2024-08-02 10:36

A look at the day ahead in U.S. and global markets from Mike Dolan August looks anxious already - as stock markets take fright at Big Tech earnings and start to reconsider 'hard landing' scenarios for the world economy just as central banks ease and bond yields plummet. It's been a frantic week's trading in all corners of the financial world. Regardless of the recently vaunted rotation of stock sectors, the biggest rotation that's emerging is one from stocks to bonds as 'recession' creeps back into parlance. Five, seven and 10-year Treasury yields have all plunged below 4% since the Federal Reserve signalled on Wednesday that its first interest rate is coming in seven weeks' time - just as manufacturing surveys slip into contraction across the world and the U.S. jobs market cools further. The stakes are higher than ever for Friday's July employment report, with markets watching closely for a possible triggering of the so-called 'Sahm rule' that maps the pace of a rising U.S. jobless rate against the onset of recession. Even though talk of broad recession still seems far-fetched, with real-time U.S. GDP estimates still tracking growth of 2.5%, fears of a negative pulse through the industrial world from a stuttering Chinese economy have been building for weeks. With the Bank of England joining G7 peers in starting its rate cut cycle on Thursday too, markets are starting to price the possibility that a September Fed rate cut could be as much as 50 basis points. Some 32bps of cuts are now priced for that month and 85bps over the remainder of the year. But the surge in market volatility, which saw the VIX 'fear index' (.VIX) , opens new tab top the 20 level on Friday for the first time since April, centred on yet another shakeout in Big Tech as the megacaps and a whole host of high-flying chipmakers reported disappointing earnings. Central to the worry is whether huge spends on artificial intelligence investments are warranted and whether AI will ultimately deliver on its promise in the wider economy. While Apple (AAPL.O) , opens new tab held the line overnight after its post-bell results beat estimates, Amazon (AMZN.O) , opens new tab dived more than 8% after its update. And although Meta rallied on Thursday, poor results from Qualcomm and Arm saw their shares and many of the big chipmakers swoon once again. Intel (INTC.O) , opens new tab dropped about 20% overnight on its miss, dividend suspension and job cuts in what would be its worst day since the 2000 dot.com bubble burst. Taiwan chip giant TSMC (2330.TW) , opens new tab lost almost 6%. After a 7% loss on Thursday, and a wildly volatile week, AI darling Nvidia (NVDA.O) , opens new tab lost another 2% out of hours on Friday following media reports that the U.S. government is launching an antitrust probe into the company following complaints from rival chipmakers. Another bruising day on Thursday for the S&P500 (.SPX) , opens new tab, Nasdaq (.IXIC) , opens new tab and Russell 2000 small caps (.RUT) , opens new tab ripped around the world overnight. Irked additionally by the week's Bank of Japan rate rise and yen surge, the Nikkei (.N225) , opens new tab plunged almost 6% in its worst day since the pandemic hit in 2020. China, at the heart of the brewing global industrial slowdown after news that its factory sector contracted again in July, saw its stocks (.CSI300) , opens new tab drop more than 1%. European stocks (.STOXXE) , opens new tab were also off about 1%. With bond yields racing to their lowest since the feverish Fed easing speculation of early 2024, even Japanese 10-year yields fell back below 1% for the first time in over a month despite the week's BOJ move. The yen held steady at just under 150 per dollar. But in all the stock and bond ructions, currency markets were generally much steadier. The dollar index (.DXY) , opens new tab was only slightly lower, with the Swiss franc outperforming amid all the angst and hitting its strongest since February. The political backdrop this month is another big consideration for U.S. markets. Whatever is driving trading patterns, it's no longer the so-called 'Trump trade'. After a wave of opinion polls showing enthusiasm for Vice President Kamala Harris' bid for the White House, betting markets now put her chances of winning as higher than that of Republican challenger Donald Trump for the first time. Key developments that should provide more direction to U.S. markets later on Friday: * US July employment report, June factory goods orders * Richmond Federal Reserve President Thomas Barkin speaks; Bank of England Chief Economist Huw Pill speaks * US corporate earnings: Exxon Mobil, Chevron, Cboe Global Markets, Coinbase Global, PPL, Linde, Perella Weinberg, Church & Dwight, LyondellBassell Industries etc Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-2024-08-02/

