueBay Asset Management, referring to the central bank. "Trust us, we are tightening and more should happen after the local elections and inflation should get down to a 30% handle at end of 2024," he said of the bank's message. The lira traded at 28.3460 at 0921 GMT, little changed on the day. It has weakened some 33% this year. IMPACT OF SHOCKS COMPLETED The central bank raised its policy rate by 500 basis points to 35% on Thursday last week, tightening aggressively for a third straight month as it steps up efforts to rein in inflation, which hit 61.5% in September. Erkan said the rise in inflation was driven by large shocks happening simultaneously and their inflation impact was largely completed, adding that the bank maintained a 5% medium-term target. President Tayyip Erdogan chose former Wall Street banker Erkan as central bank chief after his May re-election. She has led a policy U-turn to relieve an economy strained by depleted foreign exchange reserves and surging inflation expectations. Under former Governor Sahap Kavcioglu, the central bank slashed its policy rate to 8.5% from 19% in 2021, based on Erdogan's economic programme. The cuts sparked a currency crisis and the lira weakened 44% in 2021 and 30% in 2022. In past years, Erdogan has repeatedly criticised tight monetary policy, describing himself as an enemy of interest rates, but he has recently said tight policy would help bring down inflation. https://www.reuters.com/world/middle-east/turkish-central-bank-raises-inflation-forecasts-sees-70-75-peak-2023-11-02/

2023-11-02 07:00

JOHANNESBURG, Nov 2 (Reuters) - Sibanye Stillwater (SSWJ.J) said on Thursday it was considering further "repositioning" of its palladium mines in the U.S. to adjust to metal prices that have "dropped faster than anticipated". The Johannesburg-based precious metals producer last month said it planned to cut more 4,000 jobs and shut some platinum mining shafts in South Africa amid a worsening rout in prices of the metals, used in catalysts to cut vehicle emissions. Sibanye has been battling to lower costs at its Montana-based Stillwater mines as the price for palladium continued to weaken and the mines were also hit by flooding last year that curbed output and pushed up costs of production. The changes at the Stillwater mines are needed after "the decline in the palladium price during 2023 has surpassed our expectations, dropping lower and faster than anticipated", CEO Neal Froneman said in the statement. https://www.reuters.com/markets/commodities/sibanye-weighs-repositioning-us-palladium-mines-prices-fall-2023-11-02/

2023-11-02 06:30

AMSTERDAM, Nov 2 (Reuters) - Dutch airline KLM has scrapped dozens of flights to and from Amsterdam Schiphol airport on Thursday as storm Ciaran is expected to hit the Netherlands with wind gusts of up to 110 kilometres (68 miles) per hour. "We have decided to cancel all KLM flights to and from Schiphol from early afternoon until the end of the day," the Dutch arm of airline Air France KLM (AIRF.PA) said. https://www.reuters.com/business/aerospace-defense/klm-cancels-dozens-flights-amsterdam-airport-due-storm-2023-11-02/

2023-11-02 06:27

Risk appetite returns, dollar falls Pound rises to more than 1-week high post BOE rate decision Aussie, Kiwi rise versus US dollar NEW YORK, Nov 2 (Reuters) - The dollar fell across the board on Thursday, as investors' appetite for riskier currencies grew as they bet the Federal Reserve is done raising interest rates after holding them steady in the previous session. The Fed left interest rates unchanged on Wednesday as policymakers struggled to determine whether financial conditions may be tight enough already to control inflation, or whether an economy that continues to outperform expectations may need still more restraint. Investors, however, are increasingly convinced a peak in U.S. interest rates has been reached, with Fed funds futures sticking with a sub-20% chance that rates will rise in December. That view helped boost investors' risk appetite on Thursday, helping lift equities and high-yielding assets such as commodity and emerging market currencies. Brad Bechtel, global head of FX at Jefferies in New York, said the Fed is probably finished hiking rates, but he could see the rationale for tightening one more time given the still-resilient U.S. economy. "But at the same time, everyone is looking at a slowdown and inflation is going in the right direction," Bechtel said. "We can kind of debate whether they would hike another 25 (basis points) or not. It doesn't matter. The broader theme is that the Fed is pretty much near the peak." The dollar index , which measures the currency's strength against a basket of six rivals, was 0.3% lower at 106.14. "Markets were not pricing in any further tightening before yesterday so nothing changes there. But at the margin, a bit more conviction around the next move being a cut may be emerging," Shaun Osborne, chief currency strategist at Scotia Bank, said in a note. Sterling, meanwhile, rose after the Bank of England kept rates at a 15-year high and stressed that it did not expect to start cutting them any time soon. The pound rose as much as 0.6% against the dollar to $1.2225, its highest level in 1-1/2 weeks after the BoE voted 6-3 to hold rates steady at 5.25%, while ruling out rate cuts anytime soon. Sterling was last up 0.4% at $1.2201 . The Australian dollar , often used as a proxy for risk appetite, jumped 0.54% on Thursday, while the New Zealand dollar rose 0.8%. Norway's central bank also left its benchmark rate unchanged, as widely expected, but said it would likely raise borrowing costs next month unless inflation showed a continued decline. The dollar was 0.2% lower against the Norwegian crown to 11.16 . Against the yen, the dollar fell 0.3% to 150.44 , off a one-year high touched earlier this week. The yen has been struggling for traction, even as the Bank of Japan on Tuesday made another relaxation of its yield curve control policy. A fall to a one-year low of 151.74 per dollar and 15-year low of 160.83 per euro after the BoJ's announcement had traders on watch for possible intervention to prop up the currency. Kazuo Ueda, the central bank's governor, will continue to dismantle its ultra-loose monetary policy and look to exit the decade-long accommodative regime sometime next year, sources told Reuters. Bitcoin , slipped 1.7% to $34,836, after hitting an 18-month high of $35,968 earlier in the session. https://www.reuters.com/markets/currencies/dollar-tracks-treasury-yields-lower-fed-stays-hold-2023-11-02/

