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By Wayne Cole SYDNEY (Reuters) - Global share markets started in haphazard fashion on Monday as soft U.S. data suggested downside risks for this week's June payrolls report, while the hubbub over possible recession was still driving a relief rally in government bonds. The search for safety kept the U.S. dollar near 20-year highs, though early action was light with U.S. markets on holiday. Cash Treasuries were shut but futures extended their gains, implying 10-year yields were holding around 2.88% having fallen 61 basis points from their June peak. MSCI's broadest index of Asia-Pacific shares outside Japan was flat, after losing 1.8% last week. Japan's Nikkei added 0.6%, while South Korea fell 0.8%. Chinese blue chips edged up 0.3%, though cities in eastern China tightened COVID-19 curbs on Sunday amid new coronavirus clusters. EUROSTOXX 50 futures added 0.5% and FTSE futures 0.8%. However, both S&P 500 futures and Nasdaq futures eased 0.7%, after steadying just a little on Friday. David J. Kostin, an analyst at Goldman Sachs (NYSE:GS), noted that every S&P 500 sector bar energy saw negative returns in the first half of the year amid extreme volatility. "The current bear market has been entirely valuation-driven rather than the result of reduced earnings estimates," he added. "However, we expect consensus profit margin forecasts to fall which will lead to downward EPS revisions whether or not the economy falls into recession." Earnings season starts of July 15 and expectations are being marked lower given high costs and softening data. The Atlanta Federal Reserve's much watched GDP Now forecast has slid to an annualised -2.1% for the second quarter, implying the country was already in a technical recession. The payrolls report on Friday is forecast to show jobs growth slowing to 270,000 in June with average earnings slowing a touch to 5.0%. RATES UP, THEN DOWN Yet minutes of the Fed's June policy meeting on Wednesday are almost certain to sound hawkish given the committee chose to hike rates by a super-sized 75 basis points. The market is pricing in around an 85% chance of another hike of 75 basis points this month and rates at 3.25-3.5% by year end. "But the market has also moved to price in an increasingly aggressive rate cut profile for the Fed into 2023 and 2024, consistent with a growing chance of recession," noted analysts at NAB. "Around 60bps of Fed cuts are now priced in for 2023." In currencies, investor demand for the most liquid safe harbour has tended to benefit the U.S. dollar, which is near two-decade highs against a basket of competitors at 105.100. The euro was flat at $1.0429 and not far from its recent five-year trough of $1.0349. The European Central Bank is expected to raise interest rates this month for the first time in a decade, and the euro could get a lift if it decides on a more aggressive half-point move. The Japanese yen also attracted some safe haven flows late last week, dragging the dollar back to 135.23 yen from a 24-year top of 137.01. A high dollar and rising interest rates have not been kind to non-yielding gold, which was pinned at $1,812 an ounce having hit a six-month low last week. [GOL/] Fears of a global economic downturn also undermined industrial metals with copper hitting a 17-month low having sunk 25% from its March peak. [MET/L] Oil prices wobbled as investors weighed demand concerns against supply constraints. Output restrictions in Libya and a planned strike among Norwegian oil and gas workers were just the latest blows to production. [O/R] Brent slipped 1 cent to $111.62, while U.S. crude eased 10 cents to $108.33 per barrel. (Reorting by Wayne Cole; Editing by Sam Holmes & Shri Navaratnam)
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By Wayne Cole SYDNEY (Reuters) - Asian shares were ending a rough quarter in a sombre mood on Thursday amid fears central banks' cure for inflation will end up sickening the global economy, though it is proving to be a fillip for the safe-haven dollar and government bonds. As policy makers reiterated their commitment to controlling inflation no matter what pain it caused, data on U.S. core prices later in the session should only underline the extent of the challenge. "Inflation can be sticky," warned analysts at ANZ. "It is broadening from goods to services and wage growth is accelerating. "Even with rapid rate rises, it will take time for tightness in labour markets to unwind, and that means inflation can stay higher for longer." That suggests it is too early to pick a peak for interest rates or a bottom for stocks, even though markets have already fallen a long way. The S&P 500 has lost almost 16% this quarter, its worst performance since the very start of the pandemic, while the Nasdaq is off an eye-watering 21%. On Thursday, S&P 500 futures and Nasdaq futures were both down 0.4% with little sign as yet that the new quarter will bring in brave bargain hunters. EUROSTOXX 50 futures and FTSE futures both fell 0.5%. MSCI's broadest index of Asia-Pacific shares outside Japan eased another 0.5%, bringing its losses for the quarter to 10%. Japan's Nikkei fell 1.4%, though its drop this quarter has been a relatively modest 5% thanks to a weak yen and the Bank of Japan's dogged commitment to super-easy policies. The need for stimulus was underscored by data showing Japanese industrial output dived 7.2% in May, when analysts had looked for a dip of only 0.3%. Chinese blue chips added 1.6% helped by a survey showing a marked pick up in services activity. Analysts at JPMorgan (NYSE:JPM) expect a major rebound in China in coming months and felt that, with so much bad news priced into world markets, positioning argued for a bounce. "It is not that we think that the world and economies are in great shape, but just that an average investor expects an economic disaster, and if that does not materialize risky asset classes could recover most of their losses from the first half," they wrote in a note. DOLLAR IN DEMAND For now, the risk of recession was enough to bring U.S. 10-year yields back to 3.10% from their recent peak at 3.498%, though that is still up 77 basis points for the quarter. The yield curve has continued to flatten, and turned negative in the three- to seven-year range, while futures are almost fully priced for another Federal Reserve hike of 75 basis points in July. ted the U.S. dollar its best quarter since late 2016. The dollar index was trading up at 105.100 and just a whisker from its recent two-decade peak of 105.79. The euro was struggling at $1.0452, having shed 5.6% for the quarter so far, though it remains just above the May trough of $1.0348. It also dropped to a fresh 7-1/2-year low versus the Swiss franc at 0.99663 francs. The Japanese yen is in even worse shape, with the dollar having gained more than 12% this quarter to 136.50 and hitting its highest since 1998. Rising interest rates and a high dollar have not been good for non-yielding gold which was stuck at $1,816 an ounce having lost 6% for the quarter. [GOL/] Oil prices were flat on Thursday amid concerns about an unseasonable slowdown in U.S. gasoline demand, even as global supplies remain tight. [O/R] OPEC and OPEC+ end two days of meetings on Thursday with little expectation they will be able to pump much more oil despite U.S. pressure to expand quotas. September Brent rose 17 cents to $112.62 a barrel, while U.S. crude added 7 cents to $109.85.
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By Julie Zhu HONG KONG (Reuters) - Asian shares swung into positive territory in afternoon trade on Tuesday, propelled by China's decision to ease some quarantine requirements for international arrivals, with Hong Kong stocks particularly supported. MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.5%, having spent most of the day in the red. The index has fallen 3.8% so far this month. Health authorities said on Tuesday that China will halve to seven days its COVID-19 quarantine period for visitors from overseas, with a further three days spent at home. Following the news, Hong Kong's Hang Seng index reversed its losses and jumped 0.85% in afternoon trade. In China, the blue-chip CSI300 index was 1% higher, also having clawed back earlier losses. The sharp change in mood looked set to last into the global day with the pan-region Euro Stoxx 50 futures up 0.31%, German DAX futures 0.2% higher and FTSE futures climbing 0.47%. U.S. stock futures rose 0.46%. "With local new infections dropping further in June, and COVID curbs to ease more, we expect the (Chinese) economy to continue to recover," BofA said in its note. "That said, given soft domestic demand and lingering COVID uncertainties, the mending path is likely to be bumpy in the coming months." Market sentiment was also boosted by an official's remarks that Beijing would roll out tools to cope with economic challenges as COVID-19 outbreaks and risks from the Ukraine war pose a threat to employment and price stability. Australian shares were up 0.86%, while Japan's Nikkei stock index rose 0.66%. U.S. stocks ended a volatile trading session slightly lower on Monday with few catalysts to sway investor sentiment as they approach the half-way point of a year in which equity markets have been slammed by heightened inflation worries and tightening Fed policy. Interest rate sensitive megacaps such as Amazon.com Inc (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) Inc were the heaviest drags on the U.S. main indexes. The Dow Jones Industrial Average fell 0.2%, the S&P 500 lost 0.30% and the Nasdaq Composite dropped 0.72%. Oil continued to rise with investors still weighing worries about an economic slowdown against concerns over lost Russian supply amid sanctions related to the conflict in Ukraine. U.S. crude ticked up 1.02% to $110.69 a barrel. Brent crude rose to $116.42 per barrel. "A seam of tight supply news bolstered the (oil) market," said analysts at Commonwealth Bank of Australia (OTC:CMWAY). "Political unrest might curtail supply from a couple of second-tier producers, Ecuador and Libya. And then there's the G7's proposed price cap on Russian oil." In bond markets, Treasury yields climbed on Monday following capital and durable goods orders data and as pending home sales surprised to the upside from the previous month. The yield on benchmark 10-year Treasury notes last reached 3.1828% on Tuesday, compared with its U.S. close of 3.194% on Monday. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 3.0934%. Also, the dollar edged lower versus major rivals as investors weighed expectations on inflation and interest rate hikes. The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down at 103.96. Gold was slightly higher with the spot price trading at $1,825.79 per ounce. [GOL/]
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By Huw Jones LONDON (Reuters) - Prospects for a firm start on Wall Street helped European shares claw back from a new low for the year on Thursday as investors weighed the risk of hefty interest rate rises tipping economies into recession. Tech-laden Nasdaq futures were up 1%, while S&P500 futures gained 0.7%. Stronger U.S. futures helped shares in Europe, reverse an earlier fall to a 2022 low on the back of dismal economic data in Germany and France. Crude oil also recouped earlier losses but copper remained at 16-month lows as fears of a slowdown cast a pall over the red metal. U.S. Treasury yields remained lower on Thursday after Federal Reserve Chair Jerome Powell, in testimony to the U.S. Senate Banking Committee on Wednesday, underlined the central bank's commitment to cutting inflation at all costs and acknowledged a recession was "certainly a possibility". "Powell said (money markets) are appropriately priced, which means we are going to double the Fed funds rate this year," said Jeremy Schwartz, global chief investment officer at Wisdom Tree Investments. "Coming into this year, we thought you might be able to avoid (recession) this year, but certainly the data has started to come in much more negative," Schwartz said. In a further sign of market caution, JPMorgan (NYSE:JPM) analysts said more investors were turning to cash, surpassing its previous peak in March 2020, when markets went into a tailspin due to COVID-19 lockdowns. The German economy, Europe's largest, suffered a sharp loss of momentum at the end of the second quarter, according to the latest Purchasing Managers' Index, while corresponding figures for France also showed weaker activity. UniCredit bank said the data, which sent euro zone bond yields plunging, was sounding an alarm bell, suggesting that growth momentum might be weakening sooner and more quickly than expected. Prices of copper and crude oil fell on prospects of less demand for fuel and building materials as consumers limit spending. "Copper has always been the lead indicator commodity for economic growth," said Patrick Spencer, vice chairman of equities at Baird Investment Bank. The MSCI all-country share index was down 0.14%, off its low for the day, adding to its slide of more than 20% for the year. "A slowdown is coming and it's really about degree," said Michael Hewson, chief markets analyst at CMC Markets. Spencer said there has been so much damage to stock markets that they had largely discounted a recession already. "If you look at the data, I think at worst what you are looking at is, maybe, a mild recession. I believe the markets are in a bottoming process, and maybe you've only got another 5% downside," Spencer said. CHINA FINTECH Stocks in Asia were mixed, with South Korea down 1.2% while China's blue chips rose 1.7%, and Japan's Nikkei was flat. Chinese tech shares in Hong Kong staged a strong rebound, rising 2.8%, after Chinese President Xi Jinping chaired a top-level meeting that approved a plan for further development of large payment firms and the fintech sector. Concerns about the demand outlook have sapped commodity prices, with oil tumbling on Thursday to the lowest in more than a month. Brent crude was down 0.3% at $111.46 a barrel and U.S. crude declined 0.36% to $105.81 a barrel, both well off their lows of the day. Iron ore was already at six-month lows, having lost more than 20% in recent weeks, while copper struck a 16-month trough. The yield on benchmark 10-year Treasury notes was down slightly, at 3.1337%. The two-year yield, which rises with traders' expectations of higher Fed fund rates, eased to 3.0398%, compared with a U.S. close of 3.056%. In foreign exchange markets, the dollar rose 0.340%against a basket of major currencies. The index was up more than 8% this year, reflecting the broad risk-off sentiment and the dollar's Fed-driven yield advantage. Gold was slightly lower, with spot prices traded at $1,827 per ounce, down 0.5% on the day. [GOL/]
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By Stella Qiu and Alun John BEIJING/HONG KONG (Reuters) - Asian shares wobbled while commodity prices fell on Thursday, as mounting worries about the risks of a global recession amid aggressive rate hikes by the Federal Reserve kept broad investor sentiment fragile. MSCI's broadest index of Asia-Pacific shares outside Japan eked out a 0.5% gain in volatile trade, reversing earlier losses. Stocks in South Korea were down 0.7%, China's blue chips rose 1.2%, and Japan's Nikkei edged up 0.2%. Chinese tech shares in Hong Kong staged a strong rebound, rising 2.8%, after Chinese President Xi Jinping chaired a top-level meeting on Wednesday that approved a plan for the further development of China's large payment firms and the fintech sector. Volatility is set to continue when European markets open. The pan-region Euro Stoxx 50 futures were down 0.4% while German DAX futures and FTSE futures saw similar declines. Both Nasdaq futures and S&P500 futures eased 0.1%. Overnight, the dollar fell alongside U.S. Treasury yields after Fed Chair Jerome Powell, in testimony to the U.S. Senate Banking Committee, underlined their commitment to bringing inflation down at all costs and acknowledged a recession was "certainly a possibility". A Reuters poll showed the Fed will deliver another 75-basis-point interest rate hike in July, followed by a half-percentage-point rise in September, and won't scale back to quarter-percentage-point moves until November at the earliest. "What is clear is the market views a recession as increasingly likely, a view heard from Powell, who detailed that a recession was a possibility but not their intention," said Chris Weston, head of research at brokerage Pepperstone in Melbourne. "Equities have held in well despite the falls in commodities, altogether there has been rotation into low-risk areas of the market and defensive sectors, with predictable outflows from energy and materials stock." U.S. stocks rallied after Powell's remarks, which some analysts said did not break any new ground, before giving up gains. The Dow Jones Industrial Average fell 0.15%, the S&P 500 lost 0.13%, and the Nasdaq Composite dropped 0.15%. Powell is set to give the second congressional semi-annual testimony later on Thursday. Investors are continuing to assess the risks of central banks pushing the world economy into recession as they attempt to curb inflation with interest rate increases. Concerns about the demand outlook have sapped commodity prices, with oil on Thursday tumbling to the lowest in more than a month. Brent crude was down 2% to $109.60 per barrel and U.S. crude declined 2.2% to $103.89 a barrel. Iron ore was already at six-month lows having lost more than 20% in recent weeks, while copper struck a 15-month trough overnight. Moves in the Treasuries market on Thursday were rather muted, after a strong rally the previous day as investors sought the safety of sovereign debt amid growing fears of a recession. The yield on benchmark 10-year Treasury notes were down slightly to 3.1524%, hovering around the lowest in almost two weeks, compared with its U.S. close of 3.156% the previous day. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 3.0693%, compared with a U.S. close of 3.056%. In foreign exchange markets, the dollar eased 0.1% against a basket of major currencies, bringing its decline since Friday to 0.46%. However, the index was up more than 8% this year, reflecting the broad risk-off sentiment and the dollar's Fed-driven yield advantage. Those factors were underscored by the South Korean won, which fell below a psychological threshold of 1,300 per dollar for the first time in 13 years, amid global economic recession worries. The Australian and New Zealand dollars lost ground on Thursday as commodity prices fell. Gold was slightly lower, with spot prices traded at $1,831.32 per ounce. [GOL/]
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By Wayne Cole SYDNEY (Reuters) - Asian shares slipped on Monday and Wall Street futures eked out slight gains amid worries the U.S. Federal Reserve would this week underline its commitment to fighting inflation with whatever rate pain was required. The euro showed little reaction after French President Emmanuel Macron lost control of the National Assembly in legislative elections on Sunday, a major setback that could throw the country into political deadlock. Trade was choppy with the U.S. on holiday and Nasdaq futures see sawed through the session to be last up 0.3%, while S&P 500 futures firmed 0.2%. EUROSTOXX 50 futures fell 0.3% and FTSE futures 0.2%. The S&P 500 fell by almost 6% last week to trade 24% below its January high. Analysts at BofA noted this was the 20th bear market in the past 140 years and the average peak to trough bear decline was 37.3%. Investors will be hoping it does not match the average duration of 289 days, given it would not end until October 2022. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.4% and Tokyo's Nikkei 1.2%. Chinese blue chips gained 0.5%, perhaps aided by news President Joe Biden was considering removing some tariffs on China. Looming over markets are concerns major central banks will have to tighten so aggressively to contain runaway inflation that they will tip the world into recession. "Market volatility has remained elevated with the VIX index seeing the highest weekly close since late April, a theme that goes beyond equities with a spike in FX and rates volatility alongside wider credit spreads," said Rodrigo Catril, a strategist at NAB. "At this stage it is hard to see a turn in fortunes until we see evidence of a material ease in inflationary pressures." Relief seems unlikely this week with UK inflation figures expected to show another alarmingly high reading that could push the Bank of England into hiking at a faster pace. FED GOES UNCONDITIONAL A whole chorus line of central bankers are also on the speaking calendar this week, led by a likely hawkish testimony from Federal Reserve Chair Jerome Powell's to the House on Wednesday and Thursday. The Fed last week vowed its commitment to containing inflation was "unconditional", while Fed Governor Christopher Waller on Saturday said he would support another hike of 75 basis points in July. "With rapidly slowing growth momentum and a Fed committed to restoring price stability, we believe a mild recession starting in Q4 is now more likely than not," warned analysts at Nomura. "Financial conditions are likely to tighten further, consumers are experiencing a significant negative sentiment shock, energy and food supply disruptions have worsened and the outlook for foreign growth has deteriorated." The hawkish outlook is keeping the dollar at 104.420 and near last week's two-decade high of 105.790. The euro was a fraction firmer after the French election at $1.0524, but still uncomfortably close to last week's trough at $1.0357. The yen remained under broad pressure as the Bank of Japan stuck doggedly to its super-easy policies even as all its developed world peers took steps to tighten. The dollar was steady at 134.98 yen, having reached its highest since 1998 last week. Bitcoin slipped 3% to $19,897, having bounced sharply over the weekend amid talk of a single large buyer. The strength in the dollar has kept gold in a tight sideways pattern for the past month or so and it was last stuck at $1,841 an ounce. [GOL/] Oil prices edged down again after a sharp retreat late last week amid concerns high energy prices were adding to risks of a global recession which would ultimately curb demand. [O/R] Brent fell 10 cents to $113.02, while U.S. crude lost 27 cents to $109.29 per barrel.
