NEW DELHI, Dec 2 (Reuters) – If India needed any more proof that it was in the midst of a huge housing boom, it got in this week’s GDP data, heightening expectations that the industry will continue to power the economy for years to come.
The construction sector grew 13.3% in July-September from a year earlier, up from 7.9% in the previous quarter and its best performance in five quarters, the data released on Thursday showed.
That helped India expand at a forecast-beating 7.6%, making it one of the world’s fastest-growing major economies. In contrast, Western economies have been squeezed by high interest rates and energy prices, while China has been hobbled by a debt crisis in its property sector.
The long-awaited boom – which has created millions of jobs – comes after about six years of debt and pandemic-induced downturn before the construction sector began improving last year and hitting its stride this year. It has been driven by rising incomes for many Indians, a severe housing shortage in big cities and strong population growth.
The world’s most populous nation had an urban housing shortage of around 19 million units last year – and that is expected to double by 2030, according to government estimates.
“The robust growth in construction has significantly contributed to the economic growth – and is likely to play the same role in next couple of quarters,” said Sunil Sinha, an economist at India Ratings and Research, an arm of rating agency Fitch.
Builders are bullish long-term with many saying the boom could last two to three years and some even more optimistic.
“The housing market could continue to perform well for another three to four years,” Sanjeev Jain, managing director at Parsvnath Developers, a leading real estate company, noting that India is in the initial stages of a housing growth cycle.
Home sales in India’s seven largest cities, including Mumbai, New Delhi and Bangalore, rocketed 36% in the July-September quarter from a year earlier to more than 112,000 units, despite an 8%-18% increase in prices, according to real estate consultancy Anarock.
There was also a 24% increase in new residential projects being launched, data from the consultancy showed.
“The home sales are driven by first-time buyers, and nearly 80% of the houses have been bought by end users,” said Prashant Thakur, head of research at Anarock, adding that there was also strong demand from existing home owners to move to more spacious apartments.
In Mumbai, for example, demand has been strong despite an increase in interest rates of about two percentage points, according to Jayesh Rathod, director of Mumbai-based Guardian Real Estate Advisory.
His company has sold over 5,500 flats in Mumbai and on its outskirts in Thane so far this year, a jump of more than 50% compared to the same period a year ago, he said.
Underpinning demand has been salary hikes for workers in big cities. Average hikes for sectors such as e-commerce, healthcare, retail and logistics have remained above 10% for a second straight year, according to EY estimates.
Home prices in India are expected to rise faster than consumer inflation next year, according to a Reuters poll, with property analysts saying growth will be driven by higher earners snapping up newly built luxury residences in cities.
Housing demand has also picked up significantly in smaller cities in the southern states of Tamil Nadu, Karnataka and Prime Minister Narendra Modi’s home state of Gujarat, according to construction companies who say demand has been spurred by increases in incomes and the migration of workers from rural areas.
The government is also trying to boost the availability of affordable housing by providing subsidies, which is encouraging construction in India’s smaller towns and cities.
Shares in property companies have naturally surged.
The Nifty realty index (.NIFTYREAL) is up some 67% for the year to date compared with a 12% gain for the blue-chip Nifty 50 index.
Notable gainers include Prestige Estates Projects (PREG.NS) which has jumped some 120%, DLF (DLF.NS) which has climbed 67% and Godrej Properties (GODR.NS) which is up 52%.
($1 = 83.3143 Indian rupees)
Reporting by Manoj Kumar, Additional reporting by Nigam Prusty; Editing by Ira Dugal and Edwina Gibbs
Our Standards: The Thomson Reuters Trust Principles.
LONDON, Nov 16 (Reuters) – World stocks fell for the first time in five sessions, oil slipped and the dollar saw a slight lift on Thursday, as markets continued to acclimatize to falling borrowing costs after nearly two years of relentless gains.
Europe’s moves saw the STOXX 600 (.STOXX) slip from a more than one-month high, Wall Street look set for an early dip, and Taiwan’s dollar rise after China’s President Xi Jinping and U.S. counterpart Joe Biden agreed to reopen key military communications channels between the two superpowers.
Xi also underscored the point by saying China would not “fight a cold war or a hot war with anyone”.
Global markets have rallied sharply this month as inflation data out of the United States and parts of Europe, such as Britain, have reinforced hopes that major central banks are now done raising borrowing costs.
Robust U.S. retail sales figures on Wednesday were a reminder that it might not be a straight line move, however, with the focus now squarely on weekly U.S. jobless claims data later and a monthly euro zone inflation print on Friday.
“If you don’t get confirmation of the slowing economic direction from every single piece of data every single day we risk running out of momentum on the big trades,” Societe Generale FX strategist, Kit Juckes, said.
“Until we get to the point where rate cuts are just around the corner, everything is going to be very stop-start. The dollar sell-off is stop-start, the bond market rally is really stop-start and the equity market is all over the place.”
Key government bond market borrowing costs resumed their broad downward trend on Thursday, driven by increasing confidence that rate cuts are coming next year.