2023-11-02 06:19

Markets trim bets on Dec, Jan rate hikes Markets now see rate cuts beginning June 2024 Apple results later in the day; U.S. nonfarm payrolls on Friday SYDNEY, Nov 2 (Reuters) - Asian shares and bonds extended a global rally on Thursday as a non-committal Federal Reserve Chair had markets double down on bets that U.S. interest rates have peaked and cuts are on the way. Investors are now awaiting the results from Apple (AAPL.O) later in the day, a bellwether for consumer demand and the tech sector. The Cupertino California-based company is expected to report a 1% decrease in quarterly revenue. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) surged 1.7% to the highest level in one week. Tokyo's Nikkei (.N225) gained 1.4% to cross the 32,000 level for the first time in two weeks. China's blue chips (.CSI300) were 0.3% higher, while Hong Kong's Hang Seng index (.HSI) jumped 1.7%. Stock futures in Europe and U.S. also gained. EUROSTOXX 50 futures rose 0.8% early in Asia, while S&P 500 futures added 0.3% and Nasdaq futures increased 0.5%. Overnight, the Fed held the policy rate steady in its current 5.25%-5.50% range. While Chair Jerome Powell did not rule out another hike, markets judged he was not quite as hawkish as he might have been. Fed funds futures rallied as markets pared back the risk of a December hike to about 22% and a January move to 28%. Markets have priced in a 70% chance that the tightening is over and rate cuts could amount to 85 basis points next year, beginning as soon as June. Wall Street and Treasuries rallied. The S&P 500 (.SPX) gained 1% and the Nasdaq Composite (.IXIC) surged 1.6%. The benchmark 10-year Treasury yield eased another 2 basis points to 4.7089%, the lowest in more than two weeks. Overnight, it tumbled 14 basis points, the biggest daily drop since March, also in part due to a Treasury announcement that said the government will slow increases in the size of its longer-dated auctions. "While growth was incredibly strong in the third quarter of 2023 at 4.9%, we suspect a substantial slowing in 4Q23, which, based on Powell's remarks today, likely won't be enough to garner additional tightening," Tiffany Wilding, an economist at PIMCO, wrote in a note to clients. "Instead the FOMC is happy to remain on hold, and watch and see how the economy evolves early next year." The next big focal point for the market is the non-farm payrolls data on Friday, which analysts expect to show the economy added 180,000 jobs in October, slowing from 336,000 increase the previous month. It will come after private payrolls increased far less than expected. The dollar was again on the back foot on Thursday, falling 0.1% against its peers. The prospect that the Fed is done tightening buoyed risk sensitive currencies the most, with Australian dollar bouncing 0.6% to a three-week high of $0.6428. "Although the FOMC may not be talking about it today, within a few months, the question will no longer be 'Will they hike again?' but 'When will they cut?'," said Seema Shah, Chief Global Strategist at Principal Asset Management. The yen continued to regain ground - up 0.3% to 150.46 per dollar on Thursday. It had hit a one-year low after a Bank of Japan decision to ease its control over the 1% cap on 10-year yields, with the tweak seen insufficient to close the wide interest rate gaps between Japan and other countries. Oil prices traded higher as the conflict in the Middle East kept investors on edge about whether it could disrupt oil supplies. Brent crude futures climbed 1.2% to $85.61 a barrel while U.S. West Texas Intermediate futures were at $81.43 a barrel, up 1.2%. The price of gold was 0.2% higher at $1,985.86 per ounce. (This story has been officially corrected to fix an error in the analyst quote to show that the U.S. growth rate of 4.9% was for the third quarter of 2023, not 2024, in paragraph 10) https://www.reuters.com/markets/global-markets-wrapup-1-2023-11-02/