Tag Archives: Economy

Biggest jump in a month for global stocks as oil price rises

Brokers work on the trading floor at IG Index in London, Britain

By Marc Jones

LONDON (Reuters) – World shares had their biggest jump in over a month on Monday as a pact between Saudi Arabia and Russia sent oil prices surging and lacklustre U.S. jobs figures pushed back Federal Reserve interest rate rise expectations.

European stocks touched an eight-month high as oil and mining firms cheered what at one point was a 5 percent leap in crude prices.

Saudi Arabia and Russia, two of world’s top oil producers, announced at a meeting of global leaders in China that they would start working together to stabilise the market, including limiting output.

“Freezing production is one of the preferred possibilities,” Saudi Energy Minister Khalid al-Falih said speaking alongside Russian counterpart Alexander Novak. “But it does not have to happen specifically today.”

Oil eventually halved its initial gains as traders noted the lack of immediate measures, but the buoyant mood elsewhere remained intact.

Bonds were in favour after U.S. payrolls numbers on Friday had tamed Fed bulls, while emerging market stocks were gunning for their best day since July as they climbed 1.3 percent.

“We don’t expect the Fed to do anything until next year so that lays the ground for further advances,” said TD Securities strategist Paul Fage.

Though the Fed reaction and oil price surge were the markets’ main drivers, they were not the only factors in play.

The yen turned around its recent losing streak as the head of the Bank of Japan disappointed investors who had expected clearer signals that Tokyo’s monetary policy would be eased further this month.

Though Bank of Japan Governor Haruhiko Kuroda signalled its already massive stimulus programme would continue, there was nothing explicit enough to suggest an expansion is imminent. Later Japan PM Shinzo Abe said he trusted Kuroda to “take the right steps”.

The dollar dropped 0.6 percent to 103.35 yen having gained more than 4 percent against the Japanese currency in the last six days. The euro inched up to $1.1115.

Britain’s sterling also did damage to the greenback. It hit a one-month high of 1.3360 as data showed the UK services industry bounced back strongly from a seven-year low hit after the vote to leave the European Union.

The Markit/CIPS Purchasing Managers’ Index (PMI) jumped to 52.9 in August from July’s 47.4. It was the biggest one-month gain in the survey’s 20-year history and one which beat all forecasts in a Reuters poll.

“It remains too early to say whether August’s upturn is a dead cat bounce or the start of a sustained post-shock recovery,” IHS Markit economist Chris Williamson said.

“But there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate.”

HOT OIL

U.S. markets were closed for a Labour Day public holiday meaning there was no trading on Wall Street. [.N]

Oil’s rise was its the second bumper session in a row as the Saudi/Russia pact fanned speculation that major producers could strike a firmer deal in Algeria later this month.

Brent crude futures for November delivery were last up $1 per barrel at $47.70 a barrel having been as high as $49.40 and U.S. crude for October delivery was up at $45.25 having been as high as $46.53 a barrel.

“Verbal intervention was again needed to trigger a recovery towards $50,” senior ABN Amro economist Hans van Cleef said, referring to the Saudi and Russian comments.

In Asia overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan ended up 1.6 percent, while  Japan’s Nikkei rose 0.7 percent to its highest close since May 31.

Friday’s U.S. jobs report showed non-farm payrolls rose by 151,000 jobs in August after an upwardly revised 275,000 increase in July. Economists polled by Reuters had expected a rise of 180,000.

U.S. Fed Funds futures prices indicated investors were now pricing in only around a 20 percent chance of a September hike down from over 30 percent before the jobs data. It remains at more than 60 percent by the end of year.

(Additional reporting by Lisa Twaronite in Tokyo, Ahmad Ghaddar in London Editing by Jeremy Gaunt)

Oil slips on dollar strength, still set for monthly gain

Traffic passes a BP gas station on the North Circular Road in London,

By Libby George

LONDON (Reuters) – Crude slid on Wednesday, pressured by a strong dollar and high stocks of oil, though prices remained on track for a monthly gain of more than 10 percent.