Germany’s 10-year bond yield dipped to 2.62% but held above the previous day’s two-month low of 2.568%, while sterling sank to a six-month low against the euro as dealers in London inched closer their predictions on when the Bank of England (BoE) will start cutting rates. EUR/GVD
Many now think it might be as soon as May although BoE policymaker Meg Greene warned on Thursday that investors are missing the message that central banks have been pushing recently that interest rates will remain higher for longer.
“I think markets globally haven’t really clocked on to this,” Greene told Bloomberg Television, adding that the BoE was not talking about cutting rates.
CHINA PROPERTY
Asian stocks fell overnight as new Chinese data showed continued weakness in its problem-hit property sector which dented recent optimism about a recovery in the world’s second-largest economy.
While data this week showed China’s industrial and retail sectors are now making a comeback, figures have also shown a sharp drop in property investment and weak home prices, underscoring the ongoing drag the sector is having.
There was mixed news from Japan too, where exports grew for a second straight month in October but at a sharply slower pace due to slumping China-bound shipments of chips and steel.
“The weak economic data from both countries indicate the fact that the global economy is slowing down, highlighting ongoing macro headwinds that businesses face,” said Tina Teng, market analyst at CMC Markets.
XI AND BIDEN
Australian shares (.AXJO) ended their day down 0.7% as strong wage data indicated that inflationary pressures there are still running high.
Japan’s Nikkei (.N225) dipped 0.3%, moving into reverse after it, along with the main MSCI Asian and emerging market indexes, all posted their biggest gains in a year on Wednesday.
Chinese stocks showed some disappointment at Xi and Biden’s first meeting in years, with Shanghai’s blue-chip CSI300 index (.CSI300) closing down 1% and Hong Kong’s Hang Seng index (.HSI) ending 1.3% lower.
While the two leaders agreed to resume military-to-military communications and cooperate on anti-drug policies, a sign ties are improving, some investors were disappointed at a lack of other breakthroughs in the talks.
The MSCI main 47-country global stocks index (.MIWD00000PUS) was down for the first time in five sessions after a near 8% surge this month.
Wall Street futures pointed to a slightly weaker start there too, although there was modest relief that the Senate had overwhelmingly approved a temporary funding measure to avert another U.S. government shutdown for now.
Money market traders have now fully priced in that the Federal Reserve will keep U.S. interest rates steady in December. They see the first rate cut of the cycle in May.
The yield on benchmark 10-year Treasury notes was back under 4.5% compared with its U.S. close of 4.537% on Wednesday. The two-year yield hovered at 4.88% compared with a U.S. close of 4.916%.
In currencies, the euro was flat at $1.0848, having gained 2.5% in a month, while the dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was fractionally higher.
Oil traders, meanwhile, nudged U.S. crude down 0.3% to $76.55 a barrel. Brent crude was at $80.90 per barrel while safe-haven gold was slightly higher at $1,965 per ounce .
Additional reporting by Julie Zhu in Hong Kong; Editing by Christina Fincher and Mark Potter
Our Standards: The Thomson Reuters Trust Principles.
A man looks at an electric board displaying the Nikkei stock average outside a brokerage in Tokyo, Japan June 14, 2023. REUTERS/Kim Kyung-Hoon/File Photo Acquire Licensing Rights
SYDNEY, Nov 9 (Reuters) – Asian share markets rallied on Thursday and the dollar firmed, even as global investors again sold off the troubled mainland Chinese property sector.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up 0.1%, and is up 4.3% so far this month.
The yield on benchmark 10-year Treasury notes reached 4.4902% compared with their U.S. close of 4.508% on Wednesday.
The two-year yield , which rises with traders’ expectations of higher Fed fund rates, touched 4.9277% compared with a U.S. close of 4.936%.
Australian shares (.AXJO) were up 0.26%, while Japan’s Nikkei stock index (.N225) rose 1.53%.
Hong Kong’s Hang Seng Index (.HSI) reversed an early gain and was down 0.25% in the afternoon while China’s bluechip CSI300 Index (.CSI300) was 0.1% higher.
China’s troubled property sector is being closely watched on Thursday after most major stocks rallied one day earlier following a Reuters report that Ping An Insurance Group had been asked by the Chinese authorities to take a controlling stake in Country Garden Holdings (2007.HK) .
A spokesperson for Ping An (601318.SS) said the company had not been approached by the government and denied the Reuters report that cited four sources familiar with the plan.
The Hang Seng Mainland Properties Index (.HSMPI) shed 3.73% on Thursday and the Hang Seng Properties Index (.HSNP), which covers Hong Kong developers, was down 0.7%.
“I think for equities investors, they are still shying away from Chinese property because there are so many unknowns,” said Jason Lui, BNP Paribas’s Head of APAC Equity & Derivative Strategy.
“It’s difficult to ask investors to go back to pre-property downturn days, fundamentally property is going to play a very different role in Chinese economic development going forward.
“Property needs to stop being a drag on GDP and sentiment so investors can move on to the real growth drivers.”
