China woes threaten European open

Sluggish economic data from China is set to weigh on European shares a little at the open – stop us if you’ve heard this one before in the past few weeks.

Euro STOXX 50 futures are down 0.3% with FTSE futures down 0.44%, following declines in Asian stocks and currencies after data that showed China’s services activity expanded at the slowest pace in eight months in August.

Also in the mix were oil prices, after Brent touched its highest level this year on Monday, above USD 89 a barrel.

In company news, Novartis confirmed it plans to spin-off its generic medicines division on October 4, as it published half-year results for the division, showing net third-party sales of USD 4.8 billion in the first half of the year.

Elsewhere, the initial public offering (IPO) of Renault’s Ampere electric vehicle division could get a valuation of up to 10 billion euros (USD 10.8 billion), Chief Executive Luca de Meo told the Financial Times.

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Morning Bid Europe–China optimism dissipates after weak data

Investor sentiment on China remains fragile, with Monday’s wave of optimism giving way on Tuesday to rekindled worries about the world’s second-biggest economy, after the release of a new set of weak data.

The Caixin PMI showed on Tuesday that China’s services activity in August expanded at the slowest pace in eight months, with sluggish demand continuing to dog the economy while stimulus has so far failed to meaningfully revive consumption.

The data, broadly in line with the official services PMI released last week, dragged markets lower.

The MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.75%, on course for its worst day since Aug. 25. Against a basket of currencies, the dollar was steady.

Investor attention fixed firmly on China’s largest private property developer, Country Garden. A person close to the company said it had made interest payments on two U.S. dollar bonds, due last month, just as a grace period was scheduled to end on Tuesday.

Country Garden on Friday won approval from onshore creditors to extend a private bond worth 3.9 billion yuan ($536 million).

The Reserve Bank of Australia kept interest rates steady as expected but said further tightening of monetary policy may be required. The Aussie AUD=D3 was down about 0.6%, little moved by the decision.

A whole range of data in the European hours will provide further clues on the region’s economy ahead of a European Central Bank policy meeting next week.

ECB President Christine Lagarde, noting price swings due to changes in the labour and energy markets as well as geopolitical turmoil, said on Monday: “It will be critical for central banks to keep inflation expectations firmly anchored while these relative price changes play out.”

The market is now leaning against a hike at the ECB’s September meeting, after a run of soft data.

In company news, Danish drugmaker Novo Nordisk NOVOb.CO launched its popular Wegovy weight-loss injections in the United Kingdom. Surging demand for the injections, and for its highly effective diabetes drug Ozempic, helped Novo to unseat LVMH LVMH.PA as Europe’s most valuable listed company on Friday, ending the French luxury group’s 2-1/2 year-long reign.

Philippines ready to chair ASEAN in 2026

Sept 5 (Reuters) – Philippines President Ferdinand Marcos Jr. said on Tuesday his country is ready to chair the Association of Southeast Asian Nation (ASEAN) in 2026, a year earlier than originally scheduled and replacing Myanmar.

He did not provide a reason for the change.

(Reporting by Karen Lema)

Gold prices tread water as markets weigh Fed policy path

Sept 5 (Reuters) – Gold prices edged lower on Tuesday as the dollar stood firm near recent highs, although trading was subdued with traders looking for more cues on the US Federal Reserve’s policy path after a widely expected interest rate pause this month.

Spot gold was down 0.1% at USD 1,936.19 per ounce by 0607 GMT. US gold futures fell 0.3% to USD 1,961.70 after a US holiday on Monday.

“Much remains to be seen if rate cuts in 2024 follow and to what extent,” said Harshal Barot, a senior consultant at Metals Focus, adding that the possibility of U.S. rates remaining higher for longer would keep gold price rallies in check.

If the US economy indeed sees a soft landing, there is potential for more downside in gold as some of the aggressive rate cut expectations in 2024 second half would be pared back, Barot added.

Recent US economic data has backed bets of a soft landing scenario as worries about inflation and recession have somewhat eased, cemented expectations that the Fed might not have to raise interest rates further.

Gold, which yields no interest, tends to lose its attraction when interest rates rise.

Fed officials are expected to speak during the week, ahead of the September 19-20 policy meeting.

According to the CME FedWatch tool, traders see a 93% chance of the Fed leaving rates unchanged at the meeting this month and about 60% chance that the rates would remain at current levels rest of the year.

