MELBOURNE (Reuters) – Oil prices rose in early trade on Friday on signs of improving fuel demand, though gains were capped as the market awaited clues from the U.S. Federal Reserve chairman on the outlook for rate hikes in a speech later in the day.

Brent crude futures climbed 46 cents, or 0.5%, to $99.80 a barrel at 0051 GMT. U.S. West Texas Intermediate (WTI) crude futures also rose 48 cents, or 0.5%, to $93.00 a barrel. Both slumped about $2 on Thursday. Despite uncertainty over the pace of rate hikes in the United States to tackle soaring inflation, worries about oil demand destruction eased this week, putting both benchmark oil contracts on track for gains of around 3% for the week.

ANZ Research analysts said comments from some U.S. central bank officials ahead of Chairman Jerome Powell’s speech on Friday had cast a cloud over the economic backdrop.

“Nevertheless, signs of strong demand are emerging,” ANZ Research analysts said in a note, pointing to data on encouraging traffic growth. “The most recent Congestion Index data from TomTom shows Asia Pacific, European and North American traffic levels all posting strong weekly growth in the week to August 24.”

Congestion levels in China also rebounded, ANZ said, pointing to Baidu data. Along with caution in the market ahead of Powell’s speech, the prospect of Iranian crude returning to global markets also kept a lid on price gains.

Tehran is reviewing Washington’s response to a European Union-drafted final offer to revive a nuclear deal, with the EU expecting a response soon, though it is unclear how quickly Iranian oil exports would resume even if a deal is reached.

If sanctions are lifted against Iran, it would need around a year and a half to reach its full capacity of 4 million barrels per day, up 1.4 million bpd from its current output. However, the Organization of Petroleum Exporting Countries (OPEC) would consider curbing output to offset any increase from Iran, OPEC sources said this week, after Saudi Arabia flagged the possibility of introducing cuts.

Reporting by Sonali Paul in Melbourne; Editing by Himani Sarkar

TORONTO – Canada’s main stock index is expected to advance through the end of the year and then approach a record peak in 2023 as high commodity prices bolster resource company earnings and despite the risk of another major sell-off, a Reuters poll found.

The median prediction of 24 portfolio managers and strategists polled Aug. 9-23 was for the S&P/TSX Composite Index (.GSPTSE) to advance 2% to 20,375 by the end of this year from Monday’s close of 19,974.92. While that’s well below the 21,183 year-end forecast in May’s poll, the index was then expected to surge to 22,000 by the end of 2023, taking it within a whisker of its March 29 record closing high of 22,087.22.

“The outlook for the remainder of 2022 is encouraging given the expected contribution from the energy sector, financials and overall valuation of the S&P/TSX Composite Index,” said Philip Petursson, chief investment strategist at IG Wealth Management. “The strength in oil prices and commodities in general as we head into 2023 should continue to be positive for the index.”

Oil has pulled back from the peak levels seen in March but has still advanced nearly 20% since the start of the year. Together, the energy and materials sectors account for 29% of the TSX’s market capitalization. Still, the Toronto market has not escaped the volatility that has buffeted financial markets this year as central banks globally tighten monetary policy to tackle soaring inflation.

The index has rallied nearly 10% from its July trough but is still down almost 6% since the start of 2022. Since March, the Bank of Canada (BoC) has raised its benchmark interest rate by 225 basis points to 2.50%, including a full-percentage-point move in its last policy decision in July, the biggest single hike by a G7 country in this economic cycle.

“Signs of cooling inflation make the case for the BoC to slow the pace of tightening, but we don’t think the coast is clear yet,” said Angelo Kourkafas, investment strategist at Edward Jones. “The additional rate hikes will continue to pose strong headwinds for consumer spending, the housing market and economic growth over the remainder of the year.”

Most investors that answered a set of separate questions expected volatility to rise over the coming three months and see chances of another major sell-off as high or very high. “I am not in the hard-core recession camp, but the risks are evident,” IG’s Petursson said. “If we continue to see a deterioration of economic conditions, earnings downgrades won’t be too far off.”

Reporting by Fergal Smith; additional polling by Sujith Pai, Mumal Rathore and Sarupya Ganguly in Bengaluru; Editing by Bernadette Baum

SINGAPORE – The dollar held firm on Tuesday on safe haven flows, while the euro languished around a two-decade low as investors braced for a hard winter in Europe as it grapples with energy supply and broader economic growth concerns.