Brent crude futures were trading at $47.94 per barrel at 1126 GMT, down 43 cents from the previous close, while U.S. West Texas Intermediate crude futures were down 33 cents at $46.02.

Oil had rallied by more than 20 percent from the beginning of August on hopes that producers were reviving talks on a possible output freeze, setting prices on course for their largest monthly gains since April.

Analysts, however, said the focus had shifted to physical market fundamentals, which remained shaky.

“The market is getting tired of those headlines,” Olivier Jakob, managing director of Swiss-based consultant PetroMatrix, said of a potential production freeze.

“Fundamentally, there is not a lot to support oil because the stocks are still at very high levels,” he said.

On Wednesday Saudi Arabian energy minister Khalid al-Falih said that the top crude exporter does not have a specific target figure for its oil production and that its output depends on the needs of its customers.

Yet high oil inventories could limit any quick recovery in prices. U.S. crude stocks rose by 942,000 barrels to 525.2 million barrels in the week to Aug. 26, data from industry group the American Petroleum Institute showed on Tuesday.

Official U.S. oil inventories data from the Energy Information Administration is due on Wednesday.

The strong U.S. currency, which makes dollar-priced commodities more expensive for holders of other currencies, was also affecting oil prices. The dollar index, measured against a basket of six leading currencies, touched 96.143 on Tuesday, its highest since Aug. 9.

The dollar could strengthen further if the U.S. Federal Reserve chooses to increase interest rates this year, as recent comments from Fed Chair Janet Yellen suggested it could.

“I think that many participants underestimate the compounding bearish impact of Fed rate hike amidst weak oil fundamentals,” Harry Tchilinguirian, global head of commodity strategy with BNP Paribas told the Reuters Global Oil Forum. “The only way for this market to prop itself higher is that we have another string of unplanned supply disruptions like we had between February and May this year.”

Still, many analysts still expect a tighter supply and demand balance towards the end of the year and are raising price forecasts accordingly, with Barclays lifting its fourth-quarter forecast by $2 to $52 a barrel.

“The balances are slightly tighter in Q4 than previously assessed,” the bank said.

(Additional reporting by Mark Tay and Henning Gloystein in Singapore; Editing by David Goodman and William Hardy)

More than a million Indian workers to go on strike Friday

An employee walks out of the State Bank of India main branch in Mumbai, India,

By Manoj Kumar

NEW DELHI (Reuters) – More than a million Indian workers in banking, telecoms and other sectors will go on strike on Friday, seeking higher wages and to protest against Prime Minister Narendra Modi’s labor reforms and a plan to close some loss-making firms.

Trade unions including the All India Trade Unions Congress and Centre of Indian Trade Unions rejected a government appeal on Tuesday to call off the strike, saying it failed to address their demands.

Since taking charge in May 2014, Modi has implemented a raft of economic reforms and is trying to ease labor laws to attract foreign investment and make it easier to do business in the country.

The government aims to raise 560 billion rupees ($8.35 billion) through privatization this fiscal year, and shut down some companies. Losses at 77 state-run companies exceeded $4 billion in the last fiscal year.

Tapan Sen, general secretary of the Centre of Trade Unions, said there had not been any “tangible proactive steps” by the government to address union demands such as a rollback of privatization in sectors like defense and railways, and an increase in minimum wages.

He said the strike would go on despite Finance Minister Arun Jaitley’s promise on Tuesday that the government would release state employees’ bonuses for the last two years, and increase minimum wages for unskilled laborers.

The unions also oppose a government directive to state-run pension funds to put more money into stock markets.

Another major union, the Bharatiya Mazdoor Sangh, which is loosely affiliated with the Hindu nationalist group Rashtriya Swayamsevak Sangh, the ideological parent of Modi’s Bharatiya Janata Party, is not joining the strike.

Some workers at Coal India Ltd  are due to join the strike but company officials said they did not expect any shortfall in supplies for power companies as there was an oversupply of the fuel.

