Economy

(Reuters) -U.S. stock index futures rose on Friday, setting the S&P 500 and the Nasdaq for a fourth straight week of gains on easing bets of another super-sized interest rate hike by the Federal Reserve.The S&P 500 is up 15% from its mid-June low, with the latest boost coming from a slower-than-expected rise in consumer prices and a surprise drop in producer prices in July.The benchmark index is within sight of a 50% retracement of its bear market loss and investors are watching the 4,231 level. The index last closed at 4,207.27. “The major indices are trading near highs going back to May and June and those highs are now serving as near-term resistance,” said Adam Sarhan, chief executive of 50 Park Investments.”At the same time, you have the never-ending tug of war going on between the bulls and the bears that is causing the market to just get a little bit weaker up here.”While policymakers remain firm about a further tightening in monetary policy until inflation pressures fully abate, traders see a 63.5% chance of the Fed raising rates by 50 basis points next month instead of a 75 basis points hike. [FEDWATCH]The Fed has raised its policy rate by 225 basis points since March as it battles to cool demand without sparking a sharp rise in layoffs.High-growth and technology stocks such as Tesla (NASDAQ:TSLA) Inc and Amazon.com Inc (NASDAQ:AMZN) rose 0.9% each in trading before the bell as investors flocked back to riskier assets. Growth stocks have underpeformed their value counterparts so far this year on worries that rising Treasury yields due to aggressive rate hikes will pressure their valuation. Investors bought $7.1 billion in equities in the week to Wednesday, according to a Bank of America (NYSE:BAC) note, with U.S. growth stocks recording their largest weekly inflow since December last year.Meanwhile, banks looked set to extend their rally for sixth straight week, with JPMorgan Chase & Co (NYSE:JPM) and Goldman Sachs (NYSE:GS) advancing in premarket trading. At 8:45 a.m. ET, Dow e-minis were up 137 points, or 0.41%, S&P 500 e-minis were up 19 points, or 0.45%, and Nasdaq 100 e-minis were up 69.5 points, or 0.52%.Rivian Automotive Inc rose 1.4% as the electric-vehicle maker reported better-than-expected second quarter revenue.The University of Michigan’s preliminary survey of consumer sentiment for August is expected at 10:00 a.m. ET. More

(Reuters) – Futures for Canada’s main stock index inched higher on Friday as the country’s two main telecoms firms made headway with their merger deal, but sentiment was expected to be downbeat on worries over “soft landing” challenges for the economy.Rogers (NYSE:ROG) Communications Inc and Shaw Communications (NYSE:SJR) Inc finalised an agreement to sell Freedom Mobile to Videotron, a unit of Quebecor Inc, in a C$2.85 billion ($2.23 billion) deal.The sale could help Rogers and Shaw clear a key antitrust hurdle and pave the way for their C$20 billion merger.Still, the focus will be on the yield on the Canadian 10-year government bond, which has fallen some 50 basis points below the 2-year yield and is signaling the Bank of Canada may raise interest rates to a level that triggers a recession. It is the biggest inversion of Canada’s yield curve in Reuters data going back to 1994, deeper than the U.S. Treasury yield curve inversion. Following U.S. data earlier in the week that showed an easing of inflation pressures, money market investors cut their bets that the BoC would hike rates by another three-quarters of a percentage point next month. [BOCWATCH]September futures on the S&P/TSX index were up 0.1% at 7:31 a.m. ET. The Toronto Stock Exchange’s S&P/TSX composite index ended up 0.5% on Thursday, adding to this week’s rally and posting its highest closing level since June 10. Gold financing company Sandstorm Gold (NYSE:SAND) beat estimates for quarterly earnings, with revenue rising 36% from a year ago.ECN Capital Corp met quarterly earnings expectations of 9 cents per share and topped estimates on revenue.Hydro One, Ontario’s biggest electricity distribution company, said a barge moving a crane hit three high-voltage transmission lines causing power outage for a few hours in downtown Toronto on Thursday.($1 = 1.2785 Canadian dollars) More

