Tag Archives: Currencies / Foreign Exchange Markets

Dollar tramples yen and safe-haven status, gold gains

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NEW YORK (Reuters) – The strong dollar got stronger on Thursday, rising to a three-year high against a basket of trading partner currencies, after a steep slide in the Japanese yen called into question its safe-haven status while the rally in U.S. equities took a pause.

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., February 6, 2020. REUTERS/Lucas Jackson

Gold prices hit their highest level in seven years as investors sought safe-haven assets after a rise in the number of new coronavirus cases in South Korea and the price of oil rose, supported by China’s efforts to bolster its virus-weakened economy.

The dollar has surged almost 2% since Tuesday against the yen, reaching its highest in almost 10 months, and the greenback climbed to near three-year highs against the euro.

The dollar index of the world’s most-traded currencies rose 0.12% to its highest level since May 2017.

The index is up 3.6% this year. It also gained to its best levels of the year against China’s offshore yuan and MSCI’s index of emerging-market currencies.

A host of reasons were cited for the dollar’s move, ranging from the outperformance of the U.S. economy and corporate earnings to potential recessions in Japan and the euro zone.

A run of dire economic news out of Japan has stirred talk the country is already in recession and that Japanese funds were dumping local assets in favor of U.S. shares and gold.

“The strongest explanation (for the yen’s decline) is a widespread selling by Japanese asset managers amid growing fears about the health of Japan’s economy,” said Raffi Boyadijian, investment analyst at XM.

The yen’s slide is unusual because the exchange rate with the dollar has been unraveling from its close correlation to the price of gold and U.S. Treasury yields, a development that must be watched, he said.

“This raises question marks about whether the yen is losing some of its shine as the world’s preferred safe-haven currency,” Boyadijian said.

China reported a drop in new virus cases and announced an interest rate cut to buttress its economy. But South Korea recorded an increase in new cases, Japan reported two deaths and researchers said the pathogen seemed to spread more easily than previously believed.

A rally that had lifted major U.S. and European stock indexes to record highs this week lost steam, as investors fretted about the spread of the coronavirus outside of China.

MSCI’s gauge of stocks across the globe shed 0.84% and emerging market stocks lost 0.95%.

The pan-European STOXX 600 index lost 0.62%.

The Dow Jones Industrial Average fell 283.03 points, or 0.96%, to 29,065. The S&P 500 lost 30.99 points, or 0.92%, to 3,355.16 and the Nasdaq Composite dropped 131.33 points, or 1.34%, to 9,685.85.

Morgan Stanley’s multibillion-dollar buyout for E*Trade Financial boosted the discount brokerage’s shares.

E*Trade jumped 24.4% after Morgan Stanley offered to pay $13 billion in an all-stock deal, the biggest acquisition by a Wall Street bank since the financial crisis.

Morgan Stanley’s shares fell 3.6%.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.5% overnight, led by drops in Hong Kong’s Hang Seng and South Korea’s KOSPI.

Spot gold rose 0.3% to $1,616.74 an ounce, after hitting its highest since February 2013 at $1,622.19.

Oil prices rose further after a U.S. report showed a draw in gasoline inventories and a much smaller-than-anticipated rise in crude stocks.

U.S. gasoline stockpiles fell 2 million barrels in the week to Feb. 14. Analysts had estimated an increase of 400,000 barrels.

Data from the U.S. Energy Information Administration (EIA) showed that crude inventories rose only 414,000 barrels last week, compared with a 2.5 million-barrel rise that analysts had expected in a Reuters poll. [EIA/S]

Brent crude futures rose 58 cents to $59.70 a barrel and West Texas Intermediate gained 91 cents to $54.20 a barrel.

Demand for safe-haven U.S. Treasury debt was robust, driving the 30-year bond yield below the psychologically significant 2% level to its lowest since September 2019.

The 30-year bond last rose 39/32 in price to push its yield down to 1.9626%.

Benchmark 10-year notes last rose 17/32 in price to yield 1.5135%.

Reporting by Herbert Lash; additional reporting by Ritvik Carvalho in London; editing by Jonathan Oatis

Our Standards:The Thomson Reuters Trust Principles.

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Investors charge back into stocks on signs coronavirus spread is slowing

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LONDON (Reuters) – A drop in the number of new coronavirus cases and the Federal Reserve chairman’s optimistic view of the economy lifted world stocks for a third day on Wednesday and sparked a 2% rally in oil prices, on hopes the epidemic’s effects would be contained.

FILE PHOTO: An investor monitors share market prices in Kuala Lumpur, Malaysia, August 25, 2015. REUTERS/Olivia Harris.

China reported its lowest number of new coronavirus cases since late January, lending weight to a prediction from its senior medical adviser that the outbreak might be over by April. A continued decline in new cases would inflict would keep the epidemic from doing as much economic damage as initially feared,

Those reports encouraged investors to get back into equities at the expense of bonds, gold and the Japanese yen — safe-haven assets that benefited as the virus death toll mounted.

“The virus may retard the modest upturn in global trade and manufacturing output which we predict to unfold from the second quarter of 2020s. But it seems unlikely to derail it,” analysts at Berenberg told clients.

The damage to Western economies in particular “will likely be modest and mostly temporary,” the bank said.

MSCI’s global equity index rose 0.12% to stand just off Tuesday’s record highs .MIWD00000PUS. A pan-European equity index rose to a record as automobile stocks — which depend on exports to China — jumped 1.2% .SXAP.

