2024-06-03 04:42

MUMBAI, June 3 (Reuters) - The Indian rupee pared early gains after jumping to a more-than-two-month high in early trading, following exit poll projections that Indian Prime Minister Narendra Modi's party and alliance will secure a third term with a sizeable mandate, boosting investor confidence. The rupee was at 83.08 against the U.S. dollar as of 10:05 a.m. IST, up 0.5% from its close of 83.4625 in the previous session. The currency touched an intraday high of 82.9575, its highest since March 19. Broad-based interbank dollar sales lifted the rupee in early trades but "importers have barged in," to buy dollars, hurdling the rupee's gains, a foreign exchange salesperson at a private bank said. "A big gap down move (on USD/INR) coupled with the anticipation of RBI intervention (to buy dollars) is keeping offers away." Weekend exit polls projected the alliance, led by Modi's Bharatiya Janata Party (BJP), to increase its 303 seats in the 543-member lower house of Parliament. But investors are likely to wait for the election results due on June 04 as exit polls in India have a patchy record, often getting the outcome wrong, analysts said. "We expect risk assets to rally, India govt bond yields to grind lower, and INR to strengthen in the immediate aftermath, notwithstanding RBI’s likely hand in intervening to cap INR strength," MUFG Bank said in a Monday note. Benchmark Indian equity indices, the BSE Sensex (.BSESN) New Tab, opens new tab and Nifty 50 (.NSEI) New Tab, opens new tab jumped to record highs and were last quoted up about 2.5% each. "Till final results are announced we may see appreciation in the rupee to about 82.80-90," Apurva Swarup, vice president at Shinhan Bank India said. The dollar index was little changed at 104.6 while Asian currencies were mixed. Dollar-rupee forward premiums edged lower with the 1-year implied yield down 1 basis point at 1.64%. Sign up here. https://www.reuters.com/markets/currencies/rupee-trims-gains-after-rising-over-two-month-high-forward-premiums-slip-2024-06-03/

2024-06-03 04:34

June 3 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole. Share markets have started the week in a positive mood, helped in part by signs of accelerating factory activity across Asia where the private Caixin survey showed China's main factory index hitting a two-year top. Factory activity expanded for the first time in a year in Japan, and grew at the fastest pace in two years in South Korea. South Korean markets got an added fillip from news there could be huge reserves of oil and gas off the country's coast. Oil prices pushed higher after OPEC+ agreed on Sunday to extend most of its oil output cuts into 2025, though some cuts will start to be unwound from October 2024. Indian markets (.NSEI) New Tab, opens new tab eyed record highs as Prime Minister Narendra Modi looks likely to expand his alliance's majority in parliament when election results are released on Tuesday, amid speculation this would spur greater economic reform. Analysts at BofA were bullish on the outlook, noting India's working-age population was not set to peak until 2048 whereas it has already peaked in developed markets and China. "We expect India to be the second biggest global growth driver for the rest of the decade and it's the only big equity market outside of the U.S. that's been a consistent compounder," they said. Over in Mexico, the ruling party declared Claudia Sheinbaum the winner of the presidential election by a "large margin" after polls closed on Sunday. The main focus of the week will be on interest rates with the European Central Bank considered almost certain to trim by a quarter point to 3.75% on Thursday, the first time it would have eased ahead of the U.S. Federal Reserve. Markets also imply around an 80% chance the Bank of Canada will cut at its meeting on Wednesday and 59 basis points of easing this year, though analysts are hopeful of easing being even deeper. Key developments that could influence markets on Monday: - Final May PMIs for the EU, Germany, France and UK - U.S. ISM manufacturing index, S&P Global U.S. manufacturing PMI, construction spending for April Sign up here. https://www.reuters.com/markets/europe/global-markets-view-europe-2024-06-03/

