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Markets

World stocks clamber off 18-month lows, but markets on recession watch

 

  • S&P futures up 1.13%, European stocks gain 0.96%
  • MSCI Asia ex-Japan +1.8%, Nikkei +2.64%
  • Worries over inflation, tightening policy remain
  • Dollar hovers near 20-year highs on safe-haven demand

LONDON/SHANGHAI, May 13 (Reuters) – World stocks rose from the previous day’s 18-month lows and the dollar pulled back from 20-year highs on Friday, though investors remained nervous about high inflation and the impact of rising interest rates.

Markets are becoming anxious about the possibility of recession, with the S&P getting close to a bear market on Thursday, at nearly 20% off its January all-time high.

In an interview late on Thursday, US Federal Reserve Chair Jerome Powell said the battle to control inflation would “include some pain.” Powell repeated his expectation of half-percentage-point interest rate rises at each of the Fed’s next two policy meetings, while pleading that “we’re prepared to do more.” read more

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The war in Ukraine has aggravated supply chain disruptions and inflationary pressures already in place after more than two years of the COVID-19 pandemic, but stocks enjoyed a bounce on Friday.

“There’s an awful lot of negative sentiment out there, we’re looking at a 40% chance of recession,” said Patrick Spencer, vice chairman of equities at Baird Investment Bank.

“A lot of fund managers have cut their equity allocations and raised cash, though we think this is a correction rather than a bear market.”

MSCI’s world equity index (.MIWD00000PUS) rose 0.32% after hitting its lowest since November 2020 on Thursday, though it was heading for a 4% fall on the week, its sixth straight week of losses.

S&P futures bounced 1.13% after the S&P index dropped 0.13% overnight, with the index also eyeing a sixth straight week of declines.

S&P 500 set for a sixth straight week of falls

European stocks (.STOXX) rallied 0.96% and Britain’s FTSE 100 (.FTSE) gained 1.17%.

The US dollar eased 0.22% to 104.54 against a basket of currencies, but remained close to 20-year highs due to safe haven demand.

Russia has bristled over Finland’s plan to apply for NATO membership, with Sweden potentially following suit.

Moscow called Finland’s announcement hostile and threatened retaliation, including unspecified “military-technical” measures. read more

The dollar rose 0.36% to 128.76 yen , while the euro gained 0.3% to $1.0408, recovering from Thursday’s five-year lows.

Cryptocurrency bitcoin also turned higher, cracking through $30,000 after the collapse of TerraUSD, a so-called stablecoin, drove it to a 16-month low of around $25,400 on Thursday. read more

“Some traders may see the sharp fall this month as an opportunity to buy the dip, but given the hugely volatile nature of the coins, the crypto house of cards could tumble further,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown .

The moves higher in equities were mirrored in US Treasuries, with the benchmark US 10-year yield edging up to 2.9221% from a close of 2.817% on Thursday.

The policy-sensitive 2-year yield was at 2.6006%, up from a close of 2.522%.

“Within the shape of the US Treasury curve we are not seeing any particularly fresh recession/slowdown signal, just the same consistent marked slowing earmarked for H2 2023,” Alan Ruskin, macro strategist at Deutsche Bank, said in a note.

German 10-year government bond yields edged up to 0.9250%.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up almost 2% from Thursday’s 22-month closing low, trimming its losses for the week to less than 3%.

Australian shares (.AXJO) gained 1.93%, while Japan’s Nikkei stock index (.N225) jumped 2.64%.

In China, the blue-chip CSI300 index (.CSI300) was up 0.75% and Hong Kong’s Hang Seng (.HSI) rose 2.71%, encouraged by comments from Shangahi’s deputy mayor that the city may be able to start easing some tough COVID restrictions this month. read more

“We had some pretty big moves yesterday, and when you see those big moves it’s only natural to get some retracement, especially since it’s Friday heading into the weekend. There’s not really a new narrative that’s come through,” said Matt Simpson, senior market analyst at City Index.

Oil prices were higher against the backdrop of a pending European Union ban on Russian oil, but were still set for their first weekly loss in three weeks, hit by concerns about inflation and China’s lockdowns slowing global growth.

