2023-10-31 06:35

Oct 9 (Reuters) - Financial markets have got off to a volatile start to the week, after Hamas militants launched an assault on Israel at the weekend, triggering violent conflict that left hundreds dead. A bond market rout last week and currency gyrations already had financial markets on edge ahead of U.S. inflation numbers and the start of earnings season. There's plenty to chew over for policymakers meeting at the World Bank/International Monetary Fund annual meeting, while Britain's opposition Labour party - vying for government - will set out its stall ahead of next year's election. Here's your week ahead in markets from Kevin Buckland in Tokyo, Lewis Krauskopf in New York, Rachel Savage in Johannesburg, and Naomi Rovnick and Dhara Ranasinghe in London. 1/ A JAPANESE INTRIGUE When all were bowing before king dollar in days gone by, the yen suddenly had other ideas. Following a grind to a new one-year peak above 150 yen on Tuesday, the bottom fell out, and a minute or so later the dollar was bouncing off 147. Markets whispered about possible intervention, although many had doubts and the dollar recovered quickly, lacking the shock-and-awe of Japan's move a year ago. Central bank data strongly hints of no official action that day. But the spectre of intervention will likely keep tugging at dollar spikes, maybe all the way until the next central bank decision on Halloween. Meanwhile, the euro is facing its own ghosts, with resurgent oil prices hurting a deteriorating economy and renewed concerns about Italy's fiscal position raising the risk of a move back towards the psychologically key $1 marker. 2/ HOT, COLD, OR JUST RIGHT? With benchmark Treasury yields around 16-year peaks, stakes are high for Thursday's monthly U.S. consumer price index report as investors gauge whether the Fed is likely to hike rates again to ensure inflation keeps cooling. August data showed the fastest inflation increase in 14 months as the cost of gasoline surged, though the annual rise in underlying inflation was the smallest in nearly two years. With oil prices around $90 a barrel, energy prices are also in focus. A hot report could spur worries that the Fed's rate posture may grow even more hawkish after its 'higher for longer' mantra in September spooked markets. The Fed is broadly expected to hold rates steady at its Oct 31-Nov. 1 meeting, although some traders are betting on another increase. 3/ BETWEEN A YIELD AND A HARD PLACE Reports from major banks kick off third-quarter earnings season for U.S. companies with equity investors eager for a catalysts to revive stocks in the face of surging bond yields. JPMorgan, Citigroup and Wells Fargo will post results on Oct. 13 and give a first readout on the fallout from higher rates on issues from loan demand to consumer behaviour. Other companies set to report include snacks and beverages giant PepsiCo on Tuesday, Delta Air Lines on Thursday and insurer UnitedHealth Group on Oct 13. Overall, S&P 500 companies are expected to increase third-quarter earnings by 1.6% compared to the year-ago period, according to LSEG IBES, after earnings dipped 2.8% in the second quarter. 4/ LABOUR TAKES THE STAGE The UK's governing Conservative party conference was marred by Prime Minister Rishi Sunak's controversial move to downsize plans for a long-awaited high speed railway. Now it's time for the opposition Labour Party - riding high in opinion polls and having just clinched a clear by-election victory - to take the stage with business and markets looking out for what the potential next government might have to offer. Asset managers are clamouring for Labour to listen to their ideas for reviving interest in the UK's moribund stock market - and any sign of changing political winds may bring some respite to underperforming equities, analysts said. Hopes for an economic bounce, however, will be tempered by the UK's high government debt and Labour's vow for prudent budgets with fiscal rules similar to the current government's ones. 5/ MEETING IN MOROCCO Finance officials and investors from around the globe are heading for the Morrocan city of Marrakech for the World Bank International Monetary Fund annual meetings. The gathering comes at a time when rocketing U.S. government bond yields that have led to a global jump in borrowing costs weigh on hopes that inflation can be lowered without triggering a major crisis. Policy makers also face deepening global divides and calls from large emerging economies such as China to reform the Bretton Woods global financial architecture almost 80 years after it was established and make it more representative. Amid these tensions, the IMF and World Bank are trying to boost their lending. Meanwhile, the Group of 20 leading economies' flagship debt restructuring initiative, the Common Framework, will also be in focus as it continues to face intense criticism for delays and a lack of concrete outcomes. https://www.reuters.com/business/take-five/global-markets-themes-graphic-2023-10-06/