Gold prices are expected to rebound with increased conviction of 2024 rate cuts, NAB Commodities Research said in a note, adding that they see prices rising towards an average of USD 1,968 per ounce in the last quarter this year.

Spot silver slipped 0.9% to USD 23.76 per ounce, platinum dipped 1% to USD 944.58 and palladium eased 0.2% to USD 1,218.78.

(Reporting by Swati Verma in Bengaluru; Editing by Subhranshu Sahu, Sherry Jacob-Phillips and Rashmi Aich)

((Swati.Verma@thomsonreuters.com; +91 8894503862;))

Central banks’ rate hike push slips into August lull, EM diverging

LONDON, Sept 4 – Central banks across major developed and emerging economies took a breather in August with the pace and scale of interest rate hikes shifting another gear lower as diverging growth outlooks and inflation risks muddied the outlook ahead.

August – often a more quiet month for monetary policy decisions – saw only four of the central banks overseeing the 10 most heavily traded currencies hold rate-setting meetings. Two of them – Norway and United Kingdom – delivered a total of 50 basis points of rate hikes in the lowest such tally since January. Australia and New Zealand kept their benchmarks unchanged, Reuters data showed.

The moves compare to three hikes across six meetings in July, and takes the total 2023 year-to-date tally for G10 central banks to a total of 1,075 bps across 33 hikes.

But the outlook ahead was murky, with surprisingly resilient US data contrasting with disappointing numbers from China and much of Europe and markets searching for clues when major central banks could embark on easing rates.

“This downbeat growth story does have an upbeat consequence; inflationary pressure should ease further,” said ING’s global head of macroeconomics Carsten Brzeski. He added that while this was likely not enough to bring inflation back to target for many central banks, it should be low enough to see the peak in policy rate hikes.

“Central bankers would be crazy to call an end to those hikes officially; they don’t want to add to speculation about when the first cuts might come,” Brzeski said.

Across developing economies, more evidence emerged that the turn of the rate cycle was well established in some regions. Brazil’s central bank kicked off its rate-cutting cycle with a more aggressive-than-expected 50 basis point rate cut. Latin America’s biggest economy followed in the footsteps of Chile in July and smaller peers Costa Rica and Uruguay in recent months.

China was the second country out of the 18 central banks in the Reuters sample of developing economies to lower interest rates in August, of which 12 held rate-setting meetings.

However, other developing nations were far from being able to cut rates, instead finding themselves battling currency weakness and stubbornly high inflation that forced policy makers into raising rather than cutting rates.

Turkey delivered a super-sized 750 bps rate rise in August while Russia lifted its benchmark by 350 bps and Thailand added 25 bps.

The year-to-date tally for emerging markets stands at 2,850 bps of tightening across 27 hikes – well below the pace and scale seen the 2022, where central banks in developing economies delivered 7,425 bps across 92 rate increases.

On the easing side, emerging markets banks delivered 220 bps of cuts since the start of the year across five reductions, the data showed.

With major central banks expected to maintain restrictive policy through 2024, room for maneuver for many developing economies might be limited, analysts predicted.

“Major central banks will maintain a restrictive policy stance through 2024,” said Madhavi Bokil, senior vice president strategy and research at Moody’s.

“Significant easing by emerging market central banks is unlikely with advanced economy central banks still battling elevated inflation, and uncertainty around the U.S. interest rate outlook.”

European shares end flat as China stimulus-driven advances falter

Sept 4 (Reuters) – European shares ended flat on Monday as gains driven by optimism around China’s stimulus measures to revitalise its economy fizzled out, while Danish drugmaker Novo Nordisk’s shares touched record highs.

The pan-European STOXX 600 index held steady at 457.96 points at close after touching near four-week highs earlier in the day.

Europe’s technology sector gained 0.5% as shares of Dutch semiconductor equipment maker ASML rose 0.8%.

Miners finished up 0.6% after rising nearly 2% intraday, as iron ore futures rallied on optimism over top steel producer China’s policy support for its struggling property sector.

China stepped up measures to boost the country’s faltering economy, with top banks paving the way for further cuts in lending rates and sources saying Beijing plans further action, including relaxing restrictions on home purchases.

“The slowdown that we’ve seen in China and this redirection away from consumer stimulation and to a more technical and high added value economy is taking a lot more time than people anticipated,” said Michael Browne, chief investment officer at Martin Currie, part of Franklin Templeton.

Separately, according to sources and a document seen by Reuters, embattled Chinese developer Country Garden has won approval from its creditors to extend payments for an onshore private bond, in a major relief for the firm and the crisis-hit property sector.

