Wednesday, 23 January 2019

Asian shares pause amid concerns over growth and trade

TOKYO (Reuters) - Asian stocks trod water on Wednesday as concerns over the outlook for global economic growth and the ongoing Sino-U.S. trade war kept investors away from riskier assets.

Spreadbetters expected European stocks to open lower, with Britain’s FTSE losing 0.3 percent, Germany’s DAX slipping 0.2 percent and France’s CAC shedding 0.4 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.15 percent, stalling after climbing to a seven-week high on Monday.

The Shanghai Composite Index was last down 0.15 percent, having flitted in and out of the red.

Australian stocks lost 0.25 percent and Japan’s Nikkei shed 0.1 percent.

On Wall Street, the S&P 500, the Nasdaq and the Dow all posted their biggest one-day percentage drops since Jan. 3 on Tuesday.

Following a sharp drop in December, U.S. shares gained through much of January, supported in part by expectations for a thaw in U.S.-China trade tensions and a more dovish-sounding Federal Reserve. That also prompted global investors to plow into riskier assets.

But putting a dent on sentiment again was a report by the Financial Times that the Trump administration had rejected an offer from China for preparatory trade talks this week ahead of high-level negotiations scheduled for next week.

White House economic adviser Larry Kudlow denied the report, helping U.S. equities pare some losses though the fresh concerns about U.S.-China relations kept share prices in check.

Recently published data all pointed to a rough year ahead for the world economy.

U.S. home sales tumbled 6.4 percent in December, falling short of the weakest forecast, to their lowest in three years. Compared with a year earlier, they were down more than 10 percent for the first time since 2011.

House price increases slowed sharply, adding to evidence of a further loss of momentum in the housing market.

Canadian factory sales and wholesale trade both slumped more than expected in November, while in Germany a survey by the ZEW research institute showed morale among German investors improved slightly in January, but their assessment of the economy’s current condition deteriorated to a four-year low.

Japan’s exports and imports also fell short of market expectations, with exports posting their biggest fall in more than two years.

As expected the Bank of Japan kept monetary policy easy and trimmed its inflation forecast on Wednesday with the domestic economy facing headwinds.

“The downward revision to its inflation forecasts underlines that policy tightening remains a very distant prospect,” wrote Marcel Thieliant, senior Japan economist at Capital Economics.

The IMF trimmed its global growth forecasts for 2019 and 2020 on Monday, in its second downgrade in three months, just after China reported its 2018 growth slipped to the worst level in nearly three decades.

“Risk asset prices have been essentially supported just by easing of U.S. rate hike expectations,” said Shuji Shirota, head of macro-economics strategy at HSBC Securities.

“Economic data has been weak and the U.S. government shutdown should be hurting economic sentiment, but even that has been considered as positive for risk assets, on the grounds that they make it difficult for the Fed to raise rates.”

Wall Street snaps four-sesson rally
U.S. bond prices have found support, with the benchmark 10-year yield slipping to 2.744 percent from Friday’s peak of 2.799 percent, the highest since Dec. 27, with money market futures pricing out any chance of a Fed rate hike this year.

The euro was a shade higher at $1.1368 but remained in close reach of a three-week low of $1.1336 set on Tuesday, weighed by recent weakness in the euro zone economy and worries about fallout from Brexit.

The dollar rose 0.25 percent to 109.73 yen , recovering the previous day’s losses.

In commodities, U.S. West Texas Intermediate (WTI) crude futures managed to crawl up 0.17 percent to $53.1 per barrel after shedding 1.9 percent the previous day.

Reporting by Shinichi Saoshiro

Tuesday, 22 January 2019

Dollar holds firm as global growth concerns support safe-havens

SINGAPORE (Reuters) - The dollar hovered near 2-week highs against its peers on Tuesday as a slowdown in China’s economy to 28-year lows fanned fresh worries over global growth and prompted investors to move into safe-haven currencies.

Overnight, the International Monetary Fund (IMF) cut its 2019 and 2020 global growth forecasts, citing a bigger-than-expected slowdown in China and the eurozone, and said failure to resolve trade tensions could further destabilise a slowing global economy.

