Dow, S&P 500 end With Gains up After Bumpy Week, but Nike Drags

Athletic wear company Nike’s shares fell 6.3% and were the biggest drag on the Dow and the S&P 500 after it delivered a downbeat sales forecast and warned of delays during the holiday shopping season, blaming a supply chain crunch.

Shares of footwear retailer Foot Locker also fell sharply.

On the flip side, Facebook climbed 2% and Tesla rose 2.7%. The S&P communication services sector climbed 0.7% and was the second-biggest sector gainer of the day after energy, up 0.8%.

Stocks bounced back from a sharp selloff at the start of the week tied in part to concerns over a default by China’s Evergrande and its potential risk to global financial markets.

On Friday, Evergrande’s electric car unit warned it faced an uncertain future unless it got a swift injection of cash, the clearest sign yet that the property developer’s liquidity crisis is worsening in other parts of its business.

“You’ve had a good recovery from the lows” this week, said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

“With rates this low – even if they are going to move up slowly – and with the fiscal stimulus you’ll probably see coming, I think investors still prefer stocks to any other asset class. Stocks remain in a weird way what investors see as the safe place.”

On Wednesday, the Federal Reserve said it would reduce its monthly bond purchases “soon” and half of the Fed’s policymakers projected borrowing costs will need to rise in 2022.

The Dow Jones Industrial Average rose 33.18 points, or 0.1%, to 34,798, the S&P 500 gained 6.5 points, or 0.15%, to 4,455.48 and the Nasdaq Composite dropped 4.55 points, or 0.03%, to 15,047.70.

For the week, the Dow was up 0.6%, the S&P 500 gained 0.5% and the Nasdaq was near flat.

Shares of cryptocurrency-related firms Coinbase Global, MicroStrategy Inc, Riot Blockchain and Marathon Patent Group fell after China’s central bank put a ban on crypto trading and mining.

“It’s been a very volatile week to say the least, so I think going into the last week of September the volatility is likely to continue especially with the end-of-the-quarter window dressing,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Investors are also looking for signs of progress on President Joe Biden’s spending and budget bills.

Declining issues outnumbered advancing ones on the NYSE by a 1.50-to-1 ratio; on Nasdaq, a 1.40-to-1 ratio favored decliners.

The S&P 500 posted 21 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 82 new highs and 73 new lows.

Volume on U.S. exchanges was 9.00 billion shares, compared with the 10.11 billion average for the full session over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch; additional reporting by Devik Jain in Bengaluru; Editing by Maju Samuel and David Gregorio)

Europe Shares Fall, Wall St Pauses as Evergrande Fears Hover; U.S. Yields Rise

MSCI’s gauge of stocks across the globe shed 0.20% after three days of gains, leaving it little changed for the week.

Concern over whether distress at Evergrande could spill into the broader economy has hovered over markets this week. Evergrande’s electric car unit warned it faced an uncertain future unless it got a swift injection of cash, the clearest sign yet that the property developer’s liquidity crisis is worsening in other parts of its business.

“You look back on this week and there is a lot for global markets to digest,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

“There is still not clarity on how China will address the cracks in their credit markets.”

On Wall Street, the Dow Jones Industrial Average fell 4.97 points, or 0.01%, to 34,759.85, the S&P 500 gained 1.89 points, or 0.04%, to 4,450.87 and the Nasdaq Composite dropped 22.91 points, or 0.15%, to 15,029.34.

Gains in S&P 500 cyclical sectors such as financials and energy countered declines for the tech and healthcare groups.

The pan-European STOXX 600 index lost 0.90% as weak German business confidence data also weighed.

“Some of the hesitancy in European markets could also be put down to the German elections, which promise to be the most interesting in some time,” said Chris Beauchamp, chief market analyst at IG.

Investors were also assessing a busy week of central bank meetings around the world, including arguably more hawkish stances from the U.S. Federal Reserve, as well as from policymakers in Britain and Norway.

Yields on benchmark U.S. 10-year Treasury notes hit their highest level since July 2. The notes fell 13/32 in price to yield 1.4526%, from 1.41% late on Thursday.

“A week of central bank action has shown us that policymakers are ready to move toward reining in on loose monetary policies introduced during the pandemic,” ING analysts wrote in a note to clients.

The dollar index rose 0.22% and was on track for a third straight week of gains, with the euro down 0.19% to $1.1714. The Japanese yen weakened 0.39% versus the greenback at 110.75 per dollar.

Oil prices rose, with Brent up to a near three-year high, supported by global output disruptions and inventory draws.

U.S. crude rose 0.93% to $73.98 per barrel and Brent was at $77.97, up 0.93% on the day.

Spot gold added 0.5% to $1,750.92 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Anushka Trivedi, Sruthi Shankar and Shreyashi Sanyal in Bengaluru, Alun John in Hong Kong, Dhara Ranasinghe, Elizabeth Howcroft and Marc Jones in London; Editing by Robert Birsel, Chizu Nomiyama, Andrew Heavens and Dan Grebler)

Dollar Climbs as Evergrande Uncertainty Percolates

China Evergrande Group owes $305 billion and has run short on cash, missing a Thursday deadline for paying $83.5 million and leaving investors questioning whether it will make the payment before a 30-day grace period expires. A collapse of the company could create systemic risks to China’s financial system.

The safe-haven dollar had its biggest one-day percentage drop in about a month on Thursday after Beijing injected new cash into the financial system and Evergrande announced it would make interest payments on an onshore bond, boosting risk sentiment.

The offshore Chinese yuan weakened versus the greenback at 6.4641 per dollar.

The decline came a day after the greenback was lifted by Wednesday’s announcement from the U.S. Federal Reserve that it will likely begin to trim its monthly bond purchases as soon as November and flagged interest rate increases may follow suit sooner than expected as the central bank moves away from its pandemic crisis policies.

“We are in one of the situations, and this doesn’t always happen, where the dollar is the beneficiary of multiple ideas,” said Joseph Trevisani, senior analyst at FXStreet.com.

“The U.S. economy does look better than most of its competitors, there is lingering fear out there over Evergrande and what else is out there in the rather untransparent Chinese economy and political system, plus the Fed appears finally ready.”

The dollar index rose 0.237%, with the euro down 0.2% to $1.1713.

Kansas City Fed President Esther George said the U.S. labor market has already met the central bank’s test to pare its monthly bond purchases, and the discussion should now turn to how its massive bondholding could complicate the decision on when to hike rates.

Cleveland Fed President Loretta Mester echoed the sentiment for a tapering this year, and said the central bank could start raising rates by the end of next year should the job market continue to improve as expected.

In prepared remarks in a listening session with a wide swath of economic players, Fed Chair Jerome Powell did not elaborate on his own economic or monetary policy outlook, which he had outlined at the close of the two-day Fed meeting on Wednesday.

Sterling weakened a day after hawkish comments from the Bank of England on Thursday pushed the pound to its biggest one-day percentage gain since Aug. 23.