In early European trades, the pan-region Euro Stoxx 50 futures were up 0.1%, German DAX futures were down 0.05%, FTSE futures were down 0.16% at 7,401.5,
U.S. stock futures, the S&P 500 e-minis , were down 0.06% at 4,396.8.
Chinese inflation figures for October published on Thursday showed a 0.1% decline compared to September and a 0.2% fall from one year, according to official statistics.
The dollar dropped 0.03% against the yen to 150.93 . It is moving back towards its high this year of 151.74 on Oct. 31.
The European single currency was up 0.0% on the day at $1.0708, having gained 1.25% in a month, while the dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was up at 105.51.
The dollar has rebounded from last week’s sharp sell-off on rising confidence the Fed has ended raising rates. There is less agreement on whether a rate cut is on the horizon with inflation still above the U.S. Federal Reserve’s 2% target.
On Wall Street, the S&P 500 (.SPX) rose 0.10% and the Nasdaq Composite (.IXIC) added 0.08%. The Dow Jones Industrial Average (.DJI) fell 0.12%.
The S&P 500 rose for the eighth consecutive day, extending its longest win streak in two years.
The Federal Reserve last week kept the benchmark overnight interest rate in the current 5.25%-5.50% range and the central bank is due to meet again mid next month.
The U.S weekly jobless claims published on Thursday will be closely watched as an indicator of the how the country’s labour market is performing. Economists predict claims will reach 219,000 after coming in at 217,000 last week.
Oil prices slid over 2% on Wednesday to their lowest in more than three months on concerns over waning demand in the U.S. and China.
In Asian trading Thursday, U.S. crude ticked up 0.15% to $75.44 a barrel. Brent crude rose to $79.68 per barrel.
Gold was slightly lower. Spot gold was traded at $1948.9332 per ounce.
Reporting by Scott Murdoch; Editing by Tom Hogue and Stephen Coates
Our Standards: The Thomson Reuters Trust Principles.
A look at the day ahead in U.S. and global markets from Mike Dolan
A more modest yearend schedule of Treasury debt sales than many feared helped bonds rally overnight while the Bank of Japan closed out a scary October for world markets on Tuesday with another modest tightening tweak.
A hectic Halloween of policy meetings, big macro reports and another slew of company earnings is seeing most world markets shave off the sharpest edges of a rough month, just as the Federal Reserve kicks off its latest two-day gathering.
But relief in Treasuries, the villain of the piece for several weeks, is probably the most significant marker for the remainder of the year.
On Monday, the U.S. Treasury said it expects to borrow $776 billion in the fourth quarter of the year, less than $852 billion it has previously indicated and below Wall St forecasts.
Officials said the reduced tally was down to an increased revenue estimate and that was mainly because tax payments from California and other states that had been previously deferred due to natural disasters were now flowing to Treasury coffers.
Given that the announcement in July of third-quarter borrowing of more than trillion dollars was largely responsible for the bond market selloff since, the more benign forecast for the final three months dragged 10-year benchmark yields back further from bruising 16-year peaks above 5%.
With hopes the resurfaced risk premium for holding long-term debt may ease as a result, 10-year yields were as low as 4.82% on Tuesday – some 20 basis points off recent highs.
Even though the Bank of Japan further loosened its grip on long-term interest rates on Tuesday by re-defining 1.0% as a loose “upper bound” rather than a rigid cap, markets took some solace it wasn’t more draconian. Even though 10-year Japanese government yields jumped as much as 7bps to 0.96%, the yen weakened again sharply past 150 per dollar and the Nikkei 225 index of leading stocks rose (.N225).
And there were further soothing noises for world bonds, even if not for global growth, from surprisingly weak Chinese business surveys for October. Chinese stocks (.CSI300) underperformed and closed lower yet again.
Adding to the mix on Monday was a retreat in crude oil prices to their lowest since the October 7 attacks on Israel, as Israel’s land invasion into Gaza advanced slowly and pressure to up stuttering humanitarian aid to the besieged citizens there increased.
Crude prices steadied around $83 per barrel on Tuesday, with market speculation about a rise in U.S. shale oil output circulating following recent major acquisitions by Big Oil firms.
In Europe, falling energy stocks (.SXEP) bucked a more positive wider market due to a 4.2% fall in BP (BP.L) after third-quarter earnings missed analysts’ forecasts.
Overall, the picture pointed to another positive day for Wall Street stocks, with futures marginally positive ahead of the open as the Fed meeting gets underway. The S&P500 (.SPX) rebounded after an awful month on Monday to clock its best day’s gain since August – but it remains on course to record its third straight month of losses since 2020.
The U.S. central bank is expected to leave policy rates unchanged again on Wednesday as it assess the final-quarter trajectory of inflation and the economy after a bumper Q3.
With the October jobs report due Friday, the latest consumer confidence reading for this month tops the economic diary on Tuesday in the meantime. The likes of pharma giant Pfizer and construction bellwether Caterpillar are on a heavy earnings slate.
In other positive news, General Motors (GM.N) and the United Auto Workers struck a tentative deal late on Monday, ending the union’s unprecedented six-week campaign of coordinated strikes that won record pay increases for workers at the Detroit Three automakers.