The downgrade came just hours after China reported its slowest quarterly economic growth since the financial crisis and its weakest annual expansion since 1990.

The dollar index, which measures its strength against a group of six major currencies, was steady at 96.33, holding near a 2-week high of 96.43 hit on Monday.

The dollar strengthened 0.08 percent versus the offshore yuan CNH= to 6.8049 by 0240 GMT. The greenback has gained around 1 percent over the offshore yuan in the last seven sessions.

The yen JPY=, another safe-haven currency, was steady against the dollar, fetching 109.64 in early trade. The Bank of Japan (BoJ)is widely expected to keep its policy unchanged at its Jan. 22-23 meeting. Analysts expect monetary policy to remain highly accommodative in Japan this year.

“The slowing global economy and depressed oil prices are expected to force the BoJ to revise down its outlook for economic growth and inflation,” said Osamu Takashima, currency strategist at Citibank in a note.

On the whole, the dollar is also facing indirect pressure from slackening momentum in the global economy which has forced the U.S. Federal Reserve to take a cautious approach on any further interest rate increases. Speculation is rife the Fed might soon pause its tightening cycle.

“We do not see the Federal Reserve raising rates this year which should lead to weakness in the dollar. We also think the dollar is overbought and over-valued on fundamental metrics,” said Jason Wong, senior markets strategist at BNZ markets.

Sterling GBP= continued to wobble. With little time left until the United Kingdom is due to leave the European Union on March 29, there is no agreement in London on how and even whether it should leave the world's biggest trading bloc, and a growing chance of a dramatic 'no-deal' exit with no provisions to soften the economic shock.

Prime Minister Theresa May’s Brexit deal was roundly rejected by parliament last week and on Monday she set out a proposal to overcome the impasse by seeking further concessions from the EU on a plan to prevent customs checks on the Irish border.

“With deadlines fast approaching and what seems to be a real impasse between the various sides involved, the prospect of a hard ‘no deal’ Brexit appears to becoming more likely,” said Nick Twidale, chief operating officer at Rakuten Securities in a note.

Sterling was marginally lower at $1.2886.

European shares stumble after weak Chinese GDP data
The euro EUR= was flat at $1.1367. The single currency is likely to remain under pressure as growth in Europe's economic powerhouses, Germany and France, is languishing and inflation remains weak. The European Central Bank is widely expected to maintain an accommodative mode for this year.

The Australian dollar AUD= fell by 0.13 percent to $0.7148. The Aussie dollar is likely to remain under pressure due to the weakening sentiment towards China, its largest trade partner.

Reporting by Vatsal Srivastava

Asian shares, oil skid on global growth worries

SYDNEY (Reuters) - Asian shares stumbled and oil prices fell on Tuesday as pessimism about world growth drove investors away from risky assets, while sterling ticked lower in the face of the latest twists and turns in the Brexit saga.

China got the week off to a shaky start on Monday after Beijing reported 2018 growth in the world’s second-largest economy slowed to its weakest pace in nearly 30 years. Adding to the air of caution, the International Monetary Fund trimmed its global growth forecasts and a survey showed increasing pessimism among business chiefs as trade tensions loomed.

The gloomy news highlighted the challenges facing policymakers globally as they tackle an array of current or potential crises, from the U.S.-China trade war to Brexit.

Spreadbetters point to another weak start for Europe. FTSE futures were off 0.2 percent while U.S. stock futures, which offer an indication of how Wall Street will open, were down about 0.7 percent.

In Asia, losses were led by Chinese shares, with the blue-chip index .CSI300 off 1.2 percent. Hong Kong's Hang Seng index  was down more than 1 percent and Australia's main share index faltered 0.5 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.9 percent on Tuesday, drifting away from a recent seven-week top.

Japan's Nikkei .N225, which had opened firmer, skidded 0.7 percent.

U.S. markets were closed on Monday for a holiday so trading was generally subdued overnight. However, equity prices in Europe and Latin America stumbled after the weak Chinese data.

“Concerns over slowing global growth are starting to filter through to financial markets,” said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia.

Those worries sent prices for copper, used in electrical wires and vehicles, drifting lower.

