2024-07-08 00:29

Stocks indexes, US Treasury yields mixed, dollar up a bit Euro loses steam as France heads for hung parliament Week features US CPI data, Fed's Powell, corporate earnings NEW YORK/LONDON, July 8 (Reuters) - MSCI'S global equities gauge barely gained ground on Monday, while the benchmark U.S. Treasury yield ticked up as investors awaited testimony from Federal Reserve Chair Jerome Powell, key inflation data and the corporate earnings season kick-off. In foreign exchange markets, the euro lost ground after earlier hitting a multi-week high against the dollar following France's election surprise. Investors were waiting to listen to Powell's comments to Congress on Tuesday and Wednesday for more clarity on the prospects for interest rate cuts by the U.S. central bank. They were also waiting for the closely monitored U.S. consumer price report, which is due on Thursday. June's inflation rate is expected to slow to 3.1% year-over-year, from 3.3% in May, and the core measure is estimated by economists to stay steady at 3.4%. The week will end with the kick-off of the second-quarter earnings season with reports from major U.S. banks Citigroup (C.N) New Tab, opens new tab, JP Morgan (JPM.N) New Tab, opens new tab and Well Fargo (WFC.N) New Tab, opens new tab on Friday. "Investors are positioning as they expect a continuation of this rally for the rest of the year," said Bruce Zaro, managing director at Granite Wealth Management in Plymouth, Massachusetts adding that investors are hoping for a dovish tone from Powell. Ross Mayfield, an investment strategy analyst at Baird, said investors also want to hear Powell acknowledge "that the two-sided risks are more evenly balanced today, in particular, with respect to the labor market." Traders have increased bets that the Fed will first cut rates in September, according to CME Group's FedWatch tool, which shows a 73.6% probability for a September cut, up from 72.2% on Friday and 59.8% a week ago. On Wall Street, the Dow Jones Industrial Average (.DJI) New Tab, opens new tab fell 31.08 points, or 0.08%, to 39,344.79, the S&P 500 (.SPX) New Tab, opens new tab gained 5.66 points, or 0.10%, to 5,572.85, and the Nasdaq Composite (.IXIC) New Tab, opens new tab gained 50.98 points, or 0.28%, to 18,403.74. For the benchmark S&P 500, the tiny gain marked its fourth record close in a row, while the tech-heavy Nasdaq's advance on Monday marked its fifth straight record close. After four closing records in a row, MSCI's gauge of stocks across the globe (.MIWD00000PUS) New Tab, opens new tab was up 0.07% after hitting an intraday record earlier on Monday. In Europe, the STOXX 600 (.STOXX) New Tab, opens new tab index earlier closed down 0.03%. On the currencies side, the euro eased slightly against the dollar after earlier touching its highest level since June 12. In France, a leftist alliance unexpectedly took the top spot in Sunday's parliamentary runoff election, delivering a setback to Marine Le Pen's nationalist, euroskeptic National Rally party. "There was a small risk that France would actually start to move towards exiting the Eurozone" if the National Rally had won, said Helen Given, FX trader at Monex USA in Washington. "People are just happy to have it off the table." The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, gained 0.07% at 105.02. The euro was down 0.12% at $1.0823, while against the Japanese yen , the dollar strengthened 0.05% to 160.8. U.S. Treasury yields were a mixed bag as investors awaited guidance from the U.S. central bank and June inflation data later this week to assess the next moves for government bonds. The yield on benchmark U.S. 10-year notes rose 0.5 basis points to 4.278%, from 4.273% late on Friday, while the 30-year bond yield fell 0.6 basis points to 4.4628%. The 2-year note yield, which typically moves in step with interest rate expectations, rose 3.4 basis points to 4.6327%, from 4.599% late on Friday. In commodity markets, oil futures settled lower as Hurricane Beryl shut U.S. refineries and ports along the Gulf of Mexico and as hopes for a ceasefire deal in Gaza appeared to reduce concerns about global crude supply disruptions. U.S. crude settled down 1%, or 83 cents, at $82.33 a barrel and Brent finished at $85.75 per barrel, down 0.9% or 79 cents on the day. In precious metals, gold prices slipped as investors booked profits after Friday's soft U.S. jobs data pushed prices to a more than one-month high on hopes the Fed would begin cutting interest rates in September. Spot gold lost 1.35% to $2,359.34 an ounce. U.S. gold futures fell 1.49% to $2,352.90 an ounce. Sign up here. https://www.reuters.com/markets/global-markets-wrapup-1-2024-07-08/

