2024-08-23 10:15
Aug 23 (Reuters) - U.S. equity funds attracted significant inflows in the seven days to Aug. 21, bolstered by bets of a Federal Reserve rate cut in September and easing worries about a potential downturn in economic growth. According to LSEG data, investors racked up a net $5.97 billion worth of U.S. equity funds during the week, marking their largest weekly net purchase since July 17. A benign inflation report last week and the Fed meeting minutes on Wednesday, indicating a potential rate cut in September, boosted investor appetite for risk assets. Meanwhile, strong U.S. retail sales data and upbeat consumer sentiment numbers last week alleviated earlier fears of a sharp slowdown, and propped up stock markets. Investors scooped up a robust $5.19 billion worth of U.S. large-cap funds in their largest weekly net purchase since July 24. They also acquired $1.77 billion worth of small-cap funds, but sold mid-cap and multi-cap funds to the tune of $1.29 billion and $807 million, respectively. Among sectoral funds, consumer staples, financials, consumer discretionary, and tech attracted significant inflows, worth $768 million, $589 million, $309 million and $257 million respectively. Investors, meanwhile, withdrew about $620 million from utilities, snapping a five-week buying trend. Demand for U.S. bond funds continued for a 12th successive week as investors allocated about $4.43 billion to these funds on a net basis. U.S. government bond funds secured a hefty $2.26 billion, the fourth straight weekly inflow. High yield and general domestic taxable fixed income funds also observed a notable $1.83 billion and $865 million worth of net purchases, respectively. Meanwhile, money market funds remained popular for a third week as investors poured about $19.19 billion into these funds. Sign up here. https://www.reuters.com/markets/us-equity-funds-draw-large-inflows-rate-cut-bets-easing-growth-concerns-2024-08-23/
2024-08-23 10:04
A look at the day ahead in U.S. and global markets from Mike Dolan Jerome Powell takes centre stage at the Federal Reserve's Jackson Hole jamboree on Friday but the Fed chair would have to sound super hawkish to stop the dollar (.DXY) , opens new tab recording one of its worst weeks of the year. Powell's colleagues have already done a fine job tamping down expectations that the Fed's first interest rate cut next month will be as much as 50 basis points - and futures markets are squarely priced for little more than a quarter-point move. Boston Federal Reserve President Susan Collins on Thursday said the timing "seems appropriate" to begin easing but added that she favored a "gradual methodical approach to revisiting our policy stance over time". The latest U.S. business surveys for August underlined that lack of urgency as they beat forecasts, due largely to robust responses from service sector firms. Home sales in July were also above expectations. But it wasn't all sweetness and light, with manufacturing still stuck in contraction mode and weekly jobless claims ticking higher. What's more, the aggregate global economic surprise index compiled by Citi is now clocking its most negative reading since the depths of 2020's pandemic lockdowns. And so the direction of travel for "restrictive" U.S. interest rates remains down, almost 100bp of Fed cuts this year remain in futures prices and the dollar will likely struggle to reverse this month's sharp retreat in that environment. That's especially so against the yen, where Bank of Japan governor Kazuo Ueda told parliament the central bank will push ahead with further rate rises there as long as the incoming economic data pans out as now assumed. And on that score, the latest Japanese inflation numbers were bang in line, with annual core consumer price gains for July as expected at 2.7%. Although he acknowledged policy caution following recent market turbulence, Ueda told parliament: "Japan's short-term rates are very low. If the economy is in good shape, they will move up to levels deemed neutral." Dollar/yen slipped back below 146 after the testimony and the Nikkei (.N225) , opens new tab stock benchmark closed 0.4% higher. Two-year Treasury yields barely clung on to 4% ahead of Powell's keynote speech at 10am New York time, albeit up more than 10bps from the week's low. And Wall Street stock futures clawed back much of Thursday's swoon ahead of Friday's bell, with the S&P500 (.SPX) , opens new tab still eyeing the record high it came within half a percent of hitting intraday yesterday. The VIX volatility gauge (.VIX) , opens new tab fell back to just above 17 - a fraction below its long-term median. Perhaps as big as Powell's speech for stock market megacaps is the approach of Wednesday's quarterly earnings report from artificial intelligence bellwether Nvidia (NVDA.O) , opens new tab. In politics, Vice President and Democratic candidate in November's