Investors ploughed $11 billion into U.S equity funds in the week to Wednesday, their largest weekly inflow in eight weeks, but European stocks remained unloved, recording outflows for the 26th consecutive week, BofA said on Friday in a research note citing EPFR data.Tech stocks recorded inflows of $0.6 billion, the largest in eight weeks, while so-called growth stocks which benefit when interest rates are low, got their biggest inflow since December 2021 of $2.5 billion. BofA analysts said their ‘Bull & Bear’ indicator, which seeks to track market trends, remains unchanged at “extreme bearish” level. (This story refiles to fix para 2 to remove extraneous words) More

LONDON (Reuters) – U.S. stock index futures were indicating a positive start to Wall Street on Friday and world stocks headed for a fourth straight week of gains as investors scaled back views on how far U.S. interest rates and inflation can climb.Oil lost some shine on Friday but has still recouped some of last week’s losses as recession fears ease. [O/R]A slight easing of inflation readings drove global stocks higher and capped a rising dollar this week, though a string of Fed speakers dampened expectations of the central bank going slow on further policy tightening.”Inflation seems to have turned and that was positive, the growth stocks are outperforming again,” said Matthias Scheiber, global head of portfolio management for multi-asset solutions at Allspring.”I wouldn’t be surprised if we have a good finish into the weekend,” he added, though he said investors remained cautious.S&P futures gained 0.37% after the S&P index closed down 0.07%.MSCI’s world stock index was steady but was eyeing a 1.7% rise on the week.Investors bought $7.1 billion in equities in the week to Wednesday, with U.S. growth stocks recording their largest weekly inflow since December 2021, BofA said on Friday.European stocks hit two-month highs before trimming gains to trade down 0.12%. Britain’s FTSE climbed 0.28% and was eyeing two-month highs.Investors are focused on further inflation data later on Friday, with the publication of the University of Michigan’s preliminary survey of consumers for August.Odds of a 75 basis points U.S. hike in September were as high as 68% earlier in the week, but are now around 34%, where they were a week ago.However, San Francisco Federal Reserve Bank president Mary Daly said on Thursday that while a 50 basis point rate hike next month “makes sense” given economic data, she’d be open to a bigger hike if necessary. The rate is currently in the 2.25%-2.5% range. Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari have this week also pointed to rates well above 3% this year.”Inflation is elevated, so we do not rule out additional tightening,” said Steve Ellis, global CIO fixed income at Fidelity International.”However, markets expect another 100 basis points of hiking this year and this is, in our opinion, excessive.”U.S. 10-year Treasury yields were trading at 2.869% after hitting a near-three-week high of 2.906%.Benchmark German 10-year government bond yields briefly rose above 1% for the first time in two weeks.The dollar gained 0.37% against a basket of currencies while the euro lost 0.28% to $1.0287. Sterling dropped 0.76% against the dollar to $1.2120 after data showing British GDP fell 0.6% in June and 0.1% on the quarter. MSCI’s broadest index of Asia-Pacific shares outside Japan hit six-week highs before steadying, and was heading for a weekly gain near 1%. Hong Kong’s Hang Seng index rose 0.46%, but Chinese blue-chip stocks dipped 0.1%. Japan’s Nikkei was the major outlier, surging 2.62% to its highest level since January as markets reopened following a national holiday.Brent crude was headed for a weekly climb of more than 3%, recouping part of last week’s 14% tumble, as recession fears eased. [O/R]However, Brent crude futures fell 1.17% to $98.37 a barrel. U.S. West Texas Intermediate crude dropped 1.58% to $92.76. Spot gold was down 0.1% at $1,787 an ounce. More

The move came after a rural banking scandal in central China’s Henan province and eastern Anhui province threatened public confidence in the country’s financial system. Multibillions of dollars of deposits have been frozen in several local banks in what authorities have said was a complex scam.As of Thursday night, authorities have repaid 18.04 billion yuan ($2.68 billion) to 436,000 depositors, the media outlet reported, citing officials at China Banking and Insurance Regulatory Commission as saying at a briefing. That accounted for 69.6% of depositors being affected and 66% of involved deposits, 21jingji reported.($1 = 6.7419 Chinese yuan renminbi) More