2024-06-03 00:45

ECB seen easing on Thursday, Canada may cut on Wednesday Treasury yields drop after surprisingly soft US ISM survey Oil drops after OPEC+ cuts, European gas prices surge on outage NEW YORK/LONDON June 3 (Reuters) - World stocks rose on Monday despite a subdued Wall Street following unexpected weakness in U.S. manufacturing data, feeding uncertainty about the U.S. interest rate outlook as the euro zone prepared for a rate cut on Thursday. By early evening in New York, the MSCI All Country World Price Index (.MIWD00000PUS) New Tab, opens new tab added 0.41%. U.S. stocks alternated between gains and losses, amid a reported technical glitch on the New York Stock Exchange regarding "Limit Up-Limit Down" bands that sent dozen of stocks listed on the exchange into volatility pauses. The exchange said it was investigating the problem and will provide information as soon as possible. The S&P 500 index (.SPX) New Tab, opens new tab edged up 0.1%, the Dow Jones Industrial Average (.DJI) New Tab, opens new tab shed 0.3%, and the Nasdaq Composite (.IXIC) New Tab, opens new tab rose 0.6%. The pan-European STOXX index (.STOXX) New Tab, opens new tab was up 0.32%. Benchmark U.S. Treasury yields fell to a two-week low and the dollar tumbled after data showed U.S. manufacturing activity slowed for a second straight month in May. New goods orders dropped by the most in nearly two years. The soft data supported speculation the Federal Reserve might cut rates this year, although some investors remained skeptical, since inflation remains above the Fed's 2% target. In Europe, investors expect the European Central Bank on Thursday to cut the benchmark rate by 25 basis points to 3.75%. "We see inflation limiting how much central banks can cut interest rates," Jean Boivin, the head of Blackrock Investment Institute, said. "We see them keeping rates high for longer." Benchmark 10-year note yields were lost as much as 11 basis points at 4.4021%, and got as low as 4.404%, the lowest since May 16. Two-year note yields fell 7 basis points to 4.823% and reached 4.816%, also the lowest since May 21. The ECB is considered almost certain to trim rates on Thursday, yet after last week's surprisingly strong euro zone inflation data, markets now price in fewer than 60 basis points of easing. "There's a relatively positive risk tone to start the week, which seems like a continuation of the positive momentum seen on Friday, albeit it is somewhat surprising given the bumper calendar of event risk coming up," said Michael Brown, strategist at broker Pepperstone in London. China's factory activity in May grew at the fastest pace in about two years, data showed on Monday. That extended optimism in markets following Friday figures showing the Fed's preferred measure of inflation held steady in April. "The ECB decision is perhaps the most important event to watch, particularly after last week’s inflation data which raises the hawkish risk that there is only one more cut this year after a 25 bp reduction on Thursday," Brown said. Markets imply around an 80% chance the Bank of Canada will cut rates at its meeting on Wednesday and around 60 basis points of easing this year, though analysts hope the easing will be greater. ASIAN STRENGTH The dollar fell to a three-week low after the weak U.S. manufacturing data. The dollar index, a measure of the U.S. currency's value versus six major currencies, slipped 0.48% to 104.09 . The greenback also fell to a two-week low against the yen following the data and was last down 0.6% at 156.245 . The euro rose 0.5% against the dollar to $1.0901. In other currencies, the Mexican peso weakened after the ruling party declared Claudia Sheinbaum winner of the presidential election by a "large margin". The U.S. dollar was last up 4.1% at 17.70 pesos . India's rupee strengthened and its stock market (.NSEI) New Tab, opens new tab rose to a record high, buoyed by expectations of sustained economic growth as Prime Minister Narendra Modi looked set for a third term. Gold was up 1% at $2,350.17 an ounce , having now rallied for four months in a row, helped in part by buying from central banks and China. Oil prices slumped a day after OPEC+ made a complicated decision on output that some analysts described as incrementally bearish for oil prices. Brent tumbled 3.61% to $78.18 a barrel, while U.S. crude dropped 3.78% to $74.08 per barrel. European natural gas prices rose more than 8% to their highest this year at over 37 euros/ MWh as an outage in Norway, which overtook Russia in 2022 as Europe's biggest gas supplier, pushed exports sharply lower. ($1 = 157.1900 yen) Sign up here. https://www.reuters.com/markets/global-markets-wrapup-1-2024-06-03/