White House race Kamala Harris delivered her key address to the Democratic convention in Chicago late on Thursday - saying she will aim to pass a middle-class tax cut as one of her plans. Although the gap in betting markets has narrowed over the past week, PredictIt's site shows Harris remains favourite to win the election over challenger Donald Trump. In overseas corporate news, Swiss food group Nestle (NESN.S) , opens new tab lost 1.5% after announcing it would replace CEO Mark Schneider with company veteran Laurent Freixe. Key developments that should provide more direction to U.S. markets later on Friday: * US July new home sales; Mexico Q2 current account * Federal Reserve Chair Jerome Powell speaks in Jackson Hole; Bank of England Governor Andrew Bailey and Norway's central bank governor Ida Wolden Bache also speak at the symposium Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-2024-08-23/
2024-08-23 08:45
MUMBAI, Aug 23 (Reuters) - The Indian rupee rose in early trade on Friday, boosted by gains in most of its Asian peers ahead of closely watched remarks from Federal Reserve Chair Jerome Powell later in the day. The rupee was at 83.8850 against the U.S. dollar as of 10:10 a.m. IST, higher than its close of 83.9525 in the previous session. Asian currencies were mostly higher on the day, with the offshore Chinese yuan up 0.1% at 7.13, while the Thai baht rose 0.4% to lead gains. The dollar index was down slightly at 101.3. With "dollar on the weaker side," the rupee should be closer to 83.75, but the absence of strong inflows alongside persistent dollar demand from importers has kept it in narrow range, a foreign exchange trader at a state-run bank said. Local oil companies were bidding for dollars on Friday as well, keeping a lid on the currency's upside, the trader added. Overseas investors have pulled out about $2.1 billion from domestic stocks in August so far, in contrast to nearly $7 billion in net inflows in June and July. The rupee is likely to trade with a positive bias on the day but expect gains to be limited near 83.80, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities. Meanwhile, Federal Reserve policymakers lined up in support of U.S. interest rate cuts starting next month in remarks on Thursday. Comments from Fed Chair Powell will be in focus later in the day as investors gauge the extent and timing of U.S. rate cuts. Interest rate futures have fully priced a 25 basis-point September rate cut, while the odds of 50 bp cut are at 26%, according to CME's FedWatch tool. Sign up here. https://www.reuters.com/markets/currencies/rupee-lifted-by-gains-asian-peers-oil-firms-bids-cap-upside-2024-08-23/
2024-08-23 08:17
JOHANNESBURG, Aug 23 (Reuters) - The South African rand jumped on Friday, after comments by Federal Reserve Chair Jerome Powell signalled an interest rate cut next month. At 1520 GMT, the rand traded at 17.71 against the dollar , 1.82% stronger than its previous close. "The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks," Powell said to the Kansas City Fed's annual economic conference in Jackson Hole, Wyoming. Like other risk-sensitive currencies, the rand often takes cues from global drivers such as U.S. monetary policy in addition to major local factors. The dollar index slumped 0.75% against a basket of currencies following Powell's remarks. Domestic investors will next week shift their focus towards July producer inflation, money supply, trade and budget balance figures for clues on the health of South Africa's economy. On the Johannesburg Stock exchange, the blue-chip Top-40 index (.JTOPI) , opens new tab closed up 0.73%. South Africa's benchmark 2030 government bond was stronger, with the yield down 13.5 basis points to 9.075%. Sign up here. https://www.reuters.com/world/africa/south-african-rand-firms-traders-wait-powell-speech-2024-08-23/
2024-08-23 07:56
SHANGHAI, Aug 23 (Reuters) - Having spent all year trying to put a floor under the tumbling yuan, China's central bank is suddenly faced with the opposite problem and is turning to subtle ways to stop the currency from appreciating sharply. The usually restrained yuan has strengthened 1.3% against the dollar in August, recouping nearly all its losses in the first half of the year. On Friday, it looked set for its fifth straight weekly gain, the longest winning streak , opens new tab in more than three years. While none of the underlying drivers at home, namely a weak economy and capital flight, has changed, the yuan has been helped by growing bets for Federal Reserve interest rate cuts, which are weakening the dollar, and by a rally in the Japanese yen. Meanwhile, Chinese authorities have worked behind the scenes to ensure the currency doesn't spike abruptly, which could roil fragile domestic financial markets and hurt exporters. They have surveyed the market to gauge the pressure, and quietly relaxed restrictions on imports