The Japanese yen weakened 0.43% versus the greenback at 110.77 per dollar, while Sterling was last trading at $1.3666, down 0.36% on the day.

Cryptocurrencies slumped after China’s most powerful regulators increased the country’s crackdown on the digital assets, with a blanket ban on all crypto transactions and crypto mining.

Bitcoin, the world’s largest cryptocurrency, last fell 5.89% to $42,256.47.

Smaller coins, which generally move in tandem with bitcoin, also dropped. Ether last fell 8.08% to $2,899.10 while XRP last fell 7.2889413% to $0.93.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Dan Grebler and Sonya Hepinstall)

Oil Hits Highest In Almost 3 Years as Supply Tightens

The rally was slightly dampened by China’s first public sale of state crude reserves.

Brent futures rose 84 cents, or 1.1%, to settle at $78.09 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 68 cents, or 0.9%, to settle at $73.98.

That was the highest close for Brent since October 2018 and for WTI since July 2021, both for a second day in a row.

It was the third week of gains for Brent and the fifth for WTI mostly due to U.S. Gulf Coast output disruptions from Hurricane Ida in late August.

New York Harbor Ultra Low Sulfur Diesel (ULSD) futures also closed at their highest since October 2018.

“As oil prices are on track to close another week of gains, the market is pricing in a prolonged impact of supply disruptions, and the likely storage draws that will be needed to fulfill refinery demand,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

Some disruptions could last for months and have already led to sharp draws in U.S. and global inventories. [EIA/S]

U.S. oil refiners were hunting to replace Gulf crude, turning to Iraqi and Canadian oil, traders said.

India’s crude imports rose to a three-month peak in August, rebounding from July’s near one-year low.

Some members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have struggled to raise output due to under-investment or maintenance delays during the pandemic.

Russia said it will remain a reliable supplier of energy to global markets. Russian gas giant Gazprom had been accused of doing too little to increase its natural gas supplies to Europe, where prices have soared.

Iran, which wants to export more oil, said it will return to talks on resuming compliance with the 2015 Iran nuclear deal “very soon”, but gave no specific date.

Edward Moya, senior market analyst at OANDA, said: “Extra Iranian barrels of crude seem unlikely to be a 2021 story,” noting negotiations “will be a long drawn-out process.”

Kazakhstan’s biggest oil producer, Chevron-led Tengizchevroil (TCO), will delay components of its $45.2 billion expansion project by three to seven months.

In the United States, drillers added 10 oil rigs this week, putting the oil and gas rig count up for a 14th month in a row.

Brent could hit $80 by the end of September due to stock draws, lower OPEC production and stronger Middle East demand, UBS analysts wrote.

China’s first public sale of state oil reserves capped crude price gains. PetroChina and Hengli Petrochemical bought four cargoes totaling about 4.43 million barrels, sources said.

Analysts also noted indebted China Evergrande remains a risk to oil prices after the company’s electric car unit warned it faced an uncertain future unless it got a swift injection of cash.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Ron Bousso in London and Aaron Sheldrick in Tokyo; Editing by Louise Heavens, Edmund Blair, Emelia Sithole-Matarise and David Gregorio)

Evergrande Misses Payment Deadline, EV Unit Warns of Cash Crunch

Evergrande owes $305 billion, has run short of cash and investors are worried a collapse could pose systemic risks to China’s financial system and reverberate around the world.

The company missed a payment deadline on a dollar bond this week and its silence on the matter has left global investors wondering if they will have to swallow large losses when a 30-day grace period ends.

China Evergrande New Energy Vehicle Group, meanwhile, said without a strategic investment or the sale of assets its ability to pay staff and suppliers and mass produce vehicles would be hit.

Evergrande’s silence on this week’s $83.5 million interest payment contrasts with its treatment of its domestic investors.

On Wednesday, Evergrande’s main property business in China said it had privately negotiated with onshore bondholders to settle a separate coupon payment on a yuan-denominated bond.

“This is part of the tactics of any sovereign-driven restructuring process – keeping people in the dark or guessing,” said Karl Clowry, a partner at Addleshaw Goddard in London.

“The view from Beijing is offshore bondholders are largely Western institutions and so can justifiably be given different treatment. I think people think it’s still a falling knife.”

China’s central bank again injected cash into the banking system on Friday, seen as a signal of support for markets. But authorities have been silent on Evergrande’s predicament and China’s state media has offered no clues on a rescue package.

“These are periods of eerie silence as no one wants to take massive risks at this stage,” said Howe Chung Wan, head of Asia fixed income at Principal Global Investors in Singapore.

“There’s no precedent to this at the size of Evergrande … we have to see in the next ten days or so, before China goes into holiday, how this is going to play out.”

Evergrande is expected to be one of the largest-ever restructurings in China and hopes are not high for a swift resolution.

The liabilities of China’s HNA group pale in comparison but its insolvency is still ongoing, with creditors seeking $187 billion, according to a source familiar the talks. On Friday, police seized both the HNA chairman and its CEO.

So far, there have been few signs of stress in money and credit markets as well as other areas that would signal that the crisis was spreading beyond China.

APPOINTS ADVISERS

Evergrande appointed financial advisers and warned of default last week and world markets fell heavily on Monday amid fears of contagion, though they have since stabilised.

The conundrum for China’s leaders is how to impose financial discipline without fuelling social unrest, since an Evergrande collapse could crush a property market which accounts for 40% of Chinese household wealth.

Protests by disgruntled suppliers, home buyers and investors last week illustrated discontent that could spiral in the event a default sparks crises at other developers.

China’s fragmented property market is showing some signs of strain, which could spur a wave of consolidation among real estate companies.

Capital Economics’ senior China economist, Julian Evans-Pritchard, said Evergrande’s crisis had had a much bigger impact on housing demand than he had anticipated, and households had turned much more cautious, triggering a drop in prices.

“I think Evergrande is going to have real issues. I don’t think the interest payment is going to be made,” Marc Lasry, CEO of Avenue Capital Group, said on CNBC Friday. Lasry said he had sold Evergrande’s bonds.

Global markets on Friday seemed rattled by the missed payment and regulatory silence.

PLAY FOR TIME

Some $20 billion of Evergrande’s debts are owed offshore while at home there are risks for China’s property sector and its liabilities spread across bank balance sheets and beyond.

There have been few signs of official intervention. The People’s Bank of China’s 270 billion yuan ($42 billion) cash injection this week is the largest weekly sum since January and has helped put a floor under stocks.

Bloomberg Law also reported that regulators had asked Evergrande to avoid a near-term default, citing unnamed people familiar with the matter.

The Wall Street Journal said, citing unnamed officials, that authorities had asked local governments to prepare for Evergrande’s downfall and distress is already evident among Evergrande’s peers.

Some banks, insurers and shadow banks have begun checks on their exposure to the troubled sector.