US crude rose 0.75% to $106.97 a barrel, and global benchmark Brent crude was up 1.05% at $108.58 per barrel.

Spot gold , which had been driven to a three-month low by the soaring dollar, was up 0.2% at $1,824.61 per ounce.

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Reporting by Andrew Galbraith; Editing by Simon Cameron-Moore, Lincoln Feast and Kim Coghill

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Markets

Nomura offers its first bitcoin derivatives, just as crypto markets tumble

Nomura Securities trading floor is pictured at the company’s Otemachi Head Office in Tokyo, Japan, November 18, 2016. REUTERS/Toru Hanai

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HONG KONG, May 13 (Reuters) – Nomura (8604.T) has begun offering bitcoin over-the-counter derivatives to clients, it said Friday, the latest move by a traditional financial institution into the cryptocurrency industry, even as markets are in tumoil.

The trades, executed on the CME by crypto asset trading firm Cumberland DRW this week, were the Japanese investment bank’s first digital asset trades, said Nomura’s head of markets, Asia ex-Japan, Rig Karkhanis in a statement.

“Working with institutional-grade counterparties will allow us to scale into the increasing demand from our clients,” he said.

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Many global investment banks have been looking to offer clients more crypto related services, responding they say to demand from institutional investors and private clients for access to what had been a fast growing sector.

However, crypto markets have tumbled this week as a meltdown in TerraUSD, one of the world’s largest stablecoins, sent digital tokens, already swept up in a sell-off of riskier assets, into meltdown. read more

Bitcoin hit a 16-month low of around $25,400 on Thursday.

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Reporting by Alun John; Editing by Kim Coghill

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Business

Bitcoin eyes record losing streak as ‘stablecoin’ collapse crushes crypto

Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018. REUTERS/Dado Ruvic/Illustration

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SINGAPORE, May 13 (Reuters) – Cryptocurrencies nursed large losses on Friday, with bitcoin pinned below $30,000 and set for a record losing streak as the collapse of TerraUSD, a so-called stablecoin, rippled through markets.

Crypto assets have also been swept up in broad selling of risky investments on worries about high inflation and rising interest rates. Sentiment is particularly fragile, however, as tokens supposed to be pegged to the dollar have faltered.

Bitcoin, the largest cryptocurrency by total market value, attempted a bounce early in the Asia session and rose 2% to $29,500, something of a recovery from a 16-month low of around $25,400 reached on Thursday.

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It remains a long way below week-ago levels of around $40,000 and, unless there is a rebound in weekend trade, is headed for a record seventh consecutive weekly loss.

“I don’t think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong based firm that runs a crypto index fund.

“I think there is more downside in the coming days. I think what we need to see is the open interest collapse a lot more, so the speculators are really out of it, and that’s when I think the market will stabilize.”

TerraUSD (USDT) broke its 1:1 peg to the dollar this week, as its mechanism for remaining stable, using another digital token, failed under selling pressure. It last traded below 10 cents. read more

Tether, the biggest stablecoin and one whose developers say is backed by dollar assets, has also come under pressure and fell to 95 cents on Thursday, according to CoinMarketCap data. read more

UNSTABLE

Selling has roughly halved the global market value of cryptocurrencies since November, but the drawdown has turned to panic in recent sessions with the squeeze on stablecoins.

These are tokens pegged to the value of traditional assets, often the US dollar, and are the main medium for moving money between cryptocurrencies or to convert balances to fiat cash.

“Over half of all bitcoin and ether traded on exchanges are versus a stablecoin, with USDT or Tether taking the largest share,” analysts at Morgan Stanley said in a research note.

“For these types of stablecoins, the market needs to trust that the issuer holds sufficient liquid assets they would be able to sell in times of market stress.”

Tether has recovered to parity on the dollar and its operating company says it has the necessary assets in Treasuries, cash, corporate bonds and other money-market products.

But it is likely to face further tests if traders keep selling, and analysts are concerned that stress could spill over into money markets if pressure forces more and more liquidation.

Ether , the second-largest cryptocurrency by market capitalization, steadied near $2,000 on Friday after a drop as low as $1,700 on Thursday. Bitcoin and ether are about 60% below record peaks reached in November.

