2024-05-20 04:31

A look at the day ahead in European and global markets from Tom Westbrook Copper and gold made record highs in Asia trade on Monday and silver surged over $30. The breakout gains were all the more noteworthy while bonds and currencies settled into ranges and with uncertainty rather than optimism on the outlook. World stocks, meanwhile, were parked just below last week's record peak. Gold's 18% rally over the year to date has been attributed, variously, to Chinese buying, global political tension and expectations that U.S. rates will start to fall soon, seen as a boon for a metal that does not pay a yield at all. Copper is soaring on China's strongest efforts yet to dig its property market out of a funk. On Friday, officials promised a trillion yuan in funding for affordable housing and redevelopment and said local governments would step in as buyers. Much is unclear, such as the effect on real estate prices, and developer stock prices wobbled through Monday. But the macro signal has been enough to put the blowtorch on copper short sellers. Last week Reuters reported that traders Trafigura and IXM were looking for physical copper to deliver against large short positions in Chicago futures. Trading volumes have spiked in Shanghai and London and silver is along for the ride, gaining 3% in Asia to shoot over $30 an ounce. On Monday, oil prices made no immediate reaction to reports of a helicopter crash which an Iranian official said killed Iran's president and foreign minister. The week ahead is light on top-tier data but holds preliminary PMI figures, minutes from the Federal Reserve and Nvidia earnings along with a number of policymaker speeches, led by Fed Vice Chair Philip Jefferson on Monday. Bonds rallied and the dollar fell last week after U.S. inflation slowed, as expected. But Treasuries retraced, and yields rose on Friday, while the dollar found some support as investors wait for more data to chart economic outlook. Minutes from the Fed this week and Australia's central bank will likely show central bankers are playing for time. Key developments that could influence markets on Monday: Speeches: Fed's Jefferson, Riksbank's Jansson and Thedeen, BoE's Broadbent Sign up here. https://www.reuters.com/markets/europe/global-markets-view-europe-2024-05-20/

2024-05-20 01:38

All 33 economists polled predict no change in BI rates BENGALURU, May 20 (Reuters) - Indonesia's central bank will keep its key interest rate on hold through next quarter to support a weak rupiah and only a slim majority expect a Q4 cut which would be after the likely start of policy easing in the United States, a Reuters poll found. Bank Indonesia (BI) unexpectedly raised its seven-day reverse repurchase rate (IDCBRR=ECI) New Tab, opens new tab to 6.25% last month - the highest since it made the instrument its main policy rate in 2016 - to bolster currency stability. Since then the rupiah has gained over 1%, suggesting pressure to continue tightening had eased somewhat but a rate cut was still months away as the currency is down about 3.5% for the year, slightly less than some of its Asian peers. The key interest rate is likely to be unchanged at 6.25% at the conclusion of BI's two-day meeting on May 22, all 33 economists in the May 13-17 poll said. Median forecasts showed interest rates on hold through the third quarter, followed by a 25 basis point cut to 6.00% before year-end. "Persistent rupiah weakness means BI's move is constrained by the dollar's strength and what the Fed does, and we think the risks are skewed to a slower start of the rate cutting cycle," said Makoto Tsuchiya, economist at Oxford Economics. "We expect BI to keep utilising various policy tools other than the policy rate, including forex intervention. Modest investment growth in Q1 should make BI wary of over-tightening." To support the currency the central bank has been dipping into its forex reserves (IDFXR=ECI) New Tab, opens new tab, which have fallen to $136 billion, down $4.2 billion in April alone - the biggest drop in 11 months. Still, risks for the rupiah falling further remain high due to a hawkish Fed outlook with the first cut now expected in September and could be postponed further if economic U.S. indicators remain resilient, impacting BI's rate outlook. Among those who provided forecasts until year-end, a slim majority, 17 of 31, expected interest rates at 6.00% or lower, but 14 saw them at 6.25% or higher. "A BI rate cut is highly unlikely in the face of the Fed's prolonged hold," said Elbert Timothy Lasiman, economist at Bank Central Asia. "Domestically, there is little change, as BI would actually prefer to ease policy to support flagging growth. What changes is the global landscape, where...the market is starting to price in the possibility of "high for longer" again." (For other stories from the Reuters global economic poll:) Sign up here. https://www.reuters.com/world/asia-pacific/bank-indonesia-hold-rates-through-q3-support-weak-rupiah-cut-q4-2024-05-20/