2024-07-07 23:05

JAKARTA/SINGAPORE, July 8 (Reuters) - Indonesia's President-elect Prabowo Subianto wants to give school children free meals, but the plan and his pledge to be 'daring' on spending have the country's debt and currency markets on edge. Prabowo and his team have tried to distance themselves from any suggestions of fiscal profligacy, and to assure market participants the incoming government respects the legal debt limits that cap its budget deficit at 3% of economic output. But for a market just getting accustomed to stability and recognition for fiscal prudence under current Finance Minister Sri Mulyani Indrawati, the mere suggestion of heavy spending has been unsettling. Bond yields have risen and the rupiah has depreciated, though the currency weakness has largely been due to a resilient U.S. dollar. "Our base case remains that this is more of noise at the moment, but we do see increasing fiscal risk and hence the market may start to require more risk premium on Indonesian government bonds," said Jenny Zeng, chief investment officer for APAC fixed income at Allianz Global Investors. "Also another risk is because there’s a change of ministers," Zeng said, referring to uncertainties about who will step into the shoes of the highly acclaimed ex-World Bank managing director Sri Mulyani. A banker at a Chinese lender in Indonesia said the fiscal concerns had prompted it to move around 30% of its portfolio into lower-tenor instruments, including diversifying into rupiah-denominated short-term securities (SRBI) issued by Bank Indonesia. Prabowo won the election in February, but takes office only in October. His free-meal plan, which his team estimates will cost 71 trillion rupiah ($4.35 billion) in 2025, should ordinarily not cause any consternation. Southeast Asia's biggest country has seen its finances improve under the Jokowi administration and runs a healthy budget surplus. From being rated junk at the start of the century, its bonds are now regarded as investment grade. Some investors even see merit in Indonesia spending more to achieve its 8% economic growth target. Yet there's unease over how much money Prabowo intends to spend on his programmes, and whether he will cut fuel and other subsidies and investments in order to balance the books. "It appears there will be more uncertainties than certainty. I still stay invested but probably not as overweight as I used to be," said Clifford Lau, a portfolio manager at William Blair. Foreign portfolio investments have been shrinking, with overseas investors pulling $2.8 billion from rupiah government bonds and its stock market (.JKSE) New Tab, opens new tab until June this year. The rupiah is at four-year lows against the dollar, with losses of more than 5% this year, although most of that has been in line with the broad decline in emerging market currencies owing to rising U.S. yields and a rising dollar. Investors seeking higher yielding bonds have also been switching to India, whose bonds not only have comparable yields but have also just made it into JP Morgan's global index. The selling has sent yields on Indonesia's 10-year bonds up 35 basis points since late May, to 7.05%. IT'S NOT ALL BAD Some investors are giving Prabowo the benefit of doubt, pointing to how his administration also plans to increase revenues and improve tax compliance, and cap the fiscal deficit at 2.8% of GDP, even if higher than this year's 2.3% target. "He’s also talking about the need to increase fiscal revenue ... so it’s actually not entirely about increasing expenses," abrdn's investment manager of Asia fixed income, Jerome Tay, said. Tay is overweight and positive on Indonesian government bonds in the medium term. Those bonds have long been a favourite among emerging market investors for their 'carry' or high yield. The spread between Indonesian and U.S. bond yields is currently half the 600 basis points it used to be before the Federal Reserve started raising rates in 2022, nonetheless they are still attractive for fixed income investors. The country is also now less vulnerable, given foreign holdings account for only 14% of outstanding government bonds. They used to own half the bonds a decade ago. Expectations that the Fed will soon begin cutting rates is of some comfort to rupiah and Indonesian bond investors, Rudiyanto, a director at local asset management Panin said. But other risks loom, notably huge debt maturities at around 800 trillion rupiah in 2025, nearly double that this year, although Sri Mulyani has said refinancing will not be a problem, provided the government maintains market confidence. ($1 = 16,335.0000 rupiah) (This story has been corrected to fix company name to Allianz Global Investors, not Allianz, and to change title to investment manager of Asia fixed income, not investment manager of Asia, in paragraphs 5, 17 respectively) Sign up here. https://www.reuters.com/world/asia-pacific/prabowos-free-meal-plan-stirs-investor-fears-about-indonesias-finances-2024-07-07/