Crypto-related stocks have also copped a pounding, with shares in broker Coinbase (COIN.O) steadying overnight but still down by half in little more than a week.

In Asia, Hong Kong-listed Huobi Technology (1611.HK) and BC Technology Group (0863.HK), which operate trading platforms and other crypto services, eyed weekly drops of more than 15%.

Amid the turmoil, Nomura (8604.T) on Friday said it had begun offering bitcoin derivatives to clients, the latest move by a traditional financial institution into the asset class.

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Reporting by Tom Westbrook and Alun John.

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Markets

Explainer: What are stablecoins, the asset rocking the cryptocurrency market?

Representations of cryptocurrencies including Bitcoin, Dash, Ethereum, Ripple and Litecoin are seen in this illustration picture taken June 2, 2021. REUTERS/Florence Lo/Illustration

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LONDON, May 12 (Reuters) – Most cryptocurrencies have a major problem with price volatility, but one sub-category of coins is designed to maintain a constant value: stablecoins.

As cryptocurrency prices plummeted this week, with bitcoin losing around a third of its value in just eight days, stablecoins were supposed to be isolated from the chaos.

But an unexpected collapse in the fourth-largest stablecoin TerraUSD, which broke from its 1:1 dollar peg, has brought the asset class under renewed attention. read more

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Here’s what you need to know:

WHAT ARE STABLECOINS?

Stablecoins are cryptocurrencies designed to be protected from the wild volatility that makes it difficult to use digital assets for payments or as a store of value.

They attempt to maintain a constant exchange rate with fiat currencies, for example through a 1:1 US dollar peg.

HOW IMPORTANT ARE THEY?

Stablecoins have a market cap of around $170 billion, making them a relatively small part of the overall cryptocurrency market, which is currently worth around $1.2 trillion, according to CoinMarketCap data.

But they have emerged in popularity in recent years. The largest stablecoin, Tether, has a market cap of around $80 billion, having emerged from just $4.1 billion at the start of 2020.

The No.2 stablecoin, USD Coin, has a market cap of $49 billion, according to CoinMarketCap data.

While data on the specific uses of stablecoins is hard to come by, they play a crucial role for cryptocurrency traders, allowing them to hedge against spikes in bitcoin’s price or to store idle cash without transferring it back into fiat currency. read more

In its biannual financial stability report on Tuesday, the US Federal Reserve warned stablecoins are increasingly used to facilitate leveraged trading in other cryptocurrencies.

From 2018 onwards, stablecoins have increasingly been used in international trade and as a way to avoid capital controls, says Joseph Edwards, head of financial strategy at crypto firm Solrise. The stablecoin Tether in particular is used for trade in and around China and South America, he said.

HOW DO THEY WORK?

There are two main types of stablecoin: those which are backed by reserves comprising assets, such as fiat currency, bonds, commercial paper, or even other crypto tokens, and those which are algorithmic, or “decentralized”.

Major stablecoins such as Tether, USD Coin and Binance USD are reserve-backed: they say that they hold enough dollar-denominated assets to maintain an exchange rate of 1:1.

The companies say that one of their stablecoins can always be exchanged for one dollar.

Asset-backed stablecoins have come under pressure in recent years to be transparent about what is in their reserves and whether they have sufficient dollars to back up all the digital coins in circulation. read more

Meanwhile TerraUSD is an algorithmic stablecoin. This means it does not have reservations. Instead, its value was supposed to be maintained by a complex mechanism involving swapping TerraUSD coins with a free-floating cryptocurrency called Luna to control supply.

WHAT CAN GO WRONG?

TerraUSD’s stability mechanism stopped working this week when investors lost faith in Luna, amid a broader downturn in cryptocurrency markets. TerraUSD’s price crashed to as low as 30 cents.

In theory, asset-backed stablecoins should hold firm despite this.

But Tether also broke away from its dollar peg for the first time since 2020 on Thursday, dropping to as low as 95 cents.

Tether sought to reassure investors, saying on its website that holders were still able to redeem their tokens at the 1:1 rate.

WHAT DO REGULATORS SAY?