2024-05-20 00:53

Gold, copper hit all-time highs Silver at highest level in over 11 years Fed officials express lack of confidence in inflation cool-down NEW YORK, May 20 (Reuters) - The Nasdaq closed at a record high on Monday and gold jumped to an all-time high as investors weighed hawkish statements from the Federal Reserve against evidence of cooling U.S. inflation. The tech-heavy Nasdaq led the three major U.S. stock indexes with a boost from chips (.SOX) New Tab, opens new tab, as Nvidia Corp (NVDA.O) New Tab, opens new tab advanced ahead of its closely watched earnings report, expected on Wednesday. The S&P 500 finished the session with a modest gain, while the blue-chip Dow dipped below 40,000 after closing on Friday above that level for the first time. "The Nasdaq is being led higher by Nvidia, but otherwise they're a little bit stalled," said Jay Hatfield, portfolio manager at InfraCap in New York. "The S&P 500 is 11% above its 200-day moving average, which is pretty extended." "We're in a range-bound market and Nvidia will dominate global equity trading this week." Comments from Fed officials have reflected the U.S. central bank's cautious view of its progress in reining in inflation and the timing of interest rate cuts. Fed Vice Chair Philip Jefferson said on Monday it was too early to tell if inflation slowdown is "long lasting," while Vice Chair Michael Barr said restrictive policy needs more time. Atlanta Fed President Raphael Bostic said it will "take a while" for the central bank to be confident that price growth is on a sustainable downward path. "The market is irrational; it started the year expecting six interest rate cuts, but then the pendulum swung completely to the other side, and everybody was talking about increases," Hatfield added. "We are probably going to grind higher as long as it's clear the next action is going to be a cut and it's going to happen sometime this year." The Dow Jones Industrial Average (.DJI) New Tab, opens new tab fell 196.82 points, or 0.49%, to 39,806.77, the S&P 500 (.SPX) New Tab, opens new tab gained 4.86 points, or 0.09%, at 5,308.13 and the Nasdaq Composite (.IXIC) New Tab, opens new tab added 108.91 points, or 0.65%, to 16,794.87. European stocks eked out modest gains, held in check by interest rate uncertainty. The pan-European STOXX 600 index (.STOXX) New Tab, opens new tab rose 0.18% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) New Tab, opens new tab gained 0.11%. Emerging market stocks rose 0.16%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) New Tab, opens new tab closed 0.19% higher, while Japan's Nikkei (.N225) New Tab, opens new tab rose 0.73%. U.S. Treasury yields inched higher after Fed officials expressed uncertainty over the timing of rate cuts. Benchmark 10-year notes last fell 7/32 in price to yield 4.4453%, from 4.42% late on Friday. The 30-year bond last fell 11/32 in price to yield 4.5816%, from 4.561% late on Friday. The dollar posted a slight gain against a basket of world currencies as investors awaited further clues about the path of interest rates. The dollar index (.DXY) New Tab, opens new tab rose 0.15%, with the euro down 0.11% at $1.0858. The Japanese yen weakened 0.39% versus the greenback at 156.30 per dollar, while Sterling was last trading at $1.2702, up 0.02% on the day. Crude prices were stable as investors weighed hawkish Fed commentary against signs that inflation is cooling. U.S. crude dipped 0.32% to settle at $79.80 per barrel, while Brent settled at $83.71 per barrel, down 0.32% on the day. Gold touched record highs, coasting on last week's encouraging inflation data, while silver reached its highest level in over 11 years. Copper, a barometer of economic sentiment, surged to a record high after China announced steps to shore up its crisis-hit property sector. Spot gold added 0.4% to $2,424.69 an ounce. Copper rose 2.97% to $10,985.00 a tonne. Sign up here. https://www.reuters.com/markets/global-markets-wrapup-1-2024-05-20/

