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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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LSE informed Italy it will not transfer bond buying and selling platforms: central financial institution supply

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MILAN/ROME (Reuters) – London Inventory Change (LSE.L) has given assurances to Italy that it plans to proceed investing in its Italian buying and selling platforms and doesn’t intend to maneuver them in another country, a Financial institution of Italy supply stated on Thursday.

FILE PHOTO: Signage is seen exterior the doorway of the London Inventory Change in London, Britain. Aug 23, 2018. REUTERS/Peter Nicholls/File Picture

LSE Group owns Italian inventory trade Borsa Italiana, which in flip controls the MTS platform on which Italian authorities bonds are traded.

The Financial institution of Italy supply was responding to a Reuters story that stated LSE was contemplating shutting down a bond buying and selling platform referred to as BondVision and transferring the administration capabilities of Italian securities’ clearing operations from Milan to London.

LSE Chief Government David Schwimmer held talks with officers from the Italian central financial institution and market regulator Consob in Rome on Thursday.

“Within the assembly as we speak LSE gave ample reassurance about its willingness to proceed to put money into the Italian market infrastructures and that it has no intention to alter (their) location,” the Financial institution of Italy supply informed Reuters, talking on situation of anonymity.

“LSE has assured its full dedication to extend the effectivity of MTS and BondVision,” the supply stated, including that the LSE could be conveying the identical message to Italy’s economic system minister.

Two Italian sources with information of the scenario had earlier informed Reuters the LSE was mulling an overhaul of MTS forward of a possible merger with knowledge supplier Refinitiv.

LSE declined to touch upon Schwimmer’s go to to Italy and the content material of the discussions.

The British group is transferring forward with a $27 billion plan to purchase Refinitiv after Hong Kong’s bourse scrapped an unsolicited $39 billion bid for the London trade operator.

Thomson Reuters, an expert data firm that’s the mum or dad of Reuters Information, holds a 45% stake in Refinitiv.

The sources stated Italian authorities had been involved that the rumored overhaul could be a primary step towards centralizing precise clearing and post-trading operations exterior Italy and would ultimately result in MTS being dismantled.

Italy, which has the world’s third largest public debt, considers the Milan inventory trade and its authorities bond buying and selling unit MTS a strategic asset. Final month, it permitted a regulation giving the federal government particular powers to guard the Milan trade from potential exterior menace.

The BondVision buying and selling platform is utilized by institutional buyers, together with the Financial institution of Italy, and largely trades Italian authorities bonds, with a each day quantity of 5-6 billion euros.

The sources who spoke concerning the potential overhaul stated the plan the LSE was contemplating envisaged shutting down BondVision as a result of Refinitiv has an analogous bond buying and selling platform, Tradeweb TWO.O.

One of many sources stated that LSE was additionally contemplating transferring the administration capabilities of clearing home unit Cassa di Compensazione & Garanzia (CC&G) and settlement home Monte Titoli from Italy to London.

In London the LSE operates LCH, one of many world’s largest clearing homes.

Reporting by Elvira Pollina and Giuseppe Fonte, further reporting by Giselda Vagnoni in Rome and Huw Jones in London, modifying by Silvia Aloisi, Jane Merriman and Andrew Heavens

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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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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

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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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Carmakers race higher, Johnson jitters for sterling

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LONDON (Reuters) – A speeding autos sector and hopes for even lower borrowing costs buoyed world stocks on Tuesday, while a brief sterling rally proved short-lived as hard-Brexit advocate Boris Johnson was confirmed as Britain’s new prime minister.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, July 22, 2019. REUTERS/Staff/File Photo

Corporate results from oil bellwether Halliburton, Swiss bank UBS and Apple supplier AMS had all helped Europe’s morning mood though it was a 4% surge from the auto sector that provided the real torque. [.EU]

German parts makers Hella and French peer Faurecia surged as much as 6% and tire maker Continental leapt 5.8% despite another profit warning, putting the sector on track for its best day since Jan. [.EU]

The region-wide STOXX 600 benchmark added over 1% while Wall Street’s main markets were expected to open 0.3%-0.4% higher later after a flurry of largely upbeat earnings from the likes of Coca-Cola and United Technologies. [.N]

“The results are coming in and have helped the market today and we are still under the influence of interest rates,” said Francois Savary, the chief investment officer of Prime Partners, referring to expectations of U.S. and ECB rate cuts.