While regulators globally are trying to establish rules for the cryptocurrency market, some have highlighted stablecoins as a particular risk to financial stability – for example, if too many people tried to cash out their stablecoins at once.

In its stability report, the Fed warned that stablecoins are vulnerable to investor runs because they are backed by assets that can lose value or become illiquid in times of market stress. A run on the stablecoin could therefore spill over into the traditional financial system by creating stress on these underlying assets, it said.

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Reporting by Elizabeth Howcroft; Editing by Michelle Price and Lisa Shumaker

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Economy

Explainer: Does the cryptocurrency crash pose a threat to the financial system?

Representations of virtual cryptocurrencies are seen in this illustration taken November 28, 2021. REUTERS/Dado Ruvic/Illustration/Files

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WASHINGTON, May 11 (Reuters) – On Tuesday, bitcoin fell briefly below $30,000 for the first time in 10 months, while cryptocurrencies overall have lost nearly $800 billion in market value in the past month, according to data site CoinMarketCap, as investors fret about tightening monetary policy.

Compared with the Fed’s last tightening cycle which began in 2016 crypto is a much bigger market, raising concerns about its interconnectivity with the rest of the financial system.

HOW BIG IS THE CRYPTOCURRENCY MARKET?

In November, the most popular cryptocurrency, bitcoin, hit an all-time high of more than $68,000, pushing the value of the crypto market to $3 trillion, according to CoinGecko. That figure was $1.51 trillion on Wednesday.

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Bitcoin accounts for nearly $600 billion of that value, followed by ethereum, with a $285 billion market cap.

Although cryptocurrencies have enjoyed explosive growth, the market is still relatively small.

The US equity markets, for example, are worth $49 trillion while the Securities Industry and Financial Markets Association has pegged the outstanding value of US fixed income markets at $52.9 trillion as of the end of 2021.

WHO OWNS AND TRADES CRYPTOCURRENCIES?

Cryptocurrency started out as a retail phenomenon, but institutional interest from exchanges, companies, banks, hedge funds and mutual funds is growing fast.

While data on the proportion of retail versus institutional investors in the crypto market is hard to come by, Coinbase, the world’s largest cryptocurrency exchange, said institutional and retail investors each accounted for about 50% of the assets on its platform in the fourth quarter.

Its institutional clients traded $1.14 trillion in crypto in 2021, up from just $120 billion in 2020, Coinbase said.

Most of the bitcoin and ethereum in circulation is held by a select few. An October report from the National Bureau of Economic Research (NBER) found that 10,000 bitcoin investors, both individuals and entities, control about one-third of the bitcoin market, and 1,000 investors own approximately 3 million bitcoin tokens.

Approximately 14% of Americans were invested in digital assets as of 2021, according to University of Chicago research.

COULD A CRYPTO CRASH HURT THE FINANCIAL SYSTEM?

While the overall crypto market is relatively small, the US Federal Reserve, Treasury Department and the international Financial Stability Board have flagged stablecoins – digital tokens pegged to the value of traditional assets – as a potential threat to financial stability.

Stablecoins are mostly used to facilitate trading in other digital assets. They are backed by assets that can lose value or become illiquid in times of market stress, while the rules and disclosures surrounding those assets and investors’ redemption rights are murky.

That could make stablecoins susceptible to a loss of investor confidence, particularly in times of market stress, regulators have said. read more

That happened on Monday, when TerraUSD, a major stablecoin, broke its 1:1 peg to the dollar and fell as low as $0.67, according to CoinGecko. That move partly contributed to bitcoin’s fall. read more

Although TerraUSD maintains its tie to the dollar through an algorithm, investor runs on stablecoins that maintain reserves in assets like cash or commercial paper could spill over into the traditional financial system, causing stress in those underlying asset classes, say regulators. read more

With more companies’ fortunes tied to the performance of crypto assets and traditional financial institutions dabbling more in the asset class, other risks are emerging, say regulators. In March, for example, the Acting Comptroller of the Currency warned that banks could be tripped up by crypto derivatives and unhedged crypto exposures, given they are working with little historical price data.

Still, regulators overall are divided on the size of the threat a crypto crash poses to the financial system and broader economy.