Key developments that should provide more direction to U.S. markets later on Tuesday:
* U.S. Oct consumer confidence, Oct Chicago business survey, Oct Dallas Fed service sector survey, Q3 employment costs, Aug house prices
* Federal Reserve starts 2-day policy meeting
* U.S. corporate earnings: Pfizer, Caterpillar, AMD, Amcor, Amgen, Marathon, MSCI, Caesars, Global Payments, Sysco, Eaton, Franklin Resources, Allegion, Assurant, AMETEK, Equity Residential, GE Healthcare, First Solar, Incyte, Paycom, Match, Bio-Techne, WEC Energy, Hubbell, Echolab, Zebra, ONEOK, Xylem
* U.S. Treasury auctions 12-month bills
By Mike Dolan, editing by Christina Fincher, <a href=”mailto:mike.dolan@thomsonreuters.com” target=”_blank”>mike.dolan@thomsonreuters.com</a>. Twitter: @reutersMikeD
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
An electronic board shows Shanghai and Shenzhen stock indexes, at the Lujiazui financial district in Shanghai, China October 25, 2022. REUTERS/Aly Song/File Photo Acquire Licensing Rights
SINGAPORE, Oct 19 (Reuters) – Asian shares slid on Thursday as risk aversion prevailed due to mounting worries over Middle East conflict, while the bond sell-off intensified, taking Treasury yields to fresh 16-year highs ahead of a keenly awaited speech from Fed Chair Jerome Powell.
Investors sought safer assets, keeping gold prices near two-month peaks and the dollar firm. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 1.42%.
The broad sell-off in U.S. Treasuries continued into Asian hours with the yield on 10-year notes touching a fresh 16-year high as investors come to grips with the Federal Reserve’s messaging that interest rates may stay higher for longer. Yields rise when bond prices fall.
The gloomy mood is likely to continue as Europe wakes up. Futures indicated stock markets in the region were set for a lower open, with the Eurostoxx 50 futures down 0.61%, German DAX futures down 0.59% and FTSE futures 0.35% lower.
U.S. President Joe Biden pledged to help Israel and the Palestinians during a lightning visit on Wednesday.
The region remained volatile in the aftermath of an explosion at Gaza’s Al-Ahli al-Arabi hospital late on Tuesday, which Palestinian officials said killed 471 people and blamed on what they said was an Israeli air strike. Israel and the U.S. said the cause was a failed rocket launch by Islamist militants in Gaza who denied responsibility.
“It’s a fairly messy, uncertain situation at present,” said Shane Oliver, head of investment strategy and chief economist at AMP in Sydney. “If the conflict remains limited to Israel, that’ll be terrible but markets will learn to live with it as they have with the Ukraine war.”
“If alternatively it expands to encompass key oil producers, notably Iran – which is where the risk is highest – that would be a major problem,” said Oliver.
Oil prices eased on Thursday after OPEC showed no signs of supporting Iran’s call for an oil embargo on Israel and as the United States plans to ease Venezuela sanctions to allow more oil to flow globally.
Oil prices had skipped 2% higher in the previous session on worries over disruptions to global supplies.
Meanwhile, investor concerns of geopolitical risks after a widening U.S. chip export ban cast a shadow over Chinese stocks despite some good news from a flurry of data on Wednesday that underscored an economy that was showing signs of stabilising.
Worries over China’s property sector have also kept investors jittery.
Bondholders of Country Garden (2007.HK) are seeking urgent talks with the company and its advisers after the troubled property developer missed a $15 million coupon repayment, putting it at risk of default, three sources told Reuters.
China’s blue-chip stock index CSI300 (.CSI300) fell 1.61%, while the Hang Seng Index (.HSI) sank 2%. Japan’s Nikkei (.N225) sank 1.58%.
AWAITING POWELL
The spotlight will now be on Fed Chair Jerome Powell, who will take the podium in New York on Thursday with his colleagues at the U.S. central bank in apparent agreement to hold interest rates unchanged at their next meeting in two weeks.
A Reuters poll of economists indicated the Federal Reserve will keep its key interest rate on hold on Nov. 1 and may wait longer than previously thought before cutting it.
While a slight majority still see a cut before the middle of 2024, a significant minority of forecasters, around 45%, now see no rate reduction until the second half of next year or later, up from 29% in the last poll.
“I think he (Powell) will hedge his bets in this environment,” said AMP’s Oliver, noting that Powell will likely reinforce the higher for longer view.
The yield on 10-year Treasury notes was up 6.4 basis points to 4.966%, touching highest since mid-2007.
The dollar index , which measures U.S. currency against six rivals, rose 0.056%%. The Japanese yen was at 149.80 per dollar.
U.S. crude eased 0.16% to $88.18 per barrel and Brent was at $91.11, down 0.43% on the day.
Spot gold was at $1,948.42 per ounce, just shy of $1,962.39 its highest since Aug. 1 touched earlier this week. Gold prices are up 6% in the past two weeks.
Reporting by Ankur Banerjee; Editing by Christopher Cushing and Lincoln Feast.