“We are concerned about the spillovers into the real economy and broader credit conditions,” said analysts at Societe Generale in a note. “The longer policymakers wait before acting, the higher the hard-landing risk.”

Analysts at BoFA Global Research, however, are among those who believe Chinese officials will be able to contain any Evergrande fallout.

“China has both the will and the tools to ring-fence a property crisis. Allowing the crisis to continue to escalate could threaten the key goal of social stability,” they said in a recent report.

Evergrande’s shares fell about 13% on Friday, while stock of its electric-vehicle unit dropped 20% to a four-year low. Its bonds fell slightly and its offshore bonds with imminent payments due last sat around 30 cents on the dollar and were thinly traded.

“It is clear now that Evergrande will make use of the 30-day grace period, to see if there is any further development or instructions from the government,” said Jackson Chan, assistant manager of fixed income research at research portal Bondsupermart.

For a look at all of today’s economic events, check out our economic calendar.

($1 = 6.4589 Chinese yuan renminbi)

(Reporting by Anshuman Daga and Tom Westbrook in Singapore, Andrew Galbraith in Shanghai and Kirstin Ridley in London. Additional reporting by Clare Jim in Hong Kong. Writing by Tom Westbrook; Editing by Jane Merriman, Jason Neely and Nick Zieminski)

Chinese Crackdown on Bitcoin Another Blow to Cathie Wood’s ARK ETF

Wood, who has said that bitcoin will rally to $500,000, has slightly more than $1 billion invested in cryptocurrency trading firm Coinbase Global Inc, a position that makes up approximately 4.7% of her $21.7 billion fund. Shares of Coinbase fell more than 1.5% on Friday after Chinese regulators announced a blanket ban on all crypto transactions and mining.

China’s move triggered a selloff in bitcoin, taking the value of the world’s largest cryptocurrency down more than 5% to approximately $42,475.

ARK Innovation was down 1.4% in midday trading on Friday.

The declines come as several of Wood’s top holdings this year are floundering during a market rally that has pushed up the benchmark S&P 500 more than 18% for the year to date.

While shares of Tesla Inc, Wood’s top holding, are up 8% for the year, large positions in companies including Teladoc Health Inc and Zoom Video Communications Inc are down 20% or more over the same time amid a shift away from the stay-at-home technology stocks that dominated during the COVID-19 lockdowns of 2020.

ARK Invest did not respond to a request for comment on this story.

Overall, the ARK Innovation Fund is down 4.4% for the year to date, putting it in the bottom 100th percentile among the 595 other U.S. mid-cap growth funds, according to Morningstar.

Over the last five years, however, the fund is up an annualized 42.3% a year, placing it among the top 1 percentile in its category.

That strong long-term performance is likely what is keeping retail investors from selling their stake in the fund this year despite its poor showing, said Todd Rosenbluth, director of fund research at CFRA.

“ARKK is down for the year and has significantly lagged behind index-based growth ETFs yet most investors have remained loyal, likely due to fond memories of prior periods of relatively strong performance,” he said. “But as the recent period of underperformance persists it is harder to justify not considering alternatives.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by David Randall in New York; Additional reporting by Saqib Iqbal Ahmed in New York; Editing by Ira Iosebashvili and Matthew Lewis)

Explainer – How China Evergrande’s Debt Troubles Pose a Systemic Risk

WHAT IS EVERGRANDE?

Chairman Hui Ka Yan founded Evergrande in Guangzhou in 1996. It is China’s second-largest property developer with $110 billion in sales last year, $355 billion in assets, and over 1,300 developments nationwide. It listed in Hong Kong in 2009.

Evergrande grew rapidly through a loan-supported land-buying spree and selling apartments quickly at low margins. It has 200,000 staff and hires 3.8 million annually for developments.

Slowing growth has seen it branch into businesses such as insurance, bottled water, football and electric vehicles (EVs).

HOW DID CONCERNS ARISE OVER DEBT?

In September last year, a leaked letter showed Evergrande pleading for government support to approve a now-dropped backdoor stock market listing. Sources told Reuters the letter was authentic; Evergrande called it fake.

In June, Evergrande said it did not pay some commercial paper on time, and in July a court froze a $20 million bank deposit held by the firm at the bank’s request.

The firm in late August said construction at some of its developments had halted due to missed payments to contractors and suppliers. Sources have told Reuters that it also missed payments to bank and trust loans in the past few weeks.

Liabilities, including payables, total 1.97 trillion yuan ($306.3 billion) – about 2% of China’s gross domestic product.

HOW HAS EVERGRANDE REDUCED DEBT?

Evergrande accelerated efforts to cut debt last year after regulators introduced caps on three debt ratios, dubbed the “three red lines”. It aims to meet requirements by 2022-end.

It offered steep discounts on residential developments to spur sales and sold the bulk of its commercial properties. Since the second half of 2020, it has had a $555 million secondary share sale, raised $1.8 billion by listing its property management unit, and saw its EV unit sell a $3.4 billion stake.

On Sept. 14, it said asset and equity disposal plans had failed to make material progress.

WHAT’S THE RISK?

The central bank in 2018 said companies including Evergrande might pose systemic risk to China’s financial system.

The firm’s liabilities involved as many as 128 banks and over 121 non-banking institutions, the leaked letter showed.

Late repayments could trigger cross-defaults as many financial institutions are exposed via direct loans and indirect holdings through different financial instruments.

In the U.S. dollar bond market, Evergrande accounts for 4% of Chinese real estate high-yielding debt, data from Singapore bank DBS showed. A default could further trigger a sell-off across high-yield credit markets.

WHAT ABOUT OPERATIONS OUTSIDE MAINLAND CHINA?

In Hong Kong, Evergrande owns an office tower and residential development as well as two nearly completed residential developments, plus a vast undeveloped land parcel.

It has spent billions of dollars acquiring stakes in automobile technology developers, including Sweden’s NEVS, the Netherlands’ e-Traction and Britain’s Protean. It also has joint ventures with Germany’s Hofer and Sweden’s Koenigsegg.

WHAT HAVE REGULATORS SAID?

The central bank and banking regulator in August ordered Evergrande to reduce debt risk.

Regulators have approved an Evergrande proposal to renegotiate payment deadlines with banks and other creditors, media reported. Guangzhou government is also seeking major lenders’ opinions about establishing a creditor committee.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Clare Jim; Editing by Sumeet Chatterjee, Stephen Coates, Christopher Cushing and Jane Merriman)

Take Five: “Auf Wiedersehen Merkel, hallo…?”

1/GERMANY’S ‘MUTTI’ BOWS OUT

Sunday’s German election is a close call and stakes for Europe’s biggest economy couldn’t be higher. After 16 years of steady, centre-right leadership, Chancellor Angela Merkel will be stepping down.

Polls suggest the centre-left Social Democrats (SPD) will form a coalition with the Greens and the liberal FDP, dubbed the traffic light alliance because of the parties’ red, green and yellow colours.

