By Jody Godoy

(Reuters) -The closely watched criminal trial of three former JPMorgan Chase & Co employees kicked off on Friday, with a prosecutor saying they “ripped off” the precious metals futures market with fake orders and defense attorneys saying the orders were genuine.

The bank’s former global precious metals desk head Michael Nowak, precious metals trader Gregg Smith and salesperson Jeffrey Ruffo are charged with racketeering and conspiracy in the U.S. Justice Department’s most aggressive case to date targeting the manipulative trading tactic known as spoofing.

Spoofing involves placing fake sell or buy orders and then canceling them with the goal of moving the price.

Prosecutor Lucy Jennings told jurors that each played a role in the scheme, which involved creating phantom supply or demand by placing buy or sell orders they never intended to fill, and then profiting from trades in the other direction.

“Either way, somebody got ripped off,” she said.

There is no doubt that orders were placed and then canceled, said Jonathan Cogan, an attorney for Smith.

“But they are wrong about what was in his mind when he did it,” he said, referring to prosecutors.

Smith and Nowak were completely willing for their orders to be filled, and the government cannot show they intended to cancel the orders from the outset, their attorneys said.

Ruffo was not a trader, and there is no evidence that he understood the traders he worked with were using illicit tactics, said his attorney Guy Petrillo.

The three men are accused of using the tactic to manipulate futures on metals such as gold, silver, platinum and palladium between 2008 and 2016.

Spoofing was outlawed in 2010 when Congress passed the Dodd-Frank Act after the financial crisis. Since then, prosecutors have argued that earlier instances constituted fraud.

The racketeering statute, a federal law enacted in 1970 to take down the Mafia, is rarely used to prosecute corporate crime. It allows prosecutors to charge a group of individuals, including those indirectly involved in alleged wrongdoing, on the basis they participated in a “criminal enterprise.”

Better Markets, a Washington nonprofit that advocates for stronger financial regulation, called the case a “potential gamechanger” because the racketeering statute would allow prosecutors to seek harsh sentences if the defendants are convicted.

In addition to racketeering and conspiracy, Nowak faces 13 other charges, including fraud, spoofing and attempted market manipulation, and Smith faces 11 additional charges.

Christopher Jordan, a trader who left JPMorgan in 2009, has also been charged and will be tried separately.

The trial is expected to take around five weeks. Prosecutors are expected to call three former traders as cooperating witnesses, all of whom have separately pleaded guilty to related charges. Alleged victims of the scheme may also take the stand, according to court papers.

Commodities manipulation and in particular spoofing have become a major focus of the Justice Department, which has brought several other cases in recent years, including against NatWest and former traders at Deutsche Bank and UBS.

JPMorgan also agreed in 2020 to pay more than $920 million and admitted to wrongdoing to settle with the Justice Department and the Commodity Futures Trading Commission over the conduct of the traders who have pleaded guilty or are facing trial.

The trial is scheduled to resume on Monday.

(Reporting by Jody Godoy; Editing by Michelle Price, David Gregorio and Jonathan Oatis)

By Jorgelina do Rosario

LONDON -The International Monetary Fund’s board of executive directors met on Friday to discuss the $44 billion Argentine programme for the first time since Silvina Batakis’ appointment as economy minister, two people with direct knowledge of the meeting said.

The IMF later confirmed the meeting had taken place and gave no further details.

In an informal meeting, the fund’s staff said Batakis, who was sworn-in on Monday, was in the process of selecting her team, and once ready the first contacts between technical level IMF officials and new Argentine officials will be made.

Staff also informed the Board that they were keeping a close watch on market conditions, as some of Argentina’s dollar bonds were now trading in very distressed territory under 20 cents on the dollar, said one of the people.

Both asked not to be named because talks are confidential.

“IMF staff regularly hold information sessions with Executive Board Members on policy and country matters,” an IMF spokesperson said via email.

“In this context, today IMF staff briefed the Executive Board on recent economic developments in Argentina.”

Argentina’s economy ministry did not reply to a request for comment.

The purpose of the meeting was to update the board on the state of affairs in Argentina, the fund’s largest debtor, the sources said.

The meeting was attended by Ilan Goldfajn and Julie Kozack, the head and deputy director of the IMF’s Western Hemisphere Department, as well as Luis Cubeddu, the IMF’s chief of mission to the country.

Sergio Chodos, who will continue to be Argentina’s representative at the IMF, was also present.

