Wednesday, 21 February 2018

Wall St. climbs as tech stocks, Amazon gain

(Reuters) - U.S. stocks were higher on Wednesday, with technology shares and Amazon driving gains ahead of minutes of the Federal Reserve’s most recent policy meeting.

The Fed left rates unchanged at the January meeting, but investors will look for its opinion on inflation and interest rates, especially after strong economic data raised concerns of an overheating economy and triggered the recent selloff.

“While the minutes may not generate quite the same response, traders will likely monitor what they say very closely for signs that policy makers are now leaning more towards three-to-four rate hikes this year, rather than two or three,” said Craig Erlam, senior market analyst at online forex broker Oanda.

Investors also took stock of the latest developments in the Broadcom-Qualcomm takeover saga.

Broadcom Corp lowered its takeover offer for chipmaker Qualcomm to account for the latter’s increased offer for NXP Semiconductors NV.Qualcomm shares fell more than 1.5 percent.

LendingClub’s shares fell more than 4 percent after the online lender posted a wider quarterly loss.

By 9:36 a.m. ET, the Dow Jones Industrial Average had gained 0.33 percent to trade at 25,046.48. McDonald's rose 1.5 percent and was the biggest driver of the blue-chip index.

The Nasdaq Composite rose 0.56 percent to 7,274.62 and the S&P 500 was up 0.41 percent at 2,727.5.

Nine of the 11 major S&P sectors were higher, led by a 0.8 percent gain in consumer discretionary shares. Amazon was up 1.3 percent and Netflix 1.7 percent.

The S&P technology index  rose 0.5 percent. The top gainers were Apple, Alphabet  and Facebook. However, the energy index  fell 0.4 percent as oil prices eased due to a rebound in dollar.

The benchmark 10-year U.S. Treasury bond yields are still near four-year highs at 2.8859.

Wall Street’s fear gauge, the CBOE Volatility index .VIX, eased at 19.21, below Friday’s close of 19.46.

Philadelphia Fed President Patrick Harker said he still thinks just two interest rate hikes this year is “likely appropriate,” but signaled he is open to more if needed.

Harker said he expected the U.S. economy to grow 2.5 percent this year before slowing to 2 percent growth next year and to below 2 percent in 2020.

Advancing issues outnumbered decliners on the NYSE by 1,778 to 748. On the Nasdaq, 1,685 issues rose and 656 fell.

Reference: Sruthi Shankar

Sterling dips ahead of crucial earnings data

LONDON (Reuters) - Sterling edged down against the dollar on Wednesday, as traders held their breath ahead of British average earnings data, which if robust will reinforce bets on a Bank of England rate hike in May.

Market have moved to price in around a 70 percent chance of a rate rise in May following a more hawkish than expected BoE policy statement earlier in the month. But economists say any tightening is contingent on solid wage growth, as well as Britain securing a post-Brexit transition deal.

Labour market data due at 0930 GMT is expected to show earnings growing at 2.5 percent.

The pound jumped on Tuesday after a media report that the European Parliament would call for giving Britain “privileged” single market access.

Growing hopes that Britain and the European Union can agree a transition deal, and then terms for the UK that allow it to remain as close as possible to the trading bloc, have helped support sterling this year.

But the British currency was back below $1.40 on Wednesday, trading down 0.2 percent by 0840 at $1.3965.

The pound was flat at 88.20 pence per euro.

“We wouldn’t be surprised if investors were genuinely confused over the short-term direction of travel for sterling given the myriad of different narratives and factors driving the currency right now,” wrote ING currency strategist Viraj Patel in a note to clients.

“Today’s eventful UK calendar is only set to ramp up the short-term noise levels. The latest jobs report will be closely watched following the BoE’s data and Brexit-contingent hawkish signal.”

Reference: reuters

Sterling slips ahead of key wages numbers

LONDON (Reuters) - Sterling fell against the dollar on Tuesday as the U.S. currency rebounded from recent lows, while traders said they were looking to crucial British earnings data due later this week that could help cement bets the central bank will hike rates in May.