2024-07-07 21:54

July 8 (Reuters) - A look at the day ahead in Asian markets. Investors start the new week in ebullient mood after last Friday's U.S. jobs figures kept the "soft landing" story on track, lowering the dollar and bond yields, and adding fuel to the relentless "risk on" rally in stocks. Most of the world's main equity markets are at record or multi-year peaks, and there doesn't seem to be much on the immediate horizon to derail them. Profit-taking, quarter-end position adjustments, worries over valuations or market concentration, and political or policy jitters have all come into play recently. But the overpowering "buy the dip" mentality has ensured any pull backs have been shallow and brief. European politics may have some influence on early Asian trading on Monday - France was on course for a hung parliament in Sunday's election, with a leftist alliance unexpectedly taking top spot ahead of the far right in a major upset that was set to bar the far right, eurosceptic National Rally party from running the government. Asia opens in good shape. Japan's Nikkei 225 index scraped a new record high of 41,100 points on Friday and has risen some 7% in just two weeks, and the MSCI Emerging Market and MSCI Asia ex-Japan indices are at their highest in two years. More broadly, the MSCI World, S&P 500, and Nasdaq all hit record highs last week, and last month euro zone stocks hit a 23-year high. Britain's FTSE 100 hit a record high in May. Monday's Asia and Pacific calendar is light, with the spotlight on bank lending, trade and current account, and overtime pay figures from Japan. Philippines central bank governor Eli Remolona and finance secretary Ralph Recto speak at a business forum on Monday too. Japan's overtime pay isn't usually seen as a top-tier indicator, but it is worth watching this month. A recent labor union survey showed that firms offered to hike pay by 5.1% on average this year, the biggest increase in 33 years and far outpacing inflation now hovering around 2%. But figures on Friday showed that household spending plunged in May as higher prices continued to squeeze consumers' purchasing power. This is a headache for Bank of Japan policymakers who want to raise interest rates and have put great store on rising wages, but are worried about the impact on an economy that's far from firing on all cylinders. Looking ahead, the most market-sensitive events in Asia this week are likely to be central bank policy meetings in New Zealand, South Korea and Malaysia, and producer and consumer price inflation figures from China. The main market drivers globally are likely to be U.S. CPI inflation on Thursday, and two days of Congressional testimony by Fed Chair Jerome Powell set for Tuesday and Wednesday. Here are key developments that could provide more direction to markets on Monday: - Japan wage growth (May) - Japan current account (May) - France general election Sign up here. https://www.reuters.com/markets/asia/global-markets-view-asia-graphic-pix-2024-07-07/

2024-07-07 20:46

HOUSTON, July 7 (Reuters) - The largest ports in Texas closed operations and vessel traffic on Sunday as Hurricane Beryl intensified as it approached the Texas coast near Houston. Beryl, which left a trail of destruction this week in the Caribbean, killing at least 11 people, was now a category 1 hurricane and may strengthen into a category 2 by landfall on Monday, the U.S. National Hurricane Center (NHC) said The ports of Corpus Christi, Houston, Galveston, Freeport and Texas City said they closed after condition "Zulu" was set by Coast Guard captains on Sunday. All vessel movement and cargo operations are restricted as gale force winds are expected within 12 hours. Corpus Christi, about 200 miles (322 km) from Houston, is the top crude oil export hub in the United States. Texas City, and Freeport also are major oil and refined products shipping hubs on the U.S. Gulf Coast. Port closures could bring a temporary halt to crude exports, oil shipments to refineries, and motor fuels from those plants. The 52-mile (83 kms) Houston ship channel, which on Sunday operated under transit restrictions before halting all traffic, allows access to 8 public facilities and some 200 private terminals. The NHC in its 11 p.m. CDT (0400 GMT) advisory said reports from an Air Force Reserve Hurricane Hunter aircraft indicate that Beryl's maximum sustained winds have increased to near 75 mph (120 kmh). Additional strengthening is expected before landfall on the Texas coast, the NHC said on late Sunday. Almost 14,000 customers in Texas had lost electricity on Sunday evening, according to PowerOutage.us. Power provider Centerpoint Energy (CNP.N) New Tab, opens new tab said it was monitoring the storm and making preparations. Acting Texas Governor Dan Patrick urged people who were on vacation in coastal areas to leave before the storm arrival. "It's a serious storm and you must take it seriously and be prepared," he said in a meeting with officials in Austin. PREPARED Energy infrastructure company Kinder Morgan (KMI.N) New Tab, opens new tab said on Sunday it shut its West Clear Lake and Dayton natural gas storage facilities, and its Texas City natural gas processing facility ahead of the storm. "We expect this to have minimal impact on our pipeline operations," it said. All the company's other facilities in the storm's path remain operational. Some energy facilities in Texas had to shut or slow down operations because of wind storms linked to Beryl. Freeport LNG's liquefaction trains 1, 2 and 3 and a pre-treatment facility were proactively shutdown due to impacts associated with Beryl. Plant operators later restarted them "as efficiently as possible to minimize flaring," according to a filing with The Texas Commission on Environmental Quality. Freeport said on Sunday that it had ramped down production at its liquefaction facility and intends to resume operations once it is safe to do so after the weather event. Liquefied natural gas producer Cheniere Energy (LNG.N) New Tab, opens new tab said on Sunday its Corpus Christi facility was operating without interruptions, but all nonessential personnel were released. "Our Gulf Coast assets have robust and proven severe-weather preparedness," it said in a release. Chemical maker Chemours Co (CC.N) New Tab, opens new tab, which has a production facility near Corpus Christi, said on Sunday it escalated its hurricane preparedness plans "to include planning for safe and adequate staffing during and after the storm and securing equipment and assets, should the storm make landfall near our site." Enbridge Inc (ENB.TO) New Tab, opens new tab, which operates large crude export facilities near Corpus Christi, said all U.S. Gulf assets were operational, adding that they had activated emergency plans. Gibson Energy (GEI.TO) New Tab, opens new tab, which also operates an export facility in the area, said on Sunday all Gateway and Houston based employees were safe, and facilities and docks were secured after the port of Corpus Christi closure. Citgo Petroleum Corp was cutting production at its 165,000 barrel-per-day Corpus Christi refinery on Saturday, sources said. The refiner plans to keep the plant in operation at minimum during Beryl's passage. Some oil producers, including Shell (SHEL.L) New Tab, opens new tab and Chevron (CVX.N) New Tab, opens new tab, had also shut in production or evacuated personnel from their Gulf of Mexico offshore platforms. Sign up here. https://www.reuters.com/world/americas/port-corpus-christi-closes-tropical-storm-beryl-approaches-2024-07-07/

