2024-07-17 05:17

Traders see 98% chance of Fed rate cut in September Dollar hits near four-month low Fed's Waller: Timing of rate cut 'drawing closer' July 17 (Reuters) - Gold prices notched up an all-time high on Wednesday, as growing optimism for an interest-rate cut from the U.S. Federal Reserve in September and a weaker dollar boosted demand. Spot gold dropped about 0.6% to $2,454.98 per ounce by 1748 GMT due to profit-taking after hitting an all-time high of $2,482.29 earlier in the session. U.S. gold futures settled 0.3% lower to $2,459.90 per ounce. "The expectation that we are getting closer to a Fed interest rate cut and we've seen this as yields continue to slowly grind lower in anticipation, that, along with a weaker dollar, are the main supportive factors behind this gold move," said David Meger, director of alternative investments and trading at High Ridge Futures. More Fed policymakers have suggested they are getting increasingly comfortable that the pace of price increases is more firmly on track, back down to the Fed's goal, after higher-than-expected readings earlier in the year. Fed Governor Christopher Waller said the time for a U.S. central bank interest rate cut "is drawing closer", but uncertainty about the path of the economy makes it unclear when a lowering in the cost of short-term borrowing might happen. Data showed production at U.S. factories increased more than expected in June, contributing to a solid rebound in output in the second quarter. Markets now see a 98% chance of a U.S. rate cut in September, according to the CME FedWatch Tool , opens new tab. Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies. The U.S. unit weakened about 0.5% to near a four-month low against a basket of currencies. Elsewhere, silver fell 3.7% to $30.21 per ounce. Platinum shed 0.4% to $996.30 and palladium dropped 0.5% to $953.93. Sign up here. https://www.reuters.com/markets/commodities/gold-soars-record-peak-us-rate-cut-bets-burnish-appeal-2024-07-17/