Futures indicated Wall Street would extend gains from Tuesday, when the S&P 500 and Nasdaq posted record closing highs ESC1 [.N].

In Asia, mainland Chinese and Hong Kong shares rose almost 1% .CSI300. The offshore-traded yuan reached two-week highs CNH=D3. The Thai baht, Korean won and Taiwanese dollar, reliant on Chinese tourism and trade, gained 0.3% to 0.5% THB= KRW= TWD=. The yen slipped 0.3% JPY=EBS to a three-week low against the dollar.

Brent crude futures rose from 13-month lows, helped by the likelihood producers would cut output LCOc1. Brent is still down almost 20% from its peaks in early January.

Some noted it remained unclear whether the coronavirus had peaked. Some Chinese companies said they were laying off workers as supply chains for goods had ruptured.

“Evidence suggests the positive mood will continue, and we see some coordination in markets with oil rallying, base metals up and Treasuries coming under pressure,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. But “I am not ready to buy risk assets yet.”

U.S. RESILIENCE

Yields on U.S. Treasuries and German Bunds US10YT=RR rose 3 to 4 basis points. Ten-year U.S. yields are now 13 bps off the four-and-a-half-month lows hit late January though almost 30 bps below where they started 2020.

Yields had risen on Tuesday after U.S. Federal Reserve Chair Jerome Powell said the U.S. economy was “resilient”. Powell also said he was monitoring the coronavirus, because it could lead to disruptions that affect the global economy.

The dollar had risen to four-month highs against a basket of currencies .DXY but inched off those levels on Wednesday.

U.S. markets also got a boost from signs President Donald Trump might be re-elected in November, since centrist candidates for the Democratic nomination appear to be struggling .

“Trump had a great start into the U.S. election season. After the early end of the impeachment trial in the Senate and the Iowa caucus chaos for the Democrats, betting markets suggest that Trump has a 58% probability of winning re-election on 3 November,” Berenberg noted.

The day’s big currency mover was the New Zealand dollar NZD=D3, which rose 0.8% for its biggest daily gain since December, after the central bank dropped a reference to further rate cuts, suggesting its easing cycle might be over.

Additional reporting by Stanley White in Tokyo, editing by Larry King

Our Standards:The Thomson Reuters Trust Principles.

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Trump touts stock market’s record run, but who benefits?

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(Reuters) – Donald Trump loves to trumpet the hot U.S. stock market as a key achievement of his presidency, and he was in full self-congratulatory mode on that front during Tuesday night’s State of the Union address.

U.S. President Donald Trump delivers his State of the Union address to a joint session of the U.S. Congress in the House Chamber of the U.S. Capitol in Washington, U.S. February 4, 2020. REUTERS/Leah Millis/POOL

“All of those millions of people with 401(k)s and pensions are doing far better than they have ever done before with increases of 60, 70, 80, 90 and 100 percent and even more,” Trump said in his address to a joint session of Congress.

While pensions and retirement funds were lifted by the rise in stock markets, the president has avoided talking about one key point about who really benefits when the market rallies: Most of the gains go to the small portion of Americans who are already rich.

That’s because 84% of stocks owned by U.S. households are held by the wealthiest 10% of Americans, according to an analysis of 2016 Federal Reserve data by Edward Wolff, an economics professor at New York University. So when the stock market has a blockbuster year – such as the nearly 30% rise in the S&P 500 benchmark index in 2019 – the payoff primarily goes to people who are already rich.

“For most Americans, a stock price increase is pretty immaterial to their well-being,” said Wolff, who published a paper about wealth inequality in the National Bureau of Economic Research in 2017.

Roughly half of Americans own some stocks through a brokerage account or a pension or retirement fund. But for most people, the exposure is too small for market gains to be life-changing or leave them feeling much better about their finances, Wolff said. “They’ll see a small increase in their wealth, but it’s not going to be anything to write home about,” he said.

Graphic: The stock boom’s unequal gains png, here

What’s more, nearly 90% of families who own stock do so through a tax-deferred retirement account, meaning they can’t access the money until they reach retirement age, unless they pay a penalty, Wolff said.

So who owns most of the stock market? The majority of corporate equities and mutual fund shares are held by investors who are white, college educated and above the age of 54, according to an analysis from the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis.

The typical middle-class family gets the bulk of its wealth from the housing market. Households in the middle three quintiles of wealth held 61.9% of their assets in their principal residence in 2016, according to Wolff’s analysis. That compares to households in the top 1%, who held 7.6% of their wealth in their homes.

Because most consumers accumulate the majority of their wealth through their homes, a rise in property values can provide a more substantial boost to household wealth than a stock market rally, said William Emmons, lead economist at the St. Louis Fed’s Center for Household Financial Stability.

Still, the recent revival in the housing market, spurred in part by the Federal Reserve’s interest rate cuts, is not helping all Americans equally. Rising property values benefit homeowners but make it harder for aspiring home buyers to break into the market, said Eugene Steuerle, co-founder of the Tax Policy Center, a joint venture between the Urban Institute and the Brookings Institution.

And some people who bought homes immediately before the recession hit may still be trying to recover their losses, Steuerle said. Their wealth may have been wiped out by foreclosure, meaning they then struggled to qualify for a new mortgage during the recovery, he said.