The euro touched its lowest since late 2002 at $0.9926 overnight and was last barely higher at $0.9939. Russia will halt natural gas supplies to Europe via the Nord Stream pipe for three days at the end of the month, the latest reminder of the precarious state of the continent’s energy supply. Heatwaves in the continent have already put a strain on energy supplies and worries are growing that any disruption during winter months could be devastating for business activity.

“Given the current mood, there’s obviously concerns as to whether that’s going to be three days or whether it’s going to be three years,” said Ray Attrill, head of FX strategy at National Australia Bank (NAB). “Is it really just going to be a three day maintenance or is this just another example of weaponisation of gas supply into Europe?”

The pound was also dragged to a new 2.5-year low overnight, and hobbled near that level at $1.1758 in early Asia trade. The Japanese yen steadied at 137.30 per dollar after touching a one-month low of 137.70. The Australian and New Zealand dollars were relatively steady, which NAB’s Attrill attributed to market’s attention being drawn to the weakness of Europe’s outlook.

Chief on investors’ minds for Tuesday will be flash manufacturing PMI readings out in the eurozone and Britain later in the day, which will provide further clarity on the growth trajectory for the respective economies.

Investors are also waiting on minutes of the European Central Bank’s (ECB) last policy meeting on Thursday that are likely to sound hawkish even as the continent faces downturn in growth. The Aussie was last up 0.15% to $0.6689, while the kiwi gained 0.18% to $0.6183. Elsewhere in Asia, the dollar hit 6.8711 against the offshore yuan , close to a nearly two-year high of 6.8752 hit on Monday.

Against a basket of currencies, in which the euro is the most heavily weighted, the U.S. dollar index stood firm at 108.9, attempting to breach a two-decade high of 109.29 hit in July. Another reason investors have sought shelter in dollars is the growing risk of a hawkish message from the Federal Reserve’s Jackson Hole symposium, flagged by several officials last week.

“Bonds sold off, led by the front-end,” said analysts at ANZ. “That’s possibly in anticipation that Chair (Jerome)Powell’s speech on Friday is likely to reiterate hawkish messaging.”

Yields on the benchmark 10-year Treasury note have risen about 4 basis points for the week and stood at 3.0201%. Yields on the two-year Treasury note were up around 5 bps to 3.3140% as investors remained on inflation and Fed watch mode.

Reporting by Rae Wee Editing by Shri Navaratnam

SYDNEY – Asian shares got off to a rocky start on Monday while the dollar remained in demand amid concerns most major central banks are committed to raising interest rates no matter the risks to growth.

Federal Reserve Chair Jerome Powell headlines a host of policy makers at Jackson Hole later in the week and risks are he will not meet investor hopes for a dovish pivot on policy.

“We expect a reminder that more tightening is needed and there is still a lot of progress to be done on inflation, but no explicit commitment to a specific rate hike action for September,” said Jan Nevruzi, an analyst at NatWest Markets. “For markets, a bland delivery like that could be underwhelming.”

Futures are fully priced for another hike in September with the only question being whether it will be 50 or 75 basis points, while rates are seen up at 3.5%-3.75% by year end.

A Reuters poll of economists forecast the Fed will raise rates by 50 basis points in September with the risks skewed towards a higher peak. One exception to the tightening trend is China where the central bank is expected to trim some key lending rates on Monday by between 10 and 15 basis points.

Unease over China’s economy tipped the yuan to a three-month low last week while pressuring stocks across the region. Early Monday, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was off 0.4%.

South Korea’s KOSPI (.KS11) shed 1.1% while Japan’s Nikkei (.N225) fell 1.0%, though it has drawn support from a recent sharp reversal in the yen. S&P 500 futures eased 0.5% and Nasdaq futures 0.6%. The S&P 500 has repeatedly failed to clear its 200-day moving average around 4,320 and ended last week down 1.2%.

BofA’s latest survey of investors found most were still bearish though 88% did expect lower inflation over time, the highest percentage since the financial crisis.

“That helps explain this month’s rotation into equities, tech and discretionary, and out of defensives,” said BofA strategist Michael Hartnett. “Relative to history investors are still long defensives and short cyclicals.” He remained a cautious bear given rising interest rates and recommended fading further S&P rallies above 4,328.

Equity valuations were not helped by a steep rise in global bond yields last week. British 10-year yields climbed by the most in five years following a shock inflation report, while bund yields jumped on a sky-high rise in German producer prices.