2024-06-03 00:40

Brent, WTI futures fall by $3/bbl to lowest since Feb OPEC+ agreed to extend supply cuts into 2025 OPEC+ deal allows unwinding of voluntary cuts from Oct US fuel demand in focus, key holiday weekend data due Wednesday NEW YORK, June 3 (Reuters) - Oil prices tumbled by $3 a barrel on Monday to their lowest in nearly four months, as investors worried that a complicated OPEC+ output decision could lead to higher supplies later in the year even though demand growth has been slow. Brent crude futures fell by $2.75, or 3.4%, to settle at $78.36 a barrel, closing below $80 for the first time since Feb. 7. U.S. West Texas Intermediate crude futures also closed at a near four-month low of $74.22 a barrel, down by $2.77 or 3.6% from Friday. Both contracts were down by $3 a barrel in post-settlement trading. OPEC+ on Sunday agreed to extend most of its oil output cuts into 2025 but left room for voluntary cuts from eight members to be gradually unwound from October onward. Analysts at Goldman Sachs said the outcome was negative for oil prices as the phasing out of voluntary cuts shows a strong desire by several OPEC+ members to bring back output despite recent increases in global oil stocks. "The communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations," Goldman Sachs analysts said. Other analysts also called the group's decision incrementally bearish for oil prices in light of high interest rates and rising output from non-OPEC producers like the United States. "Ultimately, a combination of factors has come into play," independent oil analyst Gaurav Sharma said, highlighting disappointing economic indicators in the United States and China. "When OPEC+ took the decision it did over the weekend, in a reasonably well-supplied crude market, traders factored in the macro picture alongside a dwindling risk premium (with talk of a ceasefire in Gaza) and went net short," Sharma said. An aide to the Israeli prime minister confirmed on Sunday that Israel had accepted a framework deal for winding down the Gaza war, although the Israeli side called it a flawed deal. Signs of weakening demand growth have also weighed on oil prices in recent months, with data on U.S. fuel consumption in focus. The U.S. government will release estimates of oil stocks and demand on Wednesday, which will show how much gasoline was consumed around the Memorial Day weekend, the start to the U.S. driving season. "The hard numbers are that the market is well-supplied," said John Kilduff, partner at Again Capital. "If we do not get a spectacular number on Memorial Day in the U.S., that's going to be game over," Kilduff added. U.S. gasoline futures fell more than 3% on Monday to a more than three-month low of $2.34 a gallon. U.S. efforts to replenish the country's Strategic Petroleum Reserve (SPR) could provide some support for oil prices. The United States is buying another 3 million barrels for the SPR at an average price of $77.69 a barrel, the U.S. Department of Energy said on Monday. Sign up here. https://www.reuters.com/business/energy/oil-prices-slip-despite-opec-production-cut-extension-2024-06-03/

