2024-09-06 15:19

Sept 6 (Reuters) - Traders priced in a quarter-point Federal Reserve interest-rate cut this month, with a bigger move expected at its next meeting, after Fed Governor Christopher Waller said recent labor market data shows it is time to cut rates and said he could support a bigger rate cut if the data warrant it. Traders see a 70% chance of a quarter-point move this month based on rate-futures prices, and are pricing in a Fed policy rate range of 4.5%-4.75% by the Fed's November meeting. The policy rate has been in the 5.25%-5.50% range for more than a year. Sign up here. https://www.reuters.com/markets/rates-bonds/traders-see-fed-starting-with-25-bps-cut-sept-2024-09-06/

2024-09-06 14:19

TORONTO, Sept 6 (Reuters) - Canadian economic activity contracted for the first time in 13 months in August as employment growth slowed and price pressures heated up, Ivey Purchasing Managers Index data showed on Friday. The seasonally adjusted index fell to 48.2 from 57.6 in July. It was the first time since July 2023 that the index was below the 50 threshold, indicating a decrease in activity. The Ivey PMI measures the month-to-month variation in economic activity as indicated by a panel of purchasing managers from across Canada. The gauge of employment fell to an adjusted 54.7 from 56.1 in July, while the prices index was at 63.4, up from 59.2 and its highest level since May. The unadjusted PMI fell to 50.3, its lowest level this year, from 55.3. Sign up here. https://www.reuters.com/world/americas/canadas-ivey-pmi-shows-activity-contracting-august-2024-09-06/