That’s in sharp contrast to well-off investors, whose overall wealth surged after the crisis thanks to strong returns on stocks, property and other investments. Some 72% of wealth accumulated between the third quarter of 2009 and the third quarter of 2019 went to the richest 10% of households, according to an analysis by Oxford Economics. Over that same time period, the poorest 50% of households reaped only 2% of wealth gains.

“There are a lot of families that have not yet recovered from the financial crisis,” Emmons said.

Some more evidence that the recent stock market boom is not making everyone feel richer: There has been little evidence of the “wealth effect,” which says that people tend to spend more when stock markets are up, said Lydia Boussour, a senior economist for Oxford Economics.

Since the recession, people have mostly continued to increase their savings even as the stock market rose. “Consumers are a lot more cautious,” she said.

Reporting by Jonnelle Marte; Editing by Dan Burns and Leslie Adler

Our Standards:The Thomson Reuters Trust Principles.

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Greenback bounces after end-2019 selloff, yuan shrugs off coverage easing

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(Reuters) – The greenback snapped a six-day dropping streak so as to add 0.25% on Thursday, the primary buying and selling day of 2020, pushing the euro off five-month highs whereas the offshore yuan shrugged off reserve ratio cuts that might add $115 billion value of liquidity.

FILE PHOTO: U.S. 100 greenback notes are seen on this image illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Gained/

Buying and selling might stay skinny till Tuesday, when most European international locations open after Monday’s Epiphany vacation however market gamers will likely be relieved the greenback navigated the vacation interval with out experiencing the cash market squeezes many had feared.

The greenback index slumped 0.4% on New Yr Eve as massive banks took solely a small portion of the $150 billion supplied by the U.S. Federal Reserve’s in a single day repo operation and borrowing prices fell to the bottom stage since March 2018.

(Graphic: The Fed dives into the repo market png click on, right here)

Whereas wariness stays that there might be a repeat of final January’s “flash crash”, when large stop-loss promoting swept via holiday-thinned markets, analysts mentioned the Fed’s liquidity injections had lowered the danger.

“There’s nothing basic…on the finish of final 12 months the greenback offered off fairly sharply so we’re seeing an easing in among the greenback promoting stress,” mentioned Lee Hardman, senior FX strategist at MUFG.

“The liquidity squeeze didn’t materialise in order that’s contributing to stability in broader monetary markets…However the greenback story has been turning detrimental in current months, partly due to motion taken by the Fed to ease greenback liquidity,” Hardman mentioned, referring to the U.S. central financial institution’s steadiness sheet growth re-launched in October.

Having ended December nearly 2% decrease in opposition to a basket of currencies, the greenback inched as much as 96.65 whereas in opposition to the euro it was at $1.119, knocking the only forex from its highest stage since early August of $1.1249.

The dollar index ended 2019 nearly flat.

The Chinese language yuan closed at 6.9631 to the greenback, its strongest shut since Aug. 2, and in addition firmed offshore after small downward strikes triggered by Wednesday’s transfer to chop the amount of money that banks should maintain, releasing $115 billion value of funds to assist the economic system.

The transfer had been broadly anticipated following Premier Li Keqiang’s pledge final month to unleash extra stimulus.

(Graphic: China lending fee and RRR click on, right here)

Traders at the moment are ready for the U.S. ISM manufacturing survey due on Friday. Throughout a lot of Asia and Europe, closing buying managers indexes painted a barely brighter image, with French, German and euro zone readings a contact higher than advance PMIs.

However additionally they confirmed an 11th straight month of contracting euro zone exercise.

The euro slipped 0.2%, having strengthened 1.8% in opposition to the greenback final month. Nevertheless, euro zone bond yields prolonged their rise and inflation expectations rose to the very best since July.

“Increased bond yields are more likely to hold the euro’s micro-rally going, wildfires will hold a lid on Aussie greenback, and PMIs and oil are supporting Norwegian, Swedish and Canadian currencies,” Societe Generale informed purchasers.

The Swedish crown briefly firmed 0.3% in opposition to the euro after PMIs rose in December following three months of declines, though they nonetheless languished in contraction territory.

The Norwegian crown inched to 3-1/2 month highs after firmer PMIs, additionally benefiting from firmer crude costs.

The Australian greenback slipped 0.3%.

U.S. President Donald Trump mentioned on Tuesday that Section 1 of a commerce take care of China could be signed on Jan. 15 on the White Home. Markets are ready for additional particulars

Reporting by Sujata Rao; Modifying by Frances Kerry, Kirsten Donovan

Our Requirements:The Thomson Reuters Belief Rules.

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On the spot View: U.S. September payrolls decrease than anticipated, jobless fee drops

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(Reuters) – U.S. job progress elevated reasonably in September, with the unemployment fee dropping to close a 50-year low of three.5%, which might assuage monetary market issues that the slowing economic system was on the point of a recession amid lingering commerce tensions.