Our Standards: The Thomson Reuters Trust Principles.
[1/2]The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 26, 2023. REUTERS/Staff/File Photo Acquire Licensing Rights
LONDON/HONG KONG, Sept 27 (Reuters) – Global stocks inched higher on Wednesday as investors found a footing after a sharp sell-off the previous day, while U.S. Treasury yields dipped after hitting their highest level since 2007.
Stocks and bonds have dropped in recent weeks as investors come to terms with the idea that central banks will hold interest rates “higher for longer” than previously expected, as officials try to squeeze inflation out of economies.
The Europe-wide STOXX 600 index (.STOXX) was up 0.2% on Wednesday, after falling 0.6% in the previous session in its fourth straight daily drop.
MSCI’s index of global stocks (.MIWD00000PUS) was little changed after falling 1.2% the previous day. The index has fallen 4.5% since the start of September.
Germany’s Dax index (.GDAXI) was up 0.05% while Britain’s FTSE 100 (.FTSE) was flat. In Asia overnight, Japan’s Nikkei 225 index (.N225) rose 0.18%.
At the root of the recent equity sell-off, said Jan von Gerich, chief analyst at Nordea, has been a sharp rise in bond yields as traders have cut their bets that central banks will lower interest rates any time soon.
“The latest catalyst has been the increase in bond yields, so if that stabilises then maybe the equity market stabilises as well,” he said.
“The big picture outlook is that we’re probably close to the peak (in bond yields) but the near-term momentum is still upwards.”
On Wednesday, the yield on the 10-year U.S. Treasury note was down 5 basis points to 4.507%, after touching its highest level since October 2007 on Tuesday at 4.566%. A bond’s yield rises as its price falls, and vice versa.
Also on investors’ minds is a looming U.S. government shutdown; further signs of an economic slump in China; and a recent rise in oil prices.
U.S. equity futures picked up as bond yields fell, with contracts for the benchmark S&P 500 stock index 0.43% higher. Dow Jones futures were 0.35% higher while Nasdaq futures were up 0.46%.
The Dow posted its biggest one-day percentage drop since March on Tuesday, while all three major averages ended at their lowest closing levels in well over three months.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was 0.12% higher. The index is down 3.7% so far this month.
Chinese corporate health was a focal point. Profits at China’s industrial firms fell 11.7% in the first eight months of the year, albeit a smaller decline than the 15.5% drop for the first seven months.
“The stabilising industrial profits are simply not significant enough to override concerns about risks, especially in real estate,” said Gary Ng, Asia Pacific senior economist at Natixis.
As stress spreads in the Chinese property sector, Bloomberg reported that the chairman of beleaguered Chinese property group Evergrande has been placed under police surveillance.
The dollar index , which tracks the greenback against a basket of currencies, was roughly flat at 106.2. It climbed to 106.32 earlier in the session, its highest since Nov. 30.
U.S. crude oil was 1.14% higher to $91.42 a barrel. Brent crude rose 0.85% to $94.76 per barrel.
The U.S. Senate on Tuesday took a step forward on a bipartisan bill meant to stop the government from shutting down in just five days, but the House remains hamstrung by divisions between Republican members.
Meanwhile, investors were also on the lookout for government intervention in the Japanese yen after it fell past the 149 per dollar mark on Tuesday for the first time in just under a year.
Reporting by Harry Robertson in London and Julie Zhu in Hong Kong; Editing by Jamie Freed, Edwina Gibbs and Anil D’Silva
Our Standards: The Thomson Reuters Trust Principles.
A look at the day ahead in U.S. and global markets by Mike Dolan
A renewed surge in long-term Treasury yields is stifling world markets yet again as Federal Reserve officials hang tough on one more rate rise, some $134 billion of new government debt sales hit this week and a government shutdown looms.
The yield spike has supercharged the U.S. dollar worldwide – both a reflection and aggravator of mounting financial stress far and wide.
Despite wariness of Bank of Japan intervention, the dollar/yen exchange rate hit its highest for the year on Tuesday – as did the dollar’s DXY (.DXY) index and the dollar’s rate against the South Korea’s won . Sterling hit a 6-month low.
Treasury tremors continue to reverberate from last week’s upgraded Fed forecasts, its insistence on signalling one more rate rise in the current tightening cycle and an uncompromising ‘higher-for-longer’ mantra.
Short term Fed futures haven’t moved much. All the action is in longer-dated U.S. Treasuries, which may now be repricing the economy’s resilience over multiple years and more persistent inflation pressures.
Ten-year Treasury yields , which have added a whopping 25 basis points in just a week, hit another 16-year high at 4.5660% early on Tuesday. As Deutsche Bank notes, this is historically significant territory as the average of the 10-year yield going back to 1799 is around 4.50%.
Thirty-year bond yields , meantime, have jumped over 30bp in a week to a 12-year high of 4.6840%.
And as an indication of how the long-term sustainable interest rate structure as whole is being re-thought, the 10-year real, inflation-adjusted yield has also leaped 26bp to 2.20% – its highest since 2009.