2024-09-06 14:17

NEW YORK, Sept 6 (Reuters) - STORY: U.S. employment increased less than expected in August, but a drop in the jobless rate to 4.2% suggested an orderly labor market slowdown continued and probably did not warrant a big interest rate cut from the Federal Reserve this month. Nonfarm payrolls increased by 142,000 jobs last month after a downwardly revised 89,000 rise in July, the Labor Department's Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast payrolls increasing by 160,000 jobs after a previously reported 114,000 gain in July. Estimates ranged from 100,000 to 245,000 jobs. Markets expectations for an upsized 50 basis point cut at the Federal Reserve's mid-September meeting increased after the data. MARKET REACTION: STOCKS: S&P 500 E-minis erased early losses were up 5.25 points, or 0.1%.BONDS: he yield on benchmark U.S. 10-year notes edged down 0.4 basis point to 3.729%, the two-year note yield declined 4.4 basis points to 3.7082%.FOREX: The dollar index slipped 0.02% at 101.02. COMMENTS: GENNADIY GOLDBERG, HEAD OF US RATES STRATEGY, TD SECURITIES, NEW YORK “I think the market's really struggling with this one because it's really in the middle of what could be used as a justification for either a 25 or 50 basis point rate cut.” "It is consistent with a cut in September. The big question right now is just what's the size? I think that's what the markets are struggling with right now. Is this number weak enough for a 50 basis point rate cut in September? If you ascribe a more activist role to the Fed, then yes. If you think they are looking to be a little bit more measured, then no. But either way, I think the markets are going to be really balanced on a knife's edge until the Fed shows support for either a 25 or a 50 one way or the other, and it's really a tough decision. “If you look at the payroll report net of revisions, it's not great, especially net of the 86K revisions we saw for the last two months. So I do think that the unemployment rate is the key, but it's not indicative of a very strong labor market. We do see the labor market really not just coming into balance, but really starting to cool off quite significantly, which could make the Fed quite nervous.” LOU BASENESE, PRESIDENT AND CHIEF MARKET STRATEGIST, MDB CAPITAL, NEW YORK “Everything is going down. You saw the lower-than-expected adds, you saw the last two months revised down, which means rates have to go down. Powell has got no choice. What is to be determined is if he timed it perfectly with rate cuts or if he was too late. I think so far, he's OK. You don't see massive layoffs yet. But if we start seeing layoffs in the next month or two, it's going to suggest his timing was too late. "Stocks are going to go down until next week when the Fed makes it definitive that they're cutting, which could put pressure on them to do 50 basis points versus 25. I think 25 is all but guaranteed. But downwards stocks pressure heading into the meeting could change it to a 50-basis point cut.” DREW MATUS, CHIEF MARKET STRATEGIST, METLIFE INVESTMENT MANAGEMENT, NEW JERSEY “The payroll report suggests there is no reason for the Federal Reserve to rush. Payroll growth was OK, unemployment was effectively unchanged and hours worked increased, boosting weekly take home pay for workers. The labor market is slowing, but at a slow pace, allowing the Fed to move more deliberately in September. We continue to expect 75 basis points of easing this year as the Fed calibrates policy to manage the ongoing economic slowdown.” BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN"I love all animals, so I mean this with all respect, but there was a dead cat bounce in August from the July softness. There were large back-month revisions. There was a large increase in part-time employment. There was a decrease in temporary help services again. The diffusion index for manufacturing fell. The headline number of 142,000 would ordinarily be considered healthy, but this labor market is held together by duct tape and string. "Could the Fed cut by 50 bps? Yes, but will they? No. They probably want to start with 25 and retain the option to increase that to 50 rather than just jump right into a 50." ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, FAIRFIELD, CONNECTICUT “Market is trying to digest the news just as much as anybody else. The initial pop in futures was based on the unemployment rate being pretty much right in line with expectations and down from the prior report, but when they get into the numbers, like the non-farm payroll itself, it shows that decline in the number of jobs being created versus expectations. And then the prior revisions lower, which is really sort of speaking to the economy slowing down. "I don't think it's an indication that the economy is collapsing by any means, but it is an indication that it’s slowing. This means a 25-basis-point rate cut. I don't think it speaks to needing anything more than that right yet. "Those that might have been kind of hoping for a 50bps rate cut maybe disappointed, but they have to know that they better be careful what they wish for.” KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO "The U.S. economy looks more likely to gouge the runway in the months ahead, justifying an increasingly aggressive response from officials at the Federal Reserve. "A half-point rate cut at the central bank’s September meeting remains unlikely, but today’s release provided clear evidence of a sharp deterioration in labor market fundamentals, and will bolster bets on at least one jumbo-sized rate cut in the coming months. "The dollar is retreating, yields are coming down across the front end of the curve, and rate-sensitive asset classes are adding to recent gains." MICHAEL BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON “The August US labour market report painted something of a mixed picture of the employment situation... all of this does little to clear-up the debate over the September Fed meeting." "Doves will point to a cooling pace of headline payrolls growth as potential reasoning for a larger 50bp cut. Hawks, meanwhile, will reasonably point towards the lack of further cooling compared to the July report, and hot-ish earnings growth, as reasons to kick-off the normalization cycle with a more modest 25bp move. My base case remains for the latter, particularly given the risk the Fed run of sparking a market panic were a larger cut to be delivered." MATT ROWE, HEAD OF PORTFOLIO MANAGEMENT, CROSS ASSET STRATEGIES AT NOMURA CAPITAL MANAGEMENT, NEW YORK, NY "The numbers came in at an ideal spot for what the market was hoping for. The unemployment rate remained relatively low coming in at 4.2%. It’s not showing some kind of catastrophe break down in the labor market. Also the hourly rate was not cut back. One thing that people were focused on was to see if from an employer standpoint if hours were being cut back and that doesn't appear to be the case." "Today's numbers don't look like a recession is imminent. It just looks like things are slowing down a bit, not like something cataclysmic is imminent. "The market's going to love this. Today, I think we'll see the market rally on the open. What the market's going to get out of this is clear cover for the Fed to be cutting rates and a path to cutting rates more than once ... I would be surprised if we don't finish the day in the green." (This story has been corrected to fix the dateline to Sept. 6 from Sept. 5) Sign up here. https://www.reuters.com/markets/us/view-august-us-payrolls-short-expectations-boosts-bigger-rate-cut-view-2024-09-06/

2024-09-06 12:57

WASHINGTON, Sept 5 (Reuters) - The Federal Reserve said on Thursday it was seeking feedback on how it operates its "discount window," which is intended to provide emergency lending to banks in times of stress. The Fed said it wanted comments on various aspects of how banks deal with the window, including the collection of legal documentation, pledging and withdrawing collateral, and extending credit. The central bank said the input will inform its efforts to keep the tool "effective and efficient." The solicitation marks the latest effort by the Fed to tweak the discount window, which banks have long resisted utilizing out of concern that it carries a stigma that could undermine stability in times of stress. The Fed's inquiry does not include any suggested changes, but central bank officials and other regulators have discussed making changes to the discount window to improve its utility, such as requiring banks to place cash or other assets with the Fed as collateral in case emergency borrowing is needed in the future. The Fed is giving the public 90 days to provide feedback. Fed data released in April found that less than half of U.S. banks had established borrowing capacity via pledged collateral at the discount window, despite persistent calls from regulators that it can be a helpful tool to navigate stressful periods. Sign up here. https://www.reuters.com/business/finance/fed-seeks-feedback-emergency-lending-operations-2024-09-05/