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By Marc Jones LONDON (Reuters) - European markets trimmed gains after the European Central Bank unveiled fresh measures on Wednesday to temper a market rout that has fanned fears of a new debt crisis before what is expected to be one of the sharpest U.S. rate hikes since 1994. Hopes of a quiet run in to what is forecast to be a three-quarter-point hike by the Federal Reserve later on Wednesday were quickly dashed as the ECB's unexpected meeting - less than week after its last scheduled one - prompted a rush of activity. The ECB said it would be flexible in reinvesting cash maturing from its recently-ended 1.7 trillion euro ($1.8 trillion) pandemic support scheme and would consider a fresh instrument to be devised by staff, disappointing some investors who were looking for bolder steps. The euro which was up as much as 0.3% before the statement, trimmed gains and was marginally weaker on the day at $1.0407 Italy's 10-year bond yield, which stands to benefit the most from the ECB's plans, was last down 25 basis points on the day at 3.97%, above its session low of around 3.87%. Spanish and Portuguese 10-year yields also came off their day's lows but were still sharply down on the day.. "I think essentially it is the bare minimum of what could be expected, but I also believe it's the most realistic outcome of what they could compromise (on) today," said Piet Christiansen, chief analyst at Danske Bank in Copenhagen. ) " onerror="this.style.display='none'" class="msg-img" /> INFLATION FEARS The worries about rising borrowing costs and global inflation have been hammering financial markets all year. World stocks are down over 20%, bond markets have been routed and fears that drastic Fed action could tip the world into recession means the U.S. central bank's moves later will be crucial for traders. Treasury yields had hit decade highs overnight and the dollar a 20-year peak as futures implied it was near-certain the Fed would hike by 75 basis points to a range of 1.50-1.75%. That would be the biggest increase since 1994, and markets already have rates reaching an eye-watering 3.75-4.0% by the end of the year. "Against a backdrop of sky-high inflation, rising rates, and growing recession concerns, the S&P 500 has had its worst start to the year since 1962," analysts at Goldman Sachs (NYSE:GS) said. "A likely coming peak in inflation is probably not sufficient to see the bottom..." They recommended that investors reduce portfolio duration and increase exposure to real assets. With so much priced in, a few brave investors, also buoyed by the ECB, were looking for bargains and S&P 500 futures were up 0.7%, while Nasdaq futures rose 0.75% and Dow futures added 0.4%. MSCI's broadest index of Asia-Pacific shares outside Japan was closing almost flat, but is down sharply on the week. Japan's Nikkei lost 1.1%, though sentiment was helped by a survey showing an improvement in confidence among Japanese manufacturers. Chinese shares bucked the trend with a gain of 1.3%. Data on Chinese retail sales and industrial output for May were a little better than forecast, but still showed the drag from coronavirus lockdowns. Authorities in Beijing said on Tuesday the city was in a "race against time" to get to grips with its most serious outbreak since the pandemic began. ) " onerror="this.style.display='none'" class="msg-img" /> WHATEVER IT TAKES 2.0? The ECB's move allowed bond markets everywhere to rally after their recent hammering, with German Bund yields swooping down to 1.67% and 10-year Treasury yields dropping to 3.37% from Tuesday's peak of 3.498%. Two-year yields stood at 3.30%, after touching the highest since 2007 at 3.456% overnight. Given many U.S. borrowing rates are linked to yields, financial conditions have already tightened markedly there even before the Fed hikes. ECB chief Christine Lagarde is due to speak in London at 1600 GMT. It is almost a decade since her predecessor Mario Draghi did the same at the height of the euro zone debt crisis. "I think Lagarde will try to do 'whatever it takes' 2.0 tonight" Lorenzo Codogno founder of LC Macro Advisers, said describing the current situation as a perfect storm. "But the markets won't be happy if she comes empty-handed." U.S. Treasury yields are the benchmark for bonds worldwide, so financial conditions are tightening pretty much everywhere. That is a major headwind for consumer spending power, while pressuring emerging market countries that borrow in dollars. It has also tended to boost the U.S. dollar, which had hit a 20-year high against a basket of currencies before the ECB's news, led by big gains on the low-yielding Japanese yen. The dollar flop in Europe left it trading at 134.5 yen, having reached heights last visited in 1998 at 135.60. Those gains had come as the Bank of Japan ramped up its bond buying to keep yields near zero, even as much of the rest of the world tightens policy. Still, the sheer pressure on the yen and bonds has stoked speculation the BOJ could be forced to amend its yield control policy at a meeting on Friday. Surging yields, inflation and a sky-high dollar have been a burden for gold, which was near its lowest in a month at $1,826 an ounce. [GOL/] Oil prices stumbled after the Organization of the Petroleum Exporting Countries (OPEC) stuck to its forecast that world oil demand will exceed pre-pandemic levels in 2022. [O/R] Brent was almost a dollar softer at $120.60, while U.S. crude dipped $1.23 cents to $117.70 per barrel.
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By Wayne Cole SYDNEY (Reuters) - Asian markets were in a pensive mood on Wednesday as shell-shocked investors waited to see just how aggressive the Federal Reserve would be on rates, with many fearing drastic action would risk tipping the world into recession. Treasury yields hit decade highs and the dollar a 20-year peak as futures implied it was near certain the Fed would hike by 75 basis points to a range of 1.50-1.75% later on Wednesday. That would be the biggest increase since 1994, and markets already have rates reaching an eye-watering 3.75-4.0% by the end of the year. "Against a backdrop of sky-high inflation, rising rates, and growing recession concerns, the S&P 500 has had its worst start to the year since 1962," noted analysts at Goldman Sachs (NYSE:GS). "A likely coming peak in inflation is probably not sufficient to see the bottom, and that similar past drawdowns have only ended when the Fed has shifted towards easier policy." That could be some time away so they recommend investors reduce portfolio duration and increase exposure to real assets. With so much priced in, a few brave investors were looking for bargains and S&P 500 futures edged up 0.2%, while Nasdaq futures rose 0.3%. EUROSTOXX 50 futures added 0.2% and FTSE futures 0.1%. MSCI's broadest index of Asia-Pacific shares outside Japan firmed 0.1%, but is down sharply on the week. Japan's Nikkei lost 1.0%, though sentiment was helped by a survey showing an improvement in confidence among Japanese manufacturers. Chinese shares bucked the trend with a gain of 2.4%. Data on Chinese retail sales and industrial output for May were a little better than forecast, but still showed the drag from coronavirus lockdowns. Authorities in Beijing warned on Tuesday that the city of 22 million was in a "race against time" to get to grips with its most serious outbreak since the pandemic began. DOLLAR HAS THE YIELD ADVANTAGE Bond markets tried to rally after their recent hammering, with 10-year Treasury yields dipping to 3.44% and away from Tuesday's peak of 3.498%. Two-year yields stood at 3.38%, after touching the highest since 2007 at 3.456% overnight. Given many U.S. borrowing rates are linked to yields, financial conditions have already tightened markedly there even before the Fed hikes. Treasury yields are also the benchmark for bonds across the globe, so financial conditions are tightening pretty much everywhere. That is a major headwind for consumer spending power, while pressuring emerging market countries that borrow in dollars. It has also tended to boost the U.S. dollar, which hit a 20-year high against a basket of currencies, led by big gains on the low-yielding Japanese yen. The dollar was trading at 135.07 yen, having reached heights last visited in 1998 at 135.60. The latest gains came as the Bank of Japan ramped up its bond buying to keep yields near zero, even as much of the rest of the world tightens policy. Still, the sheer pressure on the yen and bonds has stoked speculation the BOJ could be forced to amend its yield control policy at a meeting on Friday. The euro was holding on at $1.0425, not far from its May trough of $1.0348. The single currency has found some support from a hawkish turn by the European Central Bank, but is weighed by signs of stress in local bond markets. Yields for more indebted members, notably Italy, have climbed much more quickly than for Germany fanning worries about EU fragmentation. Surging yields and a sky-high dollar have been a burden for gold, which was near its lowest in a month at $1,814 an ounce. [GOL/] Oil prices edged up after the Organization of the Petroleum Exporting Countries (OPEC) stuck to its forecast that world oil demand will exceed pre-pandemic levels in 2022. [O/R] Brent was 31 cents firmer at $121.48, while U.S. crude rose 30 cents to $119.23 per barrel.
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By Andrew Galbraith SHANGHAI (Reuters) - Asian stocks fell, U.S. bond yields edged up and a surging dollar pushed to a two-decade high against the yen on Thursday as investors worried about the impact of rate rises ahead of a European Central Bank meeting later in the day. Asia's cautious tone looked likely to persist into European markets, where stock futures pointed to a lower open across the board. Pan-region Euro Stoxx 50 futures, German DAX futures and FTSE futures were all down around 0.4% to 0.5%. Moves were relatively muted ahead of the ECB meeting, which is set to bring an end to the bank's Asset Purchase Programme and signal rate hikes to combat rising inflation. Many investors were holding to the sidelines. "It's classic pre-central-bank-meeting price action. To speculate now on anything other than an hourly timeframe, or an intraday timeframe, doesn't make a whole lot of sense at the moment," said Matt Simpson, senior market analyst at City Index in Sydney. "It's the most exciting meeting since (Christine Lagarde) has been at the helm, since Draghi was here - 'whatever it takes'." Adding to concern over European inflation, data showed the euro zone economy grew much faster in the first quarter than the previous three months, despite the war in Ukraine. As investors guess at the size and pace of ECB tightening, they are also awaiting U.S. consumer price data on Friday that the White House has said it expects to be "elevated". Economists expect annual inflation to be 8.3%, according to a Reuters poll. While Asian share markets have risen around 9% from nearly two-year lows touched last month, investors remain worried that central bank policy tightening to control inflation could spark an economic slowdown. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.65% in afternoon trade, with Australian shares down 1.22% and Seoul's KOSPI 0.49% lower. Hong Kong's Hang Seng turned around from small gains to fall 0.75% and Chinese A-shares fell 1% as parts of Shanghai began imposing new COVID-19 restrictions. Hopes for an easing of curbs contributed to a recovery in Chinese shares in recent weeks, and the relaxations gave a boost to the country's exports in May. In Japan, the Nikkei stock index added 0.04%. Overnight, the Dow Jones Industrial Average fell 0.81%, the S&P 500 lost 1.08% and the Nasdaq Composite dropped 0.73%. "Over the last two weeks, trading has been in a very narrow range and also based on very low volumes," analysts at ING said in a note. "Previous instances of this range trading on low volumes have usually preceded a sharp down-shift," they cautioned, adding that the ECB meeting and Friday's U.S. price data were likely "catalysts for a more bearish outlook". The wait for U.S. price data also weighed on U.S. Treasuries, with yields rising after a weak auction of 10-year notes on Wednesday. The U.S. 10-year yield ticked up on Thursday to 3.0344% from a U.S. close of 3.029% on Wednesday and the two-year yield climbed to 2.7887% compared with a U.S. close of 2.774%. Rising yields supported the dollar, particularly against the yen, which dropped to a 20-year low of 134.56 before regaining some ground. The Japanese currency has been weighed down by a widening policy divergence, with the Bank of Japan remaining one of the few global central banks to maintain a dovish stance. [FRX/] The global dollar index was holding steady at 102.51, and the euro was flat ahead of the ECB meeting at $1.0719. Crude oil prices extended gains, rising to their highest levels in three months on expectations for strong U.S. demand and a recovery in China as COVID-19 curbs are eased. Global benchmark Brent crude was last at $123.94 per barrel, up 0.29% on the day. U.S. crude added 0.19% to $122.34. Gold, sensitive to rate hikes but seen as an inflation edge, was weaker. Spot gold lost 0.08% to $1,851.80 per ounce. [GOL/]
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By Huw Jones LONDON (Reuters) - Wall Street was set to open higher on Monday, tracking gains in Asia and Europe as investors took expected interest rate hikes in coming days their stride for now despite crude oil hitting $120 a barrel. S&P 500 futures added 1% and Nasdaq futures 1.4%. U.S. listed shares in Chinese ride-hailing firm Didi Global surged 50% premarket after the Wall Street Journal reported that Chinese regulators were preparing to allow the mobile app back in domestic app stores. The news helped Hong Kong's Hang Seng tech index close 4.6% higher. Stocks in Europe were firmer from the open, with the STOXX index of 600 companies up 0.9%. The shift back into riskier assets came ahead of central bank meetings that investors hope will give clarity on whether inflation has peaked and how much growth could slow down. The European Central Bank meets on Thursday, though it is not expected to begin raising interest rates until July, with rate setters at the U.S. Federal Reserve and Bank of England gathering next week. "There is still some doubt as to whether or not inflation has peaked," said Michael Hewson, chief markets analyst at CMC Markets. "We are in a bit in a no-man's land at the moment with respect to peak inflation, and also China reopening and the possible tailwinds that might bring. Oil prices are still a headwind and so it's difficult to gain any direction," Hewson said. The MSCI all country stock index gained 0.3%, its recent rebound from near bear-market territory still largely intact. Blue chips in London were up 1.2%, along with sterling, shrugging off news that British Prime Minister Boris Johnson is to face a confidence vote by lawmakers from his governing Conservative Party on Monday. Oil prices firmed after Saudi Arabia raised prices sharply for its crude sales in July, an indicator of how tight supply is even after OPEC+ agreed to accelerate output increases over the next two months. [O/R] Brent was up 0.2% at $120.02 a barrel. U.S. crude rose 0.2% to $119.14 per barrel. Gregory Perdon, co-chief investment officer at Arbuthnot Latham, said investors have to weigh up bearish factors such as inflation, rising rates, war in Ukraine and a higher dollar against still accommodative monetary policy, good though slowing economic growth and Chinese stimulus. "On balance, I do think that risk-taking in this environment is going to be more rewarding than betting against risk assets," Perdon said. "We had seven out of eight weeks of negativity on the S&P 500 and it's probably a decent entry point in terms of adding risk to porfolios, assuming you don't have too much risk on to begin with." Sentiment was aided by comments from U.S. Commerce Secretary Gina Raimondo that President Joe Biden has asked his team to look at the option of lifting some tariffs on Chinese imports. ) " onerror="this.style.display='none'" class="msg-img" /> ECB, CPI LOOM At the ECB meeting on Thursday, President Christine Lagarde is considered certain to confirm an end to bond-buying this month and a first rate increase in July, though the jury is out on whether that will be 25 or 50 bps, as some investment banks ramped up their expectations. Money markets are priced for 130 bps of rate increases by year-end, with a 50 bps move at a single meeting fully priced in by October. The prospect of ECB rates turning positive this year helped the euro nudge up to $1.0724, some way from its recent trough of $1.0348, though it has struggled to clear resistance around $1.0786. The euro also made a seven-year peak on the yen at 140.39, after climbing 2.9% last week, while the dollar held at 130.67 yen having also gained 2.9% last week. Against a basket of currencies, the dollar stood at 102, little changed on the day, after firming 0.4% last week. After the ECB on Thursday, markets will scrutinise the U.S. consumer price report on the following day, especially after EU inflation shocked many with a record high last week. Forecasts are for a steep rise of 0.7% in May, though the annual pace is seen holding at 8.3% while core inflation is seen slowing a little to 5.9%. A high number would only add to expectations of aggressive tightening by the Fed next week, with markets already priced for half-point increases in June and July and almost 200 basis points (bps) by the end of the year. In commodity markets, wheat futures jumped 4% after Russia struck Ukraine's capital, Kyiv, with missiles, dampening hopes for progress in peace talks. Gold was at $1,854 an ounce, up 0.2%, having held to a tight range for the past couple of weeks. [GOL/]
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By Wayne Cole SYDNEY (Reuters) - Asian shares joined U.S. stock futures in making cautious gains on Monday ahead of U.S. inflation data this week, while the euro touched a seven-year top against the yen amid wagers on European Central Bank tightening. Oil prices firmed after Saudi Arabia raised prices sharply for its crude sales in July, an indicator of how tight supply is even after OPEC+ agreed to accelerate output increases over the next two months. MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.1%, while Japan's Nikkei recouped early losses to gain 0.6%. S&P 500 futures added 0.5% and Nasdaq futures 0.6%. EUROSTOXX 50 futures rose 0.8% and FTSE futures 1.0%. Chinese blue chips climbed 1.3% after a survey confirmed service sector activity shrunk in May, but the Caixin index still improved to 41.4 from 36.2. Sentiment was aided by comments from U.S. Commerce Secretary Gina Raimondo that President Joe Biden has asked his team to look at the option of lifting some tariffs on China. Markets will be on tenterhooks for the U.S. consumer price report on Friday, especially after EU inflation shocked many with a record high last week. Forecasts are for a steep rise of 0.7% in May, though the annual pace is seen holding at 8.3% while core inflation is seen slowing a little to 5.9%. A high number would only add to expectations of aggressive tightening by the Federal Reserve with markets already priced for half-point increases in June and July, and almost 200 basis points by the end of the year. Some analysts thought Friday's upbeat payrolls report suggested the Fed was on track for a soft landing. "May's numbers came in about as good as the Fed could expect," said Jonathan Millar, an economist at Barclays (LON:BARC). "It's a good sign that the Fed's plans to cool the labour market are playing out favourably so far, with solid gains in employment continuing to generate steady income gains that will help allay recession worries, for the time being." NOT SO NEGATIVE The European Central Bank meets on Thursday and President Christine Lagarde is considered certain to confirm an end to bond buying this month and a first rate increase in July, though the jury is out on whether that will be 25 or 50 basis points. Money markets are priced for 125 bps of increases by year-end, and 100 bps as soon as October. "Recent communication by ECB officials have looked to 25bp increases at July and September to exit negative rates by the end of Q3, though with some members preferring to leave the door to larger 50bp hikes open," said analyst at NAB. "Lagarde's post-meeting press conference will be closely watched." The prospect of rates turning positive this year has helped the euro nudge up to $1.0731, some way from its recent trough of $1.0348, though it has struggled to clear resistance around $1.0786. The euro also made a seven-year peak on the yen at 140.39, after climbing 2.9% last week, while the dollar held at 130.65 yen having also gained 2.9% last week. Against a basket of currencies, the dollar stood at 102.110 after firming 0.4% last week. In commodity markets, wheat futures jumped 4% after Russia struck Ukraine's capital, Kyiv, with missiles, dampening hopes for progress in peace talks. Gold was stuck at $1,855 an ounce, having held to a tight range for the past couple of weeks. [GOL/] Oil prices got an added lift after Saudi Arabia set higher prices for shipments to Asia, while investors are wagering supply increases planned by OPEC will not be enough to meet demand especially as China is easing its lockdowns. [O/R] "Perhaps only a third to half of what OPEC+ has promised will come online over the next two months," said Vivek Dhar, a mining and energy analyst at CBA. "While that increase is sorely needed, it falls short of demand growth expectations, especially with EU's partial ban on Russian oil imports also factored in. We see upside risks to our near term Brent oil price forecast of US$110/bbl." Indeed, Brent is already well past that adding 74 cents on Monday to reach $120.46 a barrel. U.S. crude rose another 75 cents to $119.62 per barrel.
