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Asian shares set for first weekly loss in five, China stimulus eyed

By Stella Qiu


SYDNEY (Reuters) -Asian shares were headed for their first weekly loss in five on Friday as a stunning rally in Chinese shares took a breather, although all eyes are on the details of much-anticipated fiscal stimulus from Beijing this weekend.


European stock markets are set to open slightly higher, with EUROSTOXX 50 futures and FTSE futures both up 0.2%. French bond futures rallied 33 ticks, slightly ahead of a small bounce in U.S. bonds, as France planned tax hikes and spending cuts to rein in its deficit.


Wall Street futures were flat. Tesla (NASDAQ:TSLA) unveiled the long-awaited showcase of an autonomous taxi in Los Angeles, which came with fanfare but few details on timing. Production is not set to begin until 2026.


MSCI's broadest index of Asia-Pacific shares outside Japan rose a subdued 0.3% on Friday but was still set for a weekly loss of 1.7% after four straight weeks of gains. The Nikkei, however, gained 0.5%, bringing its weekly rise to 2.5%.


South Korean shares erased earlier gains and were last flat as the Bank of Korea's decision to start its easing cycle with a quarter-point move was widely expected.


China's blue chips fell 1.8% on Friday and were down 2.3% for the week. Hong Kong's Hang Seng, which was closed for a public holiday on Friday, fell 6.5% for the week, the biggest weekly drop in two years.


Investors' enthusiasm about China's economic stimulus announced last month has given way to concerns about whether the policy support would be big enough to revive growth, putting the spotlight on whether the finance ministry will announce significant fiscal stimulus at a press conference on Saturday.


Ting Lu, chief China economist at Nomura, said markets were "laser-focused" on the Saturday briefing.  

"As any specific numbers on the extra budget and bond quota will require the approval of the National People’s Congress or its Standing Committee, which is highly unlikely to meet before the briefing, the market is keen to know what else the MOF might deliver," Lu said.

Overnight, data showed core U.S. consumer inflation came in at 0.3% in September, slightly hotter than expected, pointing to stalling progress in the Federal Reserve's fight against inflation.

However, high weekly jobless claims figures kept bets intact that the Fed is still on track to cut interest rates in November. Wall Street was slightly lower overnight.

Oil, which gained more than 3% overnight, fell slightly at the end of the week, with Brent futures slipping 0.3% on Friday to $79.17 a barrel.

It was, however, still up 1.4% in the week thanks to a spike in U.S. fuel use before Hurricane Milton and Middle East supply risks as investors brace for an Israeli response to an Iranian missile attack last week.

Treasuries rose on Friday, but are still set for weekly losses as traders pared expectations for outsized U.S. rate cuts. Atlanta Fed Bank President Raphael Bostic on Thursday told the Wall Street Journal that he is open to a pause next month, although other officials supported more gradual rate cuts.

Two-year Treasury yields are up 4 basis points for the week to 3.9722%, while 10-year yields climbed 8 bps to 4.0669%.

Traders still price in an about 83% probability that the Fed will cut rates by 25 basis points next month and a 17% chance it would leave rates unchanged, according to CME's FedWatch.

"We think the FOMC remains on track to continue its level adjustment in policy rates with a 25bp cut in November. But our forecast for further easing in December is now being challenged by firm growth and inflation readings," said analysts at JPMorgan.

Currency market movements were subdued on Friday. The U.S. dollar is set for the second straight week of gains, hovering near a two-month top against major peers.

The euro lost 0.4% this week to $1.0934, undermined by expectations that the European Central Bank is almost certain to lower rates in both October and December.

Gold was last up 0.6% at $2,644.69 an ounce, holding ground above the key $2,600 level.

2024-10-11 16:39:39
Luxury goods unlikely to be next target of China's EU trade retaliation, analysts say

(This Oct. 9 story has been corrected to fix the analyst's estimate of the size of the China market to 25%, not 35%, of the global total, in paragraph 9)


By Casey Hall


SHANGHAI (Reuters) - European luxury shares have slid on investor concerns that Hermes handbags and Dior slingbacks may be Beijing's next targets for retaliation, following the EU's decision to slap tariffs on China EVs, but analysts say such a move is unlikely.