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Reporting by Hannah Lang in Washington; Editing by Michelle Price and Matthew Lewis

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Business

Stocks in a tailspin, dollar soars as hard landing fears grow

A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 1, 2020. REUTERS/Francis Mascarenhas

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  • World stocks drop to 1-1/2 yr low, down almost 20% YTD
  • Europe opens down 2% US equity futures struggle
  • Dollar hits 2yr highs on AUD, NZD
  • Bitcoin tumbling, hits new 16-month low
  • Copper buckles to lowest since October

LONDON, May 12 (Reuters) – Shares sank to a 1-1/2 year low on Thursday and the dollar hit its highest in two decades, as fears grew that fast-rising inflation will drive a sharp rise in interest rates that brings the global economy to a standstill.

Those nerves and the still-escalating war in Ukraine took Europe’s main markets down more than 2% in early trade and left MSCI’s top index of world shares (.MIWD00000PUS) at its lowest since late 2020 and down nearly 20% for the year.

The global growth-sensitive Australian and New Zealand dollars fell about 0.8% to almost two-year lows. The Chinese yuan slid to a 19-month trough while the dollar powered to its highest level since late 2002.

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Nearly all the main volatility gauges were signaling danger. Bitcoin was caught in the fire-sale of risky crypto assets as it fell another 8% to $26,570, having been near $40,000 just a week ago and almost $70,000 just last November.

“We have had big moves,” UBS’s UK Chief Investment Officer Caroline Simmons, said referring as well to bond markets and economic expectations. “And when the market falls it does tend to fall quite fast.”

Data on Wednesday had shown US inflation running persistently hot. Headline consumer prices rose 8.3% in April year-on-year, fractionally slower than the 8.5% pace of March, but still above economists’ forecasts for 8.1%. read more

US markets had whipsawed after the news, closing sharply lower, and futures prices were pointing to another round of 0.2%-0.7% falls for the S&P 500, Nasdaq and Dow Jones Industrial later.

“We’re now very much embedded with at least two further (US) hikes of 50 basis points on the agenda,” said Damian Rooney, director of institutional sales at Argonaut in Perth.

“I think we were probably delusional six months ago with the rise of US equities on hopes and prayers and the madness of the meme stocks,” he added.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 2.3% to a 22-month low overnight. Japan’s Nikkei (.N225) fell 1.8%.

Treasuries were bid in both Europe and Asia, especially at the long end, flattening the yield curve as investors braced for near-term hikes to hurt long-run growth – an outcome that would most likely slow or even reverse rate hikes.

The benchmark 10-year Treasury yield had dropped in the US and fell a further 7 bps to 2.8569% on Thursday. The gap between the highly rate-rise sensitive two-year yields and 10-year ones narrowed 4.2 bps .

In Europe, Germany’s 10-year yield, the benchmark for the bloc, fell as much as 12 bps to 0.875%, its lowest in nearly two weeks.

“I think a lot of it is catch up from what happened yesterday, and also there’s still a lot of negative sentiment in the US Treasury curve,” said Lyn Graham-Taylor, senior rates strategist at Rabobank.

SELL IN MAY

The rates outlook is driving up the US dollar and taking the heaviest toll on riskier assets that shot up through two years of stimulus and low-rate lending.

The Nasdaq (.IXIC) is down nearly 8% in May so far and more than 25% this year. Hong Kong’s Hang Seng Tech index (.HSTECH) slid 1.5% on Thursday and is off more than 30% this year.

Cryptocurrency markets are also melting down, with the collapse of the so-called TerraUSD stablecoin highlighting the turmoil as well as the selling in bitcoin and next-biggest-crypto, ether. read more

A weakening growth picture outside the United States is battering investor confidence, too, as war in Ukraine threatens an energy crisis in Europe and lengthening COVID-19 lockdowns in China throw another spanner into supply chain chaos.

Nomura estimated this week that 41 Chinese cities are in full or partial lockdowns, making up 30% of the country’s GDP.

Heavyweight property developer Sunac (1918.HK) said it missed a bond interest payment and will miss more as China’s real estate sector remains in the grip of a credit crunch. read more

The yuan fell to a 19-month low of 6.7631 and has dropped almost 6% in under a month.