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By Andrew Galbraith SHANGHAI (Reuters) - Asian share markets slipped on Thursday on widespread investor concern over high inflation and the threat of recession, while oil prices slumped following a report of reassurances from Saudi Arabia over production. In Europe, shares were set to nudge higher at the open after regional indexes notched two days in the red. Euro Stoxx 50 futures were up 0.16% and German DAX futures added less than 0.1%, while FTSE futures were flat. Global benchmark Brent crude was down about 2% at $114.02 per barrel ahead of a meeting of oil producing countries later in the day, which is expected to pave the way for output increases. [OIL/] U.S. crude also dipped around 2% to $112.97. The fall in oil prices gathered pace after the Financial Times reported that Saudi Arabia may be prepared to raise oil production in the event of a sharp drop in Russia's output. "This will be well received by Western leaders given inflation – and inflation expectations – remain eye wateringly high, and central banks try to raise rates at the risk of tipping their economies into a recession," said Matt Simpson, senior market analyst at City Index in Sydney. "More supply essentially soothes some of those inflationary fears, even if there is a lot more work to do when it comes to fighting inflation." Carlos Casanova, senior Asian economist at Union Bancaire Privee in Hong Kong, said that amid reports that China and India are buying oil at a steep discount from Russia, an increase in Saudi production could see oil prices stabilise at around $100-$110 per barrel. MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.4% in afternoon trade. China's blue-chip index fell 0.1%, Australian shares lost 1%, and Seoul's KOSPI slid 1.1%. In Tokyo, the Nikkei slipped 0.25%. Investors' worries over inflation and recession have festered amid uncertainty caused by the U.S. Federal Reserve's pace of interest rate hikes, the impact of the Russia-Ukraine war on food and commodity prices, and supply chain constraints exacerbated by strict COVID-19 curbs in China. On Wednesday, a survey showing stronger-than-expected U.S. manufacturing activity in May did little to assuage those concerns. Jamie Dimon, chairman and chief executive of JPMorgan Chase & Co (NYSE:JPM), likened the challenges facing the U.S. economy to a "hurricane". Rodrigo Catril, senior FX strategist at NAB, said details of the survey showed price signals "still consistent with extremely strong inflationary pressures" and negative employment growth in the manufacturing sector. "The services sector is the big U.S. employer so it will be important to see what the Services ISM reveals on Friday," he said. A new survey of South Korean factory activity on Thursday showed slowing growth in May as import and export orders shrank, the latest indicator of global manufacturing woes. While the stronger U.S. manufacturing data did little to lift U.S. shares overnight, it supported the dollar as yields pushed to two-week highs. [FRX/] In Asian trade, the global dollar index was steady at 102.56, while the yen firmed slightly to 130.04 per dollar as U.S. yields inched lower. The euro edged up 0.05% to $1.0651. Benchmark U.S. 10-year Treasury notes last yielded 2.9076%, down from a U.S. close of 2.931% on Wednesday, while the two-year yield slipped to 2.6540% from a close of 2.664%. The lower yields kept gold prices steady after hitting a two-week low on Wednesday. Spot gold was barely higher at $1,846.46 per ounce. [GOL/]
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By Danilo Masoni MILAN (Reuters) - World share markets rose on Monday and the dollar was anchored at five-week lows on bets of a possible slowdown in U.S. monetary tightening and after an easing of COVID restrictions in China. The gains built on last week's rally, helping the MSCI's benchmark for global stocks turn positive on the month, as confidence in a less aggressive Federal Reserve grew following signs of peaking American inflation on Friday. Also helping to mellow the mood was news that Shanghai authorities would cancel many restrictions on businesses resuming work from Wednesday, easing a city-wide lockdown that began two months ago. The MSCI index hit its highest level in more than four weeks and by 1332 GMT it was up 0.55% to 656.4 points, supported by a positive session in Europe after strong gains in Asia. The index was now up 0.5% so far this month. "It seems the worst is behind us. The bad news is out. The market is hoping it has seen the bottom," said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan. "Then there also seems to be a little more clarity on what the ECB (European Central Bank) will do. There will be rate hikes that should move the bloc away from negative rates that have had an extremely distorting effect on banks and markets," he added. The pan-European STOXX 600 equity benchmark gained 0.3%, while Japan's Nikkei added 2.2% and Chinese blue chips firmed 0.7%. Although Wall Street will be shut for the Memorial Day holiday, U.S. derivative markets were open. S&P 500 e-mini futures rose 0.3%, having rallied 6.6% last week in their best run this year, while Nasdaq e-minis were up 0.7%. Investors have seized on hints that the Federal Reserve, once it has hiked aggressively in June and July, might then slow its tightening. "Talk of a pause in the Fed rate hike cycle is doing wonders for everything ranging from equities to bonds and – unfortunately – commodities too," said AFS Group analyst Arne Petimezas in Amsterdam. "Over the past few weeks about 50bps has been lopped off from Fed terminal rate pricing. Predictably, Fed pricing suggests the Fed will shift a gear lower after the annual Jackson Hole retreat in August," he added in a note. The steadier market mood has seen the safe-haven dollar decline, while the euro was boosted by hawkish comments from European Central Bank officials who have been flagging a rate hike as early as July. "U.S. economic data appear to be slowing, ECB officials are debating even faster initial rate hikes, and front-end rate differentials have started to move in the euro's favour," noted Goldman Sachs (NYSE:GS) analyst Zach Pandl. "A sharp slowing in the U.S. economy - if not matched by similar weakness in Europe - could result in a meaningful euro rebound, though the reverse is also true if U.S. data hold up better than expected," Pandl added. "We see downside risks to U.S. growth, and have recommended USD/JPY put options to express this view." That underscores the importance of key U.S. data due this week, which includes the ISM survey of manufacturing on Wednesday and the May payrolls report on Friday. Payrolls are forecast to rise by a solid 320,000, though that would be down from April, with unemployment at 3.5%. The euro rose to a five-week high and was last up 0.35% at $1.0764, having risen 1.6% last week. The dollar index fell to a fresh five-week low of 101.35 and was last down 0.2% at 101.46, after shedding 1.3% last week. China's offshore yuan rose 0.3% after hitting a one-week high of 6.654 per dollar. The chance of a less hawkish Fed saw Treasuries rebound, with 10-year note yields ending on Friday just above a six-week low at 2.743%, down from a peak of 3.203% on May 9. In Europe, yields climbed on Monday after German inflation rose more than expected in May, reaching its highest level in nearly half a century at 8.7%. Germany's 10-year yields rose 9 bps to an over one-week high of 1.064%. The pullback in the dollar helped gold off its recent lows, sending the metal up 0.4% at $1,860.5 an ounce. [GOL/] Oil prices hit their highest in over two months, as traders waited to see whether a planned European Union meeting would reach an agreement on banning Russian oil imports. Brent rose 0.4% to $119.91 per barrel, while U.S. crude gained 0.5% to $115.64 per barrel.
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By Andrew Galbraith SHANGHAI (Reuters) - Asian share markets slipped on Thursday on persistent concerns over growth in China and worries about the Federal Reserve's intent to tighten policy quickly, confirmed in minutes of the early May rate-setting meeting released overnight. While Wall Street closed higher after the minutes, which showed a majority of Fed policymakers backed half-percentage-point rate hikes in June and July along with a unanimous view the economy was strong, the mood was subdued in Asia. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.6%, taking losses for the month to 5%. Australian shares were down 0.47%, while Japan's Nikkei stock index slid 0.17%. In early European trading, the pan-region Euro Stoxx 50 futures were down 0.14%, as were German DAX futures. "It's very difficult for investors to navigate this market at the moment with high inflation, slower growth, rising interest rates and concerns about the Chinese (COVID-19) predicament, but also stagflation is looming as a potential issue at the same time," said Ryan Felsman, a senior economist at fund manager CommSec. The falls in Asia contrasted with a more upbeat mood on Wall Street, where the Dow Jones Industrial Average rose 0.6%, the S&P 500 gained 0.95% and the Nasdaq Composite added 1.51%. [.N] All participants at the Fed's May 3-4 meeting supported a half-percentage-point rate increase - the first of that size in more than 20 years - and "most participants" judged that further hikes of that magnitude would "likely be appropriate" at the Fed's policy meetings in June and July, according to minutes from the meeting While some investors worry that overly aggressive interest rate hikes by the Fed could tip the economy into recession, Wednesday's minutes seemed to suggest the Fed would pause its tightening streak to assess the impact on growth. The immediate attention is on Thursday's Commerce Department release of its second take on first-quarter GDP, which analysts expect to show a slightly shallower contraction than the 1.4% quarterly annualised drop originally reported. "The Fed will be crossing their fingers for Q1 GDP to be upwardly revised today, because another print of -1.4% or worse could exacerbate concerns of stagflation," Matt Simpson, senior market analyst at broker City Index, wrote. Elsewhere in Asia, South Korea's central bank raised interest rates for a second consecutive meeting as it grapples with consumer inflation at 13-year highs. Chinese blue-chips fell initially, but recovered as the day progressed after a drop in daily COVID-19 cases in the country, where lockdowns aimed at curbing the spread of the virus threaten to undermine recent economic support measures. Mainland markets also seemed to seek relief in commments from Premier Li Keqiang on Wednesday that China will strive to achieve reasonable economic growth in the second quarter and stem rising unemployment. After rising on Wednesday following the Fed minutes, the dollar was little changed in Asia trade. It was barely changed against the yen at 127.30, while the euro was almost flat at $1.0675. The dollar index, which tracks the greenback against a basket of major peers was just 0.13% higher at 102.20. Moves in U.S. Treasury yields were also muted. The 10-year yield edged up to 2.781% and the policy-sensitive two-year yield was flat at 2.502%. Crude oil was steady after a cautious rally this week, with Brent crude flat at $114.03 per barrel and U.S. crude up 0.13% at $110.47. Spot gold was down 0.2% at $1,849.19 per ounce. [GOL/]
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By Wayne Cole SYDNEY (Reuters) - Asian shares slid on Tuesday as relief at a rally on Wall Street was punctured by a retreat in U.S. stock futures, while the euro held near one-month highs as odds narrowed on a July rate rise from the ECB. After ending Monday firmer, Nasdaq futures lost 1.5%, with traders blaming an earnings warning from Snap (NYSE:SNAP) which saw shares in the Snapchat owner tumble 28%. S&P 500 futures slipped 0.9%, surrendering some of Monday's 1.8% bounce. EUROSTOXX 50 futures fell 0.5% and FTSE futures 0.6%. MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.8% in hesitant trading. Japan's Nikkei fell 0.8% and Chinese blue chips 1.1%. Markets had taken some comfort from U.S. President Joe Biden's comment on Monday that he was considering easing tariffs on China, and from Beijing's ongoing promises of stimulus. Unfortunately, China's zero-COVID policy, with attendant lockdowns, has already done considerable economic damage. "Following disappointing April activity data, we have downgraded our China GDP (gross domestic product) forecast again and now look for 2Q GDP to contract 5.4% annualised, previously ‒1.5%," warned analysts at JPMorgan (NYSE:JPM). "Our 2Q global growth forecast stands at just 0.6% annualised rate, easily the weakest quarter since the global financial crisis outside of 2020." Early surveys of European and U.S. manufacturing purchasing managers for May due on Tuesday could show some slowing in what has been a resilient sector of the global economy. Japan's manufacturing activity grew at the slowest pace in three months in May amid supply bottlenecks, while Toyota announced a cut in its output plans. Analysts have also been trimming growth forecasts for the United States given the Federal Reserve seems certain to hike interest rates by a full percentage point over the next two months. The hawkish message is likely to be driven home this week by a host of Fed speakers and minutes of the last policy meeting due on Wednesday. The European Central Bank is also turning more hawkish, with President Christine Lagarde surprising many by opening the door for a rate rise as early as July. That saw the euro at $1.0665, having bounced 1.2% overnight in its best session since early March. It now faces stiff chart resistance around $1.0756. The dollar also retreated versus sterling and a range of currencies, taking the dollar index down 0.9% overnight. It was last up a fraction at 102.240. Meanwhile the euro had jumped sharply to 136.05 Japanese yen, while the dollar faded a little to 127.65 yen. The pullback in the dollar helped gold regain some ground to $1,855 an ounce. [GOL/] Oil prices were caught between worries over a possible global downturn and the prospect of higher fuel demand from the U.S. summer driving season and Shanghai's plans to reopen after a two-month coronavirus lockdown. [O/R] U.S. crude eased 66 cents to $109.63 per barrel, while Brent lost 70 cents to $112.74.
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By Andrew Galbraith SHANGHAI (Reuters) - Asian shares jumped on Friday after China cut a key lending benchmark to support a slowing economy, but a gauge of global equities remained set for its longest weekly losing streak on record amid investor worries about sluggish growth. China cut its five-year loan prime rate (LPR) by 15 basis points on Friday morning, a sharper cut than had been expected, as authorities seek to cushion an economic slowdown by reviving the housing sector. The five-year rate influences the pricing of mortgages. MSCI's broadest index of Asia-Pacific shares outside Japan quickly built on early gains after the cut and was last up more than 1.8%. European equities were set to follow Asia's lead, with pan-region Euro Stoxx 50 futures, German DAX futures and FTSE futures all up more than 1%. Chinese blue-chips also rose 1.8%, boosted by foreign buying, and Hong Kong's Hang Seng index jumped more than 2%, while Australian shares rose 1.1%. In Tokyo, the Nikkei stock index gained 1.3%. "While it certainly will not suffice to reverse growth headwinds in Q2, (the cut) constitutes a move in the right direction so markets might be reacting to expectations of stronger easing going forward," said Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong. Despite the gains in Asian shares, MSCI's All-Country World Price Index remained headed for its seventh straight week in the red, the longest such stretch since its inception in 2001. It would also be the longest including back-tested data extending to January 1988. Concerns over the impact of battered supply chains on inflation and growth have prompted investors to dump shares, with Cisco Systems Inc (NASDAQ:CSCO) on Thursday tumbling to an 18-month low after it warned of persistent component shortages, citing the impact of China's COVID lockdowns. On Friday, China's financial hub of Shanghai bruised residents' hopes for a smooth end to restrictions as it announced three new COVID-19 cases outside of quarantined areas - though plans to end a prolonged city-wide lockdown on June 1 appeared to remain on track. Industrial output in the city shrank more than 60% in April from a year earlier due to the impact of coronavirus restrictions. "The focus of (Chinese) officials has been to come up with easing policies to mitigate the impact of COVID suppression ... The problem is that such easing policies will not have any real impact so long as the COVID suppression policy is tightly enforced," said Christopher Wood, global head of equities at Jefferies. The gains in Asia came after a late rally on Wall Street petered out, leaving the Dow Jones Industrial Average down 0.75%, the S&P 500 0.58% lower and the Nasdaq Composite off by 0.26%. STRONGER YUAN In the currency market, the dollar index retreated from small earlier gains to nudge down 0.12% to 102.79, heading for its first losing week in seven. Moves elsewhere were muted, with the dollar just on the stronger side of flat against the safe-haven yen at 127.76. The euro was barely higher at $1.0586, erasing earlier losses. China's onshore yuan logged bigger moves, turning around from a 0.32% dip to strengthen to a two-week high of 6.6699 per dollar. The more freely traded offshore yuan also hit a two-week high at 6.6855 per dollar. While longer-dated U.S. government bond yields ticked higher following China's LPR cut, mirroring gains in equities, they later moderated. The U.S. 10-year yield was last at 2.855%, flat from Thursday's close, and down from a top of 2.922% earlier on Friday. The two-year yield climbed to 2.6327% compared with a U.S. close of 2.611%. Crude prices pared losses after China's LPR announcement but later extended falls on worries a demand recovery could falter. Brent crude was last down 0.53% at $111.45 per barrel and U.S. West Texas Intermediate crude was 1.21% lower at $110.85 per barrel. Gold bounced higher and was set for its first weekly gain since mid-April, helped by the weaker dollar. Spot gold, rose 0.26% to $1,846.49 per ounce. [GOL/]