"It’s a question of how Beijing will respond to the EV tariffs. Is there going to be an escalation? I think yes. Is it going to go after luxury goods? I don’t think so," said Patrice Nordey, CEO of Shanghai-based innovation consultancy Trajectry.


So far, moves by China in the ongoing tit-for-tat trade spat with the EU have targeted brandy, pork and dairy, all of which are major industries for France, which lobbied for tariffs on Chinese-made EVs imported into the EU.


Shares of LVMH, which also markets high-end Hennessy cognac, Hermes, Kering (EPA:PRTP), Ferragamo, and Burberry dropped 2%-6% on Tuesday after Beijing said it would impose temporary anti-dumping measures on imports of brandy.


Jacques Roizen, managing director of China consulting at Digital Luxury Group, said targeting luxury goods in China would run counter to what has been consistently favourable policies for luxury firms in the world's second-largest economy, where Beijing is eager to keep more luxury spending, rather than see its consumers splurge in overseas markets.


He points to the example of Hainan, which has been built into a major duty-free hub largely due to the acknowledgement from policymakers that luxury spending in China is good for the country.


"When luxury goods sales are taking place in China, that means more tax revenue, and it's significant," he said.


"If there were a new fiscal environment that forced luxury brands to increase their price in China, it would create further incentive for Chinese consumers to make their luxury expenditures outside China, which is the opposite of what the government wants."


The size of the Chinese luxury market, even considering its recent slowdown, is expected to account for 25% of the global total this year, according to Jelena Sokolova, senior equity analyst at Morningstar.


This helps to explain the reaction of European luxury shares to every announcement that comes from China, she said, but also means that even the threat of introducing tariffs or raising domestic consumption taxes on imported luxury goods would hit French luxury conglomerates where it hurts.


French brandy shipments to China reached $1.7 billion last year and accounted for 99% of the country's imports of the spirit, while 11 billion euros ($12 billion) in European luxury goods were imported into China last year.


But the very size of the luxury goods industry might make it a less likely target for Beijing, according to Albert Hu, professor of economics at the China Europe International Business School in Shanghai.


"I think at this point, neither EU nor China wants a full- scale trade war that would hurt both economies," he said, adding that China's relatively careful orchestration of retaliatory targets thus far indicates Beijing is eager to continue negotiating and working towards a compromise with Brussels.


The nature of the luxury goods industry also makes it difficult for China to reasonably stand up claims about dumping.

"It's hard, logically, to justify that there is a case for dumping $2,000 handbags," Sokolova said.

($1 = 0.9122 euros)
2024-10-11 12:20:17
South Korea's central bank cuts policy rate, as expected

SEOUL (Reuters) - South Korea's central bank cut interest rates on Friday as widely expected, embarking on an easing cycle to join global peers, as headline inflation slowed and the economy shrank in the second quarter.


The Bank of Korea (BOK) lowered its benchmark interest rate by a quarter percentage point to 3.25% at its monetary policy review, an outcome expected by 34 of 37 economists polled by Reuters.


Governor Rhee Chang-yong holds a news conference at around 0210 GMT, which will be livestreamed via YouTube.

2024-10-11 10:44:27
S&P 500 earnings to put investor focus on tech, AI

By Caroline Valetkevitch


NEW YORK (Reuters) -Investors will be looking for evidence that investment in artificial intelligence among S&P 500 companies is beginning to pay off as the reporting season progresses, despite the fact that analysts expect profit growth to decelerate from the previous quarter.


S&P 500 earnings are estimated to have increased 5.3% over the year-ago quarter, down from a second-quarter gain of 13.2%, but technology and communication services sectors are forecast to have the strongest year-over-year growth, according to LSEG data as of Friday.


The earnings period unofficially kicks off this week, with reports from major financial firms including JPMorgan Chase (NYSE:JPM) and Wells Fargo due Friday.