KEY POINTS:

* Sept nonfarm payrolls +136,000 (consensus +145,000) vs Aug +168,000 (prev +130,000), July +166,000 (prev +159,000)

* Sept labor pressure participation fee 63.2 pct vs Aug 63.2 pct (prev 63.2 pct)

* Sept jobless fee 3.5 pct (consensus 3.7 pct) vs Aug 3.7 pct (prev 3.7 pct)

* Common hourly earnings all non-public employees unchanged (cons +0.Three pct) vs Aug +0.four pct (prev +0.four pct)

* Sept U-6 underemployment fee 6.9 pct vs Aug 7.2 pct (prev 7.2 pct)

* Sept non-public sector jobs +114,000 (cons +133,000), vs Aug +122,000 (prev +96,000)

* Authorities jobs +22,000 vs Aug +46,000 (prev +34,000)

MARKET REACTION:

STOCKS: S&P e-mini futures ESv1 flip barely larger and have been final up 0.18%, pointing to flat to barely larger open

BONDS: Treasury yields rose barely; 2- 12 months US2YT=RR at 1.4237% and 10-year US10YT=RR at 1.5477%

FOREX: The greenback index .DXY reversed slight losses and was about 0.05% larger

COMMENTS:

SHAWN SNYDER, HEAD OF INVESTMENT STRATEGY, CITI PERSONAL WEALTH MANAGEMENT, NEW YORK  

“Anytime you see the unemployment fee fall Wall Avenue goes to suppose it’s good.”

“Traders are on excessive alert for indicators of a recession … It doesn’t affirm the story. Optimistic payroll shouldn’t be in line with a recession.”

“It’s type of a goldilocks report. It’s not sturdy sufficient to maneuver the Federal reserve away from chopping charges on the finish of October however it’s not weak sufficient to make you involved concerning the labor market or the patron.”

SHAUN OSBORNE, CHIEF FX STRATEGIST, SCOTIABANK, TORONTO:

    “The quantity got here simply shy of expectations, however provided that market expectations have shifted after the ADP and ISM numbers, individuals have been bracing for one thing worse than this. So that is within the ballpark of what’s acceptable. Wage progress is a bit gentle, however unemployment dropped. In a broad sense, this was not that dangerous. It most likely provides the greenback a little bit of respiratory room after a little bit of a tough experience the final three or 4 days.”

JOSEPH SROKA, CHIEF INVESTMENT OFFICER, NOVAPOINT, ATLANTA

“The quantity got here up mild relative to consensus, however not too dangerous on the non-public information. However the fruits of the weak ISM information and the payrolls report is rising the percentages in traders mindset that the Fed has extra incentive to think about one other rate of interest discount on the subsequent assembly.”

“The economic system has been going by a low degree of deceleration during the last couple of months and whenever you take them in mixture some is trade-related and a few is time-related, which means you possibly can’t develop infinitely. The Fed’s been proactive on adjusting rates of interest earlier than we noticed the info like this month’s ISM. So possibly the problem that some modest fee adjustment from the Fed is sufficient to preserve the economic system from a deeper decline and lengthen growth, albeit at a slower tempo.”

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS

“Headline job progress, non-public payrolls, and manufacturing payrolls, and wage progress all got here in weaker than anticipated and suggests some softening within the labor market.

  “This information most likely reinforces the case that the U.S. is now starting to really feel the results of the continuing international slowdown and doubtless strengthens the case for extra fee cuts, if the Fed chooses to go down that path.”

TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

“If individuals have been genuinely on the sting of the dialog about whether or not or not we’re slipping into recession or not, that is the sort of quantity that ought to pressure them to take a step again from that view. I by no means essentially thought that individuals must be holding that view, however I’m merely highlighting a market actuality. I believe that there was, from the market perspective, an actual threat that we have been slipping into recession. This isn’t a recessionary sort of quantity. This was a superbly sound report in most methods, not in each method. The one factor that I don’t like is that common hourly earnings have been flat. However however, the unemployment fee improved once more, we’re 3.5% on the unemployment report. This isn’t a dynamic that occurs with nice regularity in the USA, traditionally talking. The labor backdrop is definitely in actually fine condition, regardless of quite a lot of the noise that we proceed to listen to about these fears. This report throws quite a lot of chilly water on that.”

“I believe the Fed is locked stepping into October, virtually no end result was going to alter that. Whether or not the quantity was worse than anticipated and even fairly a bit higher than anticipated, I believe the Fed was going to go. The doves on the committee are clearly in management as a result of they’re the voters proper now.

KATHY JONES, CHIEF FIXED INCOME STRATEGIST, SCHWAB CENTER FOR FINANCIAL RESEARCH, NEW YORK

“I believe that the general image confirms the mild slowdown within the economic system that’s already priced into the bond market. However the lack of wage achieve, I believe, is a little bit of a shock. You’ll suppose that given the low degree of the unemployment fee, wages can be ticking up, however truly common hourly earnings have been down a bit. That may very well be a fluke, however they did peak in February…That raises quite a lot of questions – what’s the composition of jobs which can be being added? Is it that we’re pulling in quite a lot of people who’ve been on the margins and subsequently are extra low-wage jobs being added?”

“All in all, it’s not most likely a giant mover for the bond market, however it does go away the probability of a Fed fee minimize on the desk – maybe in October, maybe they’ll determine upon it in December and get extra information.”

“It’s fairly in line with what we noticed with the PMIs, the ISMs… The ISM was fairly gentle. The drop within the manufacturing payrolls was a affirmation of softness in there. We noticed a little bit of a drop in mining as properly, which isn’t stunning. Building, gentle. Total a gentle report, however that was anticipated.”

JOHN VELIS, GLOBAL MACRO STRATEGIST, BNY MELLON, NEW YORK

“Going into it and contemplating what we noticed with the 2 ISM surveys, it might have been so much worse. It’s most likely good for the market and never as dire as many individuals anticipated. It doesn’t imply that the economic system and the roles market are falling off a cliff. Then again, it’s not sturdy sufficient that it’s going to take out this extra Fed easing that has been priced into the curve the previous few days.”