($1 = 67.0300 Indian rupees)

(Reporting by Manoj Kumar; Editing by)

Oil rally under pressure; record Saudi output offsets U.S. drawdown

Oil field

By Barani Krishnan

NEW YORK (Reuters) – Oil’s near week-long rally was under pressure on Wednesday after an unexpected drawdown in U.S. crude and gasoline stocks was offset by worries that Saudi Arabia was cranking output to record highs even as OPEC talked of ways to ease a global glut.

U.S. West Texas Intermediate (WTI) crude futures <CLc1> were down 5 cents at $46.53 a barrel by 1:03 p.m. EDT (1703 GMT), after trading as much as 21 cents higher.

Brent crude futures <LCOc1> rose by 42 cents to $49.65 a barrel. It reached five-week highs of $49.75 earlier.

WTI’s discount to Brent <WTCLc1-LCOc1> widened to a six-month high, raising the export potential for U.S. crude.

Oil rallied about 11 percent over the past four sessions since Saudi Arabia, the kingpin in the Organization of the Petroleum Exporting Countries, stoked speculation the group was ready to reach an output freeze agreement with non-OPEC producers.

The markets briefly extended gains after the U.S. Energy Information Administration (EIA) said domestic crude inventories fell 2.5 million barrels last week, surprising analysts who had expected a build of 522,000 barrels. [EIA/S]

Gasoline stockpiles also fell 2.7 million barrels, more than expectations for a 1.6 million-barrel drop, the EIA data showed.

But the market’s upside was capped by a Reuters report that said Saudi Arabia could boost crude output in August to new records at 10.8-10.9 million bpd, overtaking Russia’s production, even as OPEC aims for a pact to curb global output.

The Saudis told OPEC they pumped 10.67 million bpd in July, versus their previous record of 10.56 million in June 2015. [OPEC/M]

Saudi-based industry sources said earlier in the year they expected the kingdom’s output to edge near record highs to meet summer demand for power. But they said it was unlikely that Saudi output will flood the market.

“One certain thing to be aware of is the Reuters report that Saudis may increase production to new record highs pushing near 11 million barrels per day,” said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in New York.

“With the U.S. rig count coming back online for several weeks, even if a freeze did happen we would be talking about freezing at higher levels of output,” Zahir said.

Before last week’s drawdown, U.S. crude stockpiles had risen unexpectedly in three previous weeks. The U.S. oil drilling rig count has also risen without pause for seven weeks, signaling more production ahead. [RIG/U]

Reports of refinery outages in the United States, including a crude unit at Exxon Mobil Corp’s <XOM.N> 502,500 barrel per day (bpd) plant at Baton Rouge in Louisiana, added to the market’s downside. [REF/OUT]

Traders will be on the lookout for a U.S. Federal Reserve statement due at 2:00 p.m. (1800 GMT) to gauge if interest rates are to rise soon.

(Additional reporting by Amanda Cooper in LONDON and Henning Gloystein in SINGAPORE; editing by Jason Neely and Marguerita Choy)

Tiny German bank breaks taboo by charging rich clients for deposits

Raiffeisenbank Gmund

By Alexander Hübner

FRANKFURT (Reuters) – A small cooperative bank in the Bavarian Alps is breaking a German taboo by charging wealthy clients to deposit their money following the European Central Bank’s shift to negative rates.

Raiffeisenbank Gmund on the idyllic Tegernsee lake, home of wealthy actors and sports stars, will apply a custody charge of 0.4 percent to sight deposit accounts over 100,000 euros ($111,500.00) from September, a board member told Reuters. Such accounts allow depositors to withdraw their money at any time.

Several German banks have passed on the ECB’s negative deposit rate to large commercial customers such as companies and institutional investors, but applying the charge to retail customers has been seen as a step too far.

“We have written to all large depositors and recommended that they think things over. If you don’t create an incentive to change things then things don’t change,” Josef Paul said.

Cooperative direct bank Skatbank has applied negative rates on deposits over 500,000 euros since 2014, while ecological lender GLS bank, also part of the cooperative system, is asking customers for a “solidarity contribution” to help offset negative interest rates.