In another sign of risk aversion, the Australian dollar AUD=D3, often used as a liquid proxy for China investments, eased 0.3 percent to $0.7134, putting it on track for a third straight session of losses.

“The focus will be firmly on the U.K. once the London market opens with Brexit news still front of mind for investors,” Twidale added.

“Brexit remains a major concern for UK markets and progress appears to be limited. With deadlines fast approaching and what seems to be a real impasse between the various sides involved, the prospect of a hard ‘no deal’ Brexit appears to becoming more likely.”

Sterling was a shade weaker at $1.2872 as British Prime Minister Theresa May refused to rule out a no-deal Brexit. There are few signs she can break a deadlock with parliament after her Brexit deal was rejected last week.

May offered to tweak her defeated deal by seeking further concessions from the European Union on a backup plan to avoid a hard border in Ireland.

European shares stumble after weak Chinese GDP data
“Any upside for sterling in the near term may be limited,” said Capital Economics analyst Liam Peach. “Uncertainty would continue during the extended negotiations and there is no guarantee that it would last for only a short period of time.”

Analysts said investors were nervous about building positions in the pound, specially given the possibility of Britain leaving the EU without a deal.

Demand for the safe-haven yen kept the greenback under pressure with the Japanese currency last buying at 109.41 per dollar. The euro was near the floor of its recent trading range at $1.1358 EUR=. Against a basket of currencies, the dollar was barely changed at 96.393.

In commodities, global growth worries pulled oil prices lower with Brent down 55 cents at $62.19 and U.S. crude futures off 39 cents at $53.41.

Reporting by Swati Pandey

Monday, 21 January 2019

Asia keeps calm as China cools, Brexit news awaited

SYDNEY (Reuters) - Asian markets kept their nerve on Monday as data showed the Chinese economy slowed at the end of last year, underlining the urgent need for more stimulus as Beijing wrestles with the United States over trade.

Investors are also waiting to hear British Prime Minister Theresa May’s ‘Plan B’ for Brexit which is due to be presented to parliament later on Monday.

The world’s second-largest economy grew 6.4 percent in the fourth quarter from a year earlier, as had been expected and matching levels last seen in early 2009 during the global financial crisis.

Yet there were some bright spots with industrial output rising a surprisingly strong 5.7 percent, while retail sales rose 8.2 percent in December, from a year earlier.

“Policy makers appear to be weighing up the medium term risks of further debt growth against short term trends – hence the relatively modest stimulatory policy thus far,” said Gerard Bung, a senior economist at NAB.

“They may be data dependent for a couple of quarters to make any large move,” he said.

Markets reacted calmly, with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.2 percent, after rising 1.6 percent last week.

Chinese blue chips gained 0.7 percent. Japan's Nikkei .N225 added 0.3 percent, helped by a recent pullback in the yen. The Australian dollar AUD=D, often used a liquid proxy for China investments, nudged up to $0.7167.

E-Mini future for the S&P 500 ESc1 eased 0.2 percent, though trade was light with the U.S. on holiday. Spreadbetters pointed to small opening gains for the major European bourses.

Chinese stocks had rallied on Friday on reports U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports, a story later denied.

U.S. President Donald Trump said on Saturday there has been progress toward a trade deal with China, but denied that he was considering lifting tariffs.

“Things are going very well with China and with trade,” he told reporters at the White House. Chinese Vice Premier Liu He will visit the United States on Jan. 30 and 31 for the next round of talks with Washington.

Over in Britain, May will return to parliament on Monday to set out how she plans to try to break the Brexit deadlock after her deal was rejected by lawmakers last week.

May told ministers on Sunday she was looking for ways to make the so-called Northern Irish backstop more acceptable to her Conservative Party and Northern Irish allies.

“We expect only incremental changes from “Plan A” given cross-party talks have fallen flat,” analysts at TD Securities wrote in a note.

“Amendments are likely to be introduced all week, with MPs pushing to cancel ‘No-Deal’, introduce a second referendum, and perhaps push for a permanent customs union,” they added. “May will likely travel to Brussels to seek concessions from the EU.”

The uncertainty kept sterling sidelined at $1.2867 GBP=, having briefly been as high as $1.3000 last week.