DOUG DUNCAN, CHIEF ECONOMIST, FANNIE MAE, WASHINGTON

“The revisions being up is a optimistic as a result of sometimes when the employment market is slowing the revisions of prior months are down, and that has been the case for about 5 months. So, the truth that the revisions are up this time recommend that there’s not a precipitous slowing in unemployment. The truth that wage charges are holding is nice information, it’s help for the patron.

“There’s not a warning of a major slowdown within the economic system from these information. Our view is that with a purpose to keep the extent of unemployment steady we have to add someplace between 100,000 and 120,000 jobs a month, so this definitely matches that. It doesn’t recommend a major slowing in exercise at this level.

“I’d be stunned if there was a major response (from the market) in both course. What it does do is spotlight the variations of opinion on the Fed board about whether or not the economic system is slowing precipitously or not and also you had a number of dissents from the final fee minimize, that doesn’t assist make clear for them whether or not their disagreements are merited or not.”

JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO

“There’s a lot to love, particularly given the revisions that occurred. Retail shedding as many roles because it did once more, I don’t suppose it’s a huge shock. We proceed to see that pattern, everyone seems to be making an attempt to determine it out, so to talk, and once more the world they misplaced them in being primarily in clothes.

“Manufacturing could also be somewhat bit regarding, down 2,000 jobs not an enormous factor total. It’s a must to bear in mind this didn’t embrace the GM strike due to timing. In order that one will present up within the subsequent report, however it’s nice that we received a 45,000 revision larger between July and August and that is among the issues individuals actually favored about this. The 2 areas which have been unbelievable being healthcare and enterprise to enterprise providers are simply stud sectors. Each single month these two sectors present up and we simply proceed to see that. The opposite factor that was vital was transportation and warehousing, so once more, areas that take items from one place to a different, up 16,000 jobs. Most of this was an actual optimistic for the economic system regardless of a few of the different numbers we’re seeing.

“We’ve had such a string of dangerous information, that something that exhibits the economic system is doing higher than maybe individuals have been speaking about is properly acquired. I don’t suppose it clarifies the image any which method (for the Fed). It’s another piece of grey thrown into the image.”

Americas Economics and Markets Desk; +1-646 223-6300

Our Requirements:The Thomson Reuters Belief Rules.

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After LSE’s sharp rebuff, HKEX begins investor attraction offensive

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LONDON (Reuters) – Hong Kong Exchanges and Clearing (0388.HK) is embarking on a three-week attraction offensive with London Inventory Trade (LSE.L) traders because the Asian buying and selling home tries to salvage its proposed $39 billion takeover provide.

FILE PHOTO: The title of Hong Kong Exchanges and Clearing Restricted is displayed on the entrance in Hong Kong, China January 24, 2018. REUTERS/Bobby Yip/File Photograph

LSE’s board is refusing to have interaction with HKEX after emphatically rejecting its method on Friday. The LSE described HKEX’s provide as essentially flawed, saying it could not meet its strategic targets and got here with a excessive threat of being blocked by regulators.

LSE has stated it desires to stay with its plan of shopping for knowledge and buying and selling firm Refinitiv for $27 billion.

However HKEX has vowed to press on, and has arrange conferences with a collection of LSE’s high traders over the following few weeks, in response to two individuals acquainted with the matter, elevating the possibilities that it might make a hostile provide.

One top-25 investor advised Reuters that they had a gathering booked with HKEX later this month and that there might be a hostile method. Others stated they have been eager to listen to extra moderately than dismissing the deal instantly in favor of the Refinitiv tie-up.

“We’d count on there to be some synergy (within the HKEX deal) each when it comes to company overheads and expertise,” stated James Bevan, chief funding officer at CCLA. He added that whereas he was broadly supportive of the Refinitiv deal, he had some considerations in regards to the knowledge agency’s development technique.

HKEX has till Oct. 9 to make a agency provide or stroll away.

HKEX declined to touch upon the deal past its assertion on Friday that it could proceed to have interaction with LSE shareholders and that its provide was of their greatest pursuits.

LSE didn’t reply to a request for touch upon Sunday.

REGULATORY RISK

A supply near HKEX stated the Asian buying and selling home was assured some LSE traders have been fascinated by their provide and that it had an opportunity of success. They identified that round 15 of the highest 20 LSE shareholders additionally had stakes in HKEX.

However the previous decade has seen a collection of makes an attempt at cross-border change offers fail, thwarted by regulators and politicians even when each firms have favored the deal.

HKEX says it has had “constructive” preliminary discussions with regulators and policymakers. Nevertheless, regulatory sources in Britain and Italy – the place LSE owns Borsa Italiana – stated that they had but to carry substantive talks with HKEX on the deal.

HKEX will probably be relying on its lead banker – Moelis’s Caroline Silver – to assist it pull off what can be a significant coup if it succeeds.

One of the vital outstanding change bankers, Silver labored on LSE’s takeover of Borsa Italiana in 2007 when at Morgan Stanley, and represented London Metallic Trade when HKEX purchased it in 2012.

“Her modus is kind of easy: she is aware of everyone within the change and monetary infrastructure world, she understands the markets … and he or she runs a really disciplined course of,” stated Martin Abbott, London Metallic Trade’s former chief govt.