Bank of England Governor Mark Carney earlier this month said interest rates needed to rise a bit faster and more than previously expected, and the market now prices in a roughly 80 percent chance of a May hike.

Analysts said the May hike was largely priced into the pound, which is up 3.4 percent against the dollar this year, and for sterling to rally further there would need to be more clarity over Britain’s departure from the European Union, or expectations of more rate hikes.

“We would need to see a significant negative [earnings data] miss to see the market reprice the chances of a May hike,” Morten Helt, a strategist at Danske Bank in Copenhagan, said, referring to data due on Wednesday.

The data is seen as crucial because the BoE has said it signalled that it needs to see rises in wage pressures before it starts to raise rates.

Carney is due to speak to a British parliamentary committee on Tuesday, but analysts said they expected him to stick to the line given earlier in the month as the market had already moved to price in a hike in May.

Helt said he thought the market was underpricing the chances of further rate hikes over the next two years, but it would take time for those expectations to adjust and to be reflected in sterling.

The pound fell 0.3 percent against the dollar to trade at $1.3953 at 0925 GMT. Sterling in January hit its highest level, at $1.4346, since the vote to leave the EU in June, 2016.

Against the euro, the pound was up marginally at 88.495 pence per euro.

Traders will be looking to an EU leaders meeting next month for progress on Britain securing itself a transition deal for when it leaves the EU.

“Shifting opinion polls regarding the merits of Brexit keep a carrot in front of the noses of sterling bulls, because there’s no doubt that any genuine hope of a soft or non-existent Brexit would be good for the currency,” Societe Generale said.

Reporting by Tommy Wilkes

Tuesday, 20 February 2018

Dollar continues recovery from three-year lows

LONDON (Reuters) - The dollar continued its rebound from three-year lows on Tuesday, having recovered 1.5 percent since Friday on the view that the U.S. currency was due a correction after a brutal sell-off in recent weeks.

The greenback has decoupled from U.S. Treasury yields since the start of the year, skidding to its lowest levels since late 2014 against a basket of major currencies despite 10-year Treasuries approaching 3 percent for the first time in four years.

That correlation breakdown has puzzled many investors. Economists have explained it by saying that the reasons for the rise in yields have not so much been driven by expectations for higher interest rates and stronger growth, but worries about runaway inflation that have caused a selloff in both the dollar and Treasuries.

But on Tuesday, the dollar rose just over half a percent against its index to 89.569, as 10-year U.S yields climbed back up to 2.92 percent.

“The dollar finally seems to be getting some support from higher US bond yields,” said ACLS Global strategist Marshall Gittler, adding that he saw further strength in the dollar against the yen in particular.

Any positive impetus from rising U.S. interest rates has been offset by a barrage of bearish factors in recent months.

Initially, the view that other central banks would catch up with the Federal Reserve in tightening policy this year was cited as a reason for the dollar’s underperformance.

Then came comments from U.S. Treasury Secretary Steven Mnuchin who stoked concerns the United States could pursue a weaker dollar policy as its trade deficit rose to highest level in almost a decade.

Mounting worries about the U.S. budget deficit, which is projected to balloon to more than $1 trillion in 2019 amid a government spending splurge and large corporate tax cuts, have also undermined the greenback.

Economists say U.S. President Donald Trump’s tax cuts and spending plans could backfire by overheating an already strong economy, causing an unwanted pick-up in inflation.

Against the yen, the dollar climbed half a percent to 107.09 yen, having bounced back from a 15-month low of 105.545 set on Friday.

Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore, said there seemed to be some short-covering in the dollar in the wake of its recent fall.

“We’ve got a lot of Fed speakers...this week. I think that could be a reason why we’re seeing some of the short dollar positions pared back,” Innes said.

He added, however, that the dollar could come under pressure if this week’s U.S. government bond auctions were to show sluggish investor demand for U.S. debt.

The euro eased 0.4 percent to $1.2360, backing down from Friday’s three-year high of $1.2556.