China-exposed industrials rose 0.1%, while automakers gained 0.3%.

Luxury heavyweight LVMH slipped 0.4%, paring initial gains and weighing on the STOXX 600.

Novo Nordisk rose 0.7% to hit a record high intraday after the Danish drugmaker launched its weight-loss injection Wegovy in Britain. Novo, with a market capitalisation of USD 424.7 billion, unseated LVMH as Europe’s most-valuable listed company on Friday.

Rising European bond yields also kept a lid on gains

German inflation and euro zone gross domestic product numbers due later in the week will act as major tests of the European economy’s health ahead of the European Central Bank’s policy meeting on Sept. 14.

European stocks ended the last week of August higher, erasing some losses during the month as recent economic data fuelled expectations that major central banks were nearly done with their interest rate hikes.

Friday’s data showing a jump in US unemployment rate cemented bets that the Federal Reserve will keep interest rates unchanged at its policy meeting later this month.

US markets are closed on Monday for Labor Day.

Telecom Italia (TIM) TLIT.MI advanced 3.5% after Barclays upgraded the stock to “equal-weight” from “underweight”.

(Reporting by Sruthi Shankar and Shashwat Chauhan in Bengaluru; Editing by Eileen Soreng, Janane Venkatraman and Tomasz Janowski)

ASEAN leaders seek to assert bloc’s relevance at annual summit

JAKARTA, Sept 5 – Southeast Asian leaders will on Tuesday converge on the Indonesian capital for an annual summit amid rifts within the 10-member regional bloc over stalled peace efforts in Myanmar and a sharpening US-China rivalry in the region.

The Association of Southeast Asian Nations (ASEAN) is seeking to clarify its relevance as cracks emerge in its response to the conflict in Myanmar, where the military seized power in a bloody coup in 2021.

“The eyes of our peoples are on us to prove ASEAN still matters and can contribute towards peace, stability and prosperity in the region,” Foreign Minister Retno Marsudi of chair Indonesia said on Monday.

Leaders will review an ASEAN peace plan that calls for a cessation of hostilities and inclusive dialogue to resolve the crisis in Myanmar, which, two years in, shows no sign of de-escalating.

A lack of progress has increased frustration and exposed internal divisions in a bloc that prioritises unity and non-interference in members’ sovereign affairs.

Indonesia has attempted to engage all stakeholders in Myanmar, but unilateral moves by Thailand to include the country’s shunned military leaders, who are banned from attending high-level ASEAN meetings, have dented the bloc’s credibility and led to division among member states.

Former Indonesian foreign minister, Marty Natalegawa, said the bloc must adapt to today’s challenges or risk oblivion.

“Obituaries on ASEAN actually have been written many times over, but somehow all those times, ASEAN has been able to reinvent itself and reassert its relevance. I feel today we are at one of those junctures,” he said on Monday.

The final ASEAN summit this year also comes days after China released a “10-dash line” map, which lays claim to a larger portion of the South China Sea and will likely add pressure to negotiations with China on a long-delayed code of conduct in the strategic waterway.

ASEAN member states Malaysia, Vietnam and the Philippines, which have overlapping claims in the South China Sea, have rejected the map.

Later this week, chair Indonesia will also host the East Asia summit, a wider forum that includes China, India, Japan, Russia and the United States, but that will be marked by the conspicuous absence of US President Joe Biden. Vice President Kamala Harris will attend in his stead and Chinese Premier Li Qiang will also attend.

(Editing by Kanupriya Kapoor)

Dollar slips in thin holiday trading on bets Fed is done with rate rises

SINGAPORE/LONDON, Sept 4 – The dollar edged lower on Monday, with US markets closed for a holiday, as investors weighed US jobs data that showed some signs of cooling, boosting bets the Federal Reserve could be at the end of its monetary tightening cycle.

Against a basket of currencies, the dollar inched 0.1% lower to 104.14 but remained close to the two-month peak of 104.44 it touched on August 25. The index gained 1.7% in August, snapping its two-month losing streak.

Data on Friday showed US job growth picked up in August, but the unemployment rate jumped to 3.8%, while wage gains moderated. The economy created 110,000 fewer jobs than previously reported in June and July.

“The Goldilocks metaphor is much used and abused in economic and financial circles, but in relation to the various ‘soft landing’ signals emanating from the report, on this occasion it does seem entirely appropriate,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank.

