Oil climbs 2% to three-week high on China stimulus, Mideast conflict

Oil prices climbed about 2% to a three-week high on Tuesday on news of monetary stimulus from China, the world’s top crude importer, and amid concerns that growing conflict in the Middle East could hit regional supply.

Oil markets gave up some earlier gains as it became more clear that a hurricane threatening the US Gulf Coast later this week would likely miss most offshore oil and natural gas-producing regions and hit Florida. The region accounts for 15% of the country’s oil and 2% of natural gas production.

Brent futures rose USD 1.27, or 1.7%, to settle at USD 75.17 a barrel, while US West Texas Intermediate (WTI) crude rose USD 1.19, or 1.7%, to settle at USD 71.56.

That was the highest close for Brent since Sept. 2.

“The Chinese government’s announcement of its largest stimulus package since the pandemic, combined with the sudden rise of geopolitical tension in the Middle East … has dealt a blow to the bearish sentiment that dominated the oil markets in the past three weeks,” Claudio Galimberti, global market analysis director at Rystad Energy, said in a note.

China’s central bank unveiled its biggest stimulus since the COVID-19 pandemic to pull the economy out of its deflationary funk and back towards the government’s growth target, but analysts warned more fiscal help was vital to hit these goals.

In the Middle East, a key oil-producing region, an Israeli airstrike on Beirut killed a senior Hezbollah commander as cross-border rocket attacks by both sides increased fears of a full-fledged war in the region.

The strikes risk pulling Iran, a member of the Organization of the Petroleum Exporting Countries, closer to a conflict with Israel. Iran supports the Lebanese militant group.

OPEC, meanwhile, raised its forecasts for world oil demand for the medium and long term in an annual outlook, citing growth led by India, Africa and the Middle East and a slower shift to electric vehicles and cleaner fuels.

In the US, the world’s biggest oil consumer and producer, several energy firms paused some production even though Tropical Storm Helene was currently expected to miss most of the producing regions in the western and central Gulf of Mexico and hit the Florida Panhandle as a major hurricane late Thursday.

But some firms, like Shell, started the process of restoring oil production as the storm forecasts shifted away from their offshore platforms.

Another factor that helped pare earlier oil price gains was news of a drop in
US consumer confidence
by the most in three years in September amid mounting fears over the labor market.

US OIL INVENTORIES

Weekly US oil storage data is due from the American Petroleum Institute (API) trade group later on Tuesday and the US Energy Information Administration (EIA) on Wednesday.

Analysts projected US energy firms pulled about 1.2 million barrels of crude out of storage during the week ended Sept. 20.

If correct, that would be the fifth time in six weeks that US crude stocks have declined and compares with a withdrawal of 2.2 million barrels during the same week last year and an average decrease of 1.0 million barrels over the past five years (2019-2023).

(Reporting by Scott DiSavino, Paul Carsten, Emily Chow, and Gabrielle Ng; Additional reporting by Arunima Kumar in Bengaluru; Editing by David Goodman, Paul Simao, and Marguerita Choy)

China fires ‘bigger guns, but still no bazooka’

Sugar high or shot in the arm?

That’s the question for Chinese stocks and investor sentiment which soared on Tuesday after Beijing, led by the central bank, unveiled a package of coordinated monetary and liquidity stimulus that packed a far more powerful punch than previous piecemeal efforts.

It was China’s biggest stimulus since the pandemic, and domestic and regional markets reacted accordingly – Shanghai’s composite index jumped 4.2% for its best day since July 2020, the MSCI Asia ex-Japan index hit its highest since April 2022, and the MSCI emerging market currency index leaped to a new high.

All well and good. But can this short-term relief morph into longer-term optimism that China’s authorities are back in the driving seat and steering the property sector, asset prices, and the economy towards sustainable recovery?

“Bigger guns but still no bazooka,” is how Barclays economists neatly summed up authorities’ steps on Tuesday, adding that the central bank may fire more salvos in the coming months through interest rate and reserve requirement cuts.

Some analysts were quick to raise their 2024 GDP growth forecasts closer to the government’s 5% target, but most agree that large-scale fiscal stimulus is needed to really change the outlook beyond this year.

In the near term, however, the Chinese market rebound may have more legs. Not only had Chinese stocks slumped to their lowest in over a year, they have performed poorly in relative terms against regional and global rivals.

Analysts at Barclays are tactically bullish on Chinese stocks over Indian equities, while the divergence between the S&P 500 and Shanghai CSI 300 index in recent years has been frankly jaw-dropping.

The yuan climbed to a fresh 16-month high on Tuesday, and is now within touching distance of breaking the 7.00 per dollar barrier. For a currency as tightly controlled as the yuan, its 3.5% appreciation in just two months is remarkable.

Investor sentiment across Asia on Wednesday should also be boosted by the S&P 500 hitting another new high on Tuesday, albeit it only just, and a softer dollar and lower Treasury yields.

Japanese stock futures point to the benchmark Nikkei 225 index opening 0.7% higher on Wednesday. That said, global growth concerns – particularly over Germany – are percolating, which could legitimately counter any sense of bullishness across Asia.

The regional economic data calendar on Wednesday sees the release of Australian consumer inflation, which is expected to cool significantly to 2.7% in August from 3.5% in July, service sector producer price inflation from Japan, and industrial production from Taiwan.

Among the regional policymakers scheduled to speak are South Korea’s finance minister Choi Sang-mok and Philippine central bank governor Eli Remolona.

Here are key developments that could provide more direction to Asian markets on Wednesday:

– Australia CPI inflation (August)

– Japan services PPI (August)

– Taiwan industrial production (August)

(Reporting by Jamie McGeever)

US yields modestly higher as soft landing view rises

NEW YORK – US Treasury yields drifted higher on Monday as bond investors continued to price out near-term recession in the world’s largest economy amid data showing increased price pressures this month that could slow the pace of the Federal Reserve’s easing cycle.

Chicago Fed President Austan Goolsbee’s comments saying there are “lots of cuts” to come over the next 12 months – after last week’s jumbo interest rate cut of 50 basis points by the US central bank – weighed on Treasury yields as they pared their gains.

US yields on the long end of the curve – those from seven-year notes to 30-year bonds – earlier climbed to three-week highs. That further steepened the yield curve, a barometer of US economic prospects, with the gap between two and 10-year yields hitting positive 17.9 basis points (bps), the steepest since June 2022. It was last at positive 15.6 bps.

The yield curve tracked a bear steepening path, in which yields on longer-dated Treasuries are rising faster than those on shorter-term maturities, suggesting that investors are pricing in a pick-up in inflation expectations at some point in the future.

Data on Monday reinforced what the yield curve is indicating. A report showed a rise in a key component of S&P Global’s flash US Composite PMI Output Index, which tracks the manufacturing and services sectors. The survey’s measure of prices paid by businesses for inputs expanded to a one-year high of 59.1 from 57.8 last month. Its gauge of prices charged rose to 54.7 from 52.9 in August.

The output index, however, was little changed at 54.4 in September compared to a final reading of 54.6 in August. A reading above 50 indicates expansion in the private sector.

In afternoon trading, the benchmark 10-year yield rose 1.5 bps to 3.743% US10YT=RR after earlier hitting a three-week high of 3.794%.

“What kind of accelerated the sell-off (that pushed yields higher) a little bit is the thought that maybe we could be in a soft-landing situation. And I’m still not convinced it’s going to happen,” said Ellis Phifer, managing director for fixed income capital markets at Raymond James in Memphis.

Phifer believes a hard-landing scenario, or a deep recession, is in store for the US economy because the