2024-08-02 10:28

MUMBAI, Aug 2 (Reuters) - The Indian rupee slipped to a record low on Friday, as local stocks declined tracking a global equity sell-off caused by concerns of a slowdown in the United States and rising geopolitical tensions in the Middle East. The rupee closed down 0.04% at 83.75 against the U.S. dollar on Friday, its weakest closing level, after hitting an all-time low of 83.7525 earlier in the session. The currency was nearly flat week-on-week. The Reserve Bank of India likely sold dollars via state-run banks to prevent a sharper decline, traders said, as the rupee was pressured by likely outflows from local equities. India's equity benchmarks, the BSE Sensex (.BSESN) , opens new tab and Nifty 50 (.NSEI) , opens new tab, ended the day down more than 1% each. Investor sentiment soured after weaker-than-expected U.S. factory data prompted growth concerns while tensions about a widening conflict in the Middle East weighed. Futures indicated that the S&P 500 would open more than 1% lower after declining in the previous session. The rupee is expected to continue depreciating gradually and trade in a 83.57-83.77 range with RBI interventions limiting volatility, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities. The dollar index was down over 0.2% at 104.1 while most Asian currencies gained between 0.1% to 1.6%. The rupee has weakened about 0.7% since the surprise outcome of India's elections on June 4, even though equity and debt markets have drawn more than $10 billion in inflows on expectations of economic growth and lower fiscal deficit. It has slipped to record lows in seven of the last 10 sessions, including Friday. The RBI has chosen to buy dollars from the market to prevent an appreciation in the rupee, which traders believe is to correct an overvaluation of the currency's real effective exchange rate. The central bank "may want to avoid a loss of competitiveness by buying USD to prevent undue strength in the INR, especially as India attempts to move its economy up the value chain", Barclays Bank said in a note. The country's foreign exchange reserves rose by $15 billion to a record high of $670.8 billion between the weeks ending June 7 and July 19. Sign up here. https://www.reuters.com/markets/currencies/india-rupee-falls-record-low-amid-decline-local-equities-tepid-risk-2024-08-02/