A string of economic data highlighting moderating inflation as well as an easing labour market have added to the impression the US economy is cooling without slowing sharply, reinforcing hopes that the economy is set for a soft landing.

Markets are pricing in a 93% chance of the Fed holding steady on rates this month, and over a 60% probability of no more hikes this year, CME FedWatch tool showed.

With US markets closed on Monday, liquidity is likely to be thin and traders hesitant in placing large bets.

Analysts at UniCredit expect trading to remain subdued on Monday despite European Central Bank President Christine Lagarde being scheduled to speak later in the day.

The euro was up 0.2% at USD 1.0793, just off a 10-week low touched last week against the dollar. Sterling was up 0.3% at USD 1.2627.

British finance minister Jeremy Hunt said at the weekend that inflation was on track to halve by the end of 2023, vowing to focus on the goal as he laid out his priorities ahead of the reopening of parliament after the summer break.

Revised British data published on Friday showed the economy recovered faster from the pandemic than previously thought.

Elsewhere, the yen eased 0.09% to 146.39 per dollar. The Japanese currency has traded around the psychologically important 145 level since the middle of August, with traders keeping an eye out for any signs of intervention.

Japan intervened in currency markets last September when the dollar’s rise past 145 yen prompted the Ministry of Finance to buy the yen and push the pair back to around 140 yen.

The Australian dollar added 0.2% to USD 0.6465 ahead of the Reserve Bank of Australia policy meeting on Tuesday when it is expected to stand pat. A Reuters poll showed that all but two of 36 economists said the RBA would hold its official cash rate at 4.10% on September 5.

The Aussie dollar and the New Zealand dollar got a lift on Monday from measures from Chinese authorities to help shore up China’s property sector.

The Canadian dollar slipped 0.14% to 1.36 per dollar ahead of Bank of Canada’s policy meeting this week, with the central bank expected to hold rates.

Looking ahead, investor focus will be on a number of Fed officials due to speak this week for clues on what the U.S. central bank will do at its next policy meeting on September 19-20.

(Reporting by Ankur Banerjee in Singapore and Joice Alves in London; Editing by Susan Fenton)

China stimulus, US rate pause optimism lift EM stocks to 3-wk high

Sept 4 – Emerging market stocks gained on Monday after China stepped up stimulus measures to boost its faltering economy, while investors remained optimistic after a jump in US unemployment rate cemented expectations of a pause in rate hikes.

The MSCI’s emerging market index rose 1.1%, hitting a three-week high, carrying forward the optimism of a pause in rate hikes from last week after data showed the unemployment rate rose and wage growth slowed in the United States.

“I think Friday’s non-farm payrolls data were some golden numbers for emerging markets that showed US economy is growing, but the fear of the Fed having to jack up rates was not so present,” said Jakob Ekholdt Christensen, senior EM fixed income strategist at BankInvest.

“This is generating the positive momentum this morning, maybe together with some of the numbers out of China.”

China’s blue-chip index and Hong Kong’s Hang Seng Index rose 1.5% and 2.5% respectively, with country’s top banks paving the way for further cuts in lending rates and sources saying Beijing plans further action including relaxing home-purchase restrictions.

Shares in China’s Country Garden jumped to their highest level since Aug. 10 after a deal with creditors for an extension on onshore debt payments worth 3.9 billion yuan ($537 million).

EM currencies were flat against a softer dollar with the yuan inching higher thanks to a firmer-than-expected official guidance as investors waited on key economic data due later this week for any currency directional clues.

The Turkish lira was steady against the dollar after annual consumer price inflation rose more-than-expected at 58.9% in August, rising for a second consecutive month in response to declines in the lira and recent tax hikes.

Israel’s shekel slipped 0.5% against the greenback as the central bank is expected to leave short-term interest rates unchanged this week but the rate hike cycle may not be over with the shekel hovering around a 3 1/2 year low.

In central and eastern Europe, Hungary’s forint climbed 0.3% against the euro after rating agency Moody’s on Friday affirmed the country’s Baa2 debt ratings while maintaining a stable outlook.

The Polish zloty rose 0.1% against the euro, while Czech crown was flat.

In other emerging markets, India’s Jio Infocomm, the telecom wing of Reliance Industries, is in talks to raise up to USD 2 billion in offshore loans to fund the purchase of 5G network gear from Ericsson, the Economic Times reported.

Markets in the United States were closed for a public holiday.