But the number of undecided voters is at its highest in recent memory, so other outcomes are possible. The SPD’s Olaf Scholz is the voters’ choice to succeed Merkel, but coalition talks could take weeks, even months. Initial market reactions to the election outcome could prove premature.

-German candidates clash in last TV debate before vote as SPD lead narrows

2/DATA DIVE

The Federal Reserve has cut its 2021 U.S. growth forecasts and projects a 5.9% rate, versus 7% previously. Upcoming data will show if the coronavirus continues to undermine the recovery.

Consumer confidence in September is on tap, after August readings came in well short of estimates, dropping to a six-month low.

Markets will get a fresh view on the housing market in the form of data on home prices and home sales, while the personal consumption expenditures (PCE) index will offer a glimpse of inflation. A Reuters poll forecasts a 3.7% annual rise in the Fed’s favourite inflation gauge, a touch above 3.6% in July.

-Fed signals bond-buying taper coming ‘soon,’ rate hike next year

3/CAUTION! FRAGILE CHINA

The woes of debt-saddled Chinese developer Evergrande are gnawing at global markets. Unsurprising because the property sector has a bearing, direct or indirect, on a quarter of the country’s huge economy.

The developer has more payment deadlines next week, but the bigger picture, the sheer size of the Chinese economy, implies the risk is high of a global growth hit — commodity prices, emerging market currencies and even European elevator-makers have all felt the heat.

BIS data shows Chinese banks had around $1.6 trillion of cross-border liabilities as of early 2021. Given their exposure to real estate, through mortgage loans and lending to property companies, any implosion could send ripples worldwide.

-China’s Evergrande problem today may dent global growth tomorrow

4/HIGH HICP

The ECB reportedly expects inflation to hit 2% by 2025. Despite analysts’ scepticism, surging power prices and the seep-through elsewhere, including into inflation expectations, could mean it may not be too far off that mark.

In that light, advance readings of German and euro zone HICP — the harmonised index of consumer prices used by the ECB — due Thursday and Friday respectively — are of interest. German HICP hit a 13-year high of 3.4% in August, while consumer inflation at 3.9% was the highest since 1993.

Euro area consumer inflation expectations have doubled this year, surveys suggest, while bloc-wide HICP hit 3% in August, the highest since 2012. Power price rises have already impacted headline readings and September may show another increase.

– ECB braces for sticky inflation; eyes end of emergency stimulus, sources say

5/PICKING A PREMIER

Japan’s ruling party votes for its new leader on Wednesday, with the victor set to be the next prime minister. And it’s a tight race.

Of the four candidates, vaccine minister Taro Kono is the ostensible frontrunner, while former foreign minister Fumio Kishida is the challenger. Sanae Takaichi and Seiko Noda, also former ministers, are each vying to be the first woman in the top job but are considered long shots.

Kono is favoured by the Liberal Democratic Party’s rank-and-file, but his reputation as a maverick makes party veterans wary. Kishida is more traditional, but is hobbled by a bland image.

Should Kono not win an outright majority, the top two will contest a run-off, where Kishida is expected to have an edge.

Investors seem to be betting on Kono. Renewable energy and office tech shares that could benefit from his policies have outperformed shares in medical services, where Kishida advocates higher spending.

-Economic policy stances of candidates to be Japan’s next PM

-Investors raise bets on Kono in Japan leadership race

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sujata Rao, Dhara Ranasinghe and Marc Jones in London; Lewis Krauskopf in New York and Kevin Buckland in Tokyo; Compiled by Sujata Rao; Editing by Hugh Lawson)

With Some Gas Stations Closed, Britain Vows to Solve Trucker Shortage

By Sarah Young, Victor Jack and Kate Holton

Just as the world’s fifth largest economy emerges from the COVID-19 pandemic, a spike in European wholesale natural gas prices and a post-Brexit shortage of truck drivers has closed some petrol stations and raised fears of a food supply crunch.

BP temporarily closed some of its 1,200 UK petrol stations due to a lack of both unleaded and diesel grades, which it blamed on driver shortages. ExxonMobil’s Esso said a small number of its 200 Tesco Alliance retail sites had also been impacted.

For months supermarkets and farmers have warned that a shortage of truck drivers was straining supply chains to breaking point – making it harder to get goods to market.

Transport Secretary Grant Shapps said there was a global shortage of truckers after COVID halted lorry driver testing so Britain was doubling the number of tests. Asked if the government would ease visa rules, he said the government would look at all options.

“We’ll do whatever it takes,” Shapps told Sky News. “We’ll move heaven and earth to do whatever we can to make sure that shortages are alleviated with HGV drivers.”

“We should see it smooth out fairly quickly,” Shapps said.

But hauliers and logistics companies cautioned that there were no quick fixes and that any change to testing or visas would likely be too late to alleviate the pre-Christmas shortages as retailers stockpile months ahead.

TRUCKER VISAS?

Such is the strain that McDonald’s had to take milkshakes and bottled drinks off the menu at its British restaurants in August and chicken chain Nando’s ran out of chicken as they battled the supply chain issues that have hit businesses across the economy.

Suppliers have warned that there could be more shortages of petrol because of a lack of drivers to transport fuel from refineries to retail outlets.

The trucking industry body, the Road Haulage Association, has called on the government to allow short-term visas for international drivers to enter Britain and fill the gap, while British drivers are being trained for the future.

“It’s an enormous challenge,” Rod McKenzie, head of policy at the RHA, told Reuters. In the short-term he said international drivers could help, even if it may be too late to help Christmas, and in the longer term the industry needed better pay and conditions to attract workers.

“It’s a tough job. We the British do not help truckers in the way that Europeans and Americans do by giving them decent facilities,” he said.

The British haulage industry says it currently needs around 100,000 more drivers after some 25,000 returned to Europe before Brexit and the pandemic halted the qualification process for new workers.

Shapps said COVID-19 exacerbated the problem and that Britain was unable to test 40,000 drivers during lockdowns.

“It’s a bit of a global problem so it’s not immediately obvious that opening up visas would actually resolve the problem but we’ll move heaven and earth on this,” he told Times Radio.

For a look at all of today’s economic events, check out our economic calendar.

(Editing by Guy Faulconbridge and Toby Chopra)

European Stocks Slide as Evergrande Concerns Resurface

The regionwide STOXX 600 index slipped 0.5% after a three-day run of gains. Miners, automakers and retailers fell more than 1% each.

Investors took some profits off the table after mid-week rally as a deadline for paying $83.5 million in bond interest passed without remark from Evergrande, concerns about which rocked financial markets earlier this week.

German sportswear makers Adidas and Puma fell 3.7% and 2.5%, respectively, after Nike cut its fiscal 2022 sales expectations and said it expects delays during the holiday shopping season, blaming the ongoing supply chain crunch.

Broadly, Germany’s DAX fell 0.7%, heading into the weekend when the country will vote to elect German chancellor Angela Merkel’s successor.