2024-07-07 20:42

Left wing bloc wins most seats, but no overall majority Banks turn higher after early falls, CAC40 up 0.4% OAT-Bund spread choppy but last around 1 bp narrower Investors apprehensive as policy outlook remains uncertain LONDON, July 8 (Reuters) - French shares turned higher on Monday after initial falls and the risk premium of French bonds over German narrowed as investors digested elections which left France facing a hung parliament and likely taxing negotiations to form a government. A surprise left-wing surge in Sunday's election blocked Marine Le Pen's quest to bring the far right to power in the National Assembly but no single group secured a working majority. That meant French assets traded choppily at the open as traders struggled to process relief at the absence of a far right victory that could have boosted spending and borrowing, and concern about a more powerful left which opposed President Emmanuel Macron's pro-market reforms. Lack of clarity about who will eventually form a government added to the uncertain market tone. France's blue-chip CAC40 share index was last up 0.4%, reversing an earlier fall, though the benchmark is still down around 4% since the election was called on June 9. (.FCHI) New Tab, opens new tab French banks were particularly hard hit by the sell off in the run up to the vote, due to concerns about the effect of higher borrowing on their large holdings of French government debt, and fears of possible windfall taxes. However, Societe Generale (SOGN.PA) New Tab, opens new tab, Credit Agricole and BNP Paribas (BNPP.PA) New Tab, opens new tab were up between 0.5% and 1.8% on Monday, also after initial falls. Opinion polls had forecast Marine Le Pen's far-right National Rally (RN) would be the largest party, but the election leaves France's 577-seat assembly divided in three big groups - the left, centrists, and the far right - with hugely different platforms and no tradition at all of working together. "I think the markets will be happy we're avoiding this extreme situation with the far right," said Aneeka Gupta, director of macroeconomic research at WisdomTree. Though "because each party's vote is split and no one has an absolute majority," she said it would also be hard for the left to pass its policies too. Bond markets too were uncertain how to price the outcome and the gap between Germany and France's 10 year bond yields widened to as much as 71.1 basis points but was last a touch narrower at 66 bps. That spread reflects the premium investors demand to hold French debt rather than euro zone benchmark Bunds. It widened to above 80 basis points in the build-up to the election, its highest since the euro zone crisis in 2012, as investors feared a far-right majority that could implement high spending policies. A higher spread makes it more costly for France to borrow on international bond markets than its neighbours, reflecting investor wariness about lending to the country. Investors also have concerns that the left's plans could unwind many of Macron's reforms and believe a gridlock could end attempts to rein in France's debt, which stood at 110.6% of gross domestic product in 2023. The euro steadied after an initial fall against both the dollar and the pound and was at $1.0835 and 84.58 pence, respectively. , NEXT PRIME MINISTER? Markets' focus now turns to who will be France's next prime minister, with a less partisan figure likely preferred by investors, according to analysts. Current Prime Minister Gabriel Attal said he would tender his resignation, but President Emmanuel Macron on Monday decided to keep Attal in office, in order, Macron said "to ensure the country's stability" Reinout De Bock, head of European rates strategy at UBS Investment Bank said if the parliament can "quickly produce a technocratic government likely to present 2024-25 budgets compliant with EU fiscal rules," they expect the spread between French and German 10 year yields to fall to approximately 60 bps. He said he would expect French-German spreads to be around 70 bps if there were a non-technocratic government, but there was a risk this could be higher if it took longer to form a government. Parties from the NFP - made up of the French Communist Party, hard-left France Unbowed, the Greens and the Socialist Party - met overnight for first talks on how to proceed, but in media interviews on Monday they gave little sense of direction. The bloc has no leader, and its parties are deeply divided over who they could select as a suitable premier, though investors remain nervous. "The economic programme of the left is in many ways much more problematic than that of the right, and while the left will not be able to govern on their own, the outlook for French public finances deteriorates further with these results," said Nordea's chief market analyst, Jan von Gerich. Sign up here. https://www.reuters.com/markets/currencies/euro-falls-after-french-exit-poll-points-hung-parliament-2024-07-07/

