TOKYO, Oct 31 — The Bank of Japan held fire today but suggested it could cut rates in the future, reflecting its fears that global risks could weigh on the country's fragile recovery. The announcement came just hours after the US Federal Reserve…
WASHINGTON, Oct 31 — The Federal Reserve yesterday cut interest rates for the third time this year to help sustain US growth despite a slowdown in other parts of the world, but signaled there would be no further reductions unless the economy takes…
NEW YORK, Oct 31 — US stocks advanced yesterday, with the S&P 500 closing at a record for the second time in three sessions, after a policy statement by the US Federal Reserve that cut interest rates by a quarter of a percentage point. The Fed…
LONDON, Oct 28 — World shares steadied near two-month highs today, boosted by hopes for a trade deal and strong US corporate earnings, while the dollar traded near its highest in a week before a Federal Reserve rate decision. MSCI’s All Country…
SYDNEY: Asian shares extended gains on Monday to hit a three-month high as risk assets got a fillip from hopes of a U.S.-China trade deal as soon as next month while the dollar marked time as focus shifts to a U.S. rate decision.
In early Asian trades, MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3% for its third straight day of gains to 518.29, the highest since late July.
Chinese shares were a tad firmer with the blue-chip CSI 300 up 0.2%. Hong Kong’s Hang Seng index jumped 0.7% while Australian shares climbed 0.1%.
Japan’s Nikkei was also upbeat, rising 0.3% to a one-year high.
The gains came after a positive session in U.S. and European markets on Friday.
U.S. and Chinese officials are “close to finalising” some parts of a trade agreement after high-level telephone discussions on Friday, the U.S. Trade Representative’s office and China’s Commerce Ministry said, with talks to continue.
U.S. President Donald Trump has said he hopes to sign the deal with China’s President Xi Jinping next month at a summit in Chile.
The protracted trade war between the world’s largest economies has hurt manufacturing activity, exports and business confidence globally while denting profits of many major industrial firms.
Optimism that Beijing and Washington were finally close to resolving their dispute led the S&P500 to surpass its July 26 closing record of 3,025.86, though it ended a tad below that level on Friday. The S&P 500’s total return index posted an all-time high.
E-mini futures for the S&P 500 started firm on Monday, up 0.1%.
Strong results from companies including Intel also boosted sentiment in equities markets. More than 81% of U.S. companies have beaten Wall Street expectations so far this earnings season despite concerns about the trade war.
Investors next await earnings from the likes of Alphabet Inc , Apple, Facebook and Exxon.
Activity later in the week will be dominated by the U.S. Federal Reserve, which markets expect is all but certain to lower interest rates at its Wednesday meeting.
The Bank of Japan meets on Thursday. On Friday, indicators for Chinese and U.S. manufacturing will be released.
“The outcome of the FOMC policy meeting will most likely draw the largest market reaction,” said Richard Grace, Sydney-based chief currency strategist at Commonwealth Bank.
“We also think the risk is the FOMC will articulate a pause,” for future rate decisions, Grace added.
“That means the 27.6% pricing for an additional 25 bps cut in December will quickly evaporate, sending U.S. yields and the USD higher.”
In currencies, the dollar index was a shade firmer at 97.866 against a basket of six major currencies. The Japanese yen was 0.1% lower at 108.75.
Sterling was last trading at $1.2816, a tad below Friday’s close.
The European Union agreed to London’s request for a Brexit deadline extension but set no new departure date. That gave Britain’s divided parliament time to decide on Prime Minister Boris Johnson’s call for a snap election.
Earlier, sources told Reuters the 27 European Union countries that will remain after Brexit hope to agree on Monday to delay Britain’s divorce until Jan. 31 with an earlier departure possible.
The euro trod water too at $1.1077.
“It feels like the calm before a potential storm, where the event risk heats up with political twists and turns, key economic data and central bank meetings,” said Chris Weston, Sydney-based strategist at Pepperstone.
Oil prices eased after strong gains last week.
U.S. crude slipped 7 cents to $56.59 a barrel, while Brent edged down 5 cents to $61.97.
Spot gold quoted at $1,504.92 an ounce. – Reuters
SYDNEY, Oct 28 — Asian shares rose today to a three-month high as risk assets got a fillip from hopes of a US-China trade deal as soon as next month while the dollar marked time as focus shifts to a US rate decision. In early Asian trades, MSCI's…
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LONDON, Aug 23 ― London's FTSE 100 bounced back today ahead of US Federal Reserve Chairman Jerome Powell's much-anticipated speech, while Peppa Pig owner Entertainment One rose to a life high after agreeing to be bought by US toy maker Hasbro. The…
SYDNEY: Australian wages growth stayed stubbornly weak last quarter in a disappointing outcome for household consumption and provided further evidence of ample spare capacity in the country’s labour market despite a strong run of jobs lately.
The wage price index rose 0.6% in the three months ended June, ticking up from a benign 0.5% in the March quarter, led largely by increases in the public sector, Australian Bureau of Statistics (ABS) data showed on Wednesday.
Annual wage growth at 2.3% has remained steady since the quarter-ended September 2018 and way below policymakers desire of “3 point something”.
The miserly pace of wage growth has weighed on domestic consumption and was a major reason the Reserve Bank of Australia (RBA) cut interest rates in June and July to a record low of 1%.
The RBA has shown willingness to move again if needed. Senior officials have also publicly discussed the possibility of unconventional monetary policies in Australia, including negative interest rates and quantitative easing.