The dollar held firm on the yen at 109.61 JPY=, while the euro was near the floor of its recent trading range at $1.1375 EUR=. Against a basket of currencies, the dollar was a shade softer at 96.295

In commodity markets, spot gold XAU= was steady at $1,281.79 per ounce.

Oil prices extended their rally after OPEC detailed specifics on its production-cut activity to ease global oversupply.

Brent crude rose 24 cents to $62.94 a barrel. U.S. crude futures CLc1 gained 23 cents to $54.03 a barrel.

Reference: Wayne Cole

Dollar firm near two-week high, risk appetite unfazed by weak China GDP

TOKYO (Reuters) - The dollar held steady near a two-week high against a basket of currencies on Monday, as investor risk appetite held up despite the latest data showing China’s 2018 economic growth slowing to a near three-decade low.

The dollar index, which measures its strength against a group of six major currencies, was steady at 96.308 after climbing to 96.394 percent on Friday, its strongest since Jan. 4.

Hopes for a thaw in U.S.-China trade tensions, a more dovish-sounding Federal Reserve and optimism that Britain could avoid a “No-Deal” Brexit are some of the factors that have fanned the return in investor risk appetite, which went into a deep freeze in December as global equity markets tumbled.

Along with a decline in Treasury yields earlier in the month which had accompanied the retreat in equities, the dollar index had slipped to a three-month low near 95.00 on Jan. 10.

“The dollar index is clearly on a recovery track. The currency was stuck in a downtrend at the start of January but is now being bought back against its peers such as the yen, euro, pound and the Aussie,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“Whether the current ‘risk on’ supporting the dollar can continue will likely depend on how U.S. corporate earnings turn out. The United States and China falling out again over trade issues and volatile U.S. politics still remain the main potential risk factors.”

The U.S.-China trade friction has already put pressure on China’s economy, with the latest data showing the world’s second-biggest economy slowing further in the last quarter of 2018. Markets appeared to take the outcome, largely in line with expectations, in their stride.

The dollar was down 0.1 percent at 109.64 yen JPY=, taking a pause after climbing to a three-week high of 109.895 on Friday. The greenback had gained more than 1 percent against its Japanese peer last week.

The euro nudged up 0.15 percent to $1.1376 EUR= but remained in close reach of a two-week low of $1.1353 brushed on Friday.

The pound was 0.1 percent lower at $1.2860 GBP=D4.

Sterling had climbed to a two-month peak of $1.3001 on Thursday on growing confidence that Britain can avoid leaving the European Union without a deal, but faced profit-taking on Friday.

“The pound is at current levels based on assumption that a no deal Brexit has been avoided. But even an exit with a deal will likely leave some damage on the economy, so it is difficult to see the pound make much further headway from here,” said Koji Fukaya, president at FPG Securities in Tokyo.

British Prime Minister Theresa May will on Monday put forward a motion on her proposed next steps. Over the following week, lawmakers will be able to propose alternatives. They will debate these plans on Jan. 29, and voting on them should indicate whether any could get majority support.

The Australian dollar was steady at $0.7166 AUD=D4 after ending Friday on a loss of 0.3 percent.

The Aussie was largely unfazed by China’s growth numbers though analysts agree that any sharp drop in demand from its biggest trading partner would put a dent in local assets.

Australia’s close trading links with the world’s second-biggest economy means its currency is often regarded as a proxy to China-related trades.

The 10-year Treasury note yield rose to a three-week high of 2.799 percent on Friday, continuing its rise from a one-year low of 2.543 percent plumbed early in January.

The U.S. financial markets will be closed on Monday for Martin Luther King Jr. Day.

Reference: Shinichi Saoshiro

Sunday, 20 January 2019

Trade optimism yields dollar's first positive week this year

NEW YORK (Reuters) - The dollar held firm against its rivals on Friday, set for its first weekly gain since mid-December on optimism about talks to end the trade war between China and the United States.

Media reports on Thursday and Friday suggested both countries were considering concessions ahead of a Washington visit from Chinese Vice Premier Liu He on Jan. 30 and 31 for talks aimed at resolving the trade standoff between the world’s two largest economies.