2024-05-19 23:02

LAUNCESTON, Australia, May 20 (Reuters) - The pace at which crude oil flowed into China's stockpiles increased in April as slower refinery processing outweighed a decline in imports. A total of 830,000 barrels per day (bpd) was added to China's commercial or strategic stockpiles in April, up from 790,000 bpd in March, according to calculations based on official data. Over the first four months of the year, China, the world's biggest crude importer, added 700,000 bpd to storages, a significant volume that goes some way to undermining the market view that oil consumption is robust amid a recovering economy. China doesn't disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of crude processed from the total of crude available from imports and domestic output. The total crude available to refiners in April was 15.13 million bpd, consisting of imports of 10.88 million bpd and domestic output of 4.25 million bpd. The volume of crude processed by refiners was 14.3 million bpd, leaving a surplus of 830,000 bpd to be added to storage tanks. For the first four months of 2024, the total crude available was 15.26 million bpd, while refinery throughput was 14.56 million bpd, leaving a surplus of 700,000 bpd. Refinery processing dropped 3.3% in April from the same month in 2023, the first annual decline in 20 months, as large oil companies carried out scheduled maintenance, while smaller refiners curbed output because of weak profit margins. It's likely that refinery throughput will recover in May as plants ramp up for the peak summer demand season, although the situation is complicated by robust demand for some refined fuels, such as jet fuel and gasoline, but softer consumption for others such as diesel. The question for the market then becomes whether any rise in refining will lead to rising demand for crude oil imports, or whether refiners will choose to dip into the stockpiles they have been building so far this year. PRICE FACTOR Much depends on oil prices, and recent history suggests that when global prices rise rapidly, or to levels China's refiners consider too high, the result is a pullback in imports, allowing for the lag of around two months to account for when cargoes are arranged to when they are delivered. April's crude oil imports were the weakest since January and came two months after prices starting rallying sharply from early February onwards, after members of the OPEC+ group of exporters extended and deepened output cuts. Global benchmark Brent crude futures surged from a low of $76.85 a barrel on Feb. 2 to a recent peak of $92.18 on April 12. This suggests that price pressures may cap the demand for crude by Chinese refiners, and any gains in volumes are likely to be concentrated in discounted oil from Russia and Iran, whose exports are subject to Western sanctions, which effectively limits the number of available buyers. The rise in official selling prices (OSPs) to a five-month high by leading exporter Saudi Arabia for cargoes loading in June may also curb China's oil demand from the kingdom, with sources pointing to a decline of 5.8 million barrels in June cargoes from May's 45 million barrels. China's crude imports rose 2.0% in the first four months of the year, according to customs data. However, in barrels per day terms this equates to a gain of just 100,000 bpd. This is well short of the 710,000 bpd rise in demand that OPEC+ forecast for China for 2024 as a whole in its latest monthly report, released on May 14. There is a difference between imports and overall demand, as demand can be satisfied from inventories or a rise in domestic crude output. While domestic oil production is slightly higher, rising 2.1% in the first four months of 2024, it seems that China is adding to inventories at a faster pace so far this year than it did in 2023. The excess of crude available over refinery processing in the first four months of 2024 was 830,000 bpd, compared to 480,000 bpd for the same period last year. The overall picture that emerges is that China's oil import growth is modest so far in 2024, and more of those imports are heading into storage than they did in 2023. The opinions expressed here are those of the author, a columnist for Reuters. Sign up here. https://www.reuters.com/business/energy/china-boosts-crude-oil-storage-amid-soft-refinery-processing-russell-2024-05-19/

2024-05-19 23:01

LONDON, May 17 (Reuters) - The copper rally turned ugly this week, morphing into a ferocious short squeeze on the U.S. contract operated by CME Group (CME.O) New Tab, opens new tab. CME cash copper hit a record high of $5.1775 a lb, or $11,414 a metric ton, on Wednesday amid extreme tightness in near-dated time-spreads. The premium over the London Metal Exchange (LME) copper contract ballooned to more than $1,000 per ton, an unprecedented disconnect in Atlantic pricing. CME has raised margins New Tab, opens new tab to calm the market wildness. The yawning arbitrage should facilitate a re-direction of physical metal towards the United States but it may take time, leaving shorts little immediate option other than to roll positions forward at painful cost. Shorts have been crushed by a wall of investment money surging into the copper market. More will follow. Canada's Sprott Asset Management has just filed a prospectus for a physically-backed copper fund, highlighting the renewed investor interest in the metal. But can the market handle so much speculative money? This week's events suggest Doctor Copper could be in for some very turbulent times. SHORT AND CAUGHT CME short-position holders have been caught standing in the path of an investment freight train. Commodity traders Trafigura and IXM are reported to be diverting metal to the United States to cover positions. Both are big players in the physical copper market but small relative to the amount of fund money entering the market on the long side. Money mangers turned net bullish on CME copper in February and had already lifted outright long positions to six-year highs as of the close of business on May 7. More momentum-based funds are likely to have joined the fray on the last leg higher. Investment fund long positions on the LME copper contract stretched to 99,215 lots, almost two and a half million tons, at the end of last week, the most bullish positioning since the LME started publishing the data at the start of 2018. Analysts at Citi estimate an eye-watering $25 billion of speculative bull money has washed into the two exchanges since February. STAND AND DELIVER? The money impact on CME shorts has been accentuated by low exchange stocks and restricted physical delivery options. CME registered inventory has slid from over 30,000 short tons at the end of March to a current 20,445, equivalent to just 18,548 metric tons. LME stocks, by contrast, stand at 103,650 tons and time-spreads suggest there is more metal available if required. While the CME forward curve is heavily backwardated, the benchmark cash-to-three-months period in London was valued at a contango of $81 per ton at the Thursday close. The problem is the type of metal that's available. Half of the LME's on-warrant inventory at the end of April was Russian brand metal. The second largest component was Chinese metal. Neither Russian nor Chinese producer brands are deliverable against the CME contract and in the case of Russian metal, it wouldn't matter anyway after the U.S. government banned all imports in its April sanctions package. A simple arbitrage transfer of stocks between exchanges isn't going to work, meaning the physical re-routing of units to the United States could take some time, delaying the realignment of CME and LME prices. CME spreads and price have eased since Wednesday but the U.S. cash contract was still trading around $500 per ton higher than London on Friday morning. MORE MONEY Even copper bulls concede that the market has run ahead of physical supply-chain reality. Some sort of correction is due, although it may have to wait until the immediate long-short battle is over. But there will be no shortage of speculative buyers on any pull-back in price. A market that has just hit the headlines for making record highs is only going to attract more attention. A sign of the growing investor enthusiasm for Doctor Copper is the return of the physically-backed exchange traded fund. Past attempts to launch such products have also coincided with bull runs but they have either failed to make it off the drawing board or struggled to keep fees competitive due to the cost of storing metal. Whether Sprott, which already manages a physical uranium fund, is more successful remains to be seen but it is a sign of the growing retail interest in copper's bull story of constrained supply and booming green energy demand. Funds were late to the mega bull market of the 2000s and retail investors later still. Industrial metals were still a backwater of the investment landscape then and much of the investment buying came in the form of cross-commodity basket allocations. This time around word of copper's bull narrative has spread far beyond the metals trading community. There is much broader interest and more products to express that interest. CME's micro contract, for example, is a street-level entry point for retail investors, coming in at 2,500 lb per contract. "Conveniently sized and tailored to the individual investor, this contract offers less capital commitment, lower margin, and smaller exchange fees than the larger-sized copper futures contract," CME notes on its website New Tab, opens new tab. Average daily volumes in April were 12,863 contracts, the highest since the contract launched in May 2022 and more than double the previous record. Cumulative volumes in the first four months of the year were the equivalent of a hefty 670,000 tons of copper. If, as many analysts contend, copper is still in the foot-hills of a multi-year bull market, professional and retail engagement is only going to grow with every new price spike. The investment flows have only just started and they have already upended cross-Atlantic arbitrage. It's an ominous sign of just how turbulent copper could become if too much money tries to crowd into a finite market. The opinions expressed here are those of the author, a columnist for Reuters. Sign up here. https://www.reuters.com/markets/commodities/ferocious-cme-copper-squeeze-presages-future-turbulence-2024-05-17/