Further reporting by Sinead Cruise, Carolyn Cohn and Huw Jones; Writing by Rachel Armstrong; Enhancing by Dale Hudson

Our Requirements:The Thomson Reuters Belief Rules.

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Waning ECB stimulus bets push bond yields higher

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LONDON (Reuters) – Global bond yields rose on Monday, amid growing caution over the extent to which the European Central Bank will add stimulus to boost an ailing economy this week and rising hopes that Berlin could loosen its purse strings.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 6, 2019. REUTERS/Staff/File Photo

Germany’s 30-year benchmark bond yield briefly broke into positive territory for the first time in more than a month, while U.S. Treasury yields climbed to 18-day highs.

Safe-haven assets have been caught up in the fixed income sell-off, with gold XAU= touching a one-month trough and Japan’s yen plumbing a five-week low. But equities failed to make gains, as weak Chinese producer prices data dampened the mood.

The bond moves comes as markets are gearing up for Thursday’s European Central Bank (ECB) meeting, which is widely expected to deliver a cut to interest rates and point to further bond-buying stimulus.

However, there is a growing chorus of opinion that ECB policymakers and other central banks with negative interest rates and sub-zero long-term sovereign bond yields are nearing the limits of stimulus policies.

Germany also starts to debate its 2020 budget in parliament later in the day, where Finance Minister Olaf Scholz’s speech will be scrutinized after Reuters reported Berlin was looking into creating a “shadow budget” to boost public investment and effectively circumvent limits set by its national debt rules.

“These stories have become more frequent in recent weeks,” said Deutsche Bank’s Jim Reid. “Whilst the market always gets more excited by the headlines than is justified by hard evidence of any change in policy, it’s fair to conclude that market pressure and chatter on this story is building.”

Europe’s largest economy is teetering on the brink of recession, but strict national spending rules have tied policymakers hands on fiscal policy.

The U.S. Federal Reserve is also widely expected to cut interest rates next week as policymakers race to shield the global economy from risks, which also include Britain’s planned exit from the European Union.

With interest rates plumbing record lows in many countries and the effectiveness of further bond-buying muted by already record-low borrowing costs for governments, attention has turned to increased public spending or tax cuts to fire up growth.

A CHINESE CLOUD

The sell-off in fixed income markets failed to lift global stocks, where the mood was subdued amid concerns over the health of the world economy.

Data showing China’s mainland factory-gate prices shrank at their fastest pace in three years, as flagging demand at home and abroad forced some businesses to slash prices, saw Asian bourses slip lower.

In Europe, the pan-European stocks benchmark index STOXX 600 fell 0.4% in a second day of losses.

China-sensitive German stocks .GDAXI eased 0.3% while France’s CAC .FCHI dropped 0.6%.

“China inflation data was probably the worst combination of prints the market could have hoped for,” said Stephen Innes, Market Strategist AXI Trader.

“While the enormous slide in China factory gate prices reminded us of what we already know, U.S. tariffs are sinking the Chinese economy and at a much quicker pace than anyone could have imagined.”

However, climbing bond yields helped lift European banking stocks .SX7P 0.3% – one of the few sectors in the black.

U.S. stock futures pointed to a lower open on Wall Street after the S&P 500 .SPX ended flat in New York on Monday.

In currencies, the rise in Treasury yields helped lift the dollar to touch a five-week high of 107.50 yen JPY=EBS. The euro EUR=EBS was flat at $1.104 after reaching an overnight high of $1.1067.

The pound GBP=D3 traded near a six-week high of $1.2385 after a law came into force demanding that Prime Minister Boris Johnson delay Britain’s departure from the European Union unless he can strike a divorce deal with the bloc.

Oil futures hit their highest level in six weeks in Asia after Saudi Arabia’s new energy minister confirmed he would stick with his country’s policy of limiting crude output to support prices.

U.S. crude traded at $57.97 a barrel after hitting the highest since July 31. Brent crude futures climbed to $62.67 a barrel.

Prince Abdulaziz bin Salman, who became Saudi Arabia’s new energy minister on Sunday, told reporters there would be “no radical” change in Saudi’s oil policy. Saudi Arabia is OPEC’s de facto leader.

Reporting by Karin Strohecker in London, additional reporting and graphic by Sujata Rao in London, additional reporting by Stanley White in Tokyo; Editing by Lincoln Feast, Sam Holmes and Alex Richardson

Our Standards:The Thomson Reuters Trust Principles.

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IMF stands by yuan view; says China may need stimulus if commerce warfare worsens

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WASHINGTON (Reuters) – The Worldwide Financial Fund on Friday stood by its evaluation that the worth of China’s yuan was largely according to financial fundamentals, however an IMF official stated the fund was encouraging China to pursue a extra versatile trade charge with much less intervention.

Indicators of Chinese language yuan and U.S. greenback are seen at a forex trade retailer in Shanghai, China August 8, 2019. REUTERS/Aly Music

James Daniel, director of the IMF’s China division, stated that an evaluation of China’s financial insurance policies discovered the yuan trade charge in 2018 to be “not considerably over-valued or under-valued.”

The IMF’s views on the yuan are at odds with these of its largest shareholder, america, which this week declared China a “forex manipulator” after it allowed the yuan to slide under 7 to the greenback to 11-year lows.

U.S. Treasury Secretary Steven Mnuchin is searching for to interact the IMF to assist “right” an unfair commerce benefit from Beijing’s forex actions, however Daniel declined to say how the IMF was responding to the request.