2024-08-02 09:29

LONDON, Aug 2 (Reuters) - The Bank of England's first interest rate cut in more than four years will help to foster a cautious sense of optimism about Britain's long-struggling economy, but the scale of the growth challenge facing the new government remains huge. The BoE lowered its benchmark rate to 5.0% on Thursday, from a 16-year high of 5.25%, offering a bit more relief to households and businesses who are emerging from the inflationary shocks of the COVID pandemic and Russia's invasion of Ukraine. Data published a few hours before the BoE announcement showed British manufacturers enjoyed a stronger July than their peers in much of the rest of Europe and Asia. British shares - which have underperformed since the 2016 Brexit vote - added to recent gains after the BoE's rate cut, with the FTSE 250 index of medium-sized firms hitting its highest since February 2022, before following other markets and falling later in the day on worries about the U.S. economy. The lowering of Bank Rate from its 16-year high and the signs of economic recovery after a shallow recession in 2023 are helpful for new Prime Minister Keir Starmer, who has made economic growth - chiefly via reforms to boost the country's weak productivity growth - the top priority of his government. BoE Chief Economist Huw Pill, who voted to keep rates on hold, welcomed the improved outlook for the economy, even if it still represented a historically tepid pace of growth at around 1% a year between 2024 and 2026. "That sort of rate, you know, that's better than what we've seen," Pill said. "But at the same time, I think it's fair to say it's not something that we should get too complacent or enthusiastic about." Michael Browne, chief investment officer of Martin Currie, part of asset management group Franklin Templeton, said the likelihood of further BoE rate cuts would help to foster the sense of turnaround in Britain. "In this environment, we continue to favour the interest rate-sensitive sectors of house builders, real estate, utilities and in particular the green energy sector," he said. REASONS TO BE CAUTIOUS The BoE's announcement came three days after finance minister Rachel Reeves announced a big public sector pay rise in the first move of her economic policy programme that seeks to double Britain's pace of economic growth to around 2.5% a year. But there are a host of reasons for continued caution. The narrow 5-4 vote in favour of a rate cut by the BoE's Monetary Policy Committee underscored the extent of inflation risks still hanging over the economy. Governor Andrew Bailey was at pains to stress that the BoE was not at the start of a series of swift cuts to borrowing costs, saying the stronger performance of the economy in recent months could keep inflation risks on the radar. Suren Thiru, economics director at accountancy body ICAEW, said the rate cut marked a notable shift in direction but the financial reality facing households and firms had not changed. "This is just one step back from the previous period of 14 rate hikes," Thiru said. Investors are fully pricing only one further cut to interest rates by the BoE later this year. At almost 6%, wage growth is running at about double the rate that would normally be consistent with the central bank's 2% inflation target. And while the BoE sharply raised its forecast for Britain's economic growth in 2024 to 1.25% from a previous 0.5%, potentially putting it ahead of France and Italy, as well as Germany - that improvement reflected the stronger start to this year rather than a rethink about the outlook. The central bank left unchanged its estimates for growth in 2025 and 2026 at 1% and 1.25%, less than half the average before the 2007-08 global financial crisis. In her response to the BoE's interest rate cut, Reeves stressed the hard road ahead, with borrowing costs still putting pressure on many households and the public finances under strain, raising the likelihood of tax increases in her first budget in October. "That is why this government is taking the difficult decisions now to fix the foundations of our economy after years of low growth," she said. Sign up here. https://www.reuters.com/markets/rates-bonds/boe-rate-cut-adds-sense-turnaround-sluggish-uk-economy-2024-08-02/