2024-06-03 00:12

LAUNCESTON, Australia, June 3 (Reuters) - The OPEC+ decision to extend crude oil production cuts is an acknowledgment that demand growth is still uncertain, but also that the group remains hopeful its bullish scenario is correct. The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, agreed at a meeting on Sunday to extend the total of 5.86 million barrels per day (bpd) of output reductions. Within that broader figure the exporter group decided to extend 3.66 million bpd of cuts that were due to expire at the end of June 2024 until the end of next year. Additional voluntary reductions of 2.2 million bpd by eight members, including leading exporters Saudi Arabia and Russia, were prolonged by three months to the end of September. Putting the extension of the larger section of the output cuts together with the possible rolling back of the smaller voluntary reductions shows OPEC+ is effectively betting that oil demand is going to be stronger in the second half of 2024. Keeping the 3.66 million bpd of cuts until the end of 2025 is a reflection that OPEC+ holds much of the world's spare production capacity, but also that supply growth from outside the group has been enough to meet the increase in global demand. Planning on phasing out the additional 2.2 million bpd of voluntary cuts in the fourth quarter is the hope that the OPEC forecast for global demand growth of 2.25 million bpd is going to turn out to be on the money. It may be a coincidence that the OPEC forecast for world demand growth almost exactly matches the OPEC+ voluntary production cuts. But if the OPEC estimate proves accurate, it implies that oil prices will at least remain at current levels while allowing the eight OPEC+ members subject to the voluntary cuts to increase their output and make more money. However, the risk for OPEC+ is that world demand growth disappoints amid ongoing tighter monetary policy to combat sticky inflation, continuing geopolitical conflicts and uncertainty surrounding the U.S. presidential election in November. OPEC+ is probably also concerned about the state of demand growth in Asia, the top-consuming region and the engine room of its forecast for global growth of 2.25 million bpd this year. The May monthly outlook from OPEC estimated total Asian demand growth of 1.27 million bpd in 2024. If that forecast is to be realised it would suggest that Asia's imports would be rising strongly, but so far in 2024 they haven't. SOFT ASIA Asia's crude imports for the first five months of the year were 27.19 million bpd, up a mere 100,000 bpd from the same period in 2023, according to data compiled by LSEG Oil Research. This means that Asia's demand for oil is going to have to surge in the second half of the year for OPEC's optimism to prove correct. The question for the market is whether a strong recovery in demand is likely in Asia. The answer is that much will depend on what happens in China, the world's second-biggest economy and also the largest crude importer. Economic signals from China have been somewhat mixed, with the property sector struggling to recover and uneven results from manufacturing and consumer spending. For crude oil, China's imports have been soft, and may even show a year-on-year decline for the first five months. Taking official customs data for the first four months of 2024 and adding LSEG's forecast for May imports gives a figure of 10.97 million bpd for the first five months of the year, which is 210,000 bpd below the customs number of 11.18 million bpd for the same period in 2023. It's possible that China's crude oil imports will rebound in the second half, especially if Beijing's stimulus measures start to bear fruit. If this is the case then OPEC+ can wind back the voluntary 2.2 million bpd of output cuts. But if China, and the rest of Asia, remains soft for crude imports, then OPEC+ has the flexibility to keep the additional restrictions in place. OPEC+ most likely wants to keep crude oil prices above $80 a barrel and more likely closer to $90, and the current Brent futures price of $80.78 is no doubt a concern. It may be helpful for the group to consider if using their market muscle and generally low production costs to pump more oil and allow the price to drop to closer to $60 would serve them better. This would allow a faster easing of monetary policy around the world by cutting inflation, while at the same time putting pressure on high-cost producers, such as U.S. shale oil. The opinions expressed here are those of the author, a columnist for Reuters. Sign up here. https://www.reuters.com/markets/commodities/opec-bets-robust-crude-oil-demand-forecast-is-right-russell-2024-06-03/