2024-07-17 05:05

July 17 (Reuters) - Rising expectations that former President Donald Trump will regain the White House in November are supercharging the so-called Trump trade, on views that his policies will lift corporate profits even while spurring worries about the country’s long-term fiscal health. The two sides of the trade have been evident in recent weeks, as investors price in greater odds of a win by the Republican challenger following a disastrous performance by President Joe Biden in a late June debate and after last weekend’s assassination attempt on Trump. Stock investors are leaning into corners of the U.S. equity market that could benefit from proposed Trump policies such as tax cuts and regulatory easing, including small caps and energy shares. Those preferences - along with expectations that the Federal Reserve will cut interest rates in coming months - are fueling a rotation out of big technology stocks and into less-loved areas of the market. Treasury markets tell a different side of the story, with some investors lightening positions in longer-dated bonds as they fret about the fiscal consequences of lower tax revenues and more budget spending. UK merchant banking firm Close Brothers estimated that a second Trump term could usher in from $4 trillion to $5 trillion of extra government borrowing over 10 years, potentially boosting inflation and weighing on bond prices. Many investors believe monetary policy and corporate profits will ultimately overshadow politics as long-term drivers for asset prices, while much could change in the less than four months until election day. Nevertheless, the recent moves give a glimpse into how markets are approaching the possibility of a second Trump term. "The market is saying that the expectation is that there is going to be a second Trump presidency," said JJ Kinahan, CEO of IG North America and president of online broker tastytrade. "The probabilities are all pointing that way." RISING ODDS, RISING STOCKS Online prediction site PredictIt on Tuesday showed bets of an election win at 69 cents for Trump, compared with 53 cents a month ago. Biden stood at 28 cents, compared with 44 cents in mid-June. A two-day Reuters/Ipsos poll that closed Tuesday found Trump opening a marginal lead among registered voters - 43% to 41% - over Biden. The rising odds have been accompanied by a rally in everything from small caps to shares of crypto companies. Beneficiaries include private prison operator Geo Group (GEO.N) , opens new tab, whose shares have risen 33% since the debate in late June. Trump promised to crack down on illegal immigration, which could boost demand for detention centers. Bitcoin miner Riot Platforms (RIOT.O) , opens new tab is up 30% this week, mirroring a rally in the price of bitcoin following the assassination attempt on Trump, who has slammed Democrats' attempts to regulate the crypto sector. The small-cap-focused Russell 2000 index is up 11% since the debate, as expectations that Trump will keep taxes low and bets that the Fed will cut interest rates in September boost the appeal of smaller companies. The S&P 500, by contrast, is up just 3.4% in that period. "The Trump trade … revolves around the prospect of faster economic growth that favors domestic companies," said Brian Jacobsen, chief economist at Annex Wealth Management. King Lip, chief strategist at BakerAvenue Wealth Management, said his firm has been holding a limited position in small-cap stocks as a hedge for a Trump victory. Robert Christian, chief investment officer at K2 Advisors, which invests in hedge funds, said many hedge funds have positioned for a Trump win with increased exposure to energy companies and financials, which they believe could benefit from a looser regulatory environment. Some stocks have suffered as Trump’s perceived chances have grown. Among them have been shares of European carmakers, which could be hard-hit by potential tariffs on foreign imports. "BIG, BIG FLOWS" For some bond investors, the worry is that a second Trump term will lead to higher inflation and boost fiscal deficits because of higher tariffs on imports, profligate government spending and lower tax revenues. Trump's team has said his pro-growth policies would bring down interest rates and shrink deficits. Treasury yields, which move inversely to bond prices, have fallen in recent weeks on expectations that the Fed will ease rates in coming months as U.S. data show a nascent economic downshift. The decline, however, has been interspersed with flareups when yields have shot higher as Trump’s position in the race seemed to improve. One such selloff came after Trump’s debate with Biden. The benchmark 10-year yield rose by about 20 basis points in the two days after the debate, though it has since reversed that move. “There was some heavy selling that went through the system, big, big flows, because of the Trump trade” after the debate, said Richard Volpe, global head of linear rates and head of rates Americas at Nomura. Spencer Hakimian, CEO of Tolou Capital Management, a New York-based macro hedge fund, is betting on weakness in longer-dated bonds because lower taxes and tariffs risk spurring inflation. “Given the increased odds of a Republican sweep after this weekend’s tragic event, it makes absolute sense to price in a higher long end of the yield curve,” he said. Still, some believe factors such as the Fed’s interest rate trajectory will ultimately be a stronger catalyst for asset prices. Analysts at UBS Global Wealth Management advised investors to deploy cash to "quality" bonds and growth stocks. “While developments in US politics may contribute to market swings in the lead-up to the election, we think investors should focus on preparing their portfolios for a lower-rate environment amid technological advances,” they wrote. Sign up here. https://www.reuters.com/world/us/investors-ride-trump-trade-expectations-grow-second-term-2024-07-17/

2024-07-17 04:35

A look at the day ahead in European and global markets from Tom Westbrook In a grand ceremony marking the opening of the new parliament replete with gold and splendour, Britain's King Charles will read out the agenda of Keir Starmer's Labour government, aimed at rebuilding an economy roiled by political turmoil. Markets' main focus, however, will be on whether Britain's inflation sticks to the global script. U.S. consumer prices fell for the first time in four years in June, data showed last week, and month-on-month Canadian prices followed suit overnight. Earlier, in the Asia, New Zealand inflation slowed more than expected - however it contained some domestic pressure under the hood that may prove cautionary. Britain's sticky services inflation was running at 5.7% year-on-year in May and is tipped at an uncomfortable 5.6% for June. Sterling was steady at $1.2978, just shy of a one-year high and rates markets have priced an even chance the Bank of England will begin cutting interest rates in August. New Zealand's dollar rose 0.5% and two-year swaps bucked the global rally to rise three basis points on the stickiness of domestically driven inflation with increases in rent and construction costs. Gold scaled record highs in Asia on firmer expectations of interest rate cuts, while Taiwan stocks were wobbled by Donald Trump equivocating on the United States' commitment to the island in remarks to Bloomberg Businessweek. "Taiwan took our chip business from us," Trump said. "They're immensely wealthy... I don't think we're any different from an insurance policy. Why? Why are we doing this?" Shares in Taiwanese chipmaker TSMC (2330.TW) , opens new tab were down 1.4%. Earnings due later on Wednesday at Dutch semiconductor equipment supplier ASML (ASML.AS) , opens new tab are expected to show new orders booming. Key developments that could influence markets on Wednesday: Sign up here. https://www.reuters.com/markets/europe/global-markets-view-europe-2024-07-17/