2024-05-19 21:48

May 20 (Reuters) - A look at the day ahead in Asian markets. Broadly speaking, the global backdrop for Asian markets is still bright, with investors confident that the Fed will soon cut U.S. interest rates keeping the dollar, bond yields and volatility in check, and boosting risk assets. But there's a cloud that shows no sign of lifting: China. If anything, it's getting darker. The economic "data dump" from Beijing on Friday showed that China's recovery is sputtering - investment growth slowed, retail sales expanded at the slowest pace since late 2022, and new home prices fell at the fastest rate in nine years. Most alarming, the property sector bust is deepening. Granted, Chinese and Hong Kong shares jumped on Friday after Beijing unveiled a series of historic steps to stabilize the sector, but will the bounce last? Even though the central bank said it is facilitating 1 trillion yuan in extra funding and easing mortgage rules, and local governments will buy some apartments, deep-rooted fundamentals of huge over-supply and weak demand remain. Renewed concern over China's growth raises the question of how Beijing will finance its fiscal support measures in the long term. China is sitting on more than $3 trillion of FX reserves. Is now the time for China to dip into that rainy day fund to prevent the property sector bust from bringing down the wider economy? It's unlikely, and Beijing may well default to ramping up exports as the preferred path to recovery. But that would not be welcomed by the United States, which last week imposed extra tariffs on $18 billion of imports from China. These tariffs and the hardening battle lines between the West and China on trade are bound to feature prominently in next week's meeting of G7 finance officials in Italy. U.S. Treasury Secretary Janet Yellen will attend, but it is unclear if Fed Chair Jerome Powell will travel, after he tested positive for COVID-19. That said, financial markets are enjoying a period of remarkable calm right now. Global FX volatility is the lowest in five weeks, U.S. Treasury market volatility is at a six-week low, and the VIX index on Friday fell below 12 for the first time this year. This low volatility environment is helping to lift U.S., European and other stock markets to all-time highs. The Asian economic calendar on Monday offers a decent serving of indicators for investors to get their teeth into, including: GDP from Thailand, current account and trade data from Indonesia, Malaysia and Taiwan, and unemployment from Hong Kong. China's central bank is widely expected to keep its one- and five-year loan prime rates on hold again at 3.45% and 3.95%, respectively, after leaving its medium-term lending facility loans unchanged on Wednesday. Pressure is mounting for a cut soon, though. Here are key developments that could provide more direction to markets on Monday: - Thailand GDP (Q1) - Taiwan exports (April) - Japan tertiary index (March) Sign up here. https://www.reuters.com/markets/asia/global-markets-view-asia-graphic-pix-2024-05-19/