AI-related companies have dominated earnings since last year, and optimism over AI plans have helped to drive strong gains in the market. The S&P 500 is at record high levels and up roughly 21% for the year so far, with tech and communication services leading sector gains since Dec. 31.


"Many analysts will start looking at how and if a lot of these larger companies can monetize the model that they're training, and we've seen the ones that have been able to do so have been rewarded quite well," said Howard Chan, chief executive officer of Kurv Investment Management in San Francisco.


Technology sector earnings in aggregate are expected to have gained 15.4% from the year-ago quarter, while communication services earnings are seen up 12.3%, based on LSEG data.


Shares of Meta Platforms (NASDAQ:META) jumped on Aug. 1, a day after it issued an upbeat sales forecast for the third quarter, signaling that digital-ad spending on its social media platforms can cover the cost of its AI investments.


"Companies like Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL), they're spending quite a bit, but it's a little bit less understood... how that will interplay with their existing businesses," Chan said.


Investors may also be hoping earnings can justify higher stock prices. With the S&P 500 at record high levels, the index is now trading at 22.3 times future 12-month earnings estimates, well above its long-term average of 15.7, according to LSEG Datastream.


Solita Marcelli, chief investment officer for Americas at UBS Global Wealth Management, wrote in a note Wednesday that third-quarter results could provide a catalyst for gains as investors focus on tech fundamentals and AI.


"We continue to favor the semiconductor space and megacaps for AI exposure," she wrote, noting that she expects tech and AI companies to beat results for the quarter ended in September and also raise their outlooks.  


UBS expects overall AI semiconductor industry revenues to grow sharply, and reach $168 billion by the end of this year, according to the note.


Earnings growth in most S&P 500 sectors is seen lower than the previous quarter.


Investors had been worried the economy may have been getting too weak. The Federal Reserve last month kicked off a monetary easing cycle by cutting its benchmark interest rate by an unusually large 50 basis points, the first reduction in borrowing costs since 2020, amid signs the labor market was weakening.


Those concerns eased a bit with last week's monthly U.S. jobs data, which showed that U.S. job gains increased in September by the most in six months, and that unemployment rate fell to 4.1%.    


Still, company comments about consumer health will be scrutinized. "Lower front-end rates are more helpful to consumers than companies ... So the Fed policy is more something that consumer-driven companies could benefit from," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.


At the same time, some strategists said, investors may be eager to hear from companies about what the recent surge in oil prices might mean for businesses. Oil prices have gained as Middle East tensions have escalated.


Earnings for the energy sector are expected to have fallen 19.7% in the third quarter from a year ago, LSEG data shows.


2024-10-11 09:10:50
World Bank raises South Asia growth forecast to 6.4% on India demand

By Manoj Kumar and Karin Strohecker


NEW DELHI/LONDON (Reuters) - The World Bank raised its growth forecast for South Asia to 6.4% in 2024 from an earlier estimate of 6.0%, citing the strength of domestic demand in India and quicker recoveries in crisis-hit countries such as Sri Lanka and Pakistan.


India's economic growth forecast for the current fiscal year, ending in March 2025, was revised to 7% year-on-year, up from April's estimate of 6.6%, helped by a rebound in agricultural output and increased private consumption.


"You have an emerging class of consumers in India that's driving the economy forward, you have recoveries from crises in Sri Lanka and in Pakistan, you also have a tourism-led recovery in Nepal and Bhutan," Martin Raiser, World Bank Vice President for South Asia, told Reuters.


The upward revision confirms South Asia as the fastest growing emerging economy region monitored by the World Bank. The Washington-based lender projects South Asia will see robust 6.2% growth annually for the following two years.


Raiser said there was "significant upside potential" to growth with greater integration of South Asian countries into the global economy, but countries needed to stick with economic reform programmes to sustain momentum.


On Wednesday, India's central bank maintained its GDP growth forecast at 7.2% for the current fiscal year and shifted its policy stance to neutral.