2024-07-07 18:19

36 million people under excessive heat warnings coming from heat dome centered over California Arizona, Washington and Oregon expected to meet or exceed record temperatures on Sunday Redding, California, hit 119 degrees Fahrenheit (48 degrees Celsius) on Saturday Fossil fuel-driven climate change is driving extreme heat waves across the world July 7 (Reuters) - A widespread heat wave is expected to deliver a fresh batch of record temperatures along the U.S. West Coast, as millions of Americans sweat through a heat dome that is also hovering over Arizona and Nevada. About 36 million people — roughly 10% of the country — are under excessive heat warnings coming from the heat dome centered over California, the National Weather Service said on Sunday. Fossil fuel-driven climate change is driving extreme heat waves across the world and will continue to deliver dangerous weather for decades to come, research shows. High temperatures are forecast to meet or exceed daily high records in Washington state, Oregon, California, northern Arizona and central Idaho. In Death Valley National Park along the California-Nevada border, the NWS projects highs near 130 degrees Fahrenheit (54 degrees Celsius) through Friday. On Saturday, the thermometer reached 128 degrees Fahrenheit there, breaking a 17-year record and killing a motorcyclist who died from exposure to the extreme heat, multiple news agencies reported, citing a government statement. Temperaturs reached 115 degrees Fahrenheit (46 degrees Celsius) in Las Vegas, which tied a record that was set in 2007. Temperatures are running as much as 20 degrees above normal this time of year in places like Redding, a city a northern California that hit an all-time high of 119 degrees Fahrenheit (48 degrees Celsius) on Saturday, NWS meteorologist Bryan Jackson said. "We're expecting it to merely drift east through the early part of next week and basically persist through the week, so we've got a real expansive and extreme heat wave ongoing, and it's expected to continue this week," he said. The NWS is also warning of increased wildfire risks due to a mix of hot, dry and windy conditions. In Southern California, residents were ordered late Saturday to evacuate parts of Santa Barbara County where the Lake Fire has scorched more than 13,000 acres since Friday, according to Cal Fire. The wildfire is 0% contained as officials investigate the cause. Another 36 million people are under heat advisories, while about 1 million people face excessive heat watches, including eastern Oregon, northeastern Nevada and southwestern Idaho. Heat warnings signify that conditions are imminent, which differ from heat watches that are issued when conditions are forecast in the coming days. U.N. Secretary-General Antonio Guterres called for urgent action to avert "climate hell." Each of the past 12 months have ranked as the warmest on record in year-on-year comparisons across the globe, according to the Copernicus Climate Change Service, European Union's climate change monitoring service, which links human activities like the combustion of fossil fuels to climate change-causing greenhouse gas emissions. Last week, U.S. President Joe Biden's administration proposed the first-ever safety standard intended to protect workers and communities from the impacts of extreme heat. Sign up here. https://www.reuters.com/world/us/record-temperatures-scorch-us-west-americans-sweat-through-extreme-heat-2024-07-07/