2023-10-31 06:26

FRANKFURT, Oct 31 (Reuters) - German chemicals maker BASF (BASFn.DE) said on Tuesday that 2023 operating earnings and sales would be at the lower end of its target ranges, weighed down by lower sales volumes across its chemicals and plastics businesses. "If chemical production does not stabilize, there are risks from a further decline in volumes and a stronger price reduction than expected," the group added. It also reported that third-quarter operating income dropped 57%, mainly because of lower prices and sales volumes of basic petrochemicals. Quarterly earnings before interest and taxes, adjusted for one-offs, fell to 575 million euros ($609 million), slightly below an analyst consensus of 601 million euros posted on the company's website. BASF said 2023 operating income would be at the lower end of a previous target range of between 4 billion euros ($4.24 billion) and 4.4 billion, down from 6.9 billion in 2022. ($1 = 0.9438 euros) https://www.reuters.com/markets/commodities/basf-sees-2023-profit-lower-end-target-range-2023-10-31/

2023-10-31 06:19

LONDON, Oct 31 (Reuters) - Global gold demand excluding over-the-counter (OTC) trading slipped 6% in the third quarter as central bank buying fell short of last year's record levels and consumption by jewellers declined, the World Gold Council (WGC) said on Tuesday. The quarter's demand of 1,147.5 metric tons however stood 8% ahead of its five-year average, and official sector purchases in the full year are expected to approach their 2022 level, the WGC said in its quarterly demand trends report. Gold demand shot to an 11-year high in 2022 due to the biggest central bank purchases on record. "With geopolitical tensions on the rise and an expectation for continued robust central bank buying, gold demand may surprise to the upside," said Louise Street, senior markets analyst at the WGC. Spot gold prices hit $2,009.29 an ounce on Friday, surpassing the key psychological $2,000 level for the first time since mid-May, as investors piled into safe-haven bullion amid the Middle East conflict. Demand from investors, who see bullion as a safe asset during periods of instability, rose 56% in the third quarter, but remained weak compared to the five-year average, the WGC said. Central bank demand totalled 337.1 tons, down from a record 458.8 tons a year before. For the first nine months of 2023 however, official sector gold purchases hit 800 tons, more than in any January-September period in WGC data going back to 2000. "This strong buying streak from central banks is expected to stay on course for the remainder of the year, indicating a robust annual total again in 2023," WGC said. Buying of gold bars and coins fell by 14% in July-September with lower demand in Europe. Outflows from exchange traded funds (ETFs) storing bullion for investors continued due to investor sentiment that interest rates would remain high. Including OTC trading, which is conducted directly between two parties rather than via an exchange, total global gold demand rose 6% to 1,267.1 metric tons in the third quarter. QUARTERLY GOLD SUPPLY AND DEMAND (tonnes)* * Source: World Gold Council, Gold Demand Trends Q3 2023 https://www.reuters.com/markets/commodities/gold-demand-down-with-lower-central-bank-buying-q3-wgc-says-2023-10-31/