British drugmaker AstraZeneca jumped 3.2% after the company said its cancer drug Lynparza met its primary goal in a late-stage trial.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)

Marketmind: Move over Evergrande, Time to Watch Soaring Bond Yields

A look at the day ahead from Saikat Chatterjee.

European and U.S. stock futures fluctuated between gains and losses after U.S. stocks posted their biggest two-day rise since July.

While a large part of those gains can be attributed to easing concerns about Evergrande contagion, Thursday’s spike in yields in the global $60 trillion plus government debt markets raised the prospects of tighter monetary policy sooner than later.

Long-term U.S. Treasury yields have surged the most in 18 months as traders brought forward expectations for the first Fed rate hike to the end of 2022 and the Bank of England opened the door to a 2021 rate increase — sparking the biggest jump in two-year UK gilt yields since March 2015.

Yield curves from Australia to Germany bear steepened in response and the dollar sprung to the top of its 2021 trading range. While it remains to be seen whether the rise in yields can be sustained, some signs of weakness can be detected in the “buy the dip” trade from investors.

Value stocks, a beneficiary of higher yields, outperformed growth ones on Thursday while FAANG stocks have underperformed broader markets so far this month. And if investors are hoping quiet weekend, think again.

Sunday’s election in powerhouse European economy Germany will provide food for thought as Chancellor Angela Merkel steps down after 16 years in charge.

Her successor will play a new role in shaping domestic and broader EU policy and have to steer Germany’s economy through a still uncertain post-COVID environment.

Thursday’s flash PMIs for September pointed to a sharp slowdown in economic activity from the previous month from rising energy prices and difficulty in sourcing parts and materials, headwinds that are unlikely to abate in the coming days.

Key developments that should provide more direction to markets on Friday:

– ECB’s Lagarde says many causes of inflation spike temporary: CNBC

– Nike warns on holiday delays, cuts full-year sales estimate

– Daimler’s Mercedes-Benz to take a 33% stake in battery cell manufacturer Automotive Cells Company

– Germany’s IFO survey for September

– Fed speaker corner: Powell, Clarida

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saikat Chatterjee; Editing by Dhara Ranasinghe)

Fed’s Powell Opens Door to Tougher Regulations as Renomination Decision Looms

At a press conference on Wednesday following the Fed’s latest meeting at which policymakers kept interest rates near zero as the U.S. economy continues to heal from the COVID-19 pandemic, Powell was unequivocal when asked how much he would defer to a new vice chair for supervision expected to be named this fall to oversee bank regulation.

“I respect that authority, I respect that’s the person who will set the regulatory agenda going forward. I would accept that and furthermore, it’s only appropriate for a new person to come in and look at the current state of regulation and supervision and suggest appropriate changes,” Powell said. “I welcome that.”

That viewpoint could offer President Joe Biden an opening to pursue a package deal in which Powell, a Republican, remains chair and current Fed Governor Lael Brainard, a Democrat and potential rival for the leadership who is favored by some progressives, takes over as the Fed’s regulation czar when the slot opens up at the end of October.

The public declaration could work in his favor given Powell, a former private equity executive and investment banker, has been regarded by some as too close to Wall Street and insufficiently tough on banks as he and current Vice Chair Randal Quarles, voted to ease regulations.

“I think he is likely the best politician who has ever been Federal Reserve chair,” said Jeff Hauser, founder of the progressive Revolving Door project, which nevertheless opposes Powell’s renomination in favor of Brainard. “He’s genuinely good at it.”

Powell’s gambit on regulation may also help bolster his credentials at a time when the central bank is under the microscope as the White House mulls his possible nomination for reappointment before his term expires in February.

TRADING FUROR

On paper, Powell remains the likely candidate for a second term. He enjoys bipartisan support in Congress, is reportedly backed by his predecessor as Fed chief and current U.S. Treasury Secretary Janet Yellen, and revamped the Fed’s approach to monetary policy last year to put greater priority on a broad and inclusive maximum employment goal, which was heralded by many supporters of Biden, including progressive, labor-focused economists.

But headaches, such as the revelation last week that two Federal Reserve regional bank presidents had engaged in controversial stock trades, leave little room for major error, particularly as Democratic Senator Elizabeth Warren, a key lawmaker, has demanded swift action to establish new ethics rules that would bar such dealings in the future.

“We need to make changes and we are going to do that,” Powell also said at the press conference as he expressed displeasure at the behavior of Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren.

“In terms of having confidence and that sort of thing, I think, no one is happy,” Powell said. Others remained less convinced by his commitment to comprehensive action.

“I think Chair Powell’s response to this trading scandal is a failure of leadership,” said Dennis Kelleher, president and chief executive officer of Better Markets, an advocacy group pushing for tighter financial regulation, who was a member of the transition team for then-President-elect Biden and Vice President-elect Kamala Harris.

“He’s not actually making changes regarding their outrageous conduct, he’s asked the staff to review the code of conduct for changes in the future.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

Indexes Close Higher as Investors Assess Fed News

Upbeat outlooks from Accenture and Salesforce helped to bolster the market, while the U.S. Food and Drug Administration late Wednesday authorized a booster dose of the Pfizer-BioNTech COVID-19 vaccine for those 65 and older.

Also helping sentiment, concern about a ripple effect from China Evergrande continued to ease.

The Fed said on Wednesday it could begin reducing its monthly bond purchases by as soon as November, and that interest rates could rise quicker than expected by next year. The November deadline was largely priced in by markets.

In a press conference after the statement, Fed Chair Jerome Powell said the bar for lifting rates from zero is much higher than for tapering.

“This is a follow-on rally from a very good Fed meeting,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

“To me that showed there were no surprises and things were as expected,” he said. “Any Fed rate hike is still quite a ways off and so much can change between now and then.”

Energy and financial stocks were the S&P sectors gaining most ground.

Unofficially, the Dow Jones Industrial Average rose 502.55 points, or 1.47%, to 34,760.87, the S&P 500 gained 52.84 points, or 1.20%, to 4,448.48 and the Nasdaq Composite added 151.28 points, or 1.02%, to 15,048.13.

Shares of IT services provider Salesforce jumped and the company was a big boost to the S&P and the Dow during the session after it raised its annual earnings forecast.

Accenture gained after the IT consulting firm boosted its first-quarter outlook.

Concerns eased further over a potential default by Chinese property developer Evergrande even as Reuters reported that some holders of the firm’s dollar bonds had given up hope of getting a coupon payment by a key Thursday deadline.

Investors shrugged off data showing sluggish business activity growth and a rise in jobless claims, in line with expectations for a slowdown in economic growth in the third quarter.

During the session the S&P 500 broke above its 50-day moving average, after trading below the indicator for three full sessions – its biggest such breach since early March.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Ambar Warrick in Bengaluru; Editing by Maju Samuel and Lisa Shumaker)

U.S. Oil Refiners Use Iraqi, Canadian Crudes to Replace Storm Losses – Traders

Royal Dutch Shell, the largest producer in the U.S. Gulf of Mexico, this week said damage to an offshore transfer facility will limit Mars sour crude supplies into early next year. The Mars sour grade of U.S. oil is used heavily by U.S. Gulf refiners and companies in South Korea and China, two top destinations for U.S. crude exports.