He also said Wall Street earnings had provided no scares so far and this week’s results from Facebook, Amazon.com and Google parent Alphabet would “drive the market up the road”.

Ahead of the U.S. open, the International Monetary Fund lowered its forecast for global growth this year and next, warning that more U.S.-China tariffs, auto tariffs or a disorderly Brexit could further slow the world economy.

Among currencies, the dollar reached a two-week high after U.S. President Donald Trump and congressional leaders agreed on Monday to a two-year extension of the U.S. debt limit, ending the threat a government default later this year. [/FRX]

The New Zealand dollar led G10 losses after its central bank said it had “begun scoping a project to refresh our unconventional monetary policy strategy and implementation”, although it added it was at a very early stage.

Britain’s pound was the other notable mover as it slid back towards the mid $1.24 region having briefly rallied after eurosceptic Johnson was elected as the replacement for outgoing Prime Minister Theresa May.

Concern that Britain will crash out of the European Union without a withdrawal agreement have grown since Johnson said he would pull Britain out on Oct. 31 “do or die”.

The pound traded 0.2% weaker at $1.2445, near last week’s 27-month low of $1.2382, having made it as high as $1.2481.

Credit ratings agency Moody’s and investment Goldman Sachs both warned the risk of a no-deal Brexit was now higher.

“With Boris Johnson at the helm, the tail risks are likely to intensify ─ well into October,” Goldman said.

“We raise our odds on a ‘no deal Brexit from 15% to 20%, and we reduce our odds on ‘no Brexit’ at all from 40% to 35%.”

The euro fell too to $1.1189, although rather than Brexit it was weighed down more by the likelihood of even more negative ECB interest rates in the coming months. The central bank meets on Thursday.

“It is going to take a bold stroke by the ECB to both satisfy markets clamoring for incremental easing and make a difference to the economy, all the while remaining inside its institutional setting and not destabilizing the financial system,” wrote Carl Weinberg, chief international economist at High Frequency Economics.

SUMMER HOT SPOTS

Europe’s government bonds barely budged, with investors largely happy to sit on their hands having seen their yields slumping since the start of the year.

U.S. yields did tick fractionally higher in response to the debt ceiling deal but Germany’s 10-year bond yield, the benchmark for the euro zone, was down a basis point, at minus 0.35% and not far from the record low -0.40% posted at the start of the month.

The next events to watch include a vote on Thursday in the Spanish parliament on the future government. Caretaker Prime Minister Pedro Sanchez failed in his first attempt on Tuesday to get parliament’s backing to form a government, leaving him two days to try and strike a deal with the far-left Unidas Podemos.

There was also a rumored meeting between the leaders of the two squabbling parties who make up Italy’s coalition government, 5-Star Movement’s Luigi Di Maio and League’s Matteo Salvini.

“Investors are waiting to see whether this government will survive,” said DZ Bank strategist Daniel Lenz. “One possibility is that the coalition continues but both agree to replace (Giuseppe) Conte as prime minister, which would be a very bad signal.”

Conte is widely seen as a moderating influence on the anti-establishment Italian government, particularly in terms of its relationship with Brussels.

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville/File Photo

In commodities, Brent crude edged lower to reach $63 per barrel, having shot up 1.2% the day before on concern over possible supply disruptions after Iran seized a British tanker last week. [O/R]

U.S. West Texas Intermediate crude slipped 23 cents to $55.99. “The response of oil prices to the seizure of a British oil tanker by armed Iranian forces near the Strait of Hormuz has been amazingly muted so far,” said Carsten Fritsch, analyst at Commerzbank.

“It appears that the majority of market participants are convinced that there will be no open conflict between the West and Iran.”