“Our discussions with the U.S. Treasury are ongoing on a variety of points,” Daniel advised reporters on a convention name, echoing an earlier assertion from an IMF spokesperson.

The IMF stated within the report {that a} worsening of commerce tensions with america may put China’s financial and monetary stability in danger, making new fiscal stimulus measures from the federal government warranted.

The IMF stated if america had been to impose 25% tariffs on a remaining $300 billion checklist of Chinese language imports, this would scale back China’s progress by round 0.Eight proportion factors over the next 12 months, pushed by a pointy fall in demand and a tightening of economic circumstances. Destructive international spillovers might be vital, it added.

Daniel stated {that a} 10% tariff on this class of products — as U.S. President Donald Trump intends to impose on Sept. 1 — may lead to a 0.three proportion level lower to progress.

Weighed down by weak demand at residence and overseas, China’s progress slowed to six.2% within the second quarter, a close to 30-year low.

Extra trade charge flexibility may assist China cope with these exterior pressures, releasing up financial coverage to cope with home demand circumstances, Daniel stated.

He additionally stated the IMF was urgent China for structural reforms to its financial system, together with opening extra sectors to overseas competitors and lowering the position of the state in sure business — targets additionally broadly sought by the Trump administration.

“We see continued rebalancing and opening up by China and elevated trade charge flexibility as being in China’s personal pursuits and in addition benefiting the worldwide financial system.”

IMF administrators in an announcement agreed with employees assessments that China’s exterior place in 2018 was broadly according to fundamentals.

However in addition they known as for extra transparency in China’s trade charge insurance policies, the IMF stated, with some searching for disclosures of China’s overseas trade market interventions.

Reporting by David Lawder and Jonas Ekblom; Enhancing by Jonathan Oatis, Leslie Adler & Kim Coghill

Our Requirements:The Thomson Reuters Belief Rules.

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Inventory markets discover a ground as Chinese language information soothe nerves

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LONDON (Reuters) – Inventory markets loved a tentative restoration on Thursday after better-than-expected Chinese language export information and a steadying of the yuan restored some calm to world markets.

The German share worth index DAX graph is pictured on the inventory change in Frankfurt, Germany, August 7, 2019. REUTERS/Employees

European markets adopted Asia larger in early commerce, helped by information exhibiting Chinese language exports rose 3.3% in July from a yr earlier, beating an anticipated decline of two%. Chinese language imports fell by lower than forecast, regardless of the Sino-U.S. tariff wrestle.

China moved on Monday to permit the yuan to weaken past 7 yuan per greenback, after U.S. President Donald Trump mentioned he would impose extra tariffs on Chinese language imports. That despatched markets right into a tailspin.

Traders worry the commerce battle between the world’s two greatest economies will trigger a world recession. Bond markets have flashed purple and a carefully watched U.S. recession indicator reached its highest stage since March 2007.

On Thursday, the pan-European Euro STOXX 600 rose 0.87%. Germany’s DAX was up 0.84% and France’s CAC 40 1.03%.

The MSCI world fairness index, which tracks shares in 47 nations, rose 0.25%. It stays down greater than 3% because the begin of August.

“There’s a bit of little bit of calm again out there in the mean time,” mentioned Peter Kinsella, world head of FX technique at UBP. “However the ball may be very a lot in Trump’s court docket.”

Wall Road recovered earlier losses on Wednesday and completed the day larger. E-Mini futures for the S&P 500 gained 0.34%, suggesting it might construct on that restoration on Thursday.

RECESSION FEARS

Traders ran for the protection of bonds this week as fears of a recession grew.

Yields on U.S. 30-year bonds fell as little as 2.123% in a single day, not removed from a document low of two.089% set in 2016. Ten-year yields dropped additional beneath three-month charges, an inversion that has reliably predicted recessions up to now.

The most recent spasm started when central banks in New Zealand, India and Thailand stunned markets on Wednesday with aggressive rate of interest cuts.

“Monetary markets are elevating dangers of recession,” mentioned JPMorgan economist Joseph Lupton. “Equities proceed to slip and volatility has spiked, however the alarm bell is loudest in charges markets, the place the yield curve inverted probably the most since simply earlier than the beginning of the monetary disaster.”

Markets have ramped up their expectations for extra easing by the U.S. Federal Reserve, however the query stays how briskly Fed policymakers will transfer.

Futures moved to cost in a 100% chance of a Fed minimize in September and a close to 24% probability of a half-point minimize. Some 75 foundation factors of easing is implied by January, with charges finally reaching 1%.

European and U.S. authorities bond yields rose on Thursday, with German and French 10-year yields up from document lows after a rally in current periods.

The 10-year U.S. Treasury yield rose to 1.7155% from as little as 1.595% on Wednesday.

Gold additionally benefited this week as traders scrambled to seek out someplace secure to park their money, rising above $1,500 for the primary time since 2013. Spot gold was final at $1,498 per ounce, down from as a lot as $1,510 on Wednesday. Gold is up 16% since Might.

In overseas change markets, the Japanese yen rose once more, gaining 0.2% to 106.04 yen per greenback. The yen tends to achieve at instances of uncertainty, and its rise this week underlined investor fears.

China’s yuan additionally gained. Within the offshore promote it rose 0.2% to 7.07 yuan per greenback after touching as excessive as 7.14 yuan on Tuesday.