The United States now generally exports more than 3 million barrels of oil per day, most from the U.S. Gulf Coast. With overall fuel demand rebounding to pre-pandemic levels, refiners will need to make up for the Mars shut-ins.

The loss of up to 250,000 barrels per day (bpd) has some U.S. refiners seeking replacements for fourth-quarter delivery, especially Iraq’s Basrah crude, traders said. Others received supplies of sour crude from U.S. storehouses.

Basrah crude has come to the fore during past disruptions. In 2019, when U.S. sanctions on Venezuela cut off heavy crude grades to Gulf refiners, Iraq rapidly boosted cargoes. Canadian heavy-oil suppliers also benefited.

EMERGENCY SUPPLIES

Exxon Mobil and Placid Refining Co have received oil from the U.S. Strategic Petroleum Reserve (SPR), addressing immediate needs for sour crude.

“Refiners that needed to specifically replace Mars barrels requested sour crude from the SPR. Many others are buying extra cargoes of Basrah for October delivery, whose prices were very convenient as sour crudes in general are under pressure,” a U.S. Gulf crude trader said.

Earlier this month, Mars crude traded as high as a $1.50 premium over WTI but on Wednedsay it was offered at a $2.25-per-barrel discount to the U.S. benchmark, returning to pre-storm levels. Most of the nine U.S. refineries that halted output during Ida have returned to production.

Refiner Marathon Petroleum bought Basrah for October loading, one trader said. Refiners able to process and blend heavier crudes also have shown interest in Canadian and Latin American grades, traders added. Marathon declined to comment.

U.S. Energy Information Administration preliminary data through Tuesday showed imports from Mexico and Brazil rising after the storms.

CUSHIONING EXPORTS

Of the up to 250,000 bpd of lost Mars crude production, about 80,000 bpd typically are sent to Asian refineries, according to cargo tracking firm Vortexa.

South Korea has accounted for about two-thirds of Mars exports this year, said Kpler oil analyst Matt Smith. China’s Unipec and South Korea Energy boosted Mars purchases ahead of the storm to take advantage of favorable prices.

Unipec recently bought 200,000 tonnes of Russia’s Urals crude for October delivery amid a broader weakness in price differentials.

South Korea’s second largest refiner, GS Caltex Corp, had a Mars cargo canceled that had been set to arrive in late November, and the company has not yet looked for replacement crude, according to traders.

Unipec’s parent, Sinopec, and GS Caltex did not reply to after-hours requests for comment.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Arathy S Nair in Bengaluru, Marianna Parraga in Houston and Florence Tan in Singapore; Editing by David Gregorio)

Dollar Slumps as Risk Appetite Rebounds

Investors’ risk appetite improved after Beijing injected fresh cash into its financial system ahead of an $83.5 million bond coupon by embattled property giant Evergrande, at risk of becoming one of the world’s largest-ever corporate defaults.

Worries about Evergrande’s payment obligations and what systemic risks to China’s financial system the property giant’s difficulties pose have weighed on global financial risk sentiment in recent sessions.

“Commodity currencies are broadly higher while havens are weaker, leaving the USD trading generally lower after a firm close following the FOMC (Federal Open Market Committee),” Shaun Osborne, chief currency strategist at Scotiabank, said in a note.

The U.S. Dollar Currency Index, which measures the greenback against a basket of six rivals, was 0.5% lower at 93.037. The index, which had risen 0.25% on Wednesday, was on pace for its biggest daily percentage drop in a month but remains close to the near 10-month high touched in late August.

The offshore Chinese yuan strengthened versus the greenback at 6.4599 per dollar.

The dollar found little support from data that showed the number of Americans filing new claims for jobless benefits unexpectedly rose last week amid a surge in California.

Thursday’s improved mood boosted risk-sensitive commodity currencies, with the Australian dollar rising 0.9% and the New Zealand dollar up 1.0%.

The improved risk-appetite was reflected in Wall Street’s major equity indexes, with the S&P 500 on track for a gain of more than 1% and its largest two-day percentage gain since late July.

On Wednesday, the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected.

While positive for the dollar, the boost from the Fed’s announcement was undercut by hawkish messages from several central banks in Europe, and as Norway became the first developed nation to raise rates.

Norway’s crown jumped to a 3-1/2 month high versus the euro on Thursday after the central bank raised its benchmark interest rate and said more hikes will follow in the coming months.

Sterling extended its rise on Thursday after the Bank of England said two of its policymakers had voted for an early end to pandemic-era government bond buying and markets brought forward their expectations for an interest rate rise to March.

In emerging markets, the Turkish lira plummeted to a record low after a surprise interest rate cut of 100 basis points to 18% that came despite inflation hitting 19.25% last month

Meanwhile, bitcoin extended its recovery from a sharp fall earlier this week, rising 2.42% to a 3-day high of $44,642.78.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saqib Iqbal Ahmed and Chuck Mikolajczak; Additional reporting Sujata Rao and Saikat Chatterjee in London and Tom Westbrook in Singapore; Editing by Bernadette Baum, Will Dunham and Hugh Lawson)

Evergrande Bondholders Run Out of Hope for Coupon Payment on Thursday – Source

The property developer was instead expected to provide more information in the coming month, the source said.

Global investors have been on tenterhooks ahead of Evergrande’s payment obligations as there are fears its difficulties could pose systemic risks to China’s financial system, and possibly spill over to other markets.

Evergrande, which epitomises the borrow-to-build business model and was once China’s top-selling developer, has run into trouble over the past few months as Beijing tightened rules in the property sector to rein in debt levels and speculation.

Evergrande was due to pay $83.5 million in interest on a $2 billion offshore bond on Thursday and also has a $47.5 million dollar-bond interest payment next week.

Both would default if the company, which has outstanding debt of $305 billion, fails to settle the interest within 30 days of the scheduled payment dates.

By midnight in Hong Kong, there had been no announcements by Evergrande about the payment.

The company has yet to make an announcement about its plans for Thursday’s offshore bond coupon payment and a company spokesperson did not respond to requests for comment.

Earlier on Thursday, Bloomberg Law reported that Chinese regulators had asked Evergrande executives to avoid a near-term default on its dollar bonds and to communicate proactively with bondholders, citing people familiar with the matter.

“They don’t want a default right now,” said Connor Yuan, the head of emerging market flow credit trading for Asia at Goldman Sachs. “Given there is a 30-day grace period, I think today it’s very likely the coupon won’t be made but it is possible that they try to get a deal done in the next 30 days.”

The Wall Street Journal reported separately on Thursday that Chinese authorities were asking local governments to prepare for the potential downfall of Evergrande, China’s second-biggest property developer, citing officials familiar with the talks.