China has offered to go on a six-year buying spree to ramp up imports from the United States in order to reconfigure the relation between the two countries, Bloomberg reported on Friday, citing people familiar with the matter.

U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs on Chinese goods and suggested offering a tariff rollback during the trade discussions scheduled for Jan. 30, the Wall Street Journal reported on Thursday, citing people familiar with the internal deliberations.

Although a Treasury spokesman denied Thursday’s report, the positive sentiment was enough to lift the dollar index and the three major U.S. stock indexes Friday morning. Following the publication of the Bloomberg story on Friday, the dollar index added to its gains rising 0.3 percent, last at 96.352.

“Yesterday’s WSJ headline concerning a possible rollback of the Trump tariffs was a setback for (the U.S. dollar/renminbi cross), and although it was subsequently denied, it had created confusion in the foreign exchange space,” said Stephen Gallo, European head of foreign exchange strategy at BMO Capital Markets in London.

Stronger-than-expected U.S. industrial production numbers also helped lift the greenback. American manufacturing output increased by the most in 10 months in December, pushed up by a surge in the production of motor vehicles and a range of other goods, the Federal Reserve said on Friday.

Wall Street rallies
Going into 2019, weakness in the dollar was a consensus view among currency market traders. The bet was that the U.S. central bank would stop raising interest rates and the economy would slow after a fiscal boost last year. While expectations of a U.S. rate pause have manifested in money markets, bets on policy tightening by other major central banks have also receded, giving a boost to the dollar.

Against a basket of rivals, the dollar was set to rise 0.68 percent on the week, its first positive week since mid-December. Against the euro, the dollar had strengthened 0.26 percent to $1.137, its strongest since Jan. 4.

The pound slipped against the euro and against the dollar, trimming overnight gains, as traders wagered on a second referendum vote on Britain’s EU membership.

Reporting by Kate Duguid and Saikat Chatterjee

Friday, 18 January 2019

Pound set for biggest weekly gain vs euro in more than a year on Brexit hopes

LONDON (Reuters) - The pound weakened on Friday as investors took profits after a stellar rally this week that set the currency up for its biggest weekly gain against the euro in more than a year on growing confidence that a no-deal Brexit can be avoided.

Data showing that British shoppers cut back on spending in the three months to December was broadly in line with market expectations and sparked just a brief rise in sterling.

The bigger focus for sterling traders remained Brexit, especially after a tumultuous week in which British Prime Minister Theresa May’s Brexit deal suffered a heavy defeat in parliament on Tuesday but won a subsequent vote of confidence.

This week’s developments appear to have boosted a perception in markets that Britain will be able to avoid crashing out of the EU without a deal, boosting the pound.

The currency has risen about 1.3 percent against the euro EURGBP=D3 this week, set for its biggest weekly gain since November 2017.

“Sterling has rallied quite a bit over the past week-and-a- half and the weakness today is a bit of check on those gains and a bit of profit taking,” said Tapas Strickland, a market strategist at National Australia Bank in London.

“The market is pricing out the risk of hard Brexit and some kind of agreement... so against this background, you’d expect sterling to grind higher above $1.30.”

At 1220 GMT, the pound was down 0.4 percent at $1.2936 GBP=D3, having touched $1.30 on Thursday.

Against the euro, sterling tumbled 0.5 percent to 88.13 pence and below two-month peaks hit a day earlier at around 87.65 pence.

On Friday, prominent Brexit campaigner Nigel Farage said the United Kingdom is likely to delay Brexit and another referendum is possible so opponents of EU membership need to organize.

Markets: Europe's shares lifted by trade hopes, Ryanair's grounded
May is due to hold a series of meetings with some of her top ministers on Friday to discuss the way forward on Brexit after her deal with Brussels was rejected by parliament, her spokeswoman said.

“It is our understanding that markets, and I think rightly, see the risk of no-deal Brexit as having receded substantially,” said Ross Hutchison, rates portfolio manager at Aberdeen Standard Investments.

“And the move in gilts and sterling reflects this.”

Britain’s 10-year government bond or gilt yield rose to 1.376 percent GB10YT=RR, its highest level in more than six weeks.

Reporting by Dhara Ranasinghe