MOSCOW (Reuters) – Russia is considering buying the currencies of “friendly” countries such as China, India and Turkey to hold in its National Wealth Fund (NWF), having lost the ability to buy dollars or euros due to sanctions, the central bank said on Friday.The bank said it was sticking to the policy of a free-floating rouble exchange rate but highlighted that it was important to reinstate a budget rule which diverts excess oil revenues into the rainy day fund.In a report on its monetary policy for 2023-2025, the central bank said various options on how to return to the fiscal rule and replenish the NWF are now being discussed, taking into account the Western sanctions against Russia.”The Russian Ministry of Finance is working on the possibility of implementing an operational mechanism of the budget rule mechanism for the replenishment/spending of the NWF in currencies of friendly countries (yuan, rupees, Turkish lira and others),” the central bank said.Under the budget rule, Russia previously bought dollars and euros for the NWF, but not the other currencies. It stopped daily purchases of forex for the fund in early 2022 amid increased volatility in the rouble.The NWF is managed by the finance ministry but is part of the central bank’s international reserves, which also include yuan. These totalled around $640 billion as of February, of which nearly half was frozen under Western sanctions.ECONOMY AND RATESThe Russian economy will return to growth in 2024 after two years of contraction and inflation will slow to the 4% target by then, allowing the central bank to bring the key rate to the 5-6% range in 2025, the central bank said.”Further developments in the Russian economy are characterised by substantial uncertainty… The main challenge in the coming years is to create the conditions for a successful transformation of the economy,” the central bank said.The key interest rate, the main instrument of central bank monetary policy, will average 6.5%-8.5% next year and will gradually decline to 6%-7% in 2024 and 5%-6% in 2025, down from 8% as of now, the bank forecasts in its base case scenario.The central bank also said it saw no strong reason to keep capital controls in place once the risks to the country’s financial stability subside.Russia introduced capital controls after Feb. 24 to limit financial stability risks, including imposing a limit on the withdrawal of foreign currency funds from bank accounts. (This story refiles to correct ‘Russian’ to ‘Russia’ in headline) More

LONDON (Reuters) -The dollar rose on Friday but was still set for a weekly decline as traders looked for signs of U.S. inflation peaking.U.S. inflation figures on Wednesday and Thursday were lower than expected, boosting riskier assets such as equities and weakening the dollar, as markets interpreted the data as indicating the Fed could be less aggressive in rate hikes.But Fed officials made clear they would continue to tighten monetary policy. San Francisco Federal Reserve Bank President Mary Daly said on Thursday she was open to the possibility of another 75 basis point (bp) hike in September to fight too-high inflation.At 1047 GMT, the dollar index was up 0.4% on the day at 105.520, changing course after four days of losses that have put it on track for a weekly decline of 1%.The yen lost out to the dollar’s strength, with the U.S. unit up 0.5% against the Japanese currency at 133.62.Traders were pricing in around a 36.5% chance of a 75 bps Fed rate hike in September and a 63.5% chance of 50 bps.”We think it will take far more evidence of slowing core inflation to temper Fed tightening,” Paul Mackel, global head of FX research at HSBC, said in a note to clients.”Inflation is also a global problem not just a U.S. one, and so global growth and inflation dynamics will also drive the USD,” Mackel said.”The likes of the ECB (European Central Bank) and the BoE (Bank of England) may still find it hard to match market pricing for rate hikes, creating downside pressures for EUR and GBP.”Kit Juckes, head of FX strategy at Societe Generale (OTC:SCGLY), said dollar trading was likely to remain “choppy”.“It’s not going to be going significantly weaker in a straight line because there’s still a danger than the market has to reprice terminal Fed funds higher, given there’s still plenty of inflation,” Juckes said.GDP CONTRACTION The British pound was down 0.8% at $1.212 versus the strong dollar. UK GDP contracted by less than feared in June, even though an extra public holiday had been expected to cause a big drag.The euro was down 0.3% at $1.0291. French inflation was up 6.8% year-on-year in July, while for Spain the figure was 10.8%, the highest since 1984, data showed.The euro has been weighed down by Europe’s struggles with the war in Ukraine, the hunt for non-Russian energy sources, and a hit to the German economy from scant rainfall. Low water levels on the Rhine, Germany’s commercial artery, have disrupted shipping and pushed freight costs up more than five-fold.Commerzbank (ETR:CBKG) said in a note to clients it had revised its euro-dollar forecast lower, as it expects a euro-area recession as a base scenario, having previously been a “risk scenario”. Commerzbank expects the euro to fall to $0.98 in December and to not recover until later in 2023.Inflation in Sweden eased to 8% year-on-year in July, which ING said may lessen expectations for a massive Riksbank rate hike in September.”After a good run in July, we doubt the Swedish krona pushes on too much further against the euro,” ING’s Turner said.The New Zealand dollar was lifted by expectations of a Reserve Bank of New Zealand rate rise next week. More