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By Stella Qiu and Alun John BEIJING/HONG KONG (Reuters) - Asian stocks slid on Thursday, tracking a steep Wall Street selloff, as investors worried about global inflation, China's zero-COVID policy and the Ukraine war, while the safe-haven dollar eased. European equity markets also looked set for another rough day. The pan-region Euro Stoxx 50 futures fell 0.52%, German DAX futures were down 0.63% while FTSE futures were 0.51% lower. Nasdaq futures eased 0.15%, although S&P500 futures reversed earlier losses to be 0.05% higher. Overnight on Wall Street, retail giant Target Corp (NYSE:TGT) warned of a bigger margin hit due to rising costs as it reported its quarterly profit had halved. Its shares plunged 24.88%. The Nasdaq fell almost 5% while the S&P 500 lost 4%.[.N] "The bounce on Tuesday was proven to have been 'too optimistic', thus the self-doubt stemming from the misjudgement only makes traders click the sell button even harder," said Hebe Chen, market analyst at IG. MSCI's broadest index of Asia-Pacific shares outside Japan snapped four days of gains and slumped 1.8%, dragged down by a 1.5% loss for Australia's resource-heavy index, a 2.1% drop in Hong Kong stocks and a 0.3% retreat in mainland China's bluechips. Japan's Nikkei shed 1.7%. Tech giants listed in Hong Kong were hit particularly hard, with the index falling more than 3%. Tencent sank more than 6% after it reported no revenue growth in the first quarter, its worst performance since going public in 2004. China's technology sector is still reeling from a year-long government crackdown and slowing economic prospects stemming from Beijing's strict zero-COVID policy, even though soothing comments from Vice Premier Liu He to tech executives had buoyed sentiment on Wednesday. Two U.S. central bankers say they expect the Federal Reserve to downshift to a more measured pace of policy tightening after July as it seeks to quell inflation without lifting borrowing costs so high that they send the economy into recession. "It must be said that the concern for inflation has never gone away since we stepped into 2022. However, while things haven't reached the point of no return, they are seemingly heading in the direction of 'out of control'. That is probably the most worrying part for the market," IG's Chen said. The U.S. dollar, which had rallied on falling risk appetite, eased 0.15% against a basket of major currencies, after a 0.55% jump overnight that ended a three-day losing streak. The Aussie gained 0.8%, while New Zealand's kiwi bounced 0.6% to, as an easing in Shanghai's COVID lockdown helped sentiment. [FRX/] Data on Wednesday showed that British inflation surged to its highest annual rate since 1982 as energy bills soared, while Canadian inflation rose to 6.8% last month, largely driven by rising food and shelter prices. Bilal Hafeez, CEO of London-based research firm MacroHive, said there was a strong bias toward safe-haven assets right now, particularly cash. "There may be short-term bounces in equities like the last few days, but the big picture is that the era of low yields is over, and we are transitioning to a higher rates environment," Hafeez told the Reuters Global Markets Forum. "This will pressure all the markets that benefited from low yields - especially equities." U.S. Treasuries rallied overnight and were largely steady in Asia, leaving the yield on benchmark 10-year Treasury notes at 2.9076%. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 2.6800% compared with a U.S. close of 2.667%. Oil prices recovered from early losses, as lingering fears over tight global supplies outweighed fears over slower economic growth. Brent crude rose 1.2% to $110.41 per barrel, while U.S. crude was up 0.8% to $110.48 a barrel. Gold was slightly lower. Spot gold was traded at $1814.88 per ounce. [GOL/]
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By Andrew Galbraith SHANGHAI (Reuters) - Asian shares bounced on Friday, but were set for a second straight weekly loss and remained near June 2020 lows, while the dollar hovered near 20-year highs as investors digested worries about strong inflation and tightening central bank policy. Those concerns ultimately overcame hopes on Wall Street that high inflation might be peaking, pushing the S&P 500 close to confirming a bear market on Thursday, at nearly 20% off its January all-time high. [.N] In an interview later in the day, U.S. Federal Reserve Chair Jerome Powell said the battle to control inflation would "include some pain". And he repeated his expectation of half-percentage-point interest rate rises at each of the Fed's next two policy meetings, while pledging that "we're prepared to do more". After sharp losses a day earlier, Asian shares rallied on Friday. European equities were also set for a firmer open, with pan-region Euro Stoxx 50 futures up 1.08%, German DAX futures up 0.93% and FTSE futures gaining 0.98%. In afternoon trade, MSCI's broadest index of Asia-Pacific shares outside Japan was up around 1.8% from Thursday's 22-month closing low, trimming its losses for the week to less than 3%. Australian shares gained 1.93%, while Japan's Nikkei stock index jumped 2.64%. In China, the blue-chip CSI300 index was up 0.61% and Hong Kong's Hang Seng rose 2.22%. "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. "I think there comes that point where you run out of sellers. I'm not really certain that this is going to be a buying rally at the moment, possibly a short-covering rally ahead of the weekend." The moves higher in equities were mirrored in slipping U.S. Treasuries, with the benchmark U.S. 10-year yield edging up to 2.8895% from a close of 2.817% on Thursday. The policy-sensitive 2-year yield was at 2.5924%, up from a close of 2.522%. "Within the shape of the U.S. 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 (ETR:DBKGn), said in a note. The U.S. dollar remained near 20-year highs against a basket of currencies, supported by safe haven demand as Russia 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. The dollar index, which tracks it against a group of currencies of other major trading partners, edged down about 0.1% to 104.65. But the greenback was stronger against the yen, which traded at 128.62 per dollar after hitting a two-week peak of 127.5 hit overnight. The European single currency was 0.1% firmer at $1.0389 after trading lower earlier in the day. 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. In commodities markets, 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 over inflation and China's COVID lockdowns slowing global growth. U.S. crude ticked up 1.32% to $107.53 a barrel, and global benchmark Brent crude was up 1.6% at $109.17 per barrel. Spot gold, which had been driven to a three-month low by the soaring dollar, was up 0.16 % at $1,824.61 per ounce. [GOL/]
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By Tommy Wilkes LONDON (Reuters) - Stocks fell heavily again on Monday and the dollar rocketed to a new two-decade high as worries about higher interest rates and a tightened lockdown in Shanghai deepened investors' fears that the global economy is rapidly heading for a slowdown. After a bruising session on Friday in which U.S. stocks sold off sharply as another rise in long-dated U.S. Treasury yields unnerved investors, markets were set for a rocky start to the week, with most indexes in the red. Central banks in the United States, Britain and Australia all raised interest rates last week, and investors are bracing for more tightening as policymakers try to get on top of soaring inflation. "We see recession risk over the next 12 to 18 months to be as high as about 30%," said Dan Ivascyn, group chief investment officer at bond giant PIMCO. "One of the key reasons for that is the Fed and other central banks appear dead set on getting inflation under control." There was plenty more for investors to worry about on Monday aside from tightening financial conditions. There appeared to be no let-up in China's zero-COVID policy, with Shanghai tightening the city-wide lockdown for 25 million residents. Speculation that Russian President Vladimir Putin might declare war on Ukraine in order to call up reserves during his speech at "Victory Day" celebrations also hurt market sentiment. Putin has so far characterised Russia's actions in Ukraine as a "special military operation", not a war. Wall Street futures headed sharply lower with the S&P 500 futures down 2% and Nasdaq futures 2.5%. The S&P 500 and Nasdaq on Friday posted their fifth straight week of declines -- their longest losing streak in a decade. The Euro STOXX weakened 2%. Germany's DAX lost 1.6% and Britain's FTSE 100 1.78%. MSCI's main emerging market stocks index fell 1.2% to its lowest level since July 2020. The MSCI World Index dropped 0.7%, leaving it not far from the 17-month intraday low reached on Friday. (Graphic- World equities: https://fingfx.thomsonreuters.com/gfx/ MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.4% and Japan's Nikkei 2.53%. Chinese blue chips eased 0.8%, while in offshore markets the yuan fell to as low as 6.7759 per dollar, its weakest since October 2020. The big data event of the week is the U.S. consumer price report due on Wednesday, when only a slight easing in inflation is forecast, and certainly nothing to prevent the Federal Reserve from hiking by at least 50 basis points in June. U.S. 10-year bond yields on Monday reached a new 3-1/2 year high of 3.203%. DOLLAR DOMINANCE With investors juggling so many worries, one place they are looking for safety is in the dollar. The dollar index, which measures the greenback against a basket of currencies, rose as much as 0.4% to 104.19, the latest in a string of 20-year highs. "Risk appetite is fragile and yield spreads continue to suggest further upside on the Dollar Index," said Sean Callow, a senior FX strategist at Westpac. "We look for ongoing demand for DXY (the dollar index) on dips, with 104 already being probed and still potential for a run towards 107 multi-week." The soaring dollar is hammering other currencies. The euro briefly dropped back below $1.05 while the Japanese yen fell to its weakest since 2002. Expectations that the Fed will move more aggressively in raising interest rates are supporting the dollar, as is a sense among investors that the U.S. economy will hold up better than a euro zone hit by the fallout from the war in Ukraine. But rates are also rising in the euro zone. On Monday, Germany's 10-year bond yield hit a new highest level since 2014, buoyed by hawkish policymaker Robert Holzmann saying on Saturday that the European Central Bank should raise rates three times this year to combat inflation. The diary is full of Fed speakers this week, giving them plenty of opportunity to keep up the hawkish chorus. Oil prices initially see-sawed after the Group of Seven nations committed to banning or phasing out imports of Russian oil over time, before falling. Brent dropped 2.15% at $109.97 by 1115 GMT, while U.S. crude dropped 2.39% to $107.15. [O/R] Spot gold prices lost 1.24% to $1,859 an ounce, having struggled recently to gain traction as a safe haven. [GOL/]
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By Alun John HONG KONG (Reuters) - Asian shares tumbled to their lowest in seven weeks on Friday and the dollar stood tall as investors globally shunned riskier assets over fears that higher U.S. interest rates and China's reinforcement of its zero-COVID policy could hit growth hard. MSCI's broadest index of Asia-Pacific shares outside Japan shed 2.65% on Friday and fell to its lowest level since March 16, the day when Chinese vice premier Liu He boosted shares by pledging to support markets and the economy. The benchmark is down 3.8% from last Friday's close, which would be its worst week since mid-March. Japan's Nikkei bucked the trend, rising 0.56% on its return from a three-day holiday. Chinese blue chips shed 2%, the Hong Kong benchmark lost 3.44%, and China's yuan tumbled to an 18-month low in both onshore and offshore markets. Dickie Wong, director of research at Hong Kong brokerage Kingston Securities, attributed the falls to the Wall Street plunge overnight amid worries about aggressive U.S rate hikes, as well as fears about the health of the Chinese economy. China will fight any comments and actions that distort, doubt or deny the country's COVID-19 response policy, state television reported on Thursday, after a meeting of the country's highest decision-making body. Investors said that appeared to rule out any easing in the zero-COVID policy, which is slowing Chinese economic growth and snarling global supply chains. "The silver lining is the expectation that new Chinese fiscal measures could come out over the weekend," Wong said. "That's the only thing giving Asian markets some support at their current low valuations." Overnight, the Dow Jones Industrial Average and the S&P 500 both fell more than 3%, and the Nasdaq Composite shed 4.99% in its biggest single-day plunge since June 2020. [.N] Things looked less dire in Europe, where regional share futures fell 0.25% and FTSE futures lost 0.27%. U.S. futures were flat. "Risks remain elevated for a policy mistake – either by (the Fed) not tightening quickly enough to combat inflation or being overly hawkish, resulting in the end of the current business cycle," said David Chao, global market strategist for APAC ex-Japan at Invesco. U.S. payroll data due later on Friday will help traders gauge how hot the economy is running. The market is pricing in an 87% chance of a monster 75 basis point rate hike from the Fed at its meeting in June, according to the CME's FedWatch tool. That's even after the Fed raised rates by 50 basis points this week and Chair Jerome Powell ruled out a 75 basis point hike. U.S. yields are rising on expectations of a fast pace of rate hikes. The yield on U.S. 10-year notes was last 3.065% after crossing 3.1% overnight for the first time since November 2018. [US/] As investors moved towards less risky assets, the dollar index was at 103.75 on Friday, having hit a fresh 20-year peak of 103.94 overnight supported by expectations the U.S. will hike interest rates faster than other central banks. (FRX) The dollar index is 0.43% higher this week, its fifth consecutive week of gains. Sterling was trading around its lowest level against the dollar in nearly two years after falling 2.2% on Thursday. The Bank of England raised rates by 25 basis points as expected, but two policy makers expressed caution about rushing into future rate hikes. Bitcoin, one of the risk-friendliest assets, tumbled 8% overnight, hitting a two-and-a-half-month low. It was last trading around $36,500. Oil prices shrugged off concerns about global economic growth as worries about tightening supply underpinned prices ahead of the European Union's impending embargo on Russian oil. Brent futures rose 0.6% to $111.57 a barrel. U.S. crude rose 0.64 % to $108.95 a barrel. [O/R] Gold was flat at $1876.4 an ounce. [GOL/]
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By Danilo Masoni MILAN (Reuters) - World stocks rose slightly on Tuesday and U.S. 10-year Treasury yields held near 3% as investors prepared for the Federal Reserve's biggest rate hike since 2000. In a busy week for central bank meetings, Australia's central bank raised its key rate by a bigger-than-expected 25 basis points on Tuesday, lifting the Aussie dollar as much as 1.3% and hitting local shares. On Thursday, the Bank of England is expected to raise rates for the fourth time in a row. MSCI's benchmark for global stocks gained 0.1% by 1216 GMT as European shares rose after surviving a "flash crash" on Monday caused by a single sell order trade by Citigroup (NYSE:C). The pan-European STOXX 600 equity benchmark was up 0.2%, bouncing back from Monday's losses and supported by upbeat earnings reports and gains in banking stocks tracking higher bond yields. "These are small flashes of sunshine in the markets. The broader scenario however is not encouraging," said Enrico Vaccari, head of institutional sales at Consultinvest in Milan. "Even though there's room for stock markets to rally from oversold levels, in the long term the headwinds are too many, simply because the speed of the Fed's rate hikes will drive equity and especially bond market movements," he added. In the UK, the FTSE 100 index, which reopened following a long weekend, fell 0.4%. In France, BNP rose 4% after a sharp increase in trading activities helped the country's biggest lender top earnings growth expectations. In Asia, equities were mostly steady in holiday-thinned trade, with both China and Japan markets shut, but in Hong Kong, Alibaba (NYSE:BABA) shares fell as much as 9% on worries over the status of its billionaire founder Jack Ma. A state media report that Chinese authorities had taken action against a person surnamed Ma hit the stock hard, but it recouped losses after the report was revised to make clear it was not the company's founder. Hong Kong's Hang Seng index was up 0.1% and South Korea's KOSPI declined 0.3%. Australia's S&P/ASX 200 index fell 0.4% as the central bank raised rates and flagged more hikes ahead to contain inflation. U.S. equity futures steadied, with the Nasdaq and S&P 500 e-minis hovering between flat and a rise of 0.1%, held back by some underwhelming earnings reports. On Monday, Wall Street closed a seesaw session higher as investors bought into tech stocks in the last hour of trading amid bets they had been overly beaten down ahead of this week's Fed meeting. Investors expect the Fed to raise rates by 50 basis points at the end of a two-day meeting on Wednesday, although there was uncertainty around how hawkish Chair Jerome Powell will sound in comments following the decision. Around 250 basis points of rate hikes by the end of this year are already priced in by money markets, which some analysts say reduces the scope for hawkish surprises this week. U.S. treasury yields stayed near 3% in European trade, after breaching that key psychological milestone for the first time since December 2018 on Monday. The U.S. benchmark 10-year yield fell 2 basis points to 2.955%. In April, it rose 59 basis points, scoring its best month since 2009. Consultinvest's Vaccari said if 10-year U.S. yields were to reach 4%, there would be a "very strong shift towards bonds even though that risk today looks quite far away". The dollar, which has been supported by safe haven buying on worries over the economic outlook, stayed just below the nearly two-decade high reached in April and the euro steadied above the lowest level in more five than years hit last month. The dollar index was last at 103.25, down 0.3% on the day. The euro traded up 0.4% at $1.0546. RBA JOINS THE CLUB Elsewhere in currency markets, the Australian dollar jumped after the central bank raised its cash rate by a surprisingly large 25 basis points to 0.35%, the first hike in more than a decade. It also flagged more rate hikes to come as it pulls down the curtain on massive pandemic-related stimulus. "The RBA has joined the club, with a rate hike today that was a little larger than we had expected. The case to start to move policy off emergency settings was clear and the RBA has responded to that," said Jo Masters, chief economist at Barrenjoey in Sydney. The Aussie was up 0.9% at $0.712 as a majority of analysts in a Reuters poll had expected a rise to only 0.25%. The UK pound rose, moving away from its 22-month lows against the dollar as traders took profits on the recent surge in the greenback ahead of the Bank of England policy meeting. [GBP/] Sterling rose 0.3% to $1.253, against the low of $1.2412 hit last week. Oil prices slipped as concerns about the demand outlook due to prolonged COVID lockdowns in China outweighed support from a possible European oil embargo on Russia over its actions in Ukraine. [O/R] Brent crude fell 1.1% to $106.4 per barrel, and U.S. crude lost 1.2% to $103.9. London copper prices fell to three-month lows as COVID-19 restrictions in top consumer China and the prospect of aggressive U.S. rate hikes fuelled worries about weaker global growth hitting metals demand. [MET/L] Benchmark copper on the London Metal Exchange was down 2.5% at $9,525.50 a tonne. Gold prices hit their lowest since mid-February before recovering, as an elevated dollar and the imminent rate hike by the Fed dampened bullion's appeal as an inflation hedge. [GOL/] Spot gold was flat at $1,863 per ounce.