Ten-year Treasury yields rose 14 basis points over the week and last stood at 2.99%, while the curve remained deeply inverted to reflect the risk of recession.

The general air of global uncertainty has tended to boost the U.S. dollar as the most liquid of safe havens, sending it 2.3% higher last week to 108.18 on a basket of currencies last week in its best performance since April 2020.

“The USD can track above 110.00 week if the August flash PMIs for the major economies show a further slowing in economic growth or contraction in activity,” said Joseph Capurso, head of international economics at CBA, referring to surveys of manufacturing due on Tuesday.

“We also expect Powell to deliver a hawkish message about inflation in line with recent comments from other Fed officials, supporting the USD.” The dollar was up at 137.04 yen , having shot up 2.5% last week, while the euro was struggling at $1.0030 after losing 2.2% last week.

Minutes of the European Central Bank’s last policy meeting are due this week and are likely to sound hawkish given they decided to hike by 50 basis points. The rise in the dollar has been a setback for gold, which was pinned at $1,744 an ounce .

Oil prices were also under pressure amid worries about global demand and the high dollar. Brent was down $1.02 at $95.70, while U.S. crude lost 99 cents to $89.78 per barrel.

Reporting by Wayne Cole; Editing by Shri Navaratnam

HONG KONG, Aug 9 (Reuters) – Asian shares were down on Tuesday as financial markets fretted about persistent global cost pressures, with investors turning their focus this week to U.S. inflation data and the prospects for further aggressive Federal Reserve rate hikes.

The unexpectedly strong U.S. jobs data on Friday have raised the stakes for the July U.S. consumer prices report due on Wednesday, especially for the Fed’s policy outlook.

“U.S. stocks were struggling to hold on to gains, as the focus moves from a robust U.S. labour market to the U.S. CPI data out later this week,” ANZ analysts said in a note. “The priority of reducing inflation to underpin the expansion in domestic demand and sustainable jobs growth will ring loud and clear from the 25-27 August Jackson Hole symposium.”

Early in the Asian trading day, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 0.2%. The index is up 0.5% so far this month. U.S. stock futures rose 0.07%. Japan’s Nikkei (.N225) slid 0.81% while Australian shares (.AXJO) were flat. China’s blue-chip CSI300 index (.CSI300) was down 0.31% in early trade. Hong Kong’s Hang Seng index (.HIS) opened 0.12% lower.

On Monday, Wall Street closed mostly flat after blockbuster jobs data last week reinforced expectations the Federal Reserve will crack down on inflation, while a revenue warning from chipmaker Nvidia reminded investors of a slowing U.S. economy.

Investors now await consumer price data on Wednesday to gauge whether the Fed might ease a bit in its inflation fight and provide a better footing for the economy to grow. There were some encouraging signs for the Fed on the prices front, with a New York Fed survey on Monday showing consumers’ inflation expectations fell sharply in July.

The Dow Jones Industrial Average (.DJI) rose 0.09% while the S&P 500 (.SPX) lost 0.12% and the Nasdaq Composite (.IXIC) dropped 0.1%. Bonds also got a safe-haven bid due to unease over Beijing’s sabre rattling against Taiwan amid days of Chinese military exercises around the island.

The yield on benchmark 10-year Treasury notes rose to 2.7517% compared with its U.S. close of 2.763% on Monday. The two-year yield , which rises with traders’ expectations of higher Fed fund rates, touched 3.2115% compared with a U.S. close of 3.216%.

The dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was up at 106.37. Oil prices continued their recent retreat after suffering the worst week since April on worries about stalling global demand as central banks keep tightening. O/R

U.S. crude dipped 0.19% to $90.59 a barrel. Brent crude fell to $96.48 per barrel. The rise in the dollar was a setback for gold , though it had managed to bounce from the lows hit on Friday and was traded at $1788.7731 per ounce.

Editing by Shri Navaratnam

SINGAPORE – Oil prices extended losses on Friday, after hitting their lowest since before Russia’s February invasion of Ukraine in the previous session, as the market fretted over the impact of inflation on global economic growth and demand.

Brent crude dropped 10 cents, or 0.1%, to $94.02 a barrel by 0047 GMT, while U.S. West Texas Intermediate crude was at $88.48 a barrel, down 6 cents.