LAST RESORT

The ECB has resorted to a negative deposit rate to try to encourage banks to lend to stimulate Europe’s economy, which is still suffering from the after-effects of the financial crisis. Banks, meanwhile, are seeking to encourage depositors to shift their cash out deposit accounts into other financial products.

Germany’s cooperative banking association BVR said it did not expect other deposit takers in its network to follow Raiffeisenbank Gmund’s lead.

“We don’t believe retail banking will see widespread application of negative rates in Germany, not least because of the intense competitive situation in the German banking market,” the BVR said.

Even in Gmund, the lion’s share of customers are not affected. Paul’s cooperative bank wrote to less than 140 clients, who together hold 40 million euros in deposits, about the new charge, which has already proved effective.

“Some of the customers we informed have opted for alternative investments and others moved their money to other banks,” Paul said, adding that a widening of the charge to less wealthy customers is not planned.

Raiffeisenbank Gmund is one of the country’s smaller cooperative lenders, with six branches and total assets of just 145 million euros. It has a substantial overhang of deposits, only part of which it manages to recycle as loans.

Bavaria’s GVB cooperative banking association, with 269 member banks, backed Gmund’s position.

“The ECB’s extreme monetary policy is creating considerable costs for all banks,” a GVB spokesman said.

“As a last resort, they also have to look at a means to be reimbursed for the cost of deposits,” he said.

(Writing by Jonathan Gould; Editing by Alexander Smith)

Feds to raise rates this year, likely in December after election

A man walks past the Federal Reserve Bank in Washington, D.C., U.S.

By Sumanta Dey and Deepti Govind

(Reuters) – The U.S. Federal Reserve is likely to raise interest rates in December, after the Nov. 8 presidential election, according to a Reuters poll that also predicted a pickup in economic growth but with still relatively subdued inflation.

That would be one full year after the last rate increase, something most Fed policymakers and private forecasters had not expected.

The poll forecast two more rises next year, taking the federal funds rate to 1.00-1.25 percent at the end of 2017.

A move in 2016 has been delayed, first on a sharp fall in global markets and then after Britain voted to leave the European Union.

But the Fed’s continued eagerness to tighten monetary policy underscores both the relative strength of the world’s largest economy as well as how tough the central bank is finding such a move.

Its peers from Europe to Asia are easing policy. New Zealand on Thursday cut interest rates to record lows, joining Australia, to stave off deflation and stem the rise in its currency. [ECILT/EZ] [ECILT/GB]

Of the 95 economists surveyed over the past week, 69 expect the federal funds target rate to rise to 0.50-0.75 percent by the fourth quarter from 0.25-0.50 percent currently. One forecast rates at 0.75-1.00 by year-end.

With a subdued inflation outlook, however, a slim majority of economists said a Fed rate hike this year would serve more as a confidence boost rather than a measure to quell pressure from rising prices.

After a weaker-than-expected 1.2 percent annualized pace of expansion in the second quarter, the U.S. economy is expected to grow 2.5 percent this quarter and slightly more than 2 percent in each quarter until the end of 2017, the poll found.

But respondents expected the core personal consumption expenditure price index, the Fed’s preferred inflation gauge, to average just 1.8 percent in the fourth quarter and stay below the central bank’s 2 percent target even at the end of 2017.

Cantor Fitzgerald analyst Justin Lederer said he expected one interest-rate move, in December.

“The election is one of the reasons why they can’t go sooner,” he said. “We don’t think the Fed will want to disrupt the election.”

The Fed’s November policy meeting is only days before the election. Economists gave a median probability of 58 percent of a move the next month, in December, up 8 percentage points from a poll last month.

Financial markets, however, are placing only a little more than one-in-three chance of a hike at the Dec. 14 meeting, according to data on the CME Group website.

A majority of economists said the probability of a September hike had risen after a report last week showed 255,000 new jobs were created in July and wage growth picked up pace, although that was still not their central view.