The World Bank projected Pakistan's economy would grow by 2.8% in the current fiscal year, which started in July, an increase from the previous estimate of 2.3%, aided by a recovery in manufacturing and easing monetary policy.


Sri Lanka, which is clawing its way out of a sovereign debt default and its worst economic crisis in decades, saw the biggest upward revision, with growth expected to come in at 4.4% this year and 3.5% in 2025.


Nepal's growth forecast was raised to 5.1% from 4.6% for the 2024/25 fiscal year beginning mid-July, and Bhutan's to 7.2% from 5.7%.


But Bangladesh's growth forecast was downgraded to 4.0% from 5.7% for the fiscal year 2024/25, spanning from July to June, reflecting a slowdown in garment exports amid recent social unrest.


The World Bank recommended the region should boost women’s labour force participation - currently the lowest globally at 32%. Raising employment among women to levels comparable to those among men could raise output by as much as one-half in the long term, the report said.


"Bringing more women into the labour force could add significantly to the production potential," said Raiser.

2024-10-10 16:13:38
Thai consumer confidence falls to 17-month low in September

BANGKOK (Reuters) - Thai consumer confidence dropped for a seventh consecutive month in September to its lowest level in 17 months, due mainly to concerns about slow economic growth and floods in parts of the country, a survey showed on Thursday.


The consumer index of the University of the Thai Chamber of Commerce fell to 55.3 in September from 56.5 in the previous month, the university said in a statement.


Confidence was hurt by flooding and also high living costs, despite government handouts for vulnerable groups, the university said.


"The floods have a psychological impact, overshadowing the positive sentiment of the handout scheme," university president Thanavath Phonvichai told a press conference.


The government last month launched phase one of its flagship $14 billion stimulus handout scheme, which will eventually see an estimated 45 million people receive 10,000 baht ($298) each to spend within six months, aimed at sparking economic activity.


The initial phase will 14.5 million welfare card holders and disabled people receive their handouts in cash.


The scheme, which was scheduled for rollout in the last quarter of this year, is the cornerstone of the government's plans to kickstart Southeast Asia's second-largest economy, which expand 2.3% in the second quarter of 2024.


The central bank predicts 2.6% growth this year, after last year's 1.9% expansion that trailed regional peers.


($1 = 33.5300 baht)

2024-10-10 14:42:42
US FAA could approve SpaceX Starship 5 license this month, source says

By David Shepardson and Marisa Taylor


WASHINGTON (Reuters) - The Federal Aviation Administration could approve a license for the launch of SpaceX's Starship 5 as soon as this month, a source told Reuters on Tuesday.


Last month, the FAA said it did not expect a determination on a license before late November. SpaceX said on social media late on Monday that Starship's fifth flight test could launch as soon as Oct. 13, pending regulatory approval.


The FAA, which has repeatedly said it did not expect to decide on a license until late November, on Tuesday only said it continues to review the proposed mission and would make a decision "once SpaceX has met all licensing requirements." It made no mention of the November timeframe.


SpaceX CEO Elon Musk has harshly criticized the FAA, including for proposing a $633,000 fine against SpaceX over launch issues and for the delay in approving the license for Starship 5, which the company says has been ready to launch since August.


Musk has called for the resignation of FAA Administrator Mike Whitaker and threatened to sue the agency.


SpaceX suggested last month the delay in FAA approval was over "superfluous environmental analysis"


Whitaker faced questions at a congressional hearing last month about the delay and responded that SpaceX had failed to complete a timely sonic boom analysis for the Starship 5 launch.


"The delay of the Starship (launch) had to do with SpaceX filing an application and not disclosing that they were in violation of Texas and federal law on some matters, and that's a requirement to get a permit," Whitaker said.


In an email invitation to VIP guests seen by Reuters, SpaceX said it is targeting the launch for Sunday. The invitation added "as with any test, there is a chance we don't launch on the first attempt."