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By Alun John HONG KONG (Reuters) - Asian shares were set for their best day in six weeks on Friday led by Chinese tech stocks after reports of a possible resolution to the Sino-U.S. audit dispute, giving investors much needed respite from worries of a global economic slowdown. Still, a key regional share index was set for its worst month in nine as the Ukraine war and expectations for aggressive U.S. rate hikes in coming months have added to the anxieties, propelling the safe-haven dollar to near 20-year peaks. Hong Kong listed tech stocks rose as much as 10% on Friday as trading resumed after the lunchtime pause. Ecommerce players JD (NASDAQ:JD).com and Alibaba (NYSE:BABA) each rose as much as 15% and Meituan gained around 12%. All three are listed in both the U.S. and Hong Kong bourses. They and their peers' stock prices had been affected by U.S. moves to delist Chinese companies because Beijing restricted the U.S. audit regulator's access to their audit documents. Reports on Friday that a resolution to the dispute was in sight had driven the sharp gains, said Steven Leung executive director of institutional sales at brokerage UOB Kay Hian in Hong Kong. The gains from Chinese index heavyweights sent MSCI's broadest index of Asia-Pacific shares outside Japan 1.9% higher, which would be its best day since March 17. Also helping was the Politburo, the top decision-making body of China's Communist Party, saying China will step up policy support to stabilise the economy, and a strong Wall Street after robust earnings from Facebook (NASDAQ:FB) parent Meta Platforms had driven the Nasdaq 3% higher overnight. [.N] However, Nasdaq futures fell around 0.7% in Asia trade, pressured by disappointing earnings from Amazon (NASDAQ:AMZN) after market close. European futures rose 1.29% and FTSE futures advanced 0.86%. LONGER TERM FEARS Friday's gains marked a recovery to the brutal sell-offs in globally stocks in recent weeks. The Asian regional benchmark is heading for a 5.6%% drop for the month, its worst month since July 2021. Until Friday's gains, it was set for its worst month in two years. "There are four near term catalysts driving the market at the moment: U.S. earnings which we are about half way through, rising U.S. Treasury yields and lots of hawkish speak from the Fed, the war in Ukraine, and China policy," said Fook-Hien Yap, senior investment strategist at Standard Chartered (OTC:SCBFF) Wealth Management. Yap believes Asian shares have room to rise further as much of the bad news was already priced in, though a strong rally in risk assets like equities would need U.S. yields to steady. The benchmark 10 year yield finished the U.S. session at 2.8205%, having reached as high as 2.981% on April 20. The two year yield was at 2.6132%. [US/] They didn't trade in Asia on Friday due to the holiday in Tokyo. This week has also been a volatile one for currencies. The dollar index, which tracks the greenback against six major peers fell 0.38% to 103.27 on Friday due to the improved risk sentiment, but was still not far from Thursday's high of 103.93 - its highest level since late 2022. The index's current monthly gain of 5% would be its best since 2015. On top of the safety-bid for the dollar, the rally has also been fed by market expectations for 150 basis points of rate hikes in just three Federal Reserve meetings. The aggressive Fed tightening path, mainly to curtail sky high inflation, far out paces other global central banks. The dollar's recent gains have been most significant against the yen, and it swept past the key psychological 130 yen level on Thursday, setting a fresh 20 year high. [FRX/] Weakness in China's yuan gathered pace on Friday, putting the currency on track for its biggest monthly drop since 1994, pressured by broad dollar strength and lockdowns in many major cities to curb the spread of COVID-19. Oil prices remained choppy as traders grappled with the supply issues stemming from the war in Ukraine as well as the demand impact of lockdowns in China. Brent crude rose 0.9% on Friday to 108.56 per barrel, U.S. crude rose 0.65% to $106.02. [O/R] Spot gold rose 0.65% to $1906.7 an ounce. [GOL/]
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By Julie Zhu HONG KONG (Reuters) - Asian shares traded cautiously on Tuesday, with investors weighing China's measures to cushion an economic slowdown and the prospect of aggressive Federal Reserve monetary policy tightening. Investors are also bracing for a barrage of earnings that will help them assess the impact of the Ukraine war and a spike in inflation on company financials. Netflix (NASDAQ:NFLX), Tesla (NASDAQ:TSLA) and Johnson & Johnson (NYSE:JNJ) are all to report this week. Moscow has refocused its ground offensive in Ukraine's two eastern provinces but Ukrainian President Volodymyr Zelenskiy has vowed to fight on. Early in the Asian trading day, MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.5% while U.S. stock futures, the S&P 500 e-minis, were up 0.2%. Australia's S&P/ASX 200 edged up 0.66%, as strong commodity prices lifted mining and energy stocks, while Japan's Nikkei rose 0.18%. China's blue-chip CSI300 index was 0.06% higher in early trade while the Shanghai Composite Index rose 0.24%. Hong Kong's Hang Seng index opened down 2.4%, pressured by a slump in tech giants listed in the city amid China's latest regulatory crackdown on the sector. The People's Bank of China (PBOC) said on Friday it would cut the reserve requirement for all banks by 25 basis points (bps), releasing about 530 billion yuan ($83.25 billion) in long-term liquidity to cushion a slowdown. Investors, however, felt the smaller-than-expected cut might not be enough to reverse a sharp slowdown in the world's No. 2 economy that could significantly affect global growth. China's gross domestic product (GDP) on Monday beat analysts' expectations with a 4.8% increase in the first quarter from a year earlier, while data on March activity showed weakness in consumption, property and exports affected by COVID-19 curbs. Analysts said the key question was whether authorities would make adjustments to the tough anti-COVID-19 measures. "We expect more policy support, mainly in the form of more infrastructure investment, stronger credit growth, and easier property policy. But we do not see the government undertake 'whatever it takes' to achieve the 5.5% growth target, nor shift the Covid policy soon," said Wang Tao, Head of Asia Economics and Chief China Economist of UBS Investment Bank Research. Wall Street ended the day lower in a choppy trading day on Monday, as investors contrasted Bank of America (NYSE:BAC)'s positive quarterly earnings with surging bond yields ahead of further earnings cues this week. A significant cut to global growth expectations from the World Bank, paired with March weakness in China's latest economic numbers injected some pessimism into U.S. markets, which opened Monday following a holiday-shortened previous week. The Dow Jones Industrial Average ended down 0.11%, while the S&P 500 dipped 0.02% and the Nasdaq Composite slid 0.14%. Markets were closed on Monday in Australia, Hong Kong and many parts of Europe for the Easter holiday. The benchmark 10-year Treasury yield was last at 2.845%, after previously hitting 2.884% earlier on Monday, the highest since December 2018, as investors adjusted for the Federal Reserve to raise rates by 50 basis points at its May and June meetings to contain rapid inflation. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 2.4459% compared with a U.S. close of 2.46%. The dollar index, a gauge of the greenback's value against six major currencies, was up at 100.88 after surging to 100.86 on Monday, the highest since April 2020. Oil prices were slightly lower on Tuesday, after having been boosted by concerns over tight global supply amid the Ukraine crisis in the previous sessions. U.S. crude dipped 0.57% to $107.59 a barrel. Brent crude fell to $112.7 per barrel. Gold prices steadied on Tuesday, after getting within a stone's throw of the key $2,000 per ounce level in the previous session. Spot gold traded at $1,977.18 per ounce. [GOL/]
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By Stella Qiu and Alun John BEIJING (Reuters) - Asian shares tracked Wall Street higher on Thursday, while U.S. Treasury yields eased and the dollar retreated, as the latest U.S. data raised hopes that inflation may be close to peaking, though several major central banks raised rates aggressively. Traders were waiting for a European Central Bank meeting later in the day to see if it was as hawkish as others have been. Share market sentiment received a boost from China's announcement late on Wednesday that authorities should cut banks' reserve requirement ratios (RRR) soon to support an economy battered by COVID-19 lockdowns. [nL2N2WB0UH] MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4%, buoyed by a 0.5% gain in Australia's resource-heavy shares and a 1.2% advance in mainland China's blue chip stocks. Japan's Nikkei was up 1.2%. European markets are set to open higher, with EUROSTOXX 50 futures up 0.56%, German DAX futures rising 0.56%, and FTSE futures gaining 0.24% in Asia trade. S&P500 futures rose 0.2% and Nasdaq futures were 0.4% higher. David Chao, Hong Kong-based global market strategist at Invesco, said several developments were boosting shares on Thursday, including moderating gains in U.S. core consumer prices, which could mean inflation pressures may start to abate soon, and China's announcement of more policy support. "I've argued that an upswing in money supply and credit growth could provide a floor for Chinese equities and signal that investor sentiment may soon start to improve, especially if COVID and geopolitical concerns start to wane," Chao said. Elsewhere, other central banks reinforced the hawkish global mood ahead of the ECB meeting. The Bank of Korea surprised markets with a rate hike and the Monetary Authority of Singapore also tightened policy. That did not appear to affect the sentiment much. South Korean shares KOSPI reversed earlier losses to be up 0.1%, while Singapore's benchmark Straits Times Index also rose slightly. Equity markets have suffered from central banks' hawkishness, but all three Wall Street indexes gained over 1% on Wednesday. Asian markets including Hong Kong, Singapore and Australia are on holiday on Friday for the long Easter weekend, as are major European and U.S. markets. Hopes that U.S. inflation may have peaked led U.S. Treasury yields to extend their decline on Thursday. The yield on 10-year Treasury notes was at 2.6636%, compared to an over three-year peak of 2.836%, before the data released on Tuesday showed inflation running less hot than investors had feared. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 2.3156%, compared with a close of 2.3645% the previous day. Retreating U.S. yields offered some relief to the bruised yen on Thursday, with the safe haven currency up 0.3% against the greenback. It had weakened past the 126 yen per dollar mark in the previous session. The prospect of fast and aggressive U.S. interest rate hikes and growing market expectations that the Bank of Japan will keep rates ultra-low in the near term have weakened the yen. The euro also gained 0.2% against the dollar, although it was not too far away from its 1-month low on concerns about the war in Ukraine. Ukraine warned on Wednesday that Russia was ramping up efforts in the south and east as it seeks full control of Mariupol, while Western governments committed more military help to bolster Kyiv. Oil prices fell on Thursday, after rising sharply in the first half of the week, as traders weighed a larger-than-expected build in U.S. oil stocks against tightening global supply. [O/R] U.S. crude dipped 0.48% to $103.75 a barrel. Brent crude fell 0.1% to $108.70 per barrel. Gold was slightly lower, hovering around its 1-month high. Spot gold was traded at $1,974.72 per ounce. [GOL/]
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By Scott Murdoch HONG KONG (Reuters) - Asian shares were mostly in negative territory while the U.S. dollar held strong on Tuesday ahead of U.S. inflation data which could foreshadow even more aggressive interest rate hikes from the Federal Reserve. Treasury yields spiked to a three-year high, while oil prices jumped after a partial easing of lockdowns in Shanghai. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2%, after U.S. stocks ended the previous session with mild losses, while Japan's Nikkei stock index slid 1.79%. Australian shares were down 0.57%. Higher U.S. bond yields were supporting the dollar, with the U.S. currency's index measure against six peers moving back over 100 to test last week's near-two year high. The Japanese currency bore the brunt of the losses against the greenback, which rose to 125.77 yen overnight, its highest since June 2015. It traded choppily just below that level on Tuesday and was last at 125.45 per dollar. The yen has been under the gun over recent months as the Bank of Japan has committed to maintaining ultra-easy policy even as many other major central banks, led by the Fed, have embarked on tightening monetary conditions. The euro was buffeted by politics, unable to hold onto gains from its mini-relief rally on Monday after French leader Emmanuel Macron beat far-right challenger Marine Le Pen in the first round of presidential voting. It was last steady at $1.087. China's markets gained ground as signs emerged that some of the COVID-19 restrictions were starting to ease in Shanghai, the country's financial capital, though dozens of other cities remain in partial or full lockdowns.. An easing of China's regulations on the gaming sector also gave investors heart after a multi-year crackdown on parts of the country's technology industry. China's bluechip CSI300 Index dipped into negative territory mid-session Tuesday but roared back in the afternoon to be up 1.41%, which analysts attributed to the gaming restriction changes Hong Kong's Hang Seng Index was up 0.3%. "The next few days and weeks in China is going to be challenging, COVID cases are still going up, but investors should not be focused just on COVID," said Suresh Tantia, a Credit Suisse (SIX:CSGN) strategist. "The big story for China though is political easing and tech regulations starting to subside. Tech stocks have bounced today and we think there will be more policy easing so there is a situation where China will be easing when the rest of the world is tightening." Ahead of the March inflation data, U.S. stock futures, the S&P 500 e-minis, were down 0.38% at 4,392.3. Economists polled by Reuters forecast the U.S. consumer price index (CPI) on Tuesday would post an 8.4% year-over-year increase for the month. NatWest Markets economists predict a 1.1% month-on-month jump in the headline inflation figure which would be the largest monthly gain since June 2008. "We're quite hawkish in terms of U.S rate hikes and we think it's not just the amount of tightening but the pace which is going to impact investors," Elizabeth Tian, Citigroup (NYSE:C)'s equity derivatives director in Sydney told Reuters. "Equities markets have been very resilient and quite relaxed compared to the fixed income markets, but we're expecting at the Fed's May meeting there will be some kind of announcement in term of quantitative easing tapering and that is when we could see the volatility emerging in equities. "The question is going to be how do markets react to the velocity of rate hikes we could see." In the Asian session, the yield on benchmark 10-year Treasury notes rose to 2.8224% compared with its U.S. close of 2.782% on Monday. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 2.539% compared with a U.S. close of 2.508%. U.S. crude ticked up 2.2% to $96.37 a barrel. Brent crude rose to $100.76 per barrel. Gold was slightly lower. Spot gold was traded at $1956.41.45 per ounce. [GOL/]
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By Wayne Cole SYDNEY (Reuters) - Shares slid and bond yields climbed on Monday as caution gripped markets ahead of central bank meetings and U.S. inflation data, while the euro managed only a brief gain on relief the far right did not win the first round of French presidential elections. French leader Emmanuel Macron and far right challenger Marine Le Pen qualified on Sunday for what promises to be a tightly fought presidential election runoff on April 24. A Le Pen victory could send shockwaves through France and Europe in ways similar to Britain's vote in 2016 to leave the European Union (EU). The first round result was close enough to leave the euro barely changed at $1.0883, after an initial pop to $1.0950. The mood in equity markets was cautious, with MSCI's broadest index of Asia-Pacific shares outside Japan falling 1.3%. Japan's Nikkei dropped 0.7%, having shed 2.6% last week, while Chinese blue chips lost 2.4%. S&P 500 stock futures eased 0.6% and Nasdaq futures 0.7%. EUROSTOXX 50 futures lost 0.8%, and FTSE futures 0.4%. Earnings season kicks off this week with JP Morgan, Wells Fargo (NYSE:WFC), Citi, Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) all due to report. Up to now, Wall Street has fared surprisingly well in the face of a vicious selloff in bonds which saw 10-year Treasury yields surge 31 basis points last week. [US/] Yields were last up at a three-year high of 2.77%, and topped Chinese bond yields for the first time since 2010. Markets have raced to price in the risk of ever-larger rate hikes from the Federal Reserve with futures implying rises of 50 basis points at both the May and June meetings. BofA's U.S. economist Ethan Harris now expects half-point hikes at each of the next three meetings and a cycle peak around 3.25-3.50%. "If inflation looks like it is heading below 3%, then our current call should be hawkish enough," Harris said in a note. "Conversely, if inflation gets stuck above 3% then the Fed will need to hike until growth drops close to zero, risking a recession." INFLATION TESTS ECB All of which underlines the importance of the March U.S. consumer price report on Tuesday where the median forecast is for a stratospheric rise of 1.2%, taking annual inflation to an eye-watering 8.5%. China's inflation figures surprised on the high side on Monday and, while relatively modest at 1.5% year-on-year in March, still dented hopes for aggressive policy easing from Beijing. Inflation will also be front and centre for the European Central Bank meeting on Thursday where the risk is for a hawkish slant to the statement. "Inflation has jumped well above where the ECB thought it would be just one month ago," noted analysts at TD Securities "We expect a dramatic shift from the ECB, with the announcement of an early end to QE in May and setting the groundwork, but not quite committing to, a June hike." Continuing the tightening theme, central banks in Canada and New Zealand could well raise rates by 50 basis points at their policy meetings this week. [CA/INT] [NZ/INT] The outsized rise in Treasury yields has seen the dollar index top 100 for the first time since May 2020, and it was last trading at 99.858. The main casualty has been the yen as the Bank of Japan remains dedicated to keeping its policy super-loose and bond yields near zero. The dollar was up at 124.92 yen, having gained 1.5% last week to just below its recent peak of 125.10. In commodity markets, thermal coal was the stand out winner last week with a rise of almost 13% after the EU banned imports of Russian coal. Gold managed a weekly gain of 1.1% but has been undermined by the huge rise in bond yields and was last flat at $1,942 an ounce. [GOL/] Oil prices remained under pressure after world consumers announced plans to release crude from strategic stocks and as Chinese lockdowns continued. [O/R] Early Monday, Brent was down $2.05 at $100.73, while U.S. crude lost $2.10 to $96.16.
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By Alun John HONG KONG (Reuters) - Asian shares retreated on Thursday, in line with a global selloff, as markets were spooked by more aggressive noises from U.S. policymakers about the need for tighter monetary policy, which also kept the dollar near a two-year peak. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.17% to its lowest level in a week, while Japan's Nikkei dropped 1.9%. European and U.S. share futures also fell. EUROSTOXX 50 futures eased 0.2%, S&P 500 futures fell 0.37% and Nasdaq futures fell 0.35%. "The whole political and policy stance in the U.S. has shifted, and markets are starting to get that," said Redmond Wong, a market strategist at Saxo Markets Hong Kong. "Attention has really moved towards quantitative tightening after all those Fed speakers and the minutes yesterday, and the objective is to tighten financial conditions and depress aggregate demand. I think the Fed is willing to accept some softness and wants to cool down the labour market, unlike in the past, when they wanted to protect it." Minutes of the Fed's March 15-16 meeting released on Wednesday, showed deepening concern among policymakers that inflation had broadened through the economy. U.S. Federal Reserve Governor Lael Brainard said on Tuesday she expects rapid reductions to the central bank's balance sheet. Wong said that in the long run positive real interest rates would be good for the global economy, but in the medium term there would be a repricing of assets. Overnight all three major U.S. benchmarks fell, with the Nasdaq Composite worst hit, losing 2.22%. [.N] Also on investors' minds was growing economic strains in China, which is grappling with new outbreaks of COVID-19. Shanghai, currently under a city-wide lockdown, reported nearly 20,000 new cases on April 6 - the vast majority asymptomatic - the local government said on Thursday. Nomura estimated on Tuesday that a total of 23 Chinese cities have implemented either full or partial lockdowns, which collectively are home to an estimated 193 million people and contribute 22% of the country's GDP. Chinese blue chips shed 0.9%, and Hong Kong stocks lost 1.3%, weighed by declines in large Chinese tech firms U.S. Treasuries had sold off sharply in the lead-up to the release of the Fed's minutes, sending yields to multi-year highs before steadying. The yield on 10-year Treasury notes was little changed in Asia trade at 2.5865% while the 2-year note yield was slightly softer at 2.4554%, leaving this closely watched part of the yield curve slightly steeper after starting the week inverted. [US/] In currency markets, the prospect of quantitative tightening in the United States kept the dollar near a two-year high against a basket of currencies. The index was at 99.537, just off the overnight peak of 99.778, also supported by commodity currencies' retreat from recent highs due to a dip in oil prices, and a decline in the euro. The European common currency inched up from a one-month low overnight, weighed down by what ING analysts called a "double threat" from the economic impact of new sanctions on Russia for its war in Ukraine and uncertainty about the outcome of the French election. [FRX/] Oil prices rose on Thursday, however, after falling to a three-week low the day before after large consuming nations said they would release oil from reserves to counter tightening supply. Brent crude futures were up 1.45% at $102.55 a barrel, while U.S. crude rose 1.3% to $97.48 a barrel. [O/R] Spot gold fell 0.23% to $1,920.9 an ounce [GOL/]
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By Huw Jones LONDON (Reuters) - Wall Street was headed lower on Wednesday, taking its cue from weaker global shares after U.S. Treasuries were pummelled on the prospect of the Federal Reserve firing on all cylinders next month to quell inflation. Investors also waited for details of the latest package of coordinated sanctions on Russia from the United States and its allies over civilian killings in Ukraine. The dollar hit its highest in almost two years, while expectations of new sanctions raised oil supply concerns to send crude prices higher. S&P500 futures were down 0.9%, with tech-heavy Nasdaq futures off 1.6%, pointing to a second day of selling. The CBOE Volatility index, widely dubbed Wall Street's fear index, rose to 23.25 points, up 10.5%. The MSCI All-Country stock index shed 0.5% as shares fell in Asia and Europe, after Fed Governor Lael Brainard said overnight she expected a combination of interest rate rises and a rapid balance sheet runoff to take U.S. monetary policy to a "more neutral position" later this year. Randy Kroszner, a former Fed Governor and now an economics professor at the University of Chicago Booth School of Business, said the Fed was right to act now while longer-term inflation expectations remained anchored. "Given that we've had significant 8% inflation and it's likely to persist for quite some time, longer-term inflation expectations have not yet become unanchored," Kroszner said. "So, they (Fed policymakers) have the opportunity to maintain credibility, but they need to act boldly and that means rapid rate increases, that means a more rapid winding down of the balance sheet than they would have wanted to do." The focus of investors on Wednesday will be on the release of minutes from the Fed's last policy meeting, out at 1800 GMT. "The minutes will be important for two main reasons. First, for clues on the likelihood of a 50 basis point hike, and what the committee would need to see to warrant a faster pace of hikes," analysts at UniCredit said in a note to clients. RECESSION RISK The gap between 2 and 10-year bond yields was at almost 5 basis points. This closely-watched part of the U.S. yield curve, viewed as a good indicator of recession risk, had been inverted for much of the past week. The yield on benchmark 10-year Treasury notes rose to 2.625%, hitting a three-year high after Brainard's remarks. The U.S. 2-year yield rose to its highest level since January 2019 and the 5-year yield to its highest since December 2018. [US/] DOLLAR HITS 2-YEAR HIGH The dollar index hit 99.386 after reaching its highest since late May 2020 in early trade. The euro was slightly firmer at $1.0923. The greenback was also trading firm against the yen at 123.80 yen given the Bank of Japan's conviction and repeated action last week to hold the yield on 10-year Japanese government bonds below 0.25%. Grace Peters, EMEA head of investment strategy at JPMorgan (NYSE:JPM) Private Bank, said 2022 was probably the last year of above-trend economic growth. "We are seeing Fed policy rapidly moving into restrictive territory. But we don't need to ditch equities, it just means we need to be more risk aware. At this point I would buy the dips but move into higher-quality assets," Peters said. "Markets see the curve inversion as the clock ticking down to the next recession. But it can be up to two years until recession hits and over that period stocks generally see a double-digit upside," she said. CRUDE GAINS The rise in bond yields globally has put pressure on gold, which pays no return. Spot gold slightly weaker at $1,923 per ounce. [GOL/] Oil prices recovered from early losses as the threat of new sanctions on Russia raised supply concerns, but there were fears of weaker demand following an increase in U.S. crude stockpiles and Shanghai's extended lockdown. U.S. crude was up 0.9% at $102.75 a barrel. Brent crude gained 0.5% to $107.20 per barrel. [O/R] In Asia, Hong Kong's Hang Seng index lost 1.8% on its return from a holiday, moving away from a one-month high reached on Monday, Chinese blue chips lost 0.3%. Japan's Nikkei shed 1.6%, while the MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1.3%.