(Reporting by Shubham Batra in Bengaluru; Editing by Angus MacSwan)

Oil edges up on prospect of extended OPEC+ supply cuts

NEW YORK, Sept 4 – Oil prices edged higher on Monday on expectations that OPEC+ would keep supplies tight and speculation that the U.S. Federal Reserve will cease its aggressive interest rate hike campaign.

Saudi Arabia has spearheaded efforts to support prices, making large voluntary output cuts as part of a production deal agreed by the OPEC+ producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia.

The kingdom is widely expected to extend its voluntary 1 million barrel per day (bpd) cut for a fourth consecutive month into October. Saudi Arabia’s previous announcements have come ahead of its official selling prices, which typically emerge in the first week of the month.

Russian Deputy Prime Minister Alexander Novak, meanwhile, has said that Moscow had agreed with OPEC+ partners on the parameters for continued export cuts in October.

Saudi Arabia and Russia could withdraw the cuts at any point, said OANDA analyst Craig Erlam, “but I can’t imagine they’ll be in any rush and risk sending the price tumbling again.”

Brent crude LCOc1 futures for November crept 45 cents higher to settle at $89.00 a barrel. U.S. West Texas Intermediate crude (WTI) CLc1 October futures rose 40 cents to $85.95.

Global crude oil supplies are expected to improve in the next six to eight weeks because of refinery maintenance, although sour crude will stay tight, said Russell Hardy, chief executive of the world’s largest independent oil trader, Vitol. VITOLV.UL

The oil market is vulnerable to price spikes due to low inventories and underinvestment in new oilfields, a senior official at global commodities trading firm Trafigura TRAFGF.UL said on Monday.

U.S. August jobs data, meanwhile, has strengthened expectations that the Federal Reserve will pause its increases to interest rates this month.

In China, manufacturing activity expanded unexpectedly in August and a series of economic measures to support the country’s post-pandemic recovery have ignited optimism that demand will pick up in the world’s largest oil importer.

“…The market does appear to have a more receptive and less cynical ear this morning,” said John Evans at oil broker PVM.

Chinese leader Xi Jinping’s “promises of support for the services sector and relaxing of cross-border trade restrictions find sympathy from a market that has fewer drivers with the absence of U.S. participants.”

(Reporting by Stephanie Kelly in New York; Additional reporting by Paul Carsten and Natalie Grover in London, Mohi Narayan in New Delhi, Yousef Saba in Dubai and Andrew Hayley in Beijing; Editing by Jason Neely, David Goodman, Mike Harrison and Cynthia Osterman)

((Stephanie.Kelly@thomsonreuters.com))

Oil rises on China, US economic data and OPEC+ cut expectations

BEIJING, Sept 4 – Oil prices ticked up in Asian morning trade on Monday, as market sentiment was buoyed by positive China and US economic data, as well as expectations of ongoing crude supply cuts from major producers.

Brent crude was up 17 cents, or 0.2%, at USD 88.72 a barrel at 0015 GMT. US West Texas Intermediate crude (WTI) rose 25 cents, roughly 0.3%, to USD 85.80.

The sustained upward price movement comes after both contracts settled at their highest levels in more than half a year last week, breaking a two-week losing streak.

On the demand side, China’s manufacturing activity unexpectedly expanded in August, data from Caixin’s manufacturing PMI survey indicated, leading to renewed optimism about the economic health of the world’s largest oil importer.

A series of economic support measures announced by Beijing last week, such as deposit rate cuts at some of the country’s largest state-owned banks and an easing of borrowing rules for home buyers, have also supported prices.

However, investors continue to await more substantial moves to prop up the country’s embattled property sector, which has been one of main drags on the Chinese economy since its emergence from the pandemic.

In the US, employment data was higher than expected on Friday, with nonfarm payrolls increasing by 187,000 jobs last month.

A broader cooling of the US labour market, as seen in slowing job growth, reduced the chances of further rate hikes by the Federal Reserve in the immediate future, analysts said.

Expectations of tightening oil supplies have grown after Russian Deputy Prime Minister Alexander Novak’s remarks on Thursday that Russia had agreed with partners in the Organization of the Petroleum Exporting Countries (OPEC) on the parameters for continued export cuts. An official announcement with details of the planned cuts is expected this week.

Russia has already said it will cut exports by 300,000 barrels per day (bpd) in September, following a 500,000 bpd cut in August. Saudi Arabia is also expected to roll over a voluntary 1 million bpd cut into October.

(Reporting by Andrew Hayley; Editing by Jamie Freed)

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