On Sunday, the FAA said SpaceX's workhorse Falcon 9 rocket could return to flight for a mission on Monday for the European Space Agency's Hera spacecraft from Florida.


The FAA on Sept. 30 said SpaceX must investigate why the second stage of its Falcon 9 malfunctioned after a NASA astronaut mission, grounding the launch vehicle for the third time in three months.

2024-10-10 12:32:35
China central bank kicks off 500 billion yuan swap facility to aid stock market

HONG KONG/SHANGHAI (Reuters) - China's central bank said on Thursday it would start accepting applications from financial institutions to join a newly created funding scheme, initially worth 500 billion yuan ($70.62 billion), to aid the capital market.


The People's Bank of China (PBOC) said eligible securities firms, fund companies and insurers can apply to join the swap scheme, which gives them easier access to funding to buy stocks.


The announcement came after Chinese stocks tumbled on Wednesday following a blistering rally, as previous investor enthusiasm about Beijing's plans to revive the economy waned.


The PBOC first announced the scheme on Sept. 24 as part of a broad package of policies to stimulate the economy and boost capital markets.


Under the swap facility, eligible securities firms, fund companies and insurers can use their assets including bonds, stock ETFs and holdings in constituents of the CSI 300 Index as collateral in exchange for highly liquid assets such as treasury bonds and central bank bills.


The initial scale of the swap program is set at 500 billion yuan, and can be expanded in the future.


($1 = 7.0800 Chinese yuan)

2024-10-10 10:34:54
US 30-year mortgage rate jumps to 6.36%, biggest weekly gain in 15 months

(Reuters) - The interest rate for the most popular U.S. home loan rose to 6.36% last week, marking the biggest weekly increase in more than a year after better-than-expected economic data caused financial markets to scale back bets on further Federal Reserve interest-rate cuts.


The average contract rate on a 30-year fixed-rate mortgage rose 22 basis points in the week ended Oct. 4, the Mortgage Bankers Association said on Wednesday. The last time it rose that much was in July 2023, when the Fed was still increasing interest rates in its battle to bring down inflation.


The U.S. central bank began cutting its short-term benchmark rate last month, signaling confidence that inflation is headed toward its 2% goal with a bigger-than-expected reduction of half a percentage point aimed at keeping a cooling labor market from weakening further.


Mortgage rates had peaked in October 2023, near 8%, and by the time of the Fed's September policy-setting meeting had fallen by more than 1.75 percentage points in anticipation of the Fed's pivot to policy easing.


Last week's jump puts the home borrowing rate back up where it was in late August, before the Fed's rate cut.


The 30-year rate closely tracks the yield on the 10-year Treasury note, which rose sharply last week after a government report showed job growth jumped in September and the unemployment rate fell.


The strong showing eased concerns that the labor market was cooling too sharply. Traders moved to price in smaller, and fewer, Fed rate cuts over coming months than they had previously anticipated.


Financial market bets now reflect an expectation that the Fed will reduce its policy rate, now in the 4.75%-5.00% range, to a range of 3.50%-3.75% by the middle of next year.


2024-10-10 09:02:16
China slaps anti-dumping measures on brandy imports from EU

BEIJING (Reuters) -China on Tuesday announced provisional anti-dumping measures on brandy imports from the European Union, according to a statement from the Chinese commerce ministry, reversing an earlier move amid continued tense trade talks.


From Oct. 11, importers will be required to provide what the ministry described as a corresponding security deposit to Chinese customs when importing relevant brandies originating in the EU.


The move was an about-turn after Beijing recently said it would not impose provisional tariffs on brandy imported from the EU despite finding it had been sold in China below market prices.


That was supposed to give both sides some breathing room in their ongoing heated trade talks.


Previously, when the commerce ministry decided not to improse provisonal anti-dumping measures it had said that probe would end before Jan. 5, 2025, but that it could be extended.


China had recently been trying to drum up support from the bloc's 27-member states to reject the European Commission's proposal to adopt hefty added tariffs on Chinese-made electric vehicles in a vote expected soon.

2024-10-08 16:08:56