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By Daniel Leussink TOKYO (Reuters) - Asian share markets slipped on Wednesday as investors faced up to the possibility of aggressive monetary tightening by the U.S. Federal Reserve to fight inflation, while focus was also on new Western sanctions against Russia over its invasion of Ukraine. U.S. Treasury yields hit multi-year highs and stock markets were red after Fed Governor Lael Brainard said overnight that she expected a combination of interest rate rises and a rapid balance sheet runoff to take U.S. monetary policy to a "more neutral position" later this year. Japan's Nikkei shed 1.7%, while the MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1.4%. European markets looked set to open lower too. EUROSTOXX 50 futures eased 0.4% and FTSE futures were flat. S&P500 futures edged down 0.1%. The focus of investors on Wednesday will be on the release of minutes from the Fed's last policy meeting, which they will scrutinise for clues on the prospect of a 50-basis point increase at the U.S. central bank's next meeting in May. "It's currently considered an 80% chance the Fed will take that course," said Kyle Rodda, a market analyst at IG in Melbourne. Investors hadn't fully priced in such a move, so greater evidence for it may move markets, Rodda added. "There's expectation the Fed could hike 50 bps in June too, and if that becomes more likely, then a repricing of those risks could spark another spike in volatility," he said. The yield on benchmark 10-year Treasury notes rose to a near three-year high of 2.631% on Wednesday, as a bond sell off after Brainard's remarks continued. The U.S. 2-year yield rose to its highest level since January 2019 and the 5-year yield to its highest since December 2018. [US/] Also drawing attention were China's markets, after data published on Wednesday showed activity in its services sector shrank at the fastest in two years in March as a surge of coronavirus infections restricted mobility and weighed on client demand, a closely watched private sector survey showed. Hong Kong's Hang Seng index lost 1.4% on its return from a holiday, moving away from a one-month high reached on Monday, Chinese blue chips lost 0.46%. On Tuesday, Chinese authorities extended a COVID-19 lockdown in Shanghai to cover all of the financial centre's 26 million people despite growing anger over quarantine rules. The jump in yields following Brainard's comments also played out in the currency market, providing support to the dollar. The dollar index hit 99.640, its highest since late May 2020 in early trade, also supported by a fall in the euro, which hit nearly a month low of $1.0889, hurt by fears more sanctions on Russia would damage Europe's economy. The United States and its allies will on Wednesday impose new sanctions on Russian banks and officials and ban new investment there, the White House said. The greenback was also trading firm against the yen at 123.98 yen given the Bank of Japan's conviction and repeated action last week to hold the yield on 10-year Japanese government bonds below 0.25%. The rise in bond yields globally has put pressure on gold, which pays no return. Spot gold traded down 0.16% at $1,928.8 per ounce. [GOL/] Oil prices recovered from early losses as the threat of new sanctions on Russia raised supply concerns but there were fears of weaker demand following an increase in U.S. crude stockpiles and Shanghai's extended lockdown. U.S. crude was unchanged at $101.96 a barrel. Brent crude was up 0.3% at $106.96 per barrel. [O/R]
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By Wayne Cole SYDNEY (Reuters) - Share markets made cautious gains on Monday amid talk of more sanctions against Russia over its invasion of Ukraine, while bonds screamed the risk of a hard landing for the U.S. economy as short-term yields hit three-year highs. A holiday in China made for sluggish trading, and MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.6%. Japan's Nikkei added 0.1%, while S&P 500 stock futures and Nasdaq futures were flat. EUROSTOXX 50 futures firmed 0.2% and FTSE futures 0.4%. While Russia-Ukraine peace talks dragged on, reports of Russian atrocities led Germany to say the West would agree to impose more sanctions in coming days. Germany's defence minister also said the European Union must discuss banning imports of Russian gas, a step that would most likely send prices yet higher while forcing energy rationing in Europe. Data last week showed inflation in the EU had already surged to a record high, piling pressure on the European Central Bank to rein in prices even as growth slows sharply. "It really looks like it is time for the ECB to act," warned analysts at ANZ in a note. "While the ECB will be cautious about raising rates, it certainly looks like it should act sooner to abolish its QE programme." The U.S. Federal Reserve has already raised rates and is predicted to do a lot more after Friday's solid March payrolls report. Several Fed officials are due to speak at public events this week, with the prospect of sending more hawkish signals, and minutes of the last policy meeting are due on Wednesday. "We now expect the Fed to hike by 50bps in May, June, and July, before dialling the pace back slightly by delivering 25bps hikes at the September, November and December," said Kevin Cummins (NYSE:CMI) chief U.S. economist at NatWest Markets. "This will bring the funds rate into restrictive territory sooner, with 2.50-2.75% by year-end 2022." Investors reacted by hammering short-dated Treasuries and further inverting the yield curve as the market priced in the risk all this tightening would ultimately lead to recession. On Monday, two-year yields were up at three-year highs of 2.49% and well above the 10-year at 2.410%. The jump in yields has underpinned the U.S. dollar, particularly against the yen, given the Bank of Japan acted repeatedly last week to keep its bond yields near zero. The dollar was trading firm at 122.60 yen and not far from its recent seven-year peak of 125.10. The euro drifted to $1.1045 and could fall further should the EU actually act to stop gas flows from Russia, which calls its actions in Ukraine a "special operation". The dollar index was last at 98.617, having recently bounced around between 97.681 and 99.377. The rise in bond yields globally has been a drag on gold, which pays no return, and the metal was stuck at $1,920 an ounce. [GOL/] Meanwhile oil prices took an early knock after the United Arab Emirates and the Iran-aligned Houthi group welcomed a truce that would halt military operations on the Saudi-Yemeni border, alleviating some concerns about potential supply issues. [O/R] Oil slid 13% last week - the biggest weekly fall in two years - after U.S. President Joe Biden announced the largest-ever U.S. oil reserves release. Price stabilised as the day wore on and Brent edged up 32 cents to $104.71, while U.S. crude added 22 cents to $99.49. [O/R]
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By Alun John HONG KONG (Reuters) - Asia shares joined a global rally on Wednesday as hopes rose for a negotiated end to the Ukraine conflict, while bond markets signalled concern about the U.S. economy overnight after 10-year yields briefly dipped below two year rates. MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.28% to its highest level in nearly a month, with most Asian stock markets in positive territory, and Chinese blue chips, up 2.5%, leading the charge. Japan's Nikkei bucked the trend however, falling 1%, as observers pointed to profit taking heading into the end of the fiscal year. The benchmark hit a two-month closing high on Tuesday. (T) Ukraine, on Tuesday, proposed adopting a neutral status in a sign of progress at face-to-face negotiations, though on the ground, reports of attacks continued, and Ukraine reacted with skepticism to Russia's promise in negotiations to scale down military operations around Kyiv. The rally looked set to peter out later in the day however, as while U.S. and European shares had risen sharply overnight, futures pointed to a lower open on Wednesday. EUROSTOXX 50 futures shed 0.18%, FTSE futures and U.S. S&P 500 futures were flat. "On the one hand there has been more positive news regarding Ukraine, and the market is hopeful of a peace deal at some point, which is resulting in a bit of a 'risk-on' event, with shares up," said Shane Oliver chief economist and head of investment strategy at AMP (OTC:AMLTF) Capital. "But then it's back to worrying about inflation and bond yields, and there's this debate about whether we're going to see a recession in the U.S. because of the inversion of part of the U.S. yield curve." The widely tracked U.S. 2-year/10-year Treasury yield curve briefly inverted on Tuesday for the first time since September 2019, as bond investors bet that aggressive tightening by the Federal Reserve could hurt the U.S. economy over the longer term. [US/] Longer-dated yields falling below shorter ones indicate a lack of faith in future growth, and 10-year yields falling beneath 2-year rates is widely seen as a harbinger of recession. On the other hand, the spread between the yield on 3-month Treasury bills and 10-year notes this month remained steeper. "The messages from the yield curve are very confusing," said Oliver. The benchmark U.S. 10-year yield was last softer at 2.3615% having risen as high as 2.557% on Monday, its highest since April 2019, as traders position themselves for quickfire rate hikes by the U.S. Federal Reserve. The spread between the U.S. 10-year and 2-year yields was last 3.4 basis points. JAPAN IN FOCUS Rising U.S. yields are also dragging Japanese government bond yields in their wake, a threat to Japan's ultra loose monetary policy. The Bank of Japan increased its efforts to defend its key yield cap on Wednesday offering to ramp up buying of government bonds across the curve including through unscheduled emergency market operations. While this apparently underscored its resolve to hold to the policy, some analysts questioned whether the strategy was sustainable. “I wouldn’t be surprised if the Bank of Japan sets a higher limit for 10 year JBG yields – currently at 0.25%. They can’t afford to be too far behind the curve, because if the yen were to weaken further beyond certain levels it could raise market fears,” said Joël Le Saux fund manager of Eurizon Fund's Sustainable Japan Equity sub fund. The widening differential between U.S. and Japanese yields have caused the yen to weaken sharply, but it managed to regain some lost ground on Wednesday. The Japanese currency was was at 121.95 per dollar, compared to from Monday's low of 124.3. Traders pointed to rising fears that Japanese authorities might step in to try and halt the slide as being behind the recovery. [FRX/] Elsewhere in currency markets, the euro was up 0.2% at $1.1107 supported by hopes that talks between Russia and Ukraine lead to peace. Supply tightness kept crude prices firm, according to analysts, as the oil market was not ready to speculate that the talks would end the conflict and pave the way for Western allies to remove sanctions against Russian oil exports. Brent crude rose 0.66% to $110.96 per barrel. U.S. crude rose 0.7% to $104.97. [O/R] Spot gold rose 0.3% to $1920.6 per ounce. [GOL/]
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By Lawrence Delevingne BOSTON (Reuters) -U.S. stocks on Monday gave back some of the previous week's gains and oil prices climbed as the conflict in Ukraine continued. The Dow Jones Industrial Average fell 197.09 points, or 0.57%, to 34,557.84, the S&P 500 lost 17.31 points, or 0.39%, to 4,445.81 and the Nasdaq Composite dropped 160.70 points, or 1.16%, to 13,733.14. Boeing (NYSE:BA) shares fell more than 5.5% on Monday morning after a 737 jet crashed in China. Most stock markets rallied last week in anticipation of an eventual peace deal on Ukraine, but it will likely take actual progress to justify further gains. Turkey's foreign minister said on Sunday that Russia and Ukraine were nearing agreement on "critical" issues and he was hopeful for a ceasefire if the two sides did not backtrack from progress achieved so far. On Monday, Ukraine defied a Russian ultimatum that its forces laid down arms before dawn in Mariupol, while the European Union was set to consider a possible energy embargo against Russia. "The coming days will be a litmus test on whether last week's risk-on rally was overdone. Hopes related to a peaceful resolution in Ukraine have relied on headlines more than evidence," said ING's Francesco Pesole and Chris Turner. The MSCI world equity index was down 0.41% as of 10:30 a.m. ET (1430 GMT). European shares were choppy with the pan-regional STOXX 600 benchmark down 0.01%. BofA's global fund manager survey last week had a bearish bias with cash levels the highest since April 2020 and global growth expectations the lowest since the financial crisis of 2008. Long oil and commodities were the most crowded trade, and vulnerable to a pullback. The war in Ukraine, surging commodity prices, supply chain issues and policy tightening have all made investors less upbeat about the prospects for global earnings growth. Bond investors were braced for more hawkish language from the U.S. Federal Reserve with Chair Jerome Powell speaking on Monday and other Fed members through the week. Policymakers have flagged a string of rate rises ahead to take the funds rate to anywhere from 1.75% to 3.0% by the end of the year. The market implies a 50-50 chance of a half point hike in May and an even greater chance by June. Atlanta Federal Reserve Bank President Raphael Bostic said on Monday he had pencilled in a total of eight interest rate hikes for this year and the next, fewer than most of his colleagues as he worries about the effects of Russia's invasion of Ukraine on the U.S. economy. CURVES FLATTENED Bond investors seem aware of the risks to growth given the marked flattening of the U.S. Treasury yield curve of recent weeks. The spread between two- and 10-year yields shrunk on Monday to as low as 11.37 basis points, the smallest since the start of the pandemic in March 2020. The dollar index steadied at 98.30, off its recent peak hit earlier in March at 99.415. The euro fell 0.13% to $1.1035, after surging 1.3% last week. In commodity markets, gold has failed to get much of a lift from safe-haven flows or inflation concerns, losing more than 3% last week. It was last up 0.8% on Monday at $1,936 an ounce . [GOL/] Oil prices pushed higher on Monday, after losing ground last week, as there was no easy replacement for Russian barrels in a tight market. Brent rose 6% to $114.40, while U.S. crude rose 5.5% to $110.5 a barrel as European Union countries considered joining the United States in a Russian oil embargo, while a weekend attack on Saudi oil facilities caused jitters. [O/R]
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By Scott Murdoch SYDNEY (Reuters) - Asian stocks were in the red on Tuesday as surging COVID-19 cases in China hit the confidence of investors who are already worried about the Ukraine war and the first U.S. interest rate rise in three years that could come this week. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.97%, led by pronounced weakness in Chinese stocks. The index is down 8.2% so far this month. Global oil prices fell overnight as prospects of talks between Russia and Ukraine reaching some kind of resolution eased immediate concerns about energy supply disruption. Those losses extended into the Asian session, however, the investor focus had shifted to the demand side, with China's new wave of COVID-19 infections casting a cloud over the outlook for the world's second-largest economy. More broadly, a lack of major progress seen in Ukraine-Russia talks on Monday added to the nervousness in equity markets while concerns are now growing about the potential for new tensions between China and United States. Washington has warned Beijing against providing military or financial help to Moscow after its invasion of Ukraine, as sanctions on Russian political and business leaders mount. "The question we are asking is whether the markets have reached peak bearishness," said Jack Siu, Credit Suisse (SIX:CSGN)'s chief investment officer for Greater China. "We know there has been a lot of bad news, there could be worse to come, stock prices have fallen substantially and there is no clarity on any resolutions from U.S. regulators towards Chinese listed stocks there." Hong Kong's Hang Seng Index remained mired in negative territory Tuesday, dropping 4% following an almost 5% selloff a day earlier. Hong Kong's main board is down 17% so far in March. The city's tech index has been hammered, falling nearly 30% this month as investors worry about the next regulatory crackdown from U.S. and Chinese authorities on the sector. China's CSI300 index was down 1.78%, pushing its losses for the month out to 11.2%. Australian shares closed down 0.73%. Shrugging off the weakness in Asia, however, stock futures for the S&P 500 rose 0.21% while Tokyo's Nikkei Index reversed its losses and was marginally higher, up 0.22%. Adding to the overall negative sentiment for markets are rising case numbers of COVID-19 in China, which investors fear will hurt the mainland's economic growth in the first quarter. China on Tuesday reported 3,602 new confirmed coronavirus cases compared with 1,437 on Monday.. During the Asian session, U.S. crude slipped a further 5.2% to $97.66 a barrel. Brent crude was down 5.16% to $101.37 per barrel. "Right now everyone is looking at the Chinese cases and realising that has to have an effect on production," said Hong Hao, BOCOM International's head of research. "China's growth in the first quarter could be closer to zero than 5.5%. There's a ripple effect. There's Ukraine, the risk of U.S. sanctions on China and rising Chinese domestic COVID cases - it does not look good." Investor focus is also on the U.S Federal Reserve, which meets on Wednesday and is expected to hike interest rates for the first time in three years to offset rising inflation. Wall Street experienced a mixed session, with declining technology companies prompting most indexes to close lower Monday. The yield on the benchmark 10-year Treasury notes rose to 2.1384%. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 1.865%, up from 1.849%. Gold was also weaker in Asia with the spot price at $1,932.1 per ounce. [GOL/]
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By Julie Zhu (Reuters) -Oil prices firmed and Asian shares fell on Tuesday as Ukraine peace talks made little headway and the prospect of a ban on oil imports from Russia triggered investor fears over inflation and slowing economic growth. President Joe Biden's administration is willing to move ahead with a U.S. ban on Russian oil imports even if European allies do not, Reuters reported on Monday, citing people familiar with the matter. Crude has already hit 14-year highs and Russia warned that prices could surge to $300 a barrel and it might close the main gas pipeline to Germany if the West halts oil imports over the invasion of Ukraine. Germany has rejected plans to ban energy imports. The biggest buyer of Russian crude oil is accelerating plans to expand its use of alternative energy sources but cannot halt imports of Russian energy overnight, German Chancellor Olaf Scholz said on Monday. "Clearly oil is in the firing line now from both sides. And there's a little bit of brinkmanship as to who can threaten whom when it comes to oil imports or exports," said Kyle Rodda, a market analyst at IG Australia. "We're entering some kind of crisis when it comes to energy security, and the question is how long that lasts and how big it will be. Whatever size it is, it's going to result in higher inflation and weaker growth, and we're seeing that get priced into equity markets." European markets appeared set for a lower open with pan-region Euro Stoxx 50 futures down 1.98%, German DAX futures falling 1.89% and FTSE futures dropping 0.93%. U.S. stock futures, the S&P 500 e-minis, were down 0.32%. MSCI's broadest index of Asia-Pacific shares outside Japan lost 1% in afternoon trade, tracking a bruising Wall Street session. Japan's Nikkei sank 1.43%, hitting a 16-month low below the 25,000 level on Tuesday, while Australian shares were down 0.83% amid a sea of red across Asian markets. China stocks extended losses on Tuesday after hitting a 20-month low in the previous session, as worries about inflation and coronavirus outbreaks weighed on markets. Chinese blue chips shed 1.26% while Hong Kong's Hang Seng index lost 0.36%. International oil benchmark Brent crude, which briefly hit more than $139 a barrel in the previous session, was up about 2.6% at $126.42 in afternoon trade. U.S. crude ticked up 1.8% at $121.55 a barrel, while prices of many other commodities, including nickel, rose as industrial buyers and traders scramble as the Russian-Ukraine conflict shows no sign of cooling. Russia calls its actions in Ukraine a "special operation," but the move has triggered sweeping sanctions by the United States and Europe that aim to isolate Russia to a degree never before experienced by such a large economy. Overnight, Wall Street's main indexes fell sharply with the Nasdaq Composite confirming it was in a bear market. The Dow Jones Industrial Average fell 2.37%, the S&P 500 lost 2.95% and the Nasdaq Composite dropped 3.62%. The yield on benchmark 10-year Treasury notes rose to 1.8025% compared with its U.S. close of 1.749% on Monday. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 1.5705% compared with a U.S. close of 1.548%. The rally in oil and other commodities prices will only add to the global inflationary pulse with data this week expected to show the U.S. Consumer Price Index climbed a stratospheric 7.9% on a year-on-year basis in February, up from 7.5% in January. "The progressive rise in breakeven inflation rates is evidence of mounting inflation concerns as commodity prices remain firmly underpinned," ANZ analysts said in a note. With the outlook for European growth darkening, the single currency was up 0.1% on the day at $1.0857, after taking a beating and falling 3% last week to its lowest since mid-2020. The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was steady at 99.212. Gold was slightly lower, with the spot price at $1,989.66 per ounce. [GOL/]
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By Tom Westbrook SINGAPORE (Reuters) -Asian stocks steadied on Wednesday and demand for safe-havens waned a little as investors regarded Russian troop movements near Ukraine and initial Western sanctions as leaving room to avoid a war, while a rate hike lifted New Zealand's dollar. Commodity prices remain elevated, however, and traders are still nervous over the situation on Europe's eastern edge. Overnight oil struck a seven-year high while the S&P 500 index tipped into correction territory, having dropped more than 10% from January's record peak. [O/R][.N] S&P 500 futures were up 0.55% in Asian trade, after U.S. President Joe Biden left the door open to diplomacy as he announced sanctions on two Russian banks and some elites close to President Vladimir Putin. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3%. Japan's Nikkei was closed for the Emperor's birthday holiday. "The market sees the various sanctions ... as modest and perhaps not as aggressive as feared," said Chris Weston, head of research at brokerage Pepperstone. "For now, one could assess there is a vibe across markets that Russian troops will hold Donbass, but push no further," he added, referring to the parts of eastern Ukraine that Russia has recognised as independent and has sent troops to reinforce. The European Union and Britain also announced plans to target banks and Russian elites while Germany halted Russia's Nord Stream 2 gas pipeline, leading to a nearly 11% leap in Europe's benchmark gas price. Japan followed on Wednesday, with Prime Minister Fumio Kishida saying the nation is prohibiting the issuance of Russian bonds in Japan and freezing the assets of certain Russian individuals as well as restricting travel to Japan. Wheat futures had also leapt on Tuesday, posting the sharpest leap in three-and-a-half years and corn futures hit an eight-month high on concern that conflict could disrupt grain supply from the Black Sea export region. [GRA/] Brent crude futures were last steady at $97.09 a barrel, having eased off Tuesday's top of $99.50. U.S. crude futures sat at $92.2 a barrel. CENTRAL BANKS TOO The crisis in Ukraine and the potential for surging energy prices come on top of nerves about whether the global economy can handle rising interest rates. "That's what's weighing on markets - the uncertainty around how hard and fast central banks will go and what it does to the economy in terms of slowing it down," said Kerry Craig, global market strategist at J.P. Morgan Asset Management in Melbourne. Aidan Yao, senior emerging Asia economist at AXA Investment Managers, told the Reuters Global Markets Forum that the Fed and other central banks would now need to contend with both market sentiment and rising energy prices. "So it's a rock and a hard place - the onus will be on the Fed to make sure spikes in commodity prices don't morph further into inflation expectations and wage/pricing behaviours," he said. The Reserve Bank of New Zealand announced its third consecutive rate hike on Wednesday, lifting its benchmark cash rate by 25 basis points to 1%, as expected, but surprising investors with a hawkish tone. The New Zealand dollar rose 0.6% on the news and is on its longest streak of daily gains in almost two years. [NZD/] China is a notable outlier where rates are falling and, according to a private research group, banks in nearly 90 cities have cut mortgage rates this month. Elsewhere in currency markets, moves were fairly muted, though hopes that war in Ukraine can be avoided took some of the bid from safe-havens. [FRX/] The yen was steady at 115.00 per dollar, having hit 114.50 a day ago. The euro hovered around its 50-day moving average at $1.1331. The Australian dollar, which has been supported by surging commodity prices, touched a two-week high of $0.7241. Cash Treasuries were closed in Asia due to the holiday in Tokyo but benchmark 10-year futures were steady and showed an implied yield of 1.97%. [US/] Precious metals eased from overnight highs but remain bid on nerves about war. Gold was steady at $1,898 an ounce and is up more than 8% from December lows, while platinum and palladium have surged on fears about supply disruption. [GOL/] Platinum is up more than 20% since December and palladium has gained more than 50%.