The UK economy contracted in the second quarter, with households cutting spending as the cost of living crisis began to bite and health sector output falling as Covid cases and testing declined. Gross domestic product, the measure of the quantity of goods and services produced, fell 0.1 per cent in the second quarter of the year after rising 0.7 per cent in the previous quarter.A temporary recovery is expected in the third quarter before the UK slides into recession over the winter as further rises in energy prices squeeze household incomes and hit spending. The decline was sharper at the end of the quarter, with GDP falling 0.6 per cent in June, but this drop reflected two lost work days from the Queen’s platinum jubilee. The Office for National Statistics, however, said the celebrations had “little impact on the quarterly estimates” and the drop in GDP reflected economic growth grinding to a halt.Overall, the figures on Friday were close to those expected by economists and the Bank of England. Darren Morgan, director of economic statistics at the ONS, said the economy “shrank slightly” over the quarter with weak health and retailing partially offset by “growth in hotels, bars, hairdressers and outdoor events across the quarter”. Yael Selfin, chief UK economist at KPMG, said the end of the coronavirus test and trace programme was significant in the second quarter decline in output and while this was temporary, weakness could be seen across the economy. “Households are already bruised by rising inflation, which is putting a squeeze on real incomes, while rising interest rates are making servicing mortgages less affordable. The expected rise in Ofgem’s utility tariff cap this autumn could be the final straw before the UK enters a consumer-driven downturn,” she said. The UK economy performed better than the US in the second quarter, but worse than the other G7 economies of Germany, France, Italy and Canada, which saw greater bouncebacks from the pandemic.Nadhim Zahawi, the chancellor, said: “I know that times are tough and people will be concerned about rising prices and slowing growth, and that’s why I’m determined to work with the Bank of England to get inflation under control and grow the economy.”Some economists were more gloomy and thought the decline in GDP already marked the start of a recession. Stephen Millard, deputy director of the National Institute of Economic and Social Research, said: “It now looks like the UK economy entered a recession [because] we expect output to continue falling over the next three quarters.” The details of the second-quarter figures showed households already feeling the pinch, with consumption down 0.2 per cent, offset by some good news from business investment, which rose 3.8 per cent. Business investment has been erratic in recent quarters and was still 6 per cent lower than pre-pandemic levels. Trade performance was again poor with another record trade deficit, excluding precious metals. Exports were £27.9bn lower than imports on this measure, a gap representing 4.5 per cent of national income, the highest since comparable records began in 1997.Much of this deficit reflects imports of expensive oil and gas, but there have also been notable increases in imports of vehicles and machinery from the EU without corresponding rises in exports. On a sectoral basis, the main decline in output in the second quarter came in services, particularly in the health sector and in retailing, offset by improvements in services related to the booming travel sector. Manufacturing contracted slightly, as did the North Sea oil and gas sector despite record prices. The figures show that the UK economy was 0.6 per cent larger than it was in the quarter immediately before the pandemic, but significantly smaller than expected, suggesting lasting damage to economic performance. More