Reporting by Jemima Kelly

Global stocks struggle as bond yields, dollar regain traction

LONDON (Reuters) - A six-day rebound in world stocks began to splutter on Tuesday, as bond market borrowing costs regained traction and the dollar kicked firmly away from a three-year low.

Europe’s main bourses saw steady start as lower domestic currencies helped their cause but weakness across Asia where Tokyo saw a 1 percent drop  meant MSCI’s 47-country world share index was 0.2 percent in the red.

The dollar meanwhile continued its rebound from three-year lows, having recovered 1.5 percent since Friday on the view that the U.S. currency was due a correction after a brutal sell-off in recent weeks.

U.S. Treasury 10-year yields - the benchmark for global borrowing costs - were also on the up again and approaching 3 percent for the first time in four years.

“I just advise caution,” said Principal Global Investors’ chief global economist Bob Baur said about stocks as Wall Street futures also pointed lower.

“I‘m not sure whether this (early February sell-off) was the dip to buy, there will probably be a relapse and then another relapse, before maybe around mid-summer stocks make another run up.”

European bond yields pushed up too, with traders also working through the options of who could succeed Mario Draghi as European Central Bank chief next year after Spain’s economy minister was nominated for the bank’s number two job.

One of other recent catalysts for the recent market disturbances, the VIX volatility index - Wall Street’s “fear gauge” - was moving higher again as well, although at just over 20 percent in early European trading it was still well below early February’s peak of above 50.

The dollar’s rebound also meant most emerging market currencies were under pressure.

South Africa’s rand and Turkey’s lira both gave back more of their recent gains, while growing concerns about an alleged fraud at India’s second-largest state-run bank sent the rupee skidding to a near three-month low.

“Punjab National Bank will need to provide for at least a substantial portion of the exposure. As a result, the bank’s profitability will likely come under pressure,” rating agency Moody’s said as it put it on a downgrade warning.

Against the yen, the dollar climbed half a percent to 107.09 yen, having bounced back from a 15-month low of 105.545 set on Friday. The euro eased 0.4 percent to $1.2360, backing down from Friday’s three-year high of $1.2556.

In commodity markets, Oil prices were mixed, with reduced flows from Canada pushing up U.S. crude while Brent sagged $65.45 per barrel on the back of weaker Asian stocks and the dollar’s bounce.

Spot gold slipped 0.4 percent to 1,341.06 an ounce, also corseted by the dollar’s bounce, while industrial metals including copper drifted lower for a second day in a thinner-than-usual trading due to new year holidays in China.

Reporting by Marc Jones

Monday, 19 February 2018

World stocks post best week in 2 years, dollar climbs

NEW YORK (Reuters) - The dollar rose and stocks around the globe rallied for a sixth straight session on Friday to post their best week in more than two years, but a U.S. indictment over alleged Russian meddling in the 2016 presidential election cooled gains on Wall Street.

The 37-page indictment of a Russian internet agency filed by Special Counsel Robert Mueller described a conspiracy with the aim of supporting Donald Trump and sowing discord in the U.S. political system.

Wall Street turned south on news of the indictment but soon rebounded as the fundamental story has not changed, said Ben Phillips, chief investment officer of EventShares, referring to a strong corporate earnings outlook and robust economy.

Analysts continue to underestimate the pace of global growth, which has led more companies to meet or beat analysts’ earnings expectations than in any quarter in 20 years, according to calculations earlier this week by Credit Suisse.

Fourth-quarter results for European companies in the STOXX 600 index are expected to increase 14.6 percent from a year ago, while the blended earnings growth estimate for the S&P 500 is 15 percent, Thomson Reuters I/B/E/S data show.

Since a market rout was sparked two weeks ago on fears of rising inflation and its impact on interest rates, a tug of war has ensued between investors seeking safety in bonds or betting a nine-year bull market in stocks is still alive.

Investors also are concerned about how the Federal Reserve will deal with still-low inflation without killing an economy and inflate asset bubbles, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

“That’s a very difficult spot. The market recognises that challenge and is wondering how the Fed will address it,” he said.