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By Xie Yu and Alun John HONG KONG (Reuters) - Global stocks tumbled while safe-havens rallied and oil surged on Tuesday as Europe's eastern flank stood on the brink of war after Russian President Vladimir Putin ordered troops into breakaway regions of eastern Ukraine. MSCI's broadest index of Asia Pacific shares outside Japan was on course for its worst day for this month, off 1.66%, weighed by markets in Hong Kong and mainland China. Japan's Nikkei shed 1.7%. U.S. and European markets were also braced for sharp losses at the opening bell, with S&P 500 futures down 1.4%, Nasdaq futures off 1.9%, the pan-region Euro Stoxx 50 futures 1.1% lower, and FTSE futures down 0.6%. Both Asian shares and U.S. and European futures had fallen more earlier in the session. In contrast, Brent crude futures rose 2.1% to $97.44, a new seven-year high, on worries Russia's energy exports could be disrupted. Spot gold added 0.1% to $1,908.10, having earlier hit a new six-month top of $1,913.89. [GOL/] [O/R] Putin on Monday recognised two breakaway regions in eastern Ukraine as independent and ordered the Russian army to launch what Moscow called a peacekeeping operation into the area, upping the ante in a crisis that could unleash a major war. A Reuters witness saw columns of military vehicles including tanks early Tuesday on the outskirts of Donetsk, the capital of one of two breakaway regions, and Putin signed treaties with leaders of the two breakaway regions giving Russia the right to build military bases. Washington and European capitals condemned the move, vowing new sanctions. Ukraine's foreign minister said he had been assured of a "resolute and united" response from the European Union. Following Russia's latest move "we are much closer to military intervention, which of course is going to drive a lot of the risk off sentiment in the markets,” said Carlos Casanova, senior Asia economist at UBP, adding the short term volatility in markets caused by both geopolitical factors and the U.S. Federal Reserve was 'relentless'. Casanova said the consequences would be higher oil prices, an equity sell off, and people flocking to safe haven assets like the Japanese yen. In Hong Kong, shares of Russian aluminium producer OK Rusal plunged as much as 22.1% to HK$6.18, their biggest daily percentage decline since April 2018. Away from Russia, and not helping the Hong Kong market, Hong Kong-listed Chinese tech stocks fell 2.3%, with heavyweights Tencent and Alibaba (NYSE:BABA) both hit by speculation about a new wave of regulatory scrutiny. CURRENCIES QUIETER In currency markets, moves were more muted, barring the Russian rouble which hit an 15-month low early in Asian trading, before steadying. The Japanese yen walked back early gains which had taken it to a near three-week high of 114.48 per dollar, fellow safe-haven the Swiss franc was holding steady near the previous day's one-month high, and the euro recovered to trade flat after earlier falling to a one-week low of $1.1286. "Currency markets are not really showing the same level of caution as equity markets," said Matt Simpson, senior market analyst at City Index. "When you read the headlines .. you'd expect to see some follow-through in the markets. We are in equities but we're not in currencies," he said. "Interestingly, overnight the Swiss franc was the safe haven, not the Japanese yen." The nerves also drove U.S. Treasury yields lower, with benchmark 10-year Treasury yields diving as much as 7 basis points to 1.846%. Bets on Federal Reserve rate hikes also eased and the chance of a 50 basis point hike next month fell below 1-in-5. U.S. policy makers have been sparring publicly about how aggressively to begin tightening. Federal Reserve Governor Michelle Bowman said on Monday that she will assess incoming economic data over the next three weeks in deciding whether a half percentage point interest rate rise is needed at the central bank's next meeting in March.
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By Carolyn Cohn LONDON (Reuters) - Global stocks hit three-week lows and oil rose on Monday as worries increased that Russia will invade Ukraine. Russian forces killed a group of five saboteurs who breached the country's southwest border from Ukraine on Monday, news agencies quoted the military as saying, an accusation that Kyiv dismissed as the latest in a series of fakes. Kyiv and the West fear that a border incident near eastern Ukraine could be used as a pretext for Moscow to attack its neighbour. Russia denies such plans. Markets are on high alert for any escalation in the crisis. MSCI's world equity index fell 0.4% to 700.11, with Monday's public holiday in the United States, which will keep Wall Street closed, thinning trade and adding to the volatility. S&P 500 stock futures fell 0.66%. Nasdaq futures dropped 1.2%. European stocks dropped 1.65% to their lowest in more than four months. British stocks fell 0.5%. Shares in companies exposed to Russia and Ukraine fell heavily. U.S. stock futures and European stocks lost earlier gains made on news that U.S. President Joe Biden and Russian President Vladimir Putin had agreed in principle to hold a summit on the Ukraine crisis. The Kremlin said there were no concrete plans in place for a summit, though a call or meeting could be set up at any time. "The Kremlin made clear today that they are in no rush for a summit with Biden," said Tim Ash, strategist at BlueBay Asset Management. British foreign minister Liz Truss said she was stepping up preparations with allies for a worst-case scenario, adding that a Russian invasion of Ukraine was highly likely. In a reminder of the stakes, Reuters reported Biden had prepared a package of sanctions that includes barring U.S. financial institutions from processing transactions for major Russian banks. The rouble slid nearly 3% against the dollar and Russian shares slumped 9% their lowest in 14 months. The U.S. dollar index dipped 0.1% to 95.668, well short of a 1-1/2 year high of 97.441 hit last month. The euro was little changed at $1.1327, while yields on German 10-year government bonds, seen as Europe's safest asset, hit two-week lows at 0.185%. [FRX/] A preliminary Purchasing Managers' Index survey showed the euro zone economy rebounded sharply this month as an easing of coronavirus restrictions gave a boost to the dominant service industry. "A Russian invasion of Ukraine would make the job of central banks across Europe much harder," said Matteo Cominetta, senior economist at Barings Investment Institute. "Investors should position for even higher uncertainty and probability of policy mistakes." Markets are also expecting aggressive policy tightening by the U.S. Federal Reserve as inflation runs rampant. The Fed's favoured measure of core inflation is due out later this week and is forecast to show an annual rise of 5.1% - the fastest pace since the early 1980s. At least six Fed officials are set to speak this week and markets will be hyper-sensitive to their views on a possible hike of 50 basis points in March. Recent commentary has leant against such a drastic step and futures have scaled back the chance of a half-point rise to around 20% from well above 50% a week ago. In oil markets, Brent crude rose by $1 to $94.41 on the Ukraine crisis, while U.S. crude also gained $1 to $91.98. Oil had suffered its first weekly loss in two months last week, taking it off seven-year highs, amid signs of progress on an Iran deal that could release new supply into the market. Iranian foreign ministry spokesman Saeed Khatibzadeh said "significant progress" had been made in talks to revive Iran's 2015 nuclear agreement on Monday after a senior European Union official said on Friday that a deal was "very, very close". [O/R] Gold has benefited from its status as one of the oldest of safe harbours, climbing to nine-month highs of $1,908 an ounce, before dropping back to $1,893 an ounce. [GOL/]
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16 febbraio 1975 - Storico successo dell'Ascoli calcio in serie A dedicato a Topo Gigio. Era il primo campionato di serie A (1974-1975), quello della retrocessione annunciata che poi non avvenne perché l’Ascoli miracoleggiò nel girone di ritorno con una serie di 0-0 e di vittorie di misura che a fine campionato videro l’Ascoli targato Rozzi-Mazzone conquistare la prima storica salvezza della sua storia segnando solo 14 gol (record) e subendone 27, ovvero la sesta miglior difesa. Qualche settimana prima, nel corso di una popolare trasmissione tv della domenica, il pupazzo Topo Gigio alla domanda del presentatore su chi avesse vinto il campionato di calcio, rispose Ascoli: i bianconeri erano ultimi e dati già per spacciati prima della fine del girone di andata. Ma la riscossa, in barba a Topo Gigio, iniziò proprio all’ultima di andata con la vittoria al Del Duca contro la Lazio che aveva lo scudetto sul petto, grazie a una punizione dello specialista Colautti. Durante quel ritorno l’Ascoli fermò Juventus (alla fine tricolore), Napoli (chiuse secondo), Roma e Milan. Tutti pareggi più preziosi dell’oro. Ma c’è una partita che un posto nella storia bianconera lo merita davvero. Fu la prima vera grande impresa dell’Ascoli, quella che a tanta gente permise di conoscere l’esistenza di una squadra di nome Ascoli che giocava in serie A con le maglie a strisce bianconere come la Juve. Fu la vittoria (0-1) di San Siro contro l’Inter. Fu decisivo Massimo Silva che si tolse la grande soddisfazione di segnare alla squadra dei suoi sogni, quella dove era cresciuto all’ombra di campionissimi. Il suo gol fu la risposta bianconera ai funesti presagi di Topo Gigio. Dopo un mese esatto, per non fare torto a nessuna delle due milanesi, lui lombardo, segnò anche al Milan. Quel 16 febbraio 1975, l’Inter schierava il portiere Bordon, il mitico Facchetti in difesa, a centrocampo un certo Sandro Mazzola e il mediano Bertini, in attacco Boninsegna cioè uno dei centravanti italiani più forti di tutti i tempi. C’erano pure l’ex bianconero Giorgio Mariani e Adelio Moro che in bianconero avrebbe scritto pagine indimenticabili dopo qualche anno. Il gol di Silva arrivò poco dopo la mezzora, troppo presto. Ma Mazzone, stratega unico quando c’era da non prenderle, non temeva confronti. E non a caso s’era presentato a San Siro con il terzino Legnaro finta ala col numero 7 (l’aveva già fatto con Vezzoso e l’avrebbe ripetuto dopo molti anni con Mandorlini). Il libero era Scorsa, che se avesse avuto qualche anno di meno avrebbe giocato in Nazionale. A proteggerlo, due stopper come Castoldi e Bertini: con loro non si passava. Dopo sette giorni al Del Duca con la Juve finì 0-0. Era la Juve che cominciava con Zoff, Gentile, Cuccureddu; che proseguiva con Furino, Morini, Scirea; che si concludeva con Damiani, Causio, Anastasi, Capello, Bettega.
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By Kevin Buckland TOKYO (Reuters) - A tech-fuelled global stocks rally cooled in Asia on Thursday as investors took a more cautious posture amid uncertainties around the outlook for inflation and interest rates. World bond yields continued to ease from multi-year highs and the dollar trod water ahead of the closely watched U.S. inflation report due later in the day that should offer new clues on the pace of Federal Reserve interest rate hikes. The performance in Asian stocks was sharply divided between Chinese equities and the rest of the region. Chinese blue chips lost 0.75% and Hong Kong's Hang Seng retreated 0.41%, as investors took profits and worries about U.S. sanctions continued to weigh on sentiment. Taiwan's benchmark, however, jumped 0.80%, while Japan's blue-chip Nikkei was 0.31% higher. MSCI's broadest index of Asia-Pacific shares added 0.33%. U.S. futures pointed to a lower open, indicating a 0.28% retreat for the Nasdaq and a 0.23% decline for the S&P, after Big Tech lifted Wall Street to solid gains overnight. European futures were mixed, signaling a 0.04% easing for Britain's FTSE but a 0.06% increase for Germany's DAX. "We don't know how many U.S. rate hikes there are going to be this year, and I don't think the Fed knows either, and that's getting markets a little bit nervous, to say the least," said Kyle Rodda, a market analyst at IG Australia. "Any kind of data surprise is going to inflame that nervousness, and that's leading to the choppiness that we're seeing in markets." Long-term bond yields continued Wednesday's retreat, with the 10-year U.S. Treasury yield slipping back to 1.9268% in Tokyo on Thursday from a near 2-1/2-year peak on Tuesday. Its German counterpart dipped from a three-year high overnight. [US/][GOVD/EUR] "It was a more positive session for global bonds, with European bond yields taking a breather from their seemingly relentless recent rise," Damien McColough, head of rates strategy at Westpac, wrote in a client note. "Even so, global bond yields have entered a bear phase and investors are likely to demand a higher premium to invest given inflation and policy risks ... so we remain better tactical sellers." Australia's 10-year benchmark yield slipped to 2.089% on Thursday from as high as 2.157% in the previous session, a near three-year peak. Japan's benchmark 10-year yield, however, renewed a six-year peak at 0.225% amid speculation that more hawkish monetary tightening globally could force some action from the Bank of Japan. The Fed is broadly expected to begin raising rates at its March meeting although there is no clarity about the pace of tightening. Money markets are certain of at least a quarter point Fed hike next month, and give 1-in-4 odds of a half point increase. Data due later on Thursday is expected to show U.S. consumer inflation racing at a 7%-plus annualised clip, a level reminiscent of the inflation shocks of the 1970s and 1980s. Currencies were largely in a holding pattern ahead of that release, with the dollar index steady at 95.556 after bouncing off a two-week low of 95.136 on Friday. [FRX/] One euro bought $1.1425 and the yen traded at 115.605 per dollar. The combination of a soft dollar and lower bond yields put some shine on gold, which held close to a two-week high, last changing hands at around $1,834 an ounce. [GOL/] Crude oil eased, with U.S. West Texas Intermediate futures down 20 cents to $89.46 a barrel, while Brent crude futures lost 42 cents to $91.13 a barrel.