2024-09-06 12:39

SINGAPORE, Sept 6 (Reuters) - Asian refiners' margins slumped to their lowest seasonal levels since 2020 this week as supplies of diesel and gasoline rose after peak summer travel demand ended, industry officials and analysts said on Friday. Persistent weak margins could prompt refiners to trim their output again, adding to a round of cuts that took place earlier in the year when margins were also low and curbing crude demand in Asia, the region that contributes most to global oil demand growth. "Asia has been cutting runs since May, 400,000-500,000 barrels per day, including China," said Amrita Sen, founder and director of Research at consultancy Energy Aspects. "We've already included 300,000 bpd of run cuts for Q4 potentially another 100,000 based on where the margins are today." Complex refining margins in Singapore, the regional bellwether, slumped to $1.62 a barrel this week, LSEG data showed, with the average in the first week of September down 68% from the same period last month. Margins are at the lowest seasonal level since 2020, slipping into a trough earlier than usual, as U.S. summer gasoline consumption disappointed while China's economic slowdown dampened demand. Asia's diesel margins are hovering near 18-month lows while the cash discounts for 10ppm sulphur gasoil have hit a near four-year low amid a widening in contango in its market structure. Prompt prices are lower than those in future months in a contango market, signalling ample supply. "Diesel demand in Europe is quite poor for now," Formosa Petrochemical's spokesman KY Lin told Reuters. Northeast Asian refineries are pressured by high inventories as their oil has nowhere else to go, except regional destinations such as Singapore and Australia, he added. Since June, traders have been moving record volume of diesel on very-large crude carriers from Asia to the west, adding to rising inventories in Europe. In China, apparent diesel demand is down 3% in the first seven months this year, said Victor Yang, senior analyst at Chinese consultancy JLC. This comes after top refiners Sinopec and PetroChina reported sharp year-on-year drops in first-half sales, he added. Sales in September and October, which are typically peak diesel consumption months in China, may also disappoint, he said. China's July oil refinery output sank to the lowest since October 2022, while Sinopec, Asia's largest refiner, has said it plans to keep crude processing rates stable in the second half versus the first half. For gasoline, prices in Asia slipped to their lowest in three years this week with cracks hovering at their lowest since October, LSEG data showed. Gasoline prices came under pressure from a switch to winter grade in the United States, and as Nigeria's new Dangote refinery has started producing the motor fuel, Lin said. An improvement in naphtha margins and robust demand for Very Low Sulphur Fuel Oil (VLSFO) are providing some support for refiners' margins, he added. Formosa is gradually reducing operating rates at its refinery ahead of a scheduled maintenance in mid-September, Lin said. Its refinery is processing 420,000-430,000 barrels per day of crude this week, compared with 440,000-450,000 bpd in August, he added. An official at a South Korean refiner it is putting in place a flexible production plan with the aim of providing stable supply to meet increased heating oil and jet fuel demand in fourth quarter. Sign up here. https://www.reuters.com/business/energy/asia-refining-margins-lowest-seasonal-levels-since-2020-supplies-grow-2024-09-06/

2024-09-06 12:07

Sept 6 (Reuters) - Canada Nickel (CNC.V) , opens new tab said on Friday that Export Development Canada has expressed interest in providing a long-term loan of up to $500 million for the miner's Crawford project in Ontario. The letter of interest proposes a tenor of up to 18 years, subject to certain conditions. Canada has identified 31 minerals, including copper, lithium and nickel, as critical for its strategic uses in modern technology and the energy transition, such as in electric vehicle batteries. It has also tightened scrutiny on the ownership of the Canadian projects that produce the critical metals and has asked several Chinese investors to divest their holdings on national security reasons. The company, in which Agnico Eagle Mines (AEM.TO) , opens new tab owns nearly 11%, said it was working with its advisers to secure the remaining funding need to start construction of the mine after receiving the necessary permits, expected to be by mid 2025. Canada Nickel has also said it was looking to raise $1 billion to build a nickel-processing plant in Ontario and expects to process 80,000 tonnes of nickel annually. Sign up here. https://www.reuters.com/markets/commodities/canada-nickel-says-export-development-canada-plans-give-500-mln-loan-mine-2024-09-06/