Significantly, this is shifting the deeply-inverted 2-to-10 year yield gap – which has for more than a year indicated recession ahead but which now looks to be closing that negative spread to its smallest since May.
The latest wobble – which has seen exchange-traded funds in U.S. Treasuries deepen year-to-date losses to more than 6% and losses over three years to more than 20% – comes as another heavy supply of new paper goes up for auction this week.
The Treasury sells $48 billion in two-year notes on Tuesday, $49 billion in five-year paper on Wednesday and $37 billion in seven-year notes on Thursday.
A government shutdown from this weekend is still looming with no budget deal in Congress yet to avert it and Moody’s warning of sovereign credit rating implications.
The Fed seems in no mood to calm the horses.
Minneapolis Fed Bank President Neel Kashkari said on Monday the Fed probably needs to raise borrowing rates further.
“If the economy is fundamentally much stronger than we realized, on the margin, that would tell me rates probably have to go a little bit higher, and then be held higher for longer to cool things off,” Said Kashkari.
Even a typically more dovish Chicago Fed boss Austan Goolsbee sounded hawkish. “The risk of inflation staying higher than where we want it is the bigger risk,” he said, adding the Fed would now have to “play by ear” in conducting policy.
Private sector bankers are starting to brace for the worst, with JP Morgan chief Jamie Dimon reported overnight as warning: “I am not sure if the world is prepared for 7% (Fed rates).”
Even though the European Central Bank seems shier of even higher rates, the higher-for-longer message there too is clear. ECB chief Christine Lagarde said on Monday the central bank can meet its 2% inflation target if record high rates are maintained for “a sufficiently long duration.”
In a thin data diary on Monday, the Dallas Fed’s September manufacturing survey showed a deterioration of activity there this month. The Chicago Fed’s national business poll for August also fell.
And a retreat in energy prices would have soothed some inflation worries, with U.S. crude falling back to $88 per barrel for the first time in almost two weeks,
Nationwide consumer confidence tops the slate on Tuesday.
Despite a late rally in Wall St stocks on Monday, futures are back about 0.5% in the red – as were bourses in Asia and Europe as the end of the third quarter hoves into view on Friday.
China Evergrande (3333.HK) shares slid for a second day, dropping as much as 8% after a unit of the embattled property developer missed an onshore bond repayment.
There was no sign of a breakthrough in the widening U.S. autoworkers labor dispute, seen as inflationary by some due to potential supply outages.
Key developments that should provide more direction to U.S. markets later on Tuesday:
* US Sept consumer confidence, US Aug new home sales, July house prices, Richmond Fed Sept business survey, Dallas Fed Sept service sector survey, Philadelphia Fed Sept services survey
* Federal Reserve Board Governor Michelle Bowman gives pre-recorded remarks to Washington conference
* U.S. Treasury auctions $48 billion of 2-year notes
* U.S. corporate earnings: Costco, Cintas
Reporting by Mike Dolan; Editing by Christina Fincher
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
TOKYO, Sept 19 (Reuters) – Asian shares sank on Tuesday as worries about the Chinese property sector weighed on markets from Hong Kong to Australia, while Japanese investors sold chip stocks on their return from a holiday-extended weekend.
Benchmark U.S. Treasury yields hovered near 16-year peaks and the dollar held close to six-month highs as traders braced for a Federal Reserve rate decision on Wednesday, in a week that also sees policy decisions from the Bank of Japan and Bank of England, among others.
Crude oil continued its rally amid tightening supply, stoking worries about stagflation.
MSCI’s broadest index of Asia-Pacific shares (.MIAP00000PUS) slipped 0.3%.
Japan’s Nikkei (.N225) tumbled 1.1% under the weight of big losses for chip-related stocks including Tokyo Electron (8035.T) and Advantest (6857.T).
Japanese markets were closed Monday, when Asian tech stocks sold off following a Reuters report that TSMC (2330.TW) had asked its major vendors to delay deliveries.
That stock sank 0.4% on Tuesday, flipping from an earlier gain of as much as 0.6%. It tumbled 3.2% on Monday.
John Pearce, CIO at Unisuper, called the TSMC news “surprising.”
“The one thing you were almost certain of was that demand for semiconductors was only one way,” he said.
Hong Kong’s Hang Seng (.HSI) declined 0.1%, with a subindex of tech stocks (.HSTECH) sliding 0.6%. An index of mainland blue chips (.CSI300) fell 0.3%.
Chinese property stocks were volatile, with a subindex of Hang Seng developers (.HSMPI) dropping as much as 1.2% at one point, before flipping to positive territory around lunchtime, although it was last off 0.4%.
Australia’s stock benchmark (.AXJO) dropped 0.4%, sagging under the weight of mining stocks (.AXMM) amid pessimism over Chinese demand.
Providing some rays of hope, though, Country Garden (2007.HK) won approval from creditors to extend repayment on another onshore bond, the last in the batch of eight bonds it has been seeking extensions for, sources said.
Peer Sunac China Holdings (1918.HK) got creditor approval for its $9 billion offshore debt restructuring plan, the first green light of a debt overhaul by a major Chinese developer.