2023-10-31 06:12

Oct 31 (Reuters) - Bitcoin, the original crypto rebel, is racing into the heart of the financial establishment with an exchange-traded fund that tracks its price. But will it strike gold? The world's biggest cryptocurrency has leapt 28% in October, with investors betting U.S. regulators will give the green light for a spot bitcoin ETF and thereby unleash a new wave of demand. How much cash could such a fund reel in, though? Well, it's hard to say, judging by the wide assortment of estimates from market players, ranging from $3 billion on its first day to $55 billion over five years. "The analogy that I'm looking at is to gold," said Dave Mazza, chief strategy officer at ETF provider Roundhill Investments, adding that the gold market had been transformed by the approval of spot ETFs. He said he expected the first spot bitcoin ETFs on the scene to see a "wave of buying," echoing the launch of the first ever gold ETF in 2006 in the U.S. or the bitcoin futures ETF in 2021. Mainstream investment giants such as BlackRock (BLK.N) and Fidelity, as well as crypto-focused firms like Grayscale, have filed applications for spot bitcoin ETFs. The U.S. Securities and Exchange Commission will be considering eight to 10 filings for new spot bitcoin products, its chair said on Thursday, without giving details of timing of decisions. Ranged against the ETF optimists are those traditional investors long wary of crypto who say they won't be won over by new investment vehicles. "Not a penny of my clients' money will find its way into these misbegotten so-called investments," said George Gagliardi, an investment advisor with Coromandel Wealth Management in Lexington, Massachusetts, who believes cryptocurrencies "have no underlying intrinsic value." The prospect of an ETF that offers investors direct exposure to bitcoin has nonetheless buoyed the price of the cryptocurrency, which hit $35,198 last week, its highest level since May 2022. The metrics investors and analysts use to come up with estimates for demand for an ETF, from the size of the gold ETF market to demand for existing products, vary almost as much as their conclusions. Bitcoin markets are also opaque, with price moves driven mostly by investor sentiment. U.S. crypto firm NYDIG estimates demand for a spot bitcoin ETF at around $30 billion. Their calculation compares the sizes of the gold and bitcoin ETFs - $210 billion versus $28.8 billion, respectively - and adjusts them for their relative volatility. "It's rare to see a brand-new asset class arrive on the ETF market," said Todd Sohn, ETF strategist at Strategas Securities. "That makes it tough to figure out exactly how much demand is going to materialize." Existing bitcoin ETFs, tied to the price of futures, don't track price movements precisely, and the cost of rolling over futures contracts can eat into returns, leading many investors to see them as a less desirable vehicle. Steven McClurg, investment chief at Valkyrie Funds, which has applied for a spot bitcoin ETF, believes one starting point in gauging demand is the size of the Grayscale Bitcoin Trust (GBTC), an open-ended private trust that owns bitcoin directly. "If you look at the current market capitalization of GBTC - $3.2 billion – that's probably day-one demand" for a spot bitcoin product, he said. HALF OF FUNDS 'GONE IN TWO YEARS' Some advocates say that financial advisers, pension funds and other money managers - a pool of capital estimated to total around $46.5 trillion by Boston Consulting Group - could be a significant source of demand for a spot bitcoin ETF. "If BlackRock reaches the market then some percentage of the wire houses and financial advisers will add their fund to platforms," said Matthew Sigel, head of digital assets research at VanEck, which has a spot bitcoin ETF awaiting SEC approval. BlackRock declined to comment on its pending spot bitcoin ETF, other than to confirm that it is still awaiting final SEC approval. Matthew Hougan, CEO of crypto firm Bitwise Investments, said in an industry panel earlier this month that he expects spot bitcoin ETFs to pull in $55 billion in their first five years. His forecast is based on how demand evolved in smaller markets where spot bitcoin ETFs already exist, such as Canada. However large demand turns out to be, it is unlikely to sustain offerings from all the asset managers vying for a slice of the action, said Steve Sosnick, chief strategist at Interactive Brokers. "Are all of them going to be a success? Of course not," he added. "The ones with the best marketing will succeed, but half will be gone within two years." https://www.reuters.com/technology/cryptoverse-good-gold-spot-bitcoin-etfs-aim-whip-up-us-demand-2023-10-31/

2023-10-31 05:34

A look at the day ahead in European and global markets from Tom Westbrook Japan's yield cap has evolved into a reference rate, with the Bank of Japan redefining its 1% limit on 10-year government bond yields as an "upper bound" rather than a rigid target. It will keep buying bonds, but time will tell whether and how tenaciously it will impede yields rising beyond 1%. The move was foreshadowed in the Nikkei newspaper and having bought the rumour, markets sold the fact. The yen slipped back to 150 per dollar. After touching an almost 10-year low in morning trade, Japanese government bond futures rallied following the announcement. The Nikkei (.N225) bounced 0.5%. For now, investors seem to think that U.S. interest rates and the dollar will stay in the driver's seat - leaving the yen to languish at an effective rate that is its lowest on record. In the longer run, higher Japanese rates might encourage investors in the world's biggest creditor nation to keep their money at home, instead of buying so many offshore assets. That could finally trigger some gains for the battered yen. For the meantime the sense that some sort of anchor remains also spread some cheer to Treasury trade, sparking a brief rally. Bond market focus now shifts to the U.S., where the Federal Reserve meets and the Treasury lays out its bond-selling plans. On Monday the U.S. Treasury Department said it expects to borrow $776 billion in the fourth quarter, $76 billion less than it had anticipated in July. Its detailed refunding plans are due on Wednesday, as is the Fed's policy decision. In Europe, GDP and inflation data is due later on Tuesday. Around the grounds in Asia, an unexpected contraction in Chinese manufacturing activity dented hope that China's economy had bottomed and that a recovery, however fragile, was underway. Falls in Hong Kong and Shanghai led MSCI's broadest index of Asia-Pacific shares outside Japan 0.9% lower (.MIAPJ0000PUS). Samsung Electronics (005930.KS) announced its best quarterly profit of the year and an executive said the chip industry had reached bottom. Shares were steady. In Australia, Origin Energy's (ORG.AX) largest shareholder spurned a takeover bid from a Brookfield consortium, and Treasury Wine Estates (TWE.AX) agreed a $900 million buyout of U.S. rival DAOU Vineyards, adding exposure to a market it has long struggled to dominate. Meanwhile, outside of markets, Hamas said its militants fired anti-tank missiles at Israel's invading forces in Gaza early on Tuesday as the conflict intensified. Key developments that could influence markets on Tuesday: Economics: Euro zone GDP and consumer prices, U.S. employment costs, consumer confidence Earnings: Anheuser-Busch Inbev, Bouygues, BASF, BP, Pfizer, Caterpillar https://www.reuters.com/markets/europe/global-markets-view-europe-2023-10-31/