2024-06-02 23:29

HONG KONG, June 3 (Reuters) - More than a year after China pledged to smoothen the process for offshore listings, firms are reeling from a regulatory logjam that is unlikely to ease soon, and staring at the prospects of sharply lower valuations even as market sentiment improves. Hopes for a revival in overseas listings were sparked by Beijing's vow in April to facilitate Hong Kong IPOs and a strong debut of Zeekr (ZK.N) New Tab, opens new tab in New York last month. China has clamped down on offshore capital raisings since 2021. A 6.1% year-to-date jump in the Hang Seng index (.HIS) New Tab, opens new tab as of Friday, after having fallen as much as 18% in the past year, was also expected to offer a window of opportunity for IPO entrants. But bankers, China company executives and their investors said they expect the offshore IPO drought to continue this year, weighing on firms' ability to raise capital in a slowing economy. Offshore listings are critical fundraising channels for Chinese companies. These deals also account for a bulk of the revenue global investment banks make in Asia. A lack of such deals, as a result of China's regulatory crackdown as well as volatile capital markets and geopolitical tensions over the past couple of years, has resulted in bank layoffs and weighed on returns for private equity funds. At least $20 billion worth of Chinese firms' Hong Kong IPO proposals have been awaiting approval for months, according to Reuters calculations. Bankers close to those deals say most of the sizable ones are unlikely to hit the market soon. Home appliance maker Midea (000333.SZ) New Tab, opens new tab has been queried about how a planned $2 billion-plus Hong Kong listing could affect the value of its Shenzhen-listed shares, Reuters reported on Wednesday. Although monthly approval, on average, rose to roughly 13 IPOs in the first five months this year, up from 9 over nine months last year after the new rules were introduced, none of them is expected to raise beyond $500 million. The China Securities Regulatory Commission (CSRC), which unveiled rules for boosting oversight of offshore listings last March, had approved just one IPO until May 24. The regulator's website on Friday showed it has approved seven more filings. In response to Reuters request for comment sent last Thursday, the CSRC said it had always supported domestic companies to lawfully tap both onshore and offshore markets for financing and development purposes. A Hong Kong-based banker, who declined to be named due to the sensitivity of the matter, however, said it sometimes takes months from IPO application to regulatory approval. The bottlenecks are mainly caused by inter-departmental scrutiny, said the listing advisers. Chinese companies with a so-called variable-interest-entity (VIE) structure, common for firms with foreign investors, must obtain approval from their respective primary industry regulators under the new filing regime. But the CSRC has no authority over other government and communist party bodies, such as the cyberspace authority, which has led to delays and uncertainty for companies, the advisers said. Since the implementation of the offshore listing rules, the CSRC has "actively and orderly" processed the IPO applications, and the number of companies that have completed filing has increased each month, the regulator said. APPROVAL PROCESS CSRC approval, referred to as completion of IPO filings, is the regulatory go-ahead a company needs before launching an IPO - a process that ended years of laissez-faire approach to overseas fundraising. The approval process has on average delayed an offshore offering by two to three months, with time needed for all regulatory clearances totalling at least eight to nine months, a senior banker at a foreign bank said. Chinese companies raised $1.5 billion in offshore IPOs as of May 17, down 21% on year, LSEG data showed, far below the $27 billion record set in 2021. The CSRC said it would continue to "optimise the overseas listing filing supervision mechanism", and that "in the near future more companies will successfully complete the filing". The lengthy regulatory process comes on top of China's slowdown and a property sector crisis, which have made both issuers and investors wary about equity offerings and company valuations. JD Industrials, a VIE-structured company, whose Hong Kong listing application was filed more than a year ago, is still awaiting approval pending supplementary materials, a regulatory disclosure shows. Its parent company JD.COM (9618.HK) New Tab, opens new tab has withdrawn the spin-off listing of another unit - JD Property, after the latest Hong Kong stock exchange filing lapsed, two sources with knowledge of the matter said. JD Property did not get CSRC clearance, they said, although it was not clear if regulatory hurdles were the reason for the withdrawal. JD.com, the parent company of JD Industrial and JD Property, did not respond to Reuters request for comment. Some IPO aspirants worry they may have to list at lower valuations if demand wanes by the time approval is granted, a banker and a senior executive at a potential listing candidate said. Others have accepted the slow pace of approvals and not sought to lobby regulators, they added. "In the past, it was often the case that regulators quietly championed firms seeking to list abroad. Now the political incentives have completely changed," said Christopher Beddor, deputy director of China research at Gavekal Dragonomics. "There's a lot of downside risk for supporting a foreign listing, and not a lot of upside." Sign up here. https://www.reuters.com/markets/asia/red-tape-clogs-chinas-offshore-ipo-pipeline-even-markets-recover-2024-06-02/