2024-08-02 09:21

Aug 2(Reuters) - Global markets are heading into what promises to be another volatile week, as investors fret stocks might be looking too pricey and even a reasonably solid earnings season so far hasn't been able to soothe those jitters. Here is your look at what's big in markets in the coming week, from Lewis Krauskopf in New York, Rae Wee in Singapore, Kevin Buckland in Tokyo and Maggie Fick and Amanda Cooper in London. 1/A TIPPING POINT Around half of the world's developed-market central banks have started cutting interest rates - the Bank of England did so on Aug. 1 and the Federal Reserve is teeing up a cut for September. Global stocks, crypto and bonds have been rallying this year in giddy anticipation of central banks finally lowering interest rates, while inflation and economic growth gently tail off from their post-COVID highs. So far, so good. Recession appears unlikely. Earnings have been decent, with more beats than misses. The problem is when assets are "priced to perfection", it does not take much for disappointment to set in. And thin summer markets often mean more volatility. Weaker readings of U.S. business activity and employment have prompted investors to assess whether rate cuts are a reflection of an economy that is weaker than they bargained for and it is time to take some money off the table. 2/MORE EARNINGS TO MULL A U.S. corporate earnings season that has come in better than expected so far gets a fresh test in the coming week, with a number of high-profile reports due. With more than half of S&P 500 companies having already reported, second-quarter earnings are on pace to have climbed 12.6% from a year earlier, LSEG IBES data showed on July 31. That is better than the 10.6% increase expected for the period on July 1. So far, 78.4% of companies have topped analyst estimates for earnings, nearly the same beat rate as in the prior four quarters. While most of the megacap companies will have reported already, other important results are expected in the days ahead. Those include industrial bellwether Caterpillar (CAT.N) , opens new tab , media and entertainment giant Walt Disney (DIS.N) , opens new tab, weight-loss drugmaker Eli Lilly (LLY.N) , opens new tab and Super Micro Computer (SMCI.O) , opens new tab, which is at the centre of the market's artificial intelligence excitement. 3/ROCKY PATH A slew of economic releases from China will reveal how its shaky recovery is taking shape in the second half of the year and chances are, the picture still is not going to be particularly rosy. The week begins with a private-sector survey on services activity, followed by trade data on Wednesday and a reading on consumer prices to round off the week. Recent Chinese data continues to point to a gloomy outlook, and a growing sense of urgency in Beijing's efforts to shore up the economy has since been reflected in its surprise rate cuts, with investors betting on more to come. Officials will be keeping a close eye on Friday's inflation report for clues on how much more needs to be done to bolster anaemic domestic demand, especially after policymakers signalled their support for more consumer-directed stimulus measures. 4/WEIGHTY RESULTS Novo Nordisk (NOVOb.CO) , opens new tab, Europe's most valuable company, releases its second-quarter results on Wednesday. The company's fortunes - and shareholder returns - have soared with the blazing success of its weight-loss drug Wegovy. Its market value has risen by $380 billion since it launched the anti-obesity injection three years ago, to $572 billion. The top questions for investors and analysts are: manufacturing capacity and supply. Novo and Eli Lilly and Co , the only other company, for now, with a rival obesity drug on the market, face the same challenge: increasing production of these medicines, which are delivered weekly in a self-injection pen. Lilly, which reports on Thursday, has quickly gained ground on Novo since launching Zepbound in December. Novo accounts for almost 4% of Europe's STOXX 600 (.STOXX) , opens new tab, so its results carry more weight for the broader index than ever. 5/CPI FLIPS RBA SCRIPT From an outside chance of a rate hike at the Reserve Bank of Australia's Aug. 5-6 policy meeting, traders switched to pricing in the risk of a rate cut by year-end instead - all because of one soft inflation reading. The Aussie dollar skidded to a three-month low and stocks surged to a record high, after core inflation unexpectedly slowed to a two-year low. This will be very welcome news at the central bank, which would have been very reluctant to raise rates already at a 12-year high amid flatlining economic growth, moribund consumer spending and a weakening labour market. Traders now put the odds of a rate cut at a coin toss for November, much sooner than the RBA's assumed timing of possible easing - around the middle of next year should inflation continue to slow as desired. Sign up here. https://www.reuters.com/business/take-five/global-markets-themes-graphic-2024-08-02/

2024-08-02 06:52

MUNDAKKAI, India, Aug 2 (Reuters) - Four people were rescued from a house in India's Kerala state on Friday, three days after devastating landslides, as search operations accelerated with the construction of a key bridge that helped transport heavy equipment to the affected area. Heavy rain in the southern coastal state of Kerala, one of India's most popular tourist destinations, caused landslides in the hills of Wayanad district early on Tuesday, sending torrents of mud, water and tumbling boulders downhill and burying or sweeping people to their deaths as they slept. The disaster, the worst in Kerala since deadly floods in 2018, has led to the death of 205 people with nearly 200 still missing, authorities said. Local Asianet TV said more than 300 had been killed. Two men and two women were found alive by the army in a marooned, remote area on Friday, V T Mathew, a top army commander, said. "They were not buried, they were just in a remote area," he told Reuters, adding that one of them was injured. Rescue efforts were hampered initially after Mundakkai, the worst affected area, was cut off from the nearest town of Chooralmala as the main bridge connecting them was washed away. Heavy vehicles had begun to ply on the 190-foot (58-metre) bridge constructed by army engineers, and drones with earth-sensing technology to find bodies buried in mud are being brought in, the army said in a statement. Although there were fewer rescue workers and volunteers at the site on Friday, the effort gathered pace as it became easier to access the worst-affected region. Before the bridge was completed, workers and volunteers hiked several miles by foot, carrying bodies and sending food to personnel working there. Rescue workers also focused on a riverbank near Vellarmala village, about three miles from Mundakkai, where 58 bodies had been found earlier, the most from one spot. "This area doesn't have a lot of population. Most of those bodies were brought here from elsewhere in Mundakkai," said Annayyan K, 65, a Vellarmala resident, whose house was completely damaged in the disaster. Rescue teams have deployed additional forces, including swimming experts, to focus on the Chaliyar river and its banks where bodies are likely to be found. Experts said the area had received heavy rain in the last two weeks that softened the soil before extremely heavy rainfall on Monday triggered the landslides. Nearly 1,600 people have been rescued from hillside villages and tea and cardamom estates during the last two days, according to authorities, with nearly 350 buildings damaged. Sign up here. https://www.reuters.com/world/india/india-landslides-rescue-operations-speed-up-with-new-metal-bridge-2024-08-02/