2023-10-31 03:51

China has bought around 2 mln T of Australia new-crop wheat Around 2.5 mln T of French wheat has been sold to China Large imports of Australian wheat to tighten Asian supplies Nearly 25 mln T or around 20% of China's crop damaged by rains SINGAPORE/BEIJING, Oct 31 (Reuters) - China is set to import record volumes of wheat this year, trading sources say, with rain damage to its crop and worries over dry weather in exporting nations fuelling Beijing's appetite to buy while prices are low. Traders said China's frantic buying is likely to support global prices, which have dropped more than a quarter this year - based on the Chicago futures benchmark price - amid abundant supplies from top exporter Russia. The world's biggest wheat producer and consumer, China bought around two million metric tons of new-crop Australian wheat in October, for shipments starting in December, trading sources told Reuters. It has also booked about 2.5 million metric tons of French wheat since September, for December-March shipment, they said, noting these were unusually large volumes for this time of year. Overall, China's 2023 imports are likely to reach around 12 million tons, two Singapore-based traders said, topping 2022's record 9.96 million tons, and the avid buying is expected to continue into 2024. "China has had problems with crop quality this year and Australia, which is the main wheat supplier to China, is going to have a much smaller crop," said one of the Singapore traders, who is at an international company which sells wheat to China. "They are buying as much as they can and as early as possible. Supplies are going to eventually tighten, especially from Australia," the trader said. China has said its wheat crop shrank 0.9% this year to 134.5 million tons, the first decline in seven years despite expanded acreage, after heavy rain battered mature grain in the key central growing region just before the harvest. read more Beijing has not provided a crop quality assessment. However, according to estimates by the two Singapore traders and one dealer in Sydney, around 25 million tons or about 20% of China's harvest this year was damaged by rains. Some of that rain-damaged wheat will only be fit for animal feed or for blending with higher quality imported wheat before being milled into flour. China's agriculture ministry did not immediately respond to a request for comment. The world's biggest hog producer, China's Muyuan Foods has benefitted from the availability of rain damaged wheat. Muyuan told investors on Friday that purchases of germinated wheat, which occurs when mature plants get wet and can no longer be used for milling, contributed significantly to lowering production costs. "Australia has the opportunity to fill the quality gap that China is currently suffering, particularly for high protein milling wheat," said Stefan Meyer, a grains broker at StoneX in Sydney. While wheat output in Australia, the world's second largest exporter, is forecast to drop to 26 million metric tons, down from last season's record 39.7 million tons, due to dryness from the El Nino weather pattern, the quality is better this year as dry weather results in higher protein content. Ma Wenfeng, senior analyst at Beijing Orient Agribusiness Consultancy, said a lower share of China's wheat harvest - about 20 million tons - was unsuitable for high-quality milling, although a portion of it can be used after cleaning. Ma and others in China said attractive prices were a bigger driver of China's imports. "Price is the main reason - it's really cheap," said Rosa Wang, analyst at Shanghai JC Intelligence Co Ltd, adding that China was probably looking at the mounting weather risks in top exporting countries and "making preparations" for next year. MORE TO COME China's January-September wheat imports jumped 53.6% to 10.17 million metric tons, customs data showed, including 6.4 million tons from Australia and 1.8 million tons from Canada. Those figures don't reflect orders made for future delivery, such as recent purchases of U.S. soft red winter wheat. Unlike other commodities, China's imports of Australian wheat were largely unaffected by the bilateral tensions between the two governments in recent years. Indeed, those tensions have eased in recent months. Beijing's heavy buying from Australia could force rival importers such as Indonesia and Japan to seek alternatives from North America and the Black Sea region, traders said. Chinese wheat purchases have stabilised global wheat prices, one of the Singapore traders said. "But we expect prices to rise going forward, when China starts taking more volumes of higher quality wheat from the U.S. as Australian supplies are going to tighten," the trader said. Given lower output in Australia, traders and analysts said China is likely to import significantly higher volumes of French wheat in the coming months. "With the U.S. having a slightly larger spring wheat crop, a type of wheat that can very much act as an 'improver' supply for many importers, we would not be surprised to see China seek some U.S. and maybe Canadian Spring wheat," said Jeffrey McPike, a U.S. analyst with brokerage WASDEA Commodities. https://www.reuters.com/markets/commodities/china-snaps-up-australian-french-wheat-crop-damage-spurs-buying-spree-2023-10-31/