2024-07-17 01:52

MANILA, July 17 (Reuters) - The Philippine central bank said on Wednesday it has approved amendments to foreign exchange regulations to facilitate timely submission of banks' reports that are necessary for policy studies and economic monitoring purposes. The amendments will allow monetary authorities "to gather more accurate and relevant information on FX transactions to promote and maintain price stability and ensure financial stability and effective supervision of banks," the Bangko Sentral ng Pilipinas said in a statement. The amendments , opens new tab, the central bank said, define non-compliant reports and revised penalties for reporting violations. Sign up here. https://www.reuters.com/markets/currencies/philippines-central-bank-amends-foreign-exchange-reporting-rules-2024-07-17/

2024-07-17 00:28

RIO DE JANEIRO/SAO PAULO, July 16 (Reuters) - Brazilian miner Vale SA (VALE3.SA) , opens new tab expressed confidence on Tuesday that it would reach the high-end of its 2024 guidance for iron ore production after output increased in the second-quarter. The company, one of the world's largest iron-ore miners, said in its quarterly sales and output report that production of the steel-making ingredient in the three-month period to the end of June rose 2.4% from a year earlier to 80.6 million metric tons. "This quarter's performance reinforces our confidence in achieving the upper end of the 2024 production guidance", Vale said. The firm expects to produce 310 million tons to 320 million tons of iron ore in 2024. Vale's rival, BHP Group (BHP.AX) , opens new tab, also reported its latest production figures, saying output reached a record high in the year to the end of June of 287 million tons. It forecast output of up to 294 tons in its fiscal 2025. Output in Vale's latest quarter was boosted by a "robust performance" at the firm's S11D and Vargem Grande mining complexes in Brazil, the company said. Second-quarter iron ore sales rose 7.3% from a year earlier to 79.8 million tons, boosted by sales of inventories. The average realized price of Vale's iron ore fines was $98.2 per ton in the quarter, nearly stable year-on-year. "We expect a slightly positive market reaction to these production results," Yuri Pereira and Arthur Biscuola at Santander said in a market note following Vale's report. They said Vale's report placed "upside risk" to their EBITDA estimates for the quarter. BASE METALS Vale's nickel output dropped 24.4% from a year earlier to 27,900 tons, mostly due to planned maintenance at processing plants, the miner said. Copper production was almost stable from a year earlier at 78,600 tons, it said, noting that bi-annual maintenance at its Sudbury plant offset a stronger performance at Salobo and Sossego. Vale is expected to release full second-quarter earnings on July 25. Sign up here. https://www.reuters.com/markets/commodities/miner-vale-sees-iron-ore-output-high-end-2024-guidance-after-q2-rise-2024-07-16/

2024-07-17 00:11

WELLINGTON, July 17 (Reuters) - New Zealand could miss its 2035 emissions reduction target, despite being on track to meet climate change goals for 2022 to 2030, a discussion document on the plan released on Wednesday showed. Its carbon dioxide emissions in the five years to 2035 are expected to be 7% higher than targeted unless changes are made, according to a discussion document on New Zealand’s second emissions reduction plan released by the Ministry for the Environment. The forecast failure to meet the target is in part due to the centre-right government's removal of a number of its centre-left predecessor's climate policies and fewer trees being planted commercially, the document said. Another factor cited was the decision by the private owners of New Zealand's aluminium smelter to keep it operating, which has an outsized impact given the country has little heavy industry. Simon Watts, minister for climate change, said in the foreword of the plan he remained confident New Zealand could achieve net zero emissions by 2050 with impactful actions. "Our success will rely on our ability to sustainably transition to a low-emissions economy," he said. The new plan, which is for the period from 2026 to 2030, includes boosting the electric vehicle charging network, investigating carbon capture and storage, increasing renewable energy production, boosting public transport, improving waste management and revitalising the emissions trading scheme. Chloe Swarbrick, co-leader of the opposition Green Party, called for credible solutions including more investment in public transport, energy efficiency and decarbonisation to meet climate targets. The public can comment on the plan before it is finalised. Sign up here. https://www.reuters.com/business/environment/new-zealand-may-miss-2035-emission-target-government-report-forecasts-2024-07-17/