2024-08-02 06:32

Typhoon Gaemi brought record rainfall to southern Hunan province Floods devastated Hunan, with city of Zixing faring the worst Thirty deaths reported in Zixing, 35 still missing BEIJING, Aug 2 (Reuters) - Rescuers in China scrambled on Friday to locate dozens of people still missing a week after the year's most powerful typhoon roared into the southern province of Hunan, while emergency workers rushed to seal breached dykes on swollen rivers. Even before Typhoon Gaemi hit on July 25, China was roiled by months of extreme weather that pummelled southern provinces with record rain and parched northern regions with heat waves. Weather officials are warning of more harsh weather in August. The city of Zixing took the brunt of the typhoon in Hunan, lashed by 673.9 mm (26.5 inches) of rain over 24 hours, local officials told a press conference, or the equivalent of a quarter of its average annual rainfall. The most powerful typhoon to hit China this year, Gaemi has killed 30 residents of the city, with 35 missing, local officials said at a press conference on Friday. "Typhoon Gaemi brought great damage to Zixing," said provincial disaster prevention official Xiao Yingbin. "It was a very serious natural disaster." Power supply was knocked out in 149 villages and communications cut in 78, while 1,641 houses were destroyed and 1,345 sections of road collapsed, one official said. About 118,000 residents of Zixing, or a third of its population, have been affected, and about 13,800 hectares (34,100 acres) of crops were damaged, the official added. Rescuers must make every effort to find the missing, restore infrastructure and guard against disasters such as landslides, China's second-most senior official, Premier Li Qiang, urged on Thursday during a visit to the city. Mountainous terrain and dense forests present challenges for the rescuers, officials said, as they have been forced to walk to the hardest-hit areas, cut off by road collapses. Supplies had to be air-dropped in some places, said local emergency management official Cao Zhongsheng. ECONOMIC IMPACT Across Hunan province, the rains have affected 1.15 million people, with direct economic losses of 6.13 billion yuan ($849 million). Emergency workers rushed this week to seal a breached dyke on the Juanshui River, with two other dyke breaches reported on July 28. Extreme weather crimped China's factory operations in July while high temperatures and floods hobbled the construction sector, official data showed this week, after last month's contraction in manufacturing activity. July was China's hottest month in modern history, mirroring record high temperatures elsewhere in the world fuelled by climate change. More harsh weather is in store for China in August, Jia Xiaolong, deputy head of the National Climate Center, said on Thursday, with many regions expected to get more rain than in corresponding periods of previous years. Up to three typhoons could hit China this month, he added. Drought might hit the middle and lower reaches of the Yangtze River in central China, Jia added, calling for measures such as cloudseeding to ensure crops grow. Visiting the central province of Henan this week, Vice Premier Liu Guozhong called for efforts to limit damage to farm output from torrential rain and floods and ensure a bumper autumn harvest. Henan, known as China's granary, grows about one-third of its wheat. ($1=7.2213 Chinese yuan renminbi) Sign up here. https://www.reuters.com/world/china/rescuers-china-race-find-missing-seal-dykes-after-devastating-floods-2024-08-02/