Individuals sit in entrance of a board exhibiting market data at a securities brokerage home in Beijing, China August 5, 2019. REUTERS/Thomas Peter

The greenback slipped, dropping 0.2% in opposition to the euro to $1.1223.

Oil costs regained some floor amid discuss that Saudi Arabia was weighing choices to halt its decline, offsetting a rise in stockpiles and fears of slowing demand.

Brent crude futures climbed $1.25 to $57.48, although that adopted steep losses on Wednesday, U.S. crude rose $1.46 to $52.53 a barrel.

Extra reporting by Wayne Cole in Sydney; modifying by Larry King

Our Requirements:The Thomson Reuters Belief Ideas.

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Asia shares hit six-month lows, bonds growth amid market shakeout

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SYDNEY (Reuters) – Asian shares slid to 6-1/2-month lows on Monday and the yuan slumped to a greater than decade trough as a fast escalation within the Sino-U.S. commerce warfare despatched traders stampeding to conventional protected harbors together with the yen, bonds and gold.

FILE PHOTO: A girl walks previous an digital board exhibiting the inventory market indices of varied international locations exterior a brokerage in Tokyo, Japan, October 11, 2018. REUTERS/Kim Kyung-Hoon

Markets have been badly spooked since U.S. President Donald Trump abruptly declared he would slap 10% tariffs on $300 billion in Chinese language imports, ending a month-long commerce truce. China vowed on Friday to battle again.

In response, China’s yuan CNH= CNY= burst past the psychological 7-per-dollar threshold in a transfer that threatened to unleash a brand new entrance within the commerce hostilities – a forex warfare.

“Every thing is promoting off proper now,” mentioned Ray Attrill, head of foreign exchange technique at Nationwide Australia Financial institution in Sydney. “We have now no motive to anticipate any cessation in promoting except we see any robust motion to defend any CNY or CNH weak spot.”

“Our working assumption is that we’re unlikely to see any significant decision to the commerce dispute anytime quickly.”

Asian share markets have been a sea of crimson with Japan’s Nikkei .N225 shedding 2.4% to the bottom since early June. It was the sharpest each day drop since March.

Australian shares slipped about 1.4% to spend their fourth straight session within the crimson, and South Korea’s Kospi .KS11 tumbled 2.2% to hit its lowest since December 2016.

MSCI’s broadest index of Asia-Pacific shares exterior Japan sank 2.1% to depths not seen since late January.In China, the blue-chip index .CSI300 fell 0.8% whereas the troubled Hong Kong market .HSI hit a seven-month trough. The ache shortly unfold globally, with E-Mini futures for the S&P500 ESc1 and FTSE futures FFIc1 each down over 1%.

Oil costs have been additionally pulled down once more on demand worries, whereas gold climbed 0.65% to $1,450.41 an oz..

The grim temper adopted declines on Wall Road on Friday with MSCI’s gauge of world shares posting its largest weekly lack of the 12 months.

The commerce dispute between the world’s two largest economies has already disrupted international provide chains and slowed financial progress.

The abrupt escalation capped a essential week for international markets after the U.S. Federal Reserve delivered a broadly anticipated rate of interest minimize and performed down expectations of additional easing.

EVER DEEPER CUTS

Up to now, traders will not be shopping for Fed Chair Jerome Powell’s declare that the 25-basis-point price discount was a mere “mid-cycle adjustment to coverage”.

Futures at the moment are pricing in deeper cuts than earlier than final week’s Fed assembly. The terminal U.S. price is seen at 1.22%, 93 foundation factors beneath the present efficient price.

Analysts at TD Securities are forecasting a minimum of 5 extra cuts from the Fed, amounting to 125 foundation factors of easing, over the approaching 12 months or so.

Bond markets have been nicely forward of the sport as U.S. 10-year yields US10YT=RR dived 7 foundation factors to 1.77%, a violent shift for normally cautious Asian hours. Yields in Australia and New Zealand touched all-time lows.

German 10-year authorities bond yields on Friday dropped to an all-time low of -0.502% and the nation’s total authorities bond yield curve turning damaging for the primary time ever.

The flight to security lifted the yen, which frequently positive aspects at time of stress because of Japan’s place because the world’s largest creditor. The greenback slipped to a seven-month trough of 105.78 yen JPY=, whereas the euro sank to its lowest since April 2017 at 117.64 yen EURJPY=.

That dragged the greenback index .DXY off 0.1%, although it was up towards most different Asian currencies and people uncovered to China or commodities together with the Australian greenback AUD=.

The Aussie AUD=D3, a liquid proxy for rising market and China threat, slipped to a contemporary seven-month trough at $0.6748 after shedding 1.6% final week.

The Swiss franc CHF= was additionally boosted by safe-haven demand from the escalating commerce tensions. Trump can be eyeing tariffs on the European Union, however is but to make any formal bulletins. The euro EUR= was comparatively regular on the greenback at $1.1119.

Sterling GBP= hovered close to 2017 lows at $1.2159, pressured by considerations about Britain exiting the European Union and not using a deal in place.

The pound has been whiplashed since late final month when Boris Johnson, a figurehead for the “go away” marketing campaign within the 2016 Brexit referendum, turned the nation’s prime minister.

Oil prolonged losses with U.S crude off 26 cents at 55.40 and Brent down 35 cents at $61.54.

Modifying by Sam Holmes and Richard Borsuk

Our Requirements:The Thomson Reuters Belief Ideas.

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