Former economy minister Martin Guzman, the architect of the South American country’s deal with the IMF, resigned abruptly on Saturday as tensions within the government coalition boiled on how to handle the economic crisis.

His departure sparked concerns of a shift towards populist policies and state spending in the country where inflation is running above 60%.

Overseas bond prices fell amid raising concerns that the new government would seek to change the terms of the IMF deal.

The executive board completed on June 24 the first review of the extended fund facility (EFF) programme and released $4 billion after the fund said Argentina met all end-March 2022 quantitative targets and made progress toward implementing the structural commitments under the program.

Separately on Friday, the Argentine government said it made scheduled payments to the Fund for about $1.3 billion.

Earlier this week, Batakis told IMF officials that she supported the objectives of the fund’s programme and would work constructively with the global lender.

IMF chief Kristalina Georgieva said on Wednesday she had a “very good call” with Batakis about the continuation of the programme.

After a private debt restructuring and an IMF deal, Argentina still needs to work on some $2 billion it owes the Paris Club of creditor nations. Talks were originally scheduled to continue this week, but the meeting in the French capital was postponed after Guzman’s resignation.

A Paris Club source said on Thursday that the new economy minister must give her commitment to an IMF programme in order for the club to open talks.

(Reporting by Jorgelina do Rosario; writing by Rodrigo Campos;Editing by Tomasz Janowski and David Gregorio)

By David French

(Reuters) – Wall Street ended little changed on Friday after a volatile session in which investors tried to comprehend how a robust jobs report would influence the U.S. Federal Reserve and its plans to aggressively hike interest rates.

Despite the bumpy nature of the day though, the Nasdaq posted its fifth straight gain – its longest winning streak since the beginning of November – and all three benchmarks finished solidly up for the week shortened by the Independence Day holiday.

The Labor Department’s closely awaited data showed nonfarm payrolls rose by 372,000 jobs in June, higher than the estimated rise of 268,000 jobs, according to a Reuters poll of economists.

The report also showed the jobless rate remained near pre-pandemic lows at 3.6% and average hourly earnings rose 0.3%, after gaining 0.4% in May.

After a brutal first half of the year, U.S. stock markets started July on a solid footing as investors took relief from easing commodity prices and the Fed hinting at a more tempered program of rate hikes amid concerns of a recession.

“We think the market has right-sized itself, somewhat, and will continue to adjust around the edges as we see macro data and as we work our way through earnings season,” said Mike Loukas, chief executive of TrueMark Investments.

“Now it’s a matter of people trying to figure out where the entry point is, and where the bottom is or if we are close to it.”

Investors remain nervy though, sifting through each new piece of data and commentary from Fed governors to see how this might influence the U.S. central bank’s plans to dramatically shift rates higher.

This resulted in see-saw trading on Friday, with all three main benchmarks experiencing periods in positive and negative territory.

“The market suspects when you start to see truly strong signs of the Fed relaxing its path of rate increases and leading indicators picking up, we’ll probably get a pretty good upward movement in the market, and no one wants to miss that,” said Derek Izuel, chief investment officer at Shelton Capital Management.

“So we’re going to have this volatility as we have all these false starts along the way.”

With the earnings season around the corner, investors will focus on company forecasts as well as key inflation data expected next week to gauge the health of the economy.

Atlanta Fed President Raphael Bostic, until recently among the central bank’s most dovish policymakers, said on Friday he “fully” supports another 75-basis-point rate rise later this month.

Speaking later on Friday, New York Federal Reserve President John Williams did not specify if he favors a half point or three-quarter point increase at the Fed’s upcoming July meeting, but acknowledged rising interest rates were affecting the economy.

On Friday, the Dow Jones Industrial Average fell 46.4 points, or 0.15%, to 31,338.15, the S&P 500 lost 3.24 points, or 0.08%, to 3,899.38 and the Nasdaq Composite added 13.96 points, or 0.12%, to 11,635.31.

For the week, the Nasdaq gained 4.5%, while the S&P and Dow advanced 1.9% and 0.8%, respectively.

Volume on U.S. exchanges was 9.60 billion shares, compared with the 13.03 billion average for the full session over the last 20 trading days.

The S&P 500 posted two new 52-week highs and 29 new lows; the Nasdaq Composite recorded 21 new highs and 52 new lows.

(Reporting by Amruta Khandekar and Bansari Mayur Kamdar in Bengaluru and David French in New York; Editing by Marguerita Choy)

By Carolina Mandl

NEW YORK -Hedge funds posted a negative performance in June, bringing losses this year to almost 6%, as volatility across markets accelerated, a report by hedge fund data provider HFR showed on Friday.