“The data largely confirms the RBA’s view that spare capacity is limiting upward pressure on wages, and the economy needs to generate more jobs to absorb the extra workers,” said Sarah Hunter, chief economist at BIX Oxford Economics.
“Given this, we still expect the Board to cut the cash rate again this year, to 0.75%, and possibly one more time in early 2020.”
Financial markets imply the RBA’s cash rate at 0.5% by early next year.
With Wednesday’s data barely moving the chance of future rate cuts, the Australian dollar was unchanged at $0.6796 but within spitting distance of a recent decade low of $0.66775.
The data showed annual private sector wage growth slowed further to 2.3% from a four-year high of 2.5% in March while government services did the heavy lifting. Annual public sector wage growth was a solid 2.6%.
Electricity, gas, water and waste services and health care and social assistance enjoyed the highest quarterly pay rises of 0.7% while in the information media and telecommunications the wage increase was a piddly 0.1%.
Wage weakness is a global phenomenon linked to everything from the rise of China, the fall of union membership, technological change, job casualisation and the increasing concentration of market power in the hands of a few giant corporations.
RBA policymakers are still holding out hope for an eventual recovery in wage power.
Further progress requires the labour market to keep tightening and a survey of business from NAB this week had some potentially troubling news on that front.
The survey’s main measure of employment fell sharply to below average levels, implying a slowing in job growth from here.
“We expect the unemployment rate to rise further over the coming months which should keep a lid on wage pressures,” said Capital Economics economist Marcel Thieliant.
“The upshot is that wage growth may fall back to 2% in 2020.” – Reuters
SYDNEY: Asian shares hit five-week highs on Wednesday as investors hoped the Federal Reserve would follow the lead of the European Central Bank and open the door to future rate cuts at its policy meeting later in the day.
Indeed, ECB President Mario Draghi’s shock about-face on easing fuelled talk of a worldwide wave of central bank stimulus, firing up stocks, bonds and commodities.
Adding to the cheer was news U.S. President Donald Trump would meet with Chinese President Xi Jinping at the G20 summit later this month, and that trade talks would restart after a recent lull. But most analysts do not expect a decisive breakthrough.
“We expect no real change following the G20 sideline meeting. (But) the fact that both sides are talking should at least postpone thoughts of a further increase in tariffs, for a while at least…,” ING’s Greater China economist Iris Pang said in a note.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1.5% to a five-week top. Shanghai blue chips firmed 1.7% to a six-week peak.
Japan’s Nikkei rose 1.6%, while Australia added 1% to its highest in 11 years. E-Mini futures for the S&P 500 were a fraction firmer after a upbeat Wall Street session.
The Dow ended Tuesday with gains of 1.35%, while the S&P 500 rose 0.97% and the Nasdaq 1.39%. The S&P 500 has surged 6% so far this month to be 1% from the all-time high hit in early May.
All eyes are now upon the Fed which is scheduled to release a statement at 1800 GMT on Wednesday, followed by a press conference by Chairman Jerome Powell shortly after.
Yet the heightened anticipation also creates risks the Fed might fail to meet investors’ high expectations.
“Market expectations for a dovish shift are nearly universal, the only question seems to be the degree,” said Blake Gwinn, head of front-end rates at NatWest Markets.
Futures are almost fully priced for a quarter-point easing in July and imply more than 60 basis points of cuts by Christmas. “Markets will be looking for validation of this pricing,” he added. “We think this represents a fairly high bar for the Fed to deliver a dovish surprise.”
BofA Merrill Lynch’s latest fund manager survey spoke volumes about the sea change in sentiment.
Allocation to global equities dropped 32 points to a net 21% underweight, the lowest since March 2009, while the bond allocation hit the highest since September 2011.
Interest rate expectations collapsed, while concerns about a trade war soared to be the top risk for investors, ahead of monetary policy impotence, U.S. politics and a slower China.
The shift was clear in bond markets where German yields hit record lows deep in negative territory, while Japanese yields sank to the lowest since august 2016 at -0.145%.
Yields on the U.S. 10-year note reached the lowest since September 2017 at 2.016%, a world away from the 3.25% top touched in November last year.
The fallout in currencies was significantly less, in large part because it was hard for one to gain when all the major central banks were under pressure to ease.
The euro did pull back a bit after Draghi’s comments, but at $1.1192 was still well within the recent trading range of $1.1106-$1.1347.
The dollar remained sidelined against the yen at 108.49 , and a shade firmer on a basket of currencies at 97.657 . The yuan picked up to 6.905 to the dollar on the trade news.
In commodity markets, the rate-cut buzz kept gold near 14-month highs at $1,344.20 per ounce. Michael Hsueh, an analyst at Deutsche, noted the decisively dovish shift in central bank expectations was bullish for gold.
“This provides the desired backdrop – one in which investors are less likely to be concerned about the opportunity cost of holding a non-yielding asset, particularly versus the increasing stock of negative-yielding debt,” he said.
Reflation trades helped steady oil prices, as did hopes for a thaw in Sino-U.S. tensions.
Brent crude futures were off 6 cents at $62.06, while U.S. crude firmed 3 cents to $53.93 a barrel.
Confidence among Asian companies in the second quarter fell to its lowest since the 2008-09 financial crisis, as the trade war disrupts global supply chains and shows little sign of easing soon, a Thomson Reuters/INSEAD survey found.