Respondents gave just a 25 percent chance of a hike for September, with only a handful of economists calling for one then.

A few banks said there would be no increase at all this year.

(Polling and analysis by Vartika Sahu; Editing by Lisa Von Ahn)

Dollar drops as Fed rate rise prospects reassessed

A bank employee counts U.S. dollar notes at a Kasikornbank in Bangkok, Thailand

By Anirban Nag

LONDON (Reuters) – The dollar fell against a basket of currencies on Wednesday as investors re-evaluated whether the Federal Reserve will raise interest rates this year, which also sent the higher-yielding Australian dollar to its loftiest level since late April.

The U.S. dollar sagged against the euro and the yen after downbeat productivity data sapped some of the momentum it had gained from last week’s robust jobs report.

U.S. Treasury yields fell after the productivity report suggested the economy may not be growing as quickly as anticipated, prompting investors to cut long-term inflation expectations. According to CME’s Fedwatch, investors have trimmed chances of a rate rise in December 2016.

The dollar was down 0.6 percent at 101.28 yen, having gone as high as 102.66 on Monday on the strong non-farm payrolls data. The euro rose 0.5 percent to $1.1173, touching a 5-day high of $1.1184.

The dollar index dropped 0.6 percent to 95.577.

“The release of the third consecutive decline in quarterly U.S. productivity – the worst run since at least 1980 – does not bode well for the prospects for the dollar,” Morgan Stanley head of currency strategy, Hans Redeker, said.

The Australian dollar advanced to a more than three-month peak of $0.7729, buoyed this week by Australia’s relatively high yields and stronger investor appetite for risk.

“Part of the Australian dollar’s resilience is the lack of follow-through in pricing for a Fed hike in September, limiting the U.S. dollar’s gains,” analysts at Westpac said in a note. They recommended investors to buy the Australian dollar.

The U.S. dollar’s weakness also gave struggling sterling a lift. The pound was up 0.5 percent at $1.3061, recovering from $1.2956 struck on Tuesday, its lowest since July 11.

The pound took a knock on Tuesday after Bank of England policymaker Ian McCafferty said more monetary easing was likely to be needed if the UK’s economic decline worsened.

In European trade, attention briefly turned to the Norwegian crown. The crown scaled its highest against the euro in more than a month, after inflation rose more than expected in July, sapping expectations of interest rate cuts in the near term from the Norges Bank.

Data showed July core inflation rose to 3.7 percent from a year ago, beating expectations of a 3.1 percent rise. For the month, core inflation rose 0.7 percent.

The euro fell 0.8 percent to 9.2575 crowns, its lowest since July 5, and down from around 9.33 beforehand.

Earlier, Nordea Markets said the Norwegian policy rate had bottomed out at 0.50 percent and the central bank was no longer expected to cut rates in September.

(Editing by Toby Chopra)

U.S. household debt rises to $12.29 trillion in Q2

(Reuters) – U.S. household debt hit $12.29 trillion in the second quarter, up $434 billion from a year earlier as auto loans and credit card debt increased, a Federal Reserve Bank of New York survey showed on Tuesday.

Some 4.8 percent of the outstanding debt was in some stage of delinquency, down from 5.6 percent from a year ago, according to the quarterly household debt and credit report.

Auto debt was $1.10 trillion, up $97 billion from a year earlier, while the aggregate credit card limit increased for the 14th straight quarter, reflecting Americans’ easier access to credit as the 2007-2009 financial crisis fades.

Mortgage debt was $8.36 trillion, up $246 billion from last year, while student loan debt was $1.26 trillion, up $69 billion.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

Obama, Singapore leader push Pacific trade deal in state visit

Obama and Loong discussing Trans-Pacific Deal

By Timothy Gardner and Ayesha Rascoe

WASHINGTON (Reuters) – President Barack Obama welcomed Singapore’s prime minister for a state visit on Tuesday with a major trade deal and China’s development of islands in the South China Sea at the top of their agenda.