of gold and trading positions in the yuan for some banks. "The government is probably less concerned about depreciation but remains wary of FX volatility," said Gary Ng, senior economist for Asia Pacific at Natixis. "While the pressure on the yuan may ease as the Fed may finally cut interest rates, there may be sudden and significant movements in capital flows." One big reason for the People's Bank of China (PBOC) to be worried is the build-up of speculative short yuan positions during the currency's steady decline since early 2023, which could be unwound messily if the currency rises fast. Foreign companies operating in China, domestic exporters and investors have swapped yuan for dollars to earn better returns in what is known in market circles as the yuan carry trade. Analysts at the Macquarie Group estimate exporters and multinational companies have accumulated foreign currency holdings of more than $500 billion since 2022. "As the yuan appreciates... concerns about the potential unwinding of yuan carry trade and shocks to financial markets may arise," said Zhu Chaoping, global market strategist at J.P. Morgan Asset Management. "Recent market volatility in Japan might have reminded policymakers about these risks." China's currency regulator, the State Administration of Foreign Exchange (SAFE), and the PBOC did not immediately respond to Reuters requests for comment. PREVENT A STAMPEDE Possibly to get an idea of pent-up yuan buying that could come as the currency appreciates, SAFE surveyed banks about their clients' FX conversion ratio - the proportion of revenues exporters convert into yuan - last week, two people with direct knowledge of the matter told Reuters. "FX settlement is the issue that everyone in the market is mostly concerned about, besides the Fed rate cut," said Liu Yang, general manager of the financial market business department at minerals exporter Zheshang Development Group. "After all, exports are the only major driver of China's economy among its traditional 'troika' (traditional growth engines), and regulators do not want the yuan to appreciate rapidly and substantially to weaken the competitiveness of export products," he said. Separately, guidance given to banks last year banning them from keeping short yuan positions at the end of a day's trading has also been relaxed for some banks, two people with direct knowledge of the matter told Reuters. Chinese banks have also been given new gold import quotas by the central bank, Reuters reported. Gold imports are usually curtailed when the yuan faces depreciation pressures. The measures are subtle, analysts said, and together with the trend in the PBOC's daily benchmark guidance setting for the yuan, simply point to a desire to contain volatility, rather than thwart gains. Still, market participants are revising their yuan forecasts. Analysts at BofA Securities expect the yuan will continue to weaken, "given subdued growth and PBOC's easing bias", but see the yuan at 7.38 per dollar by year-end, not 7.45 as they had previously forecast. It is currently around 7.14 per dollar. Sign up here. https://www.reuters.com/markets/currencies/after-battle-with-yuan-bears-china-is-now-keen-avoid-sharp-currency-gains-2024-08-23/
2024-08-23 07:42
LONDON, Aug 23 (Reuters) - Investors poured $37 billion into cash-like money market funds (MMFs) in the week to Wednesday, Bank of America said on Friday, as they braced for the U.S. Federal Reserve to cut interest rates in September. It put MMFs on track for their biggest three-week cumulative inflow since January at $145 billion, BofA said, citing figures from financial data provider EPFR. Investors put $20.4 billion into stocks, $15.1 billion into bonds, and $1.1 billion into gold, BofA said, in its weekly round up of flows in and out of world markets. Many fund managers hope rate cuts will lower the returns on MMFs and cause a rush of cash into stocks and bonds. Yet big investors typically flock to money market funds before the Fed cuts rates, as the range of short-term fixed income securities in the funds means they tend to offer higher returns for longer than short-term Treasury bills. "Rate cuts not a likely spark for equity buying from the $6.2 trillion money market fund (sector)," BofA strategists, led by Jared Woodard, wrote. "History shows the first Fed cut precedes more cash inflows in a 'soft' landing, and bonds the likely winner if 'hard'." Recent economic data, broadly speaking, has pointed to a gradual economic slowdown, or 'soft landing' as opposed to a more dramatic 'hard' alternative. BofA and EPFR's data showed investment grade bonds drew their 43rd straight week of inflows at $8.1 billion. Emerging market equities received $4.7 billion in their 12th straight week of inflows, the longest streak since February 2024. Sign up here. https://www.reuters.com/markets/us/global-markets-flows-bofa-update-1-2024-08-23/