The fund weighted composite index fell 3.08% last month. All main four different hedge fund categories tracked by HFR – equity, event-driven, macro and relative value – posted losses in June.

“Powerful risk off trends accelerated in June driving extreme financial market volatility with hedge funds trading through a wide range of risks including not only generational inflation, increasing interest rates, the continuation of the Russia/Ukraine war and record energy price increases, but also the increased likelihood of a consumer-led US economic recession,” Kenneth J. Heinz, president of HFR said in a statement.

Equity hedge funds, mainly those invested in growth stocks, whose valuations rely more heavily on future cash flows, have been the hardest hit by market volatility. They went down 12.3% in the first half of the year, but outperformed the S&P 500, which fell roughly 20%.

Macro hedge funds, however, were still in positive territory for the first half of the year, up 8.98%, although they fell 0.42% last month. Macro managers trade a broad range of assets, such as bonds, currencies, rates, stocks and commodities.

Despite a bumpy road last month, some macro managers were able to post double digit gains for the year. Rokos Capital Management’s macro fund was down 4% in June, but its performance this year is still positive by 12%, according to two sources.

AQR Capital Management told investors its global macro strategy fund rose 23.1% through June, as it benefited from an environment of surging inflation and tightening monetary policy, sources said.

Bridgewater Associates, which was up 32.2% in the first half of the year, although it faced some losses in trading of inflation-linked bonds and emerging markets currencies.

HFR said hedge funds’ performance has diverged a lot this year. Funds in the top decile of the so-called HFRI Fund Weighted Composite Index gained 34.6% on average, while the bottom decile fell 32.2%.

Gains, however, were limited to 37% of the funds, HFR added.

(Reporting by Carolina Mandl; Editing by Leslie Adler and David Gregorio)

By Pete Schroeder

WASHINGTON – Wall Street ended the day flat on Friday as Treasury yields jumped following a stronger-than-expected U.S. jobs report, which suggested the Federal Reserve may push further interest rate hikes to cool the economy and slow inflation.

Oil prices rose over 2% on Friday, but still were down on the week following a steep sell-off days earlier on concerns about energy demand in a potential economic slowdown.

Strong data from the U.S. Labor Department, which reported the United States added more jobs than expected in June, indicated a recession was not yet imminent amid persistent job growth, and gives the Fed scope to deliver another large interest rate increase later this month.

Nonfarm payrolls jumped by 372,000 jobs in June, well above economists’ expectations. The unemployment rate held steady at 3.6%.

All three U.S. stock indices ended the week largely unchanged, as investors balanced solid economic news with the prospect of more rate hikes.

The Dow Jones Industrial Average ended down 0.15%, while the S&P 500 dropped 0.1% and the Nasdaq Composite added 0.12%.

“There has been a lot of doom and gloom recently, so a strong labor market read may assuage some fear of a recession and shows the resilient nature of our economy with a robust labor market in the face of hot inflation. The Fed is committed to raising rates aggressively to cool it, which will likely result in continued volatility,” said Mike Loewengart, managing director at E*TRADE from Morgan Stanley.

Atlanta Fed President Raphael Bostic said on Friday he backed another three quarters of a percentage point interest rate increase, underlining the Fed’s determination in tackling inflation.

Oil prices enjoyed a reprieve, but still ended the week lower after a steep sell-off earlier in the week on concerns over dwindling demand.

Brent crude was up 2.3% to settle at $107.02 a barrel. U.S. crude rose 2% to settle at $104.79 per barrel.

The dollar index was flat on the day after earlier hitting its highest level since 2002. And the euro drew close to parity with dollar last seen in mid-2002, having fallen 3% against the dollar this week on economic and energy concerns emanating from Europe. The euro was last up 0.19% at $1.01805.

Looming rate hikes also helped push Treasury yields higher, as a key part of the yield curve tracked as a recession indicator inverted further. Benchmark 10-year yields were last at 3.0822%, up from around 2.989% before the data. Two-year yields jumped to 3.0985%, from around 3.001%.,

The two-year, 10-year part of the Treasury yield curve inverted on Tuesday for the first time in three weeks. An inversion in this part of the curve is seen as a reliable indicator that a recession will follow in one to two years.

The MSCI world equity index, which tracks shares in 45 nations, was up 0.12%.

(Reporting by Pete Schroeder in Washington; Editing by Kim Coghill, Toby Chopra, Tomasz Janowski and Jonathan Oatis)