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By Xie Yu and Alun John HONG KONG (Reuters) - Asian shares and European stock futures advanced on Wednesday after a strong session on Wall Street, while U.S. treasury yields held near multi-year highs ahead of closely watched inflation data this week. Investors across asset classes are devoting considerable thought to the pace and timing of interest rate hikes by central banks across the world. Barring any big surprises, the consumer price index should cement expectations the U.S. Federal Reserve will raise interest rates next month, with a strong print offering further support to those tipping a larger 50 basis point rise. MSCI's broadest index of Asia-Pacific shares outside Japan added 1.5% to its highest in two weeks, helped by a 3.8% gain in Hong Kong-listed tech stocks, especially index heavyweight Alibaba (NYSE:BABA) which rose 6.6%. Japan's Nikkei gained 1.2%. Futures indicated the share rally would continue into European and U.S. trading, with the pan-region Euro Stoxx 50 futures up 0.81%, FTSE 100 futures rising 0.85% and e-mini futures for the S&P 500 0.5% higher. Overnight, three main Wall Street indexes closed higher with tech stocks including Apple Inc (NASDAQ:AAPL) and Microsoft Corp (NASDAQ:MSFT) jumping, as did bank stocks supported by the prospect of higher U.S interest rates. [.N] Nonetheless, the Nasdaq Composite is still down 9.2% this year after a brutal January. Manishi Raychaudhuri, Asia-Pacific equity strategist at BNP Paribas (OTC:BNPQY), said market volatility was lingering as investors tried to figure out how often, how far and how fast central banks would raise interest rates. "The overarching theme for the market is central banks’ monetary policies," he said. "I think volatilities will continue and will possibly increase...but over the longer term corporate balance sheets, particularly in Asian emerging markets look a lot better than they were earlier," he said. Elsewhere in Asia Pacific, gains in tech names helped Korea's KOSPI rise 0.8% and Commonwealth Bank of Australia (OTC:CMWAY), the country's largest bank gained 5.6% after announcing a A$2 billion share buyback. Gains in Hong Kong financials and tech stocks meant the local benchmark rose 2%, unfazed by tighter restrictions to combat a new wave of COVID-19. However, focus on U.S. inflation figures due Thursday is likely to cap further gains. "Even though we sit in Asia, markets are still eagerly waiting for the Thursday CPI print out of the U.S. so are sitting on their hands right now," said Marcella Chow, Hong Kong based global market strategist at JPMorgan (NYSE:JPM) Asset Management. "The market is currently expecting January's CPI to be 7.3% versus 7% in December, and if it comes in higher than expected we could see 10 year yields go higher and even reach 2%, and push a value rotation," she added. Higher yields typically cause investors to move out of so called growth stocks, particularly technology names, into value stocks. U.S. Treasury yields held firm in Asian trading, after touching multi-year highs the day before as did yields in the euro zone. The yield on 10-year Treasury notes was 1.9397%, having hit 1.97% on Tuesday, its highest since Nov 2019, and the two-year was 1.3435%, just below its highest since March 2020. [US/] In Asia, the 10-year Japanese government bond yield touched 0.215% in morning trade, its highest since January 2016 Currency markets were pretty quiet, with the dollar index, which measures the greenback against six peers was at 95.559, little moved, down 0.07%.[FRX/] Oil regained some ground after falling earlier in the week due to optimism around talks with Iran, leading to a possible rise in supply. Brent crude futures rose 0.3%, to $91.15 a barrel, while U.S. crude was at $89.7 a barrel, up 0.4%. [O/R/] Spot gold was steady at $1,827.9 per ounce. [GOL/]
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By Selena Li HONG KONG (Reuters) - Asian shares and U.S. futures fell sharply on Tuesday, with investors nervous about the potential for military conflict in Ukraine and ahead of a key Federal Reserve meeting that could offer hints about the timing and pace of rate hikes. Benchmarks slid, with most extending losses in afternoon trade. MSCI's broadest index of Asia-Pacific shares outside Japan shed 1.43% to its lowest in a month. The Nikkei closed down 1.66%, having earlier touched its lowest level since December 2020. After a tumultuous session on Wall Street which saw a late rally and a higher close, U.S. share futures fell. Nasdaq futures were off 1.3% and S&P500 e-minis lost 0.95%%. But in Europe, it looked like selling pressure would ease with pan-region Euro Stoxx 50 futures 1.16% higher and FTSE futures up 0.76%. That follows a 3.8% fall for the Euro STOXX 600 on Monday, its worst day in 18 months. Tai Hui, Asia chief market strategist at J.P. Morgan Asset Management, said investors were facing a dilemma. They are anxious about the outlook of monetary policy in the context of some growth stocks getting more expensive, while the growth outlook for 2022 is still decent and there are few assets that offer the same long-term return prospects like equities, he said. "Geopolitical uncertainties in Europe this week and potential impact on energy prices further muddled the outlook," Hui added. NATO said on Monday it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as Western "hysteria" in response to its build-up of troops on the Ukraine border. Elsewhere in Asia, Korea's KOSPI dropped 2.34% while Hong Kong shares pared early losses but were still down 1.5%. The Australian benchmark tumbled 2.68% to close at an eight-month low, hurt also by a high inflation reading Tuesday morning that stoked fears of approaching rate hikes. Keeping traders on their toes, the Federal Reserve will begin its two-day meeting later on Tuesday, with some investors starting to speculate about a surprise rate hike announcement though that is still seen as a small possibility. "The big question mark is about the pace of the Fed hiking cycle - as the central bank seeks to tame the increase in inflation – and the impact on equity markets," Prashant Bhayani, chief investment officer for Asia at BNP Paribas (OTC:BNPQY) Wealth Management, said in a note to clients. Fed tightening is putting pressure on some central banks in Asia to follow suit, potentially hurting their equity markets as happened in 2013 when the U.S. central bank began tapering its post financial crisis stimulus. Singapore's central bank tightened monetary policy on Tuesday in an out-of-cycle move. "The good news is that, by and large, current account balances in Asia are healthier compared to the taper tantrum in 2013," Bhayani added. U.S. benchmark Treasuries were sitting out some of the rate hike speculation. Yields on benchmark 10 year notes slightly edged down slightly to 1.7618% having finished a choppy day of trading Monday near where they started. [US/] In currency markets, the jitters sent the dollar higher against most peers. The dollar index was at 96.010, hovering near a two-week high, and the risk-friendly Aussie dollar gained briefly after the high inflation data. (FRX) China's yuan hovered at a more than 3-1/2-year high against the dollar, while its value against major trading partners jumped to strongest level since late 2015. Oil prices were also elevated, further worrying stock investors. U.S. crude rose 0.4% to $83.63 per barrel and Brent crude was at $86.75, up 0.55%. [O/R] Gold held on to recent gains as investors sought safety. The spot price was at $1,842 an ounce, flat on the day but near last week's two-month high of $1,847.7. [GOL/]
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By Tom Westbrook SYDNEY (Reuters) - Stocks and commodities rose in relief on Wednesday and the dollar hit a six-week low after U.S. Federal Reserve Chair Jerome Powell sounded less hawkish than expected in testimony to Congress, while economic data showed more room for policy easing in China. Treasuries have also steadied after beginning the year with a rout, though a new test looms later in the day when U.S. inflation data is expected to come in red hot. MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.4% to a one-and-a-half month high, led by a 4.3% jump for tech stocks in Hong Kong. (HK) Japan's Nikkei rose about 2%. (T) Powell told a congressional hearing on his confirmation for a second term at the helm of the central bank that the economy could weather the COVID-19 surge and was ready for tighter monetary policy. But he did not go into any new details beyond what traders already gleaned from the minutes of last months' Fed meeting and that turned out to be enough to staunch selling in the Treasury market and U.S. tech stocks. "One of our main takeaways ... was that the sense of urgency on tightening has not obviously heightened compared to the last time we heard from Powell in December," analysts at NatWest markets said in a note. The Nasdaq and S&P 500 recorded their best sessions of 2022, rising 1.4% and 0.9%, respectively. [.N] S&P 500 futures rose 0.2% in the Asia session and European futures rose 0.8%. FTSE futures rose 0.6%. In the bond market, benchmark 10-year Treasury yields were steady at 1.7321% and have pulled back more than 7 basis points (bps) from an almost two-year high hit on Monday. [US/] Commodities also caught a boost and oil touched pre-Omicron highs in Asia. Brent crude futures touched $84 a barrel for the first time in two months and U.S. crude futures crept up slightly to $81.69 a barrel. [O/R] DOLLAR STALLS While traders are bracing for headline U.S. inflation to hit an almost four-decade high of 7% year-on-year, a softer than expected reading on prices in China has drawn bets on policy easing. Five-year Chinese government bond futures rose eight ticks to an 18-month high. Yuan gains were also capped. [CNY/] U.S. data is due at 1330 GMT, though after Powell already sketched a timeline for higher rates and balance sheet runoff in the year ahead it is unclear how it might shift the outlook or move markets. The greenback has dropped through its 200-day moving average against a basket of currencies overnight touched six-week low of 95.538 on Wednesday. [FRX/] At $1.1378, it is also at a 2022 low against the euro. It has steadied at 115.33 yen but is slipping on the Aussie and kiwi. [AUD/] "There is already a lot of hawkish news in the price," said Rabobank currency strategist Jane Foley. "The dollar may need to see some pullback and fresh news on the interest rate front before finding direction." Sterling, meanwhile, has been surging and touched a two-month top of $1.3645 in Asia as investors see Britain overcoming a wave of COVID-19 cases led by the Omicron variant and have priced in a nearly 80% chance of Bank of England rate hike in February. The dollar's weakness has helped gold, though at $1,820 an ounce it is still hemmed in a range it has kept for half a year. [GOL/] Cryptocurrencies were steady with investors comforted that bitcoin's support at $40,000 held this week. Bitcoin last bought $42,720.
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By Alun John HONG KONG (Reuters) - Asian shares edged higher on Tuesday, cruising in the slipstream of another record-setting day on Wall Street, while the safe-haven yen lost ground as traders stayed in riskier assets. A variety of asset classes from oil to Japan's Nikkei Stock Average are now trading at around one-month highs, having walked back losses from late November when the Omicron variant of COVID-19 first emerged and sent investors scurrying for safe havens. As the worst fears of the impact of the new variant have subsided, investors have been returning to risk assets. On Tuesday, Japan's Nikkei gained 1.3%, and touched its highest since Nov. 26, while MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.66%. Recent losses by index heavyweights like Alibaba (NYSE:BABA) and Tencent mean the broad benchmark is still well off its late November levels. "The risk-on sentiment continues," said Edison Pun, senior market analyst at Saxo Markets in Hong Kong, who said neither Omicron nor China's coronavirus situation was troubling investors. China reported 209 new confirmed coronavirus cases for Dec. 27, up from 200 a day earlier, mostly in the northwestern province of Shaanxi, where Xian, the provincial capital, is in lockdown. Elsewhere, authorities in Britain and France have held off from imposing tough restrictions on movement, betting that high vaccination rates will stop hospitals from being overwhelmed even as cases surge. Overnight the S&P 500 index rose 1.38% to end at a record on Monday as strong U.S. retail sales underscored economic strength, while the Dow Jones Industrial Average climbed 0.98% and the Nasdaq Composite added 1.39%. [.N] The risk-on mood could be seen across asset classes. Oil prices cautiously extended gains on Tuesday, after surging more than 2% to their highest in a month a day before. [O/R] Brent crude rose 0.4% to $78.89 a barrel and U.S. crude gained 0.4% to $75.90 a barrel. Meanwhile the yen slipped to 114.87 per dollar, having touched a one-month low earlier in the session. The dollar, also a safe haven, in turn lost ground on other currencies, for example the pound, which gained 0.5% on Monday and last traded near a five-week high of $1.3445. (FRX) However, the dollar was supported by a surge in short term U.S. Treasury yields. The two-year yield, rose as high as 0.758% in early Asian trading, its highest since March 2020, following weak demand in an auction for new two-year notes the day before. The yield on benchmark 10-year Treasury notes was steady at 1.4739%. [US/] Spot gold was steady at $1,810 an ounce. [GOL/]
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By Julie Zhu HONG KONG (Reuters) -Asian shares advanced on Tuesday, shrugging off a bruising Wall Street session, as Chinese markets cheered Beijing's move to help troubled property firms, although surging cases of the Omicron coronavirus variant remain a worry for investors. U.S. stock indexes retreated more than 1% as positive COVID-19 case counts rose and President Joe Biden's social spending and climate bill hit a significant setback. The negative mood brightened somewhat in Asian hours with European and U.S. stock futures up and some assets battered in Monday's selling finding buyers, although volumes were thin heading into year-end holidays. European markets appeared set for a higher open with the pan-region Euro Stoxx 50 futures up 1.1%. German DAX futures rose 0.93% while London's FTSE futures added 1.02%. U.S. stock futures, the S&P 500 e-minis, were up 0.72%. MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.81% after declining on Monday to the lowest in a year. Japan's Nikkei rose 2% after two sessions of decline with chip-related Tokyo Electron and Advantest leading the pack, as investors bought into Monday's heavy selloff. Australian stocks were up 0.9%.[.T][.AX] While the widespread selling in global shares appeared to have eased, investors are still concerned about Omicron risks. "COVID remains a threat to the global economy. Initial evidence suggests the Omicron variant is more transmissible but results in less severe illness compared to previous variants," economists at CBA wrote in a note. Elsewhere in Asia, China and Hong Kong equities rose on Tuesday, with real estate stocks extending their rebound. China's blue-chip CSI300 index was 0.45% higher while the Shanghai Composite Index rose 0.67%. Hong Kong's Hang Seng index added 0.58%. The moves higher come as Beijing reportedly urged large private and state-owned property companies to acquire real estate projects from troubled developers to reduce risks that mounting debt piles will destabilise the economy. "Chinese regulators' encouragement for such acquisitions would help troubled developers ease their debt pressure and improve the current operating conditions of the whole real estate industry," said Zhang Zihua, chief investment officer at Beijing Yunyi Asset Management. "Thanks to the latest signs of government support, sentiment in the sector has been boosted. That's why we are seeing real estate companies and other relevant sectors rising in mainland China and Hong Kong today." However, China's video and live-streaming platforms listed in Hong Kong such as Bilibili (NASDAQ:BILI) and Kuaishou Technology slumped, after Beijing fined China's "queen of livestreaming" Viya for tax evasion, stoking fears of fresh crackdowns. On Monday, the Dow Jones Industrial Average fell 1.23%, the S&P 500 <.SPX lost> 1.14% and the Nasdaq Composite dropped 1.24%. Europe's main indexes also sold off after British Prime Minister Boris Johnson said he would tighten coronavirus curbs if needed, after the Netherlands began a fourth lockdown and others in the region considered Christmas restrictions. The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down at 96.493. The yield on benchmark 10-year Treasury notes rose to 1.4259% compared with its U.S. close of 1.419% on Monday. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 0.636% compared with a U.S. close of 0.63%. Oil prices started to recover from concerns the spread of the Omicron variant would crimp demand for fuel and signs of improving supply. [O/R] U.S. crude ticked up 1.31% to $69.51 a barrel. Brent crude rose to $72.25 per barrel. Gold was slightly higher. Spot gold was traded at $1,792.01 per ounce. [GOL/]
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By Alun John HONG KONG (Reuters) - Asian stocks tested 13-month lows on Friday, as fears about the Omicron variant of the coronavirus, inflation concerns and hawkish pivots by the world's major central banks knocked investor confidence. MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.7% on Friday to be down 2.28% on the week, and only just above the year low set last week. Chinese blue chips shed 1.35% and were heading for their worst week in three months, while an index of Hong Kong-listed tech firms hit a record low, not helped by news Washington put investment and export restrictions on dozens of Chinese companies. But weakness in stocks went beyond names in greater China - Japan's Nikkei shed 1.8% reversing the previous day's gains - and looked set to continue into European and U.S. trade. Pan-region Euro Stoxx 50 futures lost 0.96%, FTSE futures were down 0.45%, and Nasdaq futures shed 0.25%, suggesting the benchmark may extend Thursday's heavy losses. [.N] "Market volatility should be going up now as tapering is on, and we will probably see more volatility in U.S. markets from now on, which will bring bigger moves to Asian markets too," said Edison Pun, senior market analyst at Saxo Markets in Hong Kong. On Wednesday, the Federal Reserve announced it would accelerate tapering of its emergency bond buying programme and prepare to raise interest rates more quickly next year as the economy nears full employment and inflation surges. "It's amazing how much the Fed has moved. Three months ago about half the committee did not expect any rate hikes until 2023, and now we are looking at a median (projection) of three rate hikes next year," said Fook-Hien Yap, senior investment strategist at Standard Chartered (OTC:SCBFF) Bank. "Next year will be about the tussle between inflation and growth, but we are constructive and think that inflation will fade by the first half of next year and rate hikes can proceed at a more moderate pace and not derail equities." U.S. YIELDS SLIP In a further sign of the cautious mood, the yield on benchmark 10-year U.S. Treasury notes slipped to as low as at 1.412%, matching a near two-week low, while the two-year yield was steady at 0.62550%, having rolled off its recent highs. [US/] "Ordinarily, in the wake of a more hawkish (Federal Open Market Committee) outcome, yields would be expected to rise in anticipation of the Fed tightening cycle," said analysts at Westpac in a morning note. "However, there are competing dynamics at present, with ongoing inflation fears sparking the Fed’s tougher rhetoric being offset by fears that economic growth will be derailed by Omicron in the near term," they said. The Fed was not the only central bank to turn hawkish. The pound held earlier gains made after the Bank of England on Thursday surprised markets by becoming the first G7 central bank to raise interest rates.[FRX/] Even the Bank of Japan on Friday dialled back some emergency pandemic-funding on Friday but maintained ultra-loose policy and extended financial relief for small firms, cementing expectations it will remain among the most dovish central banks for the foreseeable future. The dollar index was trading at 95.879, off nearly 1% since Wednesday's high immediately after the Fed's announcement. Oil prices fell with Brent crude down 0.83% to $74.40 a barrel and U.S. crude losing 1% to $71.64 a barrel.[O/R] Spot gold rallied, moving past a symbolic $1,800 level to trade 0.35% higher at $1,805 an ounce.[GOL/]
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By Alun John HONG KONG (Reuters) - Asian shares and European futures slipped on Friday as traders edged away from riskier assets amid renewed concerns about COVID-19 and caution ahead of key U.S. inflation data, which also kept currencies in check. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.6%, snapping three days of gains and Japan's Nikkei shed 0.5%. In early European trading, the pan-region Euro Stoxx 50 futures fell 0.53% and FTSE futures lost 0.46% Shares and risk-friendly currencies had performed well earlier in the week, with MSCI's regional benchmark posting its best day in two months on Tuesday, helped by indications the Omicron strain of the new coronavirus might not be as economically disruptive as first feared. Despite Friday's falls, the index is still up 1.7% this week. However, "as we got towards the end of the week the fact that Europe was much more clearly moving into a sort of lockdown-lite and COVID-19 case numbers in the U.S. are starting to ratchet up flipped things a little bit," said Rob Carnell, head of research Asia Pacific at ING. "Also there is a slight sense of 'let's not have too much risk on the table for the weekend'. Of course, there is CPI out in the U.S. - but I think we've all woken up to the fact that there is inflation in the U.S. now," he added. U.S. consumer price index (CPI) for November is due later Friday and a Reuters poll of economists expect it to have risen 6.8% year-on-year, overtaking a 6.2% increase in October, which was the fastest gain in 31 years. Any upside surprise will likely be interpreted as a case for a faster Fed taper and bring forward expectations for interest rate rises. Elsewhere, shares in China Evergrande Group lost 1.5% after Fitch downgraded it to restricted default status. However, contagion was limited and an index tracking mainland Chinese developers listed in Hong Kong dipped just 0.36%, outperforming the local benchmark off 0.66%. Markets more broadly are much less concerned by the latest development in the long running Evergrande saga than they were a few months ago. "This issue has been going on for two-and-a-half months now, and markets don't seem to be as fussed because a default on Evergrande's offshore debt has seemed highly likely," said Shane Oliver, head of investment strategy at AMP (OTC:AMLTF) Capital. Also in China, the central bank on Thursday directed financial institutions to hold more foreign exchange in reserve for a second time this year, which markets interpreted as an attempt to slow a recent rapid appreciation of the yuan. This caused the yuan to lose about half a percent in offshore trade on Thursday. It was volatile on Friday and last sat at 6.3697. Other currency moves were muted. The dollar index held firm ahead of the CPI data, and was heading towards its seventh consecutive weekly rise, its longest since mid 2014. The euro also took a breather having jumped 0.7% on Wednesday, in line with an overall risk friendly mood, before falling 0.4% on Thursday as sentiment started to turn. The risk-off tilt caused longer dated U.S. Treasury yields to slip a little overnight before steadying. Benchmark 10-year Treasury notes were last at 1.4888%. The two-year yield stayed elevated at 0.7086%. Oil also lost ground on Friday, but like equities was heading for a weekly gain. U.S. crude dipped 0.14% to $70.84 a barrel. Brent crude fell 0.2% to $74.27. [O/R] Gold, however, edged higher. The spot price rose 0.16% to $1,777.3an ounce. [GOL/]
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