Both the United States and Singapore are signatories to the 12 nation Trans-Pacific Partnership (TPP), which Obama hopes Congress will approve before he leaves office in January.

Obama and Prime Minister Lee Hsien Loong touched on the trade issue at the opening ceremony for Lee’s visit, which is the first official one by a prime minister from Singapore since 1985.

“We stand together for a regional order where every nation large and small plays and trades by the same rules,” Obama said.

Lee said TPP would be a major trading group linking both sides of the Pacific. “Not only will the TPP benefit American workers and businesses, it will send a clear signal and a vital signal that America will continue to lead in the Asia Pacific and enhance the partnerships that link our destinies together,” he said.

The TPP faces a battle in Congress. Some U.S. voters blame trade deals for shutting factories, shipping jobs overseas and favoring corporations over the environment. The deal also is opposed by presidential candidates Hillary Clinton, a Democrat, and Donald Trump, a Republican.

Obama believes the TPP will fix problems in a previous trade deal, the 1994 North American Free Trade Agreement, and will create jobs by allowing people around the world to buy U.S. products. The TPP aims to liberalize commerce in 40 percent of the world’s economy and would be a check against China’s influence in Asia.

Also on the agenda during Lee’s visit will be China’s build up of islands in the South China Sea. China claims most of the energy-rich waters through which trillions of dollars worth of shipping trade passes annually and has been fortifying islands in the sea. Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims there.

China has accused the United States of fuelling tensions in the region with patrols and exercises.

Singapore is not a claimant to the South China Sea, but the tiny city-state has the largest defense budget in Southeast Asia at a time when nations are stepping up their military spending in response to China’s assertiveness in the region.

(Reporting by Timothy Gardner; Editing by Bill Trott)

Oil prices slide on oversupply, economic headwinds

Smoke rises from State Oil Refinery Nico Lopez in Havana, Cuba

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices fell to 2-1/2-month lows on Monday on rising concerns that a global glut of crude and refined products would weigh on markets, delaying a long-anticipated rebalance in the market.

Data from market intelligence firm Genscape pointing to a an inventory rise of 1.1 million barrels at the Cushing, Oklahoma delivery base for U.S. crude futures in the week to July 22 weighed down crude prices, said traders who saw the numbers.

A massive overhang in refined products, particularly gasoline, despite forecasts for record U.S. summer driving has made investors less optimistic about a quick market rebalancing.

The threat of resurgent U.S. oil production with the rise of drilling rigs and a strong dollar added to the gloomy sentiment in the market, traders and brokers said. [USD/] [RIG/U]

Brent crude futures were down 89 cents at $44.80 a barrel by 11:13 a.m. EST (1513 GMT), their lowest since May 10. U.S. crude was down 93 cents at $43.26 a barrel, after touching a low of $43.18, also the lowest since May 10.

“Supply continues to return from disruptions, refined products are severely oversupplied, crude demand is falling well short of product demand, and key product demand is decelerating,” Morgan Stanley said in a note.

The decline in U.S. output has been key to balancing a market that has been grappling with excess crude for nearly two years, but with prices recovering from 12-year lows, signs of drilling activity have re-emerged.

U.S. drillers added oil rigs for a fourth consecutive week, according to last week’s data from a closely followed report by energy services firm Baker Hughes.

But it could be premature to assume it could lead to a rise in production, some analysts said.

“Although drilling activity is now at its highest level since the end of March, it is still 30 percent below the level at which it found itself at the beginning of the year.” Commerzbank analysts said in a note.

Barclays bank said global oil demand in the third quarter of 2016 was expanding at less than a third of the year-earlier rate, weighed down by anaemic economic growth.

Globally, demand support from developed economies had faded, while growth from China and India had slowed, Barclays said.

New tensions in Libya highlight that the OPEC member is unlikely to see a significant boost to its oil exports any time soon, after the national oil corporation said it objected to a deal to reopen key ports.

(Additional reporting by Ahmad Ghaddar in London, Henning Gloystein in Singapore and Osamu Tsukimori in Tokyo; Editing by William Hardy and M Choy)