Additional reporting by Shinichi Saoshiro in Tokyo, Alex Lawyer and Abhinav Ramnarayan in London, editing by Larry King and Frances Kerry

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Oil jumps on U.S. plans to tighten Iran sanctions, dollar eases

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NEW YORK (Reuters) – Crude oil jumped almost 3% on Monday after the United States said it will tighten a clamp-down on Iranian oil exports in May while U.S. equities were little changed as Wall Street braced for corporate results in a busy earnings week.

FILE PHOTO: A trader works on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 18, 2019. REUTERS/Brendan McDermid

The dollar was little changed against a basket of currencies in thin holiday-impacted trading as gold held above a near four-month low on support from a weaker greenback.

The United States said it will eliminate in May all waivers that allowed eight countries to buy Iranian oil without facing U.S. sanctions, a move that sent oil prices to 2019 highs.Brent crude, the global benchmark, rose as much as 3.3 percent a barrel and was last up $1.98 to $73.95.

U.S. West Texas Intermediate crude climbed by as much as 2.9 percent to $65.87, the highest since Oct. 31. WTI was up $1.48 to $65.48 a barrel.

Another drop in Iranian exports would further squeeze supply in a market already tightened through the U.S. sanctions against Iran and fellow OPEC member Venezuela, plus voluntary cuts led by the Organization of the Petroleum Exporting Countries.

“This does bring a lot more uncertainty in terms of global supplies,” said Olivier Jakob, analyst at Petromatrix. “It is a bullish surprise for the market.”

Major financial markets in Europe were closed for Easter Monday, as were markets in Australia and Hong Kong.

Stocks on Wall Street hovered near break-even as the benchmark S&P 500 index was about 1% away from a record high hit in September, boosted in part by largely positive earnings in a market that had sharply lowered its expectations.

About one-third of the S&P 500 companies, including Boeing Co, Amazon.com Inc and Facebook Inc, will report this week.

The results will determine whether investors should be concerned about the start of an earnings recession or whether back-to-back quarters of negative growth can be avoided. [.N/O] S&P 500 profits are expected to drop 1.7% year-over-year, according to Refinitiv data, in what could be the first earnings contraction since 2016.

“The market knows and understands earnings are going to be markedly lower this quarter,” said Robert Almeida, global investment strategist at MFS Investment Management in Boston.

“It’s the beginning of the next turn in the cycle which is softer earnings,” Almeida said.

The Dow Jones Industrial Average fell 45.99 points, or 0.17%, to 26,513.55. The S&P 500 lost 1.32 points, or 0.05%, to 2,903.71 and the Nasdaq Composite dropped 2.85 points, or 0.04%, to 7,995.21.

Overnight in Asia shares slipped, pulled lower by underperforming Chinese stocks that retreated from a 13-month high. Comments from top policy-making bodies raised investor fears that Beijing will slow the pace of policy easing after some signs of stabilization in China.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.3%, edging away from a nine-month peak last week after Chinese economic data beat expectations and eased concerns about the health of the world economy.

The Shanghai Composite Index closed down 1.7 percent and Japan’s Nikkei edged up 0.08%.

The greenback has found support in recent weeks on the back of a gradual rise in U.S. 10-year Treasury yields and signs of strength in the world’s top economy, including better-than-expected retail sales in March.

The dollar index fell 0.16%, with the euro up 0.05% to $1.1252. The Japanese yen was flat versus the greenback at 111.94 per dollar.

FILE PHOTO – Pedestrians are reflected on an electronic board showing stock prices outside a brokerage in Tokyo, Japan December 27, 2018. REUTERS/Kim Kyung-Hoon

The Treasury yield curve steepened at the start of a busy week in which $237 billion of new U.S. government debt will be auctioned off.

The spread between the two- and 10-year note yields, the most common measure of the yield curve, steepens when longer-dated yields rise faster than shorter-dated yields, suggesting bullish investor sentiment.

Benchmark 10-year notes last fell 6/32 in price to yield 2.5777%.

Reporting by Herbert Lash; Editing by Susan Thomas

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