The Australian dollar fell 0.8% to a near two-year low of $0.6879. The kiwi slid by a similar margin to $0.6240, though the euro and yen held steady to keep the dollar index just shy of a two-decade peak.

Sterling was at a two-year low of just under $1.22 as well as economic data there caused worries and concerns grew that Britain’s Brexit deal with the EU was in danger of unraveling again due to the same old problem of Northern Ireland’s border. read more

In commodity trade, oil wound back a bit of Wednesday’s surge on growth worries.

Brent crude futures fell 2.3% to $104.93 a barrel, while highly growth-sensitive metals copper and tin slumped over 3.5% and 9% respectively. That marked copper’s lowest level since October.

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Additional reporting by Tom Westbrook in Singapore; Editing by Kim Coghill

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Business

Shares drop, yields shoot up after US inflation data

MILAN, May 11 (Reuters) – World shares turned lower on Wednesday and bond yields shot up after US data showed inflation there slowed down less than expected last month, cementing expectations of aggressive rate hikes by the Federal Reserve.

US futures turned negative after data showed US annual consumer price growth slowed to 8.3% in April from 8.5% in March, suggesting that inflation has probably peaked. The number, however, was above the 8.1% analyst had expected.

Paolo Zanghieri, senior economist at Generali Investments, said the data confirmed the view that the return of inflation to more tolerable values ​​will take time.

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“Overall today’s data add to the case of the strong front-loading called for by (|Fed Chair Jerome) Powell in the last meeting, who also suggested the possibility of two more 50bps rise in June and July,” Zanghieri said. “However, this will keep concern about the possibility of a recession high, and ultimately weakening growth may lead the Fed to temper it tightening after the summer.”

MSCI’s benchmark for global stocks (.MIWD00000PUS) was flat by 1247 GMT, having earlier risen as much as 0.3%. On Tuesday, the index fell to its lowest level since November 2020 on fears Fed tightening could significantly slow down the global economy.

US equity futures turned sharply negative, with the Nasdaq and S&P 500 e-minis down 1% and 0.6% respectively. The pan-European STOXX 600 (.STOXX) equity benchmark index also trimmed gains, and was last up 0.2%.

Money markets ramped up bets of Fed rate hikes by end-2022 to 208 basis points after the US inflation numbers, compared to around 195 bps before.

Earlier in Asia, equities squeezed higher from near two-year lows. Chinese blue chips (.CSI300) rose 1.4% after Shanghai officials said half the city had achieved “zero COVID” status, and after US President Joe Biden said he was considering eliminating Trump era tariffs on China.

Chinese data released on Wednesday, however, showed consumer prices rose 2.1% from a year earlier, more than expected and at the fastest pace in five months, partly due to food prices.

YIELDS SHOOT UP

After falling to their lowest levels in almost a week earlier on Wednesday, benchmark 10-year Treasury yields turned positive after the inflation data, marching back towards the three-year high of 3.203% hit on Monday.

The 10-year yield was last up 6 basis points on the day to 3.0502%, while the 2-year yield , which often reflects the Fed rate outlook, jumped 11 bps to 2.717%.

Euro area government bond yields also sold off following the US data, sending German 10-year yields up 8 bps to 1.084% .

Bets on aggressive Fed tightening have also supported the dollar this year.

The dollar index, which measures its performance against six main peers, reversed earlier weakness and was last up 0.1% to 104.04, closer to the two-decade high of 104.19 reached at the start of the week.

The Fed last week raised interest rates by 50 basis points and Chair Jerome Powell said two more such hikes were likely at the upcoming policy meetings.

There has also been speculation in markets the US central bank will need to move by 75 basis points at one meeting and currently money markets are pricing over 190 basis points of combined rate hikes per year.

“The current problem is that the market is convinced that the Fed is determined to fight inflation and therefore willing to tolerate market volatility and some demand destruction more than in the past. Personally, I’m less convinced of this determination,” said Giuseppe Sersale , fund manager at Anthilia.

Morgan Stanley forecasts 2022 global economic growth to be less than half of last year’s at 2.9%, down from a previous estimate of 3.2%. read more The US bank also cut its year-end target for the S&P 500 by 11% to 3,900 points, while raising its US 10-year yield forecast by 55 bps to 3.15%.