“Crude oil fell further on demand concerns on a cloudy economic outlook,” CMC Markets analyst Tina Teng said. “If commodities are not pricing in an imminent economic recession, they might be preparing for a ‘stagflation’ era when the unemployment rate starts picking up and inflation stays high.”

Recession worries have intensified following the Bank of England’s warning of a drawn-out downturn after it raised interest rates by the most since 1995. Investors are focused on the U.S. employment report to be released later in the day, which is expected to show nonfarm payrolls increased by 250,000 jobs last month, after rising by 372,000 jobs in June. read more

Any signs of strength in the labour market could feed into fears of aggressive steps by the Fed to curb inflation. “There are signs that high prices have taken the edge off gasoline and distillate demand,” ANZ analysts said in a note. U.S. gasoline demand fell around 7% on year in July while China’s zero-COVID strategy is pushing recovery in the world’s No.2 economy further out, they added.

Still, the global crude oil markets remained firmly in backwardation, where prompt prices are higher than those in future months, indicating tight supplies. Supply concerns are expected to ratchet up closer to winter with the European Union sanctions banning seaborne imports of Russian crude and oil products set to take effect on Dec. 5.

OPEC leaders Saudi Arabia and the United Arab Emirates stand ready to deliver a “significant increase” in output should the world face a severe supply crisis this winter, sources familiar with the thinking of the top Gulf exporters said. For September, OPEC+ is set to raise its oil output goal by 100,000 barrels per day. The hike is one of the smallest since OPEC quotas were introduced in 1982, OPEC data shows.

Reporting by Florence Tan; Editing by Himani Sarkar

TOKYO – Asia stocks continued a decline from Wall Street on Tuesday, and U.S. long-term Treasury yields sank to a four-month low, pulling the U.S. dollar down against the yen and other currencies as investors worried about the risk of global recession.

There were also jitters about an escalation in Sino-U.S. tension with U.S. House of Representatives Speaker Nancy Pelosi set to begin a visit to Taiwan against the objections of China, which regards the self-governed island as a breakaway province.

Australian equities declined amid an uncertain outlook for commodity demand – which also weighed on crude oil prices – while the local dollar hovered near its highest versus its U.S. counterpart since mid-June with the central bank widely expected to deliver a third consecutive half-point interest rate hike later in the day.

The Australian (.AXJO) and South Korean (.KS11) equity benchmarks suffered losses of about 0.3% each, while Japan’s Nikkei (.N225) tumbled 1.17%. Chinese blue chips (.CSI300) dropped 1.06% and Hong Kong’s Hang Seng (.HSI) lost 1.1%. Taiwan’s stock index (.TWII) slid 1.68%. MSCI’s broadest index of Asia-Pacific shares (.MIAP00000PUS) retreated 0.8%.

U.S. e-mini stock futures pointed to a 0.31% lower restart for the S&P 500 (.SPX), which stumbled 0.28% overnight. The week began with China, Europe and the United States reporting weakening factory activity, with that in the U.S. decelerating to its lowest level since August 2020.

That sank crude, with Brent futures edging down to $99.74 on Tuesday after losing almost $4 overnight. U.S. West Texas Intermediate futures also eased to $93.67, extending Monday’s almost $5 slide.

“Data releases over the past 24 hours have provided further evidence the global economy is slowing,” National Australia Bank strategist Rodrigo Catril wrote in a note to clients. “Signs of a slowdown are building” in the United States, while “China’s reopening activity burst is over,” he said.

The benchmark 10-year U.S. Treasury yield fell as low as 2.53% in Tokyo trade, the lowest since April 5, amid wagers the slowdown could spur the U.S. Federal Reserve to ease its foot off the policy-tightening pedal. The bonds also benefited from safety-seeking demand before Pelosi’s Taiwan visit, analysts said. That helped the U.S. dollar slide as low as 130.595 yen for the first time since June 6. The euro jumped as high as $1.0294, a level not seen since July 5.

The Taiwan dollar slipped to its lowest level in more than two years on the weaker side of 30 per U.S. dollar. Meanwhile, the Aussie was more subdued, retreating 0.26% to $0.7009, but after hitting the highest since June 17 at $0.7048 in the previous session.

Analysts polled by Reuters expect the Reserve Bank of Australia to hike by 50 basis points both on Tuesday and again at its next meeting in September as it races to rein in inflation. Market participants also see a half-point bump later as a certainty, and have priced an additional 37 basis points of tightening for the September decision.

Reporting by Kevin Buckland