Weakness in Asian equities weighed on U.S. stock futures , which pointed 0.1% lower. Pan-European Stoxx 50 futures were flat.
Currency markets were subdued, with the U.S. dollar index – which measures the currency against six major peers – rising 0.09% to 105.17, edging back toward last week’s six-month peak of 105.43.
The dollar added 0.1% to 147.75 yen , bringing it closer to last week’s 10-month top of 147.95.
The euro eased 0.1% to $1.0679.
Ten-year yields were little changed at just above 4.31%, holding close to the 4.366% level reached on Aug. 22, which was the highest since 2007.
“You can’t blame people for keeping to the sidelines for now,” with the Fed headlining a parade of central bank meetings this week, Kyle Rodda, senior financial market analyst at Capital.com, wrote in a note.
“Given the variability in outcomes, there will inevitably be crosscurrents in the markets,” Rodda said. “Price action could be choppy, with risk needing to be managed more carefully.”
Traders are all but certain the Fed will leave rates steady again at the conclusion of a two-day meeting that begins later Tuesday, but are split on the chances on another quarter-point increase by year-end.
Fed officials will also release their latest predictions on the economy and where rates are likely to be over the coming quarters.
Meanwhile, oil prices rose in early trade on Tuesday for the fourth consecutive session, as weak shale output in the U.S. spurred further concerns about a supply deficit stemming from extended production cuts by Saudi Arabia and Russia.
U.S. West Texas Intermediate crude futures rose 99 cents, or 1.1%, to $92.47, while global oil benchmark Brent crude futures rose 58 cents, or 0.61%, to $95.01 a barrel.
“Given how supply-constrained energy markets are likely to become, especially amidst harsher weather approaching the end of the year, higher oil prices are both an upside risk to inflation and a downside risk to growth,” Capital.com’s Rodda said.
“Markets that don’t export energy and suffer from energy insecurity could underperform.”
Reporting by Kevin Buckland; Additional reporting by Lewis Jackson; Editing by Stephen Coates
Our Standards: The Thomson Reuters Trust Principles.
A woman walks past a screen displaying the Hang Seng Index at Central district, in Hong Kong, China March 21, 2023. REUTERS/Tyrone Siu/File Photo Acquire Licensing Rights
SYDNEY, Sept 18 (Reuters) – Asian shares fell and the dollar was firm on Monday as investors looked ahead to policy meetings from the Federal Reserve, the Bank of Japan and other central banks this week.
Europe is set for a subdued open, with EUROSTOXX 50 futures off 0.1%. S&P 500 futures advanced 0.2% while Nasdaq futures edged up 0.1%.
Oil prices hit fresh 10-month peaks, further stoking inflationary pressures. U.S. West Texas Intermediate crude futures gained 0.8% to $91.52, their highest level since November, while Brent crude futures rose 0.7% to $94.55 per barrel.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.7%. Japan’s Nikkei (.N225) is closed for a public holiday.
Technology shares in the region retreated, with Taiwan’s TSMC (2330.TW), the world’s top contract chipmaker, falling 3% after Reuters reported that it has told its major suppliers to delay the delivery of high-end chipmaking equipment
In China, better-than-expected factory output and retail sales in the world’s second largest economy have aided Chinese bluechips (.CSI300) which were up 0.4%.
But property sector woes dragged Hong Kong’s Hang Seng (.HSI) 1% lower.
Zhongrong International Trust, which has exposure to Chinese property developers, said over the weekend it was unable to make payments on some trust products on time.
“Despite the encouraging sign of stabilization, the property market continues to be the missing puzzle piece in the economic picture,” said Tommy Xie, head of Greater China Research at OCBC Bank.
“The on-the-ground feedback indicates a rise in property viewing activities; however, most prospective buyers are not in a hurry to finalize deals due to the increasing supply of apartments post relaxation.”
Shares in embattled China Evergrande Group (3333.HK) fell as much as 25% after police in southern China detained some staff at its wealth management unit, though they later pared losses to be down 1.6%.
This week, global central banks will take centre stage, with five of those overseeing the 10 most heavily traded currencies holding rate-setting meetings. A swathe of emerging market central banks will also hold meetings.
Markets are fully priced for a second straight pause from the Fed on Wednesday, with its targeted range expected to be unchanged at 5.25% to 5.5%, so the focus will be on the updated economic and rates projections. They see about 80 basis points of cuts next year.
“In theory, the FOMC meeting should be a low-volatility affair, but it is a risk that needs to be managed,” said Chris Weston, head of research at Pepperstone.
Weston added that if the Fed revises up its rate projections for 2024, that would see rate cuts being priced out, resulting in renewed interest in the U.S. dollar and downward pressure on global shares.
On Thursday, Bank of England is tipped to hike for the 15th time and take benchmark borrowing costs to 5.5%.
Bank of Japan is the key risk event on Friday. Markets are looking for any signs that the BOJ could be moving away from its ultra-loose policy faster than previously thought, after recent comments by Governor Kazuo Ueda sent yields much higher.