Oil bounced back, buoyed by supply concerns as the European Union works on gaining support for a ban on Russian oil.

Brent rose 2.6% to $105.12 a barrel and US crude rose 3% to $102.77.

Spot gold dipped 0.1% to $1,836.2 an ounce.

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Reporting by Danilo Masoni in Milan, Sujata Rao in London and Alun John in Hong Kong, Editing by William Maclean and Tomasz Janowski

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Markets

Crypto assets shed $800 billion in market value in a month

May 10 (Reuters) – Crypto assets bled nearly $800 billion in market value over the past month, touching a low of $1.4 trillion on Tuesday, according to data site CoinMarketCap, as the end of easy monetary policy diminishes appetite for risk assets.

Bitcoin, which makes up for nearly 40% of the crypto market, hit a 10-month low earlier on Tuesday, before rebounding to $31,450, just six days after touching $40,000. It was more than 54% below its Nov. 10 all-time high of $69,000.

Digital asset prices have slumped, mirroring a plunge in equities on fears of aggressive interest rate hikes across the globe to stave off decades-high inflation. The tech-heavy Nasdaq (.IXIC) was down 28% from its November 2021 record high. read more

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Total crypto market value was at $2.2 trillion on April 2, well off of its all-time peak of $2.9 trillion in early November, as per CoinMarketCap.

“Bitcoin remains highly correlated to the broader economic conditions, which suggest the road ahead may unfortunately be a rocky one, at least for the time being,” blockchain data provider Glassnode said in a note.

Signs of weakness in stablecoins, typically a safer crypto currency, further spooked investors. TerraUSD, the world’s fourth-largest stablecoin, lost a third of its value on Tuesday as it lost its peg to the dollar. read more

Despite bitcoin’s price slump, funds and products linked to it posted inflows of $45 million last week as investors took advantage of price weakness, according to digital asset manager Coinshares in a report released on Monday. read more

“Enormous amount of liquidity that has inflated some of these cryptocurrencies,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. He expects crypto, also correlated to high-growth stocks, to come under pressure as several central banks tighten their monetary policy.

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Reporting by Medha Singh and Sruthi Shankar in Bengaluru; Editing by Shinjini Ganguli

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Business

Wall Street dips while treasury yields, oil prices drop

NEW YORK, May 10 (Reuters) – Wall Street stocks turned lower in a volatile session and oil prices fell on Tuesday with risk appetite appearing to falter as investors turned to safe havens such as Treasuries amid fears about inflation and slowing economic growth.

US Treasuries rallied, with the yield on the benchmark 10-year note tumbling from more than a three-year high to below 3% as the market reassessed the inflation outlook a day before US consumer price index (CPI) data is released.

Markets have been volatile due to a combination of surging inflation and fears that monetary tightening aimed at slowing price increases would also cause a slowdown in economic growth.

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Last week central banks in the United States, Britain and Australia raised interest rates and investors girded for more tightening as policymakers fought soaring inflation.

While all three US indexes were rebounding from Monday’s sell-off, enthusiasm for equities quickly faded.

“There’s a tonne of cross currents right now. Liquidity is drying up and volatility is the name of the game,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management in Boston.

“The tech and growth side of the (equities) market is such a big weight. Treasury yields going up as fast as they did spooked risk assets. If they could take a breather here it could let the market … find some footing. “

Miskin was reassured by Federal Reserve official comments on Tuesday that suggested efforts to engineer a soft landing. In particular he pointed to Cleveland Federal Reserve Bank President Loretta Mester’s comment that while unemployment may increase and growth slow, the Fed’s policy tightening should not push the economy into a “sustained downturn.” read more

“They’ve been so hawkish so any slight move off that the market wants to sniff that out,” said Miskin. “Sentiment wise a lot of people are looking for capitulation. The dots aren’t completely connecting yet for that.”

At 1130 EDT (1530 GMT), the Dow Jones Industrial Average (.DJI) fell 97.45 points, or 0.3%, to 32,148.25, the S&P 500 (.SPX) lost 10.91 points, or 0.27%, to 3,980.33 and the Nasdaq Composite ( .IXIC) dropped 16.49 points, or 0.14%, to 11,606.76.