A spokesperson for Evergrande, China’s second-biggest property developer, declined to comment on the two reports.

“Evergrande is a serious situation but we see it as quite contained both in terms of the sector, mainly Chinese real estate, and mostly Chinese counterparties,” Jean-Yves Fillion, chief executive officer of BNP Paribas USA, told CNBC on Thursday.

“Historically we have seen the Chinese administration taking care of these type of situations and resolving them. The linkages between the Evergrande situation and the strong U.S. equity market we see as not very significant.”

SHARES BOUNCE BACK

Investors worry that the Evergrande rot could spread to creditors including banks in China and abroad, though analysts have been downplaying the risk that a collapse would result in a “Lehman moment,” or a systemic liquidity crunch.

Still, central bankers say they are keeping a close eye on Evergrande. The Bank of England said on Thursday it did not expect the situation to go badly wrong and was cautiously optimistic Beijing would avoid any major issues.

Switzerland’s central bank, meanwhile, said Evergrande should not be dismissed as a small, local problem.Shares in Evergrande rose nearly 18% on Thursday after it said it had resolved the coupon payment for one of its domestic, onshore bonds, though the stock is down more than 80% this year.

Shares in Evergrande Property Services rose nearly 8% and relief spread to mainland property stocks listed in Hong Kong. Country Garden, China’s largest developer, climbed 7%, Sunac China jumped 9% and Guangzhou R&F Properties ended 7.5% higher.

Evergrande Chairman Hui Ka Yan urged his executives late on Wednesday to ensure the delivery of quality properties and the redemption of its wealth management products, which are typically held by millions of retail investors in China.

He did not mention the company’s offshore debt, however.

The WSJ said local governments had been ordered to assemble groups of accountants and legal experts to examine the finances around Evergrande’s operations in their respective regions.

They have also been ordered to talk to local state-owned and private property developers to prepare to take over projects and set up law-enforcement teams to monitor public anger and “mass incidents”, a euphemism for protests, it said.

Analysts said the moves by Beijing underscored the pressure on Evergrande, whose liabilities run to 2% of China’s gross domestic product, to contain the fallout from its credit crunch and protect mom-and-pop investors over professional creditors.

‘ALL MY SAVINGS’

Oscar Choi, founder and chief investment officer at Oscar and Partners Capital Ltd, said Evergrande was wary of inflaming social tensions by leaving homes unbuilt, construction workers unpaid and retail investors counting their losses.

Once those priorities had been met, Evergrande would talk to its other creditors, he said, adding: “Otherwise a few hundred thousand people will fight with the government.”

Fitch Ratings said on Sept. 16 that it had cut its 2021 economic growth forecast for China to 8.1% from 8.4%, citing the impact of the slowdown in the country’s property sector on domestic demand.

Underscoring the scramble to avoid contagion, Chinese Estates Holdings, Evergrande’s second-biggest shareholder, said on Thursday it had sold $32 million of its stake and planned to sell the rest.

Some analysts say it could take weeks for investors to have any clarity about how the Evergrande situation will resolve.

“The company could restructure its debts but continue in operation, or it could liquidate,” wrote Paul Christopher, head of global market strategy at Wells Fargo Investment Institute. In either case, investors in the company’s financial instruments would likely suffer some losses, he wrote.

“In the event of a liquidation, however, Chinese and global investors could decide that the contagion could spread beyond China,” he said.

At an eerily quiet construction site in eastern China, worker Li Hongjun said Evergrande’s crisis meant he will soon run out of food while Christina Xie, who works in the southern city of Shenzhen, feared Evergrande had swallowed her savings.

“It’s all my savings. I was planning to use it for me and my partner’s old age,” said Xie. “Evergrande is one of China’s biggest real estate companies … my consultant told me the product was guaranteed.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Anshuman Daga in Singapore, Clare Jim in Hong Kong, Andrew Galbraith in Shanghai and Karin Strohecker in London and Megan Davies in New YorkWriting by Anne Marie Roantree and Sumeet ChatterjeeEditing by Stephen Coates, David Clarke and Matthew Lewis)

Stocks Surge, Dollar Sags as Investor Risk Appetite Expands

Wall Street’s S&P 500 surged well over 1% following solid gains for European markets.

MSCI’s gauge of stocks across the globe jumped 1.06%. As it gained for a third session, the index had recovered all its losses from Monday, when it posted its biggest percentage drop in two months.

Safe-haven trades faded after benefiting earlier in the week, with gold prices dropping.

“We are seeing markets rally on the premise that while the situation in China particularly with Evergrande is not going away, the outcome is not perhaps going to be as severe or prompt some form of contagion that was originally feared,” said Craig Fehr, investment strategist at Edward Jones.

“You combine that with the fact that the tone that the Fed struck yesterday at its meeting suggests that while a reduction in stimulus is certainly coming, the Fed is not particularly eager to start tightening policy dramatically in the near term.”

The Fed said on Wednesday it will likely begin reducing its monthly bond purchases as soon as November and signalled interest rate increases may follow more quickly than expected as the U.S. central bank’s turn from pandemic crisis policies gains momentum.

In Hong Kong, shares of debt-laden property group Evergrande jumped 18% ahead of a key debt payment deadline. Fears the group’s distress could spill into the broad economy helped spark an equity sell-off to start the week.

On Wall Street, the Dow Jones Industrial Average rose 544.68 points, or 1.59%, to 34,803, the S&P 500 gained 59.11 points, or 1.34%, to 4,454.75 and the Nasdaq Composite added 146.28 points, or 0.98%, to 15,043.13.

The pan-European STOXX 600 index rose 0.93%.

Norway’s central bank raised its benchmark interest rate and said it expects to hike again in December, joining a short but growing list of nations moving away from emergency-level borrowing costs. Norway’s crown strengthened to its highest level since mid-June versus the euro.

In other currency trading, the dollar index fell 0.492% after hitting a one-month high earlier, with the euro up 0.49% to $1.1743. The Japanese yen weakened 0.34% versus the greenback at 110.15 per dollar.

Sterling was last trading at $1.3743, up 0.87% on the day, after the Bank of England said two of its policymakers had voted for an early end to pandemic-era government bond buying and markets brought forward their expectations of an interest rate rise to March.

Benchmark 10-year notes last fell 21/32 in price to yield 1.401%, from 1.331% late on Wednesday. Key Euro area bond yields also climbed after the hawkish signals from major central banks.

Oil prices rose, supported by growing fuel demand and a draw in U.S. crude inventories as production remained hampered in the Gulf of Mexico after two hurricanes.

U.S. crude gained 1.59% to $73.38 per barrel and Brent was at $77.25, up 1.39% on the day.

Spot gold dropped 1% to $1,749.66 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Sujata Rao in London and Alun John in Hong Kong; Editing by Hugh Lawson, Alex Richardson, Steve Orlofsky and Catherine Evans)

Sterling Gains Ahead of BoE Meeting

The pound had fallen this week as panic that Chinese developer Evergrande would default on its debts sent investors into safer assets and currencies.