But investors are getting comfortable with the idea that growth is sufficient enough to withstand the expected rate increases the Fed has projected this year as well as signs of rising inflation, Arone said.

MSCI’s index of stock markets across the globe rose 0.26 percent to gain 4.3 percent for the week, the best weekly performance since December 2011.

Stocks were poised for their best week in six years until news of the special counsel indictment pared some gains.

The pan-European FTSE urofirst 300 index  of leading regional shares rose 1.11 percent to 1,491.71.

On Wall Street, the Dow Jones Industrial Average .DJI closed up 19.01 points, or 0.08 percent, to 25,219.38. The S&P 500 gained 1.02 points, or 0.04 percent, to 2,732.22 and the Nasdaq Composite  dropped 16.97 points, or 0.23 percent, to 7,239.47.

Investors are trying to determine whether the market is in an overdue correction or the beginning of something worse, Arone said.

“It looks like this week they’re comfortable about uncertainty and the risks that are associated with it, and stocks are moving higher based on fundamentals,” he said.

U.S. Treasury prices rose as investors bought back bonds after a sell-off earlier in the week as investor jitters over rising inflation raised the possibility the Federal Reserve may hike interest rates at a faster pace than expected this year.

Borrowing costs across the euro area fell, though the prospect of higher inflation and a move toward tighter monetary policy from major central banks weighed on sentiment across world bond markets.

Short-dated bond yields in Germany, the euro zone’s benchmark bond issuer, have risen by about 7 basis points this week and are set for their biggest weekly rise in eight weeks.

Benchmark 10-year U.S. Treasury notes rose 6/32 in price to push their yield down to 2.8713 percent.

The dollar rose on the day but remained on track to post its biggest weekly loss in nine months as negative sentiment offset any support the greenback had from higher Treasury yields.

The dollar index, tracking a basket of major currencies, rose 0.58 percent, with the euro EUR= down 0.81 percent to $1.2404. The Japanese yen JPY= weakened 0.18 percent versus the greenback at 106.33 per dollar.

Oil prices rose, as the rebound in the global equities market and the dollar’s recent weakness supported their recovery from last week’s slide.

U.S. West Texas Intermediate crude for March delivery rose 34 cents to settle at $61.68 a barrel. Brent settled up 51 cents at $64.84.

U.S. April gold futures settled up $0.9, or 0.1 percent, at $1,356.20 per ounce.

Reporting by Herbert Lash

Friday, 16 February 2018

Hackers stole $6 million in attack on SWIFT system, Russian central bank says

MAGNITOGORSK, Russia (Reuters) - Unknown hackers stole 339.5 million rubles ($6 million) in an attack on the SWIFT international payments messaging system in Russia last year, the Russian central bank said on Friday.

The disclosure, buried at the bottom of a central bank report on digital thefts at Russian banks, is the latest in a string of attempted and successful cyber heists using fraudulent wire-transfer requests.

The central bank said it had been sent information about ”one successful attack on the work place of a SWIFT system operator.

“The volume of unsanctioned operations as a result of this attack amounted to 339.5 million rubles,” the bank said.

The central bank declined to provide further details.

A spokeswoman for SWIFT, whose messaging system is used to transfer trillions of dollars each day, said the company does not comment on specific entities.

”When a case of potential fraud is reported to us, we offer our assistance to the affected user to help secure its environment,” said the spokeswoman, Natasha de Teran.

A central bank spokesman quoted Artem Sychev, deputy head of the regulator’s security department, as saying the hackers had withdrawn the money and this was “a common scheme, when they take control of a computer.”

Brussels-based SWIFT said late last year digital heists were becoming increasingly prominent as hackers use more sophisticated tools and techniques to launch new attacks.

In December, hackers tried to steal 55 million rubles from Russian state bank Globex using the SWIFT system, and digital thieves made off with $81 million from Bangladesh Bank in February 2016.

SWIFT has declined to disclose the number of attacks or identify any victims, but details on some cases have become public, including attacks on Taiwan’s Far Eastern International Bank and Nepal’s NIC Asia Bank.

Reference: Jack Stubbs