The pan-European STOXX 600 index (.STOXX) rose 0.80% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) shed 0.33%, after earlier rising as much as 1.44%.

The US dollar was choppy on Tuesday as it held near a two-decade high ahead of a key reading on inflation that could provide insight on the Fed policy path. read more

The dollar index rose 0.164%, with the euro down 0.19% to $1.0535. The Japanese yen weakened 0.03% versus the greenback at 130.29 per dollar, while Sterling was last trading at $1.2301, down 0.24% on the day.

Earlier data showed China’s export growth slowed to its weakest in almost two years, as the central bank pledged to step up support for the slowing economy. read more

Oil prices fell in volatile trade as the market balanced impending European Union sanctions on Russian oil with demand concerns related to coronavirus lockdowns in China, a strong dollar and growing recession risks.

US crude recently fell 1.85% to $101.18 per barrel and Brent was at $103.92, down 1.91% on the day.

Benchmark 10-year notes last rose 33/32 in price to yield 2.9497%, from 3.079% late on Monday.

Spot gold dropped 0.4% to $1,847.41 an ounce. US gold futures % to $1,857.10 an ounce.

Elsewhere, Bitcoin was up 4% after earlier falling to its lowest level since July 2021. Tuesday’s gain allowed it to recover some losses when it tumbled 11.8% on Monday plunge, which had been its biggest daily fall since May 2021 . read more

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Additional reporting by Herbert Lash and Chuck Mikolajczak in New York, Elizabeth Howcroft in London; Editing by Bradley Perrett, Raissa Kasolowsky and Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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Categories
Economy

Dollar choppy with inflation data on deck

NEW YORK, May 10 (Reuters) – The dollar was choppy on Tuesday, fluctuating between modest gains and declines as it held near a two-decade high ahead of a key reading on inflation that could provide insight on the path of Federal Reserve monetary policy .

Investors were in a risk-on mood, as the yield on the benchmark US 10-year note dipped back below the 3% level and from a high of 3.203% on Monday, and the S&P 500 (.SPX) attempted to rebound after a three-day route.

Investors will closely eye the April consumer price index reading on Wednesday for any signs of inflation may be starting to cool, with expectations calling for an 8.1% annual increase compared to the 8.5% rise recorded in March. read more

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“It’s the calm before inflation data tomorrow, so this is allowing a breather for risky assets,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington DC.

“Nothing has materially improved when it comes to global growth, worries about China so the market is just seeing there is an occasion before the inflation data tomorrow and there is a little bit of positioning going on and that is working in the favor of risk assets .”

The dollar index rose 0.087% at 103.780, with the euro down 0.12% to $1.0542.

The greenback has climbed nearly 9% this year as investors have gravitated towards the safe haven on concerns about the Fed’s ability to tamp down inflation without causing a recession, and on worries about slowing growth arising from the war in Ukraine and rising COVID-19 cases in China.

After the Fed raised its benchmark overnight interest rate by 50 basis points last week, the largest hike in 22 years, investors have been attempting to assess how aggressive the central bank will be. Expectations are completely priced in for another hike of at least 50 basis points at the central bank’s June meeting, according to CME’s FedWatch Tool.

Multiple Fed officials on Tuesday echoed the need for a 50 basis point hike at the next meeting. Cleveland Federal Reserve Bank President Loretta Mester on Tuesday said raising interest rates in half-point increments “makes perfect sense” for the next couple of Fed meetings. read more

In addition, New York Fed President John Williams said that Chair Jerome Powell’s indication the central bank will hike by half a percentage point at the next two polict meetings is sensible. read more

The Japanese yen strengthened 0.07% versus the greenback at 130.17 per dollar, while Sterling was last trading at $1.2314, down 0.14% on the day.

In cryptocurrencies, Bitcoin last rose 0.29% to $31,029.07 after falling below the $30,000 mark for the first time since July.

Ethereum , last rose 2.88% to $2,356.96.

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Reporting by Chuck Mikolajczak, Editing by William Maclean

Our Standards: The Thomson Reuters Trust Principles.

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