Attention now turns to the BoE rate decision, due at 11:00 GMT.

Rate-setters meeting are unlikely to vote for an early end to COVID-19 stimulus, especially after Britain’s economic growth slowed unexpectedly in July and consumer price inflation saw a record jump to a nine-year high.

Markets have responded to the inflation numbers by bringing forward rate hike expectations off the record 0.1% low to May 2022.

Investors will now be watching closely for any signs that BoE policymakers do not view the rise in price growth quite as transitory after they previously said inflation could temporarily hit 4% by year-end.

Some analysts said the U.S. Federal Reserve’s hawkish tone in Wednesday’s policy update has also raised expectations the BoE might not sound as dovish as previously as central banks globally plot a path out of pandemic-era stimulus.

“In light of the recent hawkish repricing of BoE rate hike expectations, market participants will be closely scrutinizing the updated policy communication today for any signal that the BoE is moving closer to raising rates,” MUFG analyst Lee Hardman said in a note.

“However, we believe that there is greater risk of disappointment which could trigger a temporary correction lower for the GBP. We expect the BoE to mainly stick to the policy message from August when they formally adopted a gradual tightening bias.”

The pound was last up 0.2% at $1.3648 and against the euro it was flat at 85.85 pence.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Tommy Wilkes; Editing by Angus MacSwan)

 

Short Bets on Asian Currencies Creep up on Fed Taper Outlook: Reuters poll

In its policy meeting on Wednesday, the Fed left key rates unchanged and didn’t announce the start of its asset purchase tapering, as expected, but Chair Jerome Powell said board members believed tapering could conclude in the mid of next year, paving the way for potential rate hikes.

The Fed’s stance sent the dollar to its highest level in a month on Thursday, while its counterparts in Asia were broadly unchanged.

Mildly bullish positions in the yuan from two weeks ago were reversed, the poll of 11 respondents showed, on concerns over the fate of embattled property developer China Evergrande – Asia’s biggest junk bond issuer and a key component of the Chinese economy.

Losses in the yuan, however, were capped after the heavily indebted property giant said it would make a bond coupon payment on Thursday, easing some fears of a possible default. Financial markets were closed in China and Taiwan through Tuesday and in South Korea until Wednesday for the Mid-Autumn Festival holiday.

Short bets on the South Korean won climbed to their highest level since March last year, while bear positions rose significantly in the Thai baht and the Philippine peso.

As Thailand continues to reel under its most severe coronavirus outbreak, the government announced plans on Wednesday to speed up vaccinations and said it would introduce urgent stimulus measures.

Most of Thailand’s 1.5 million infections and 15,000 deaths occurred since April, following a year of successful containment during which its key tourism sector collapsed.

The Philippines eased some curbs last week, allowing small businesses in its capital region to reopen after being shut for weeks as the country fights one of Asia’s worst COVID-19 outbreaks.

Long bets on the Indonesian rupiah firmed after the country’s central bank left policy steady earlier this week and kept its target range for 2021 growth unchanged after a downgrade in July.

The Reuters survey is focused on what analysts believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3.

A score of plus 3 indicates the market is significantly long U.S. dollars. The figures included positions held through non-deliverable forwards (NDFs).

The survey findings ASIAPOSN are provided below (positions in U.S. dollar versus each currency):

DATE USD/CNY USD/KRW USD/SGD USD/IDR USD/TWD USD/INR USD/MYR USD/PHP USD/THB

23/09 0.25 0.96 -0.15 -0.50 -0.20 -0.45 0.25 0.56 0.75

09/09 -0.09 0.33 -0.36 -0.44 -0.69 -0.88 0.23 0.40 0.12

26/08 0.425 0.868 0.474 0.18 0.326 -0.08 1.1922 0.779 1.351

12/08 0.32 0.69 0.77 0.2 -0.09 0.37 1.39 1.17 1.75

29/07 0.27 0.78 0.71 0.27 0.36 0.29 1.4 1.21 1.49

15/07 -0.15 0.27 0.53 0.23 0.13 0.68 1.06 1.06 1.56

01/07 -0.29 -0.29 0.02 0.36 -0.19 0.5 0.49 -0.04 0.85

17/06 -0.63 -0.36 -0.49 -0.5 -0.58 -0.21 -0.05 -0.31 0.2

03/06 -1.34 -0.51 -0.55 -0.4 -0.44 -0.71 0.32 -0.66 0.37

20/05 -0.33 0.43 0.37 -0.06 0.33 -0.03 0.26 -0.22 0.81

06/05 -0.52 -0.39 -0.58 0.31 -0.59 0.86 -0.04 -0.35 0.5

(Reporting by Rushil Dutta; polling by Harish Sridharan in Bengaluru; Editing by Saumyadeb Chakrabarty)

Oil Prices Rise on Tight Supply, Renewed Risk Appetite

The market was also supported by a return of appetite for risk assets as concerns eased over a potential default by property developer China Evergrande and its possible fallout on the world’s second-largest economy.

U.S. West Texas Intermediate (WTI) crude rose 17 cents, or 0.2%, to $72.40 a barrel by 06:45 GMT, while Brent crude rose 18 cents, or 0.2%, to $76.37 a barrel.

Both contracts jumped 2.5% on Wednesday after data from the U.S. Energy Information Administration showed U.S. crude stocks fell by 3.5 million barrels to 414 million barrels in the week to Sept. 17 – the lowest total since October 2018 – in a bigger drawdown than analysts had expected. [EIA/S]

“With Gulf of Mexico production returning slowly, and natural gas prices remaining sky high, the structural outlook for oil remains promising as OPEC+ struggles to meet even its current production quotas,” said Jeffrey Halley, analyst at brokerage OANDA.

Several OPEC+ countries – including Nigeria, Angola and Kazakhstan – have struggled in recent months to raise output due to years of under-investment or maintenance work delayed by the COVID-19 pandemic.

In a sign of strong fuel demand as travel bans ease, East Coast refinery utilisation rates in the United States rose to 93%, the highest since May 2019, EIA data showed.

ANZ Research said market sentiment is also being supported by surging natural gas prices.

“Supply shortage of gas could encourage power utilities to shift from gas to oil if winter turns out to be colder this year,” ANZ analysts said in a note.

Natural gas prices have risen sharply around the globe in recent months. That has been due to a combination of factors, including increased demand particularly from Asia as it enters its post-pandemic recovery, low gas inventories, and tighter-than-usual gas supplies from Russia.

The rise in oil prices came even as the U.S. dollar held near a one-month high after the U.S. Federal Reserve signalled rate hikes could come next year, more quickly than expected.

Oil prices typically fall when the dollar rises as a stronger greenback makes oil more expensive for holders of other currencies.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Tom Hogue and Muralikumar Anantharaman)