Last Friday, Wall Street ended sharply lower as U.S. industrial labour action weighed on auto shares. Rising Treasury yields also pressured Amazon (AMZN.O) and other megacap growth companies.
Cash Treasuries were not traded in Asia with Tokyo shut. Treasury yields edged higher on Friday, with the two-year above the 5% threshold.
In the currency markets, the U.S. dollar was still standing strong near its six-month top at 105.25 against a basket of major currencies.
The euro gained 0.1% to $1.0667, after slumping to a 3-1/2 month low of $1.0632 last week as the European Central Bank signalled its rate hikes could be over.
The price of gold was 0.2% higher at $1,928.13 per ounce.
Reporting by Stella Qiu; Editing by Shri Navaratnam and Edwina Gibbs
Our Standards: The Thomson Reuters Trust Principles.
SYDNEY, Sept 11 (Reuters) – Asia stock markets started to turn positive later on Monday even though investors in China sold off shares in property developers, remaining unconvinced by authorities’ efforts to revive activity in the mainland real estate market.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) reversed earlier losses and was up 0.3%, after U.S. stocks ended the previous session with mild gains.
Australian shares (.AXJO) gained 0.36% and Japan’s Nikkei stock index (.N225) slid 0.49%.
The yen appreciated sharply against the dollar after Bank of Japan governor Kazuo Ueda stoked hopes the central bank could soon see a shift away from negative rates.
The dollar on Monday dropped 1.12% to 146.16 yen and it remains some way off its high this year of 147.87 reached earlier this month.
In Hong Kong, the Hang Seng Index (.HSI) halved its loss from earlier in the day to be off 0.66% by the afternoon session, as investors remained wary of China’s troubled property sector.
A more positive tone was seen across futures markets which pointed towards a better start for most major European indexes.
In early trades, Euro Stoxx 50 futures were up 0.26%, German DAX futures were up 0.17% and FTSE futures were up 0.29%
U.S. stock futures, the S&P 500 e-minis , were up 0.24% at 4,472.3.
Hong Kong’s Hang Seng Property Index (.HSNP), a gauge of Hong Kong’s top developers, was still down 3.24% while the mainland property index (.HSMPI) was off 1.9%. It was earlier more than 3% in the red.
“We need the property market to stabilize first in order for any meaningful kind of economic rebound to happen in China,” said David Chao, Invesco’s Asia Pacific market strategist.
In recent weeks China’s authorities – including the housing ministry, central bank and financial regulator – have rolled out a series of measures, such as easing borrowing rules, to support the debt-riddled property sector, and there are some expectations for more steps to revive demand in major cities like Beijing, Shanghai and Shenzhen.
Hong Kong stocks were also dampened as e-commerce giant Alibaba Group (9988.HK) dropped 2.5% on the surprise departure of outgoing CEO Daniel Zhang from its cloud unit.
China’s bluechip CSI300 Index (.CSI300) rallied during the session and was up 1.23% as investors expected more economic stimulus.
“In the near term investors are cautious towards China but we are quite encouraged that the policies have turned from more piecemeal to more targeted in the past few weeks, especially with property,” said Marcella Chow, JPMorgan Asset Management market strategist said.
In the United States, the Consumer Price Index (CPI) for August, due out on Wednesday, is expected to rise 0.6% month-on-month for August, which would take the year on year rate to 3.6%, according to a Wells Fargo research note.
Investors are pricing in a 93% probability that the Fed will keep rates at current levels after its next meeting ends on Sept. 20 but only a 53.5% change for another pause at the November meeting, according to CME group’s FedWatch Tool.
The yield on benchmark 10-year Treasury notes rose to 4.294% compared with its U.S. close of 4.256% on Friday. The two-year yield , which rises with traders’ expectations of higher Fed fund rates, touched 4.9948% compared with a U.S. close of 4.984%.
The European single currency was up 0.3% on the day at $1.0709, having lost 1.09% in a month, while the dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was down 0.23% at 104.61.
In China, there was an easing of deflationary pressures with consumer price index (CPI) rising 0.1% in August from a year earlier. That was slower than the median estimate for a 0.2% increase in a Reuters poll but much stronger than a 0.3% decline in July.
China also had its smallest drop in factory prices in five months. The producer price index fell 3.0% from a year earlier, in line with expectations, after a drop of 4.4% in July.
China’s central bank yanked the yuan off a 16-year low against the dollar on Monday by setting a daily midpoint guidance rate with the strongest bias on record, signaling increasing discomfort with the currency’s recent weakness.
In the spot market, the onshore yuan was changing hands at 7.3245 per dollar at 0210 GMT, after hitting 7.3510 on Friday, which as 6.1% down from the start of the year and a level last seen during the global financial crisis.
U.S. crude dipped 0.19% to $87.34 a barrel. Brent crude shifted into positive territory to be up 0.2% $90.80 per barrel.
Spot gold was trading slightly higher at $1,927.08 per ounce.
Reporting by Scott Murdoch in Sydney; Editing by Edwina Gibbs & Simon Cameron-Moore
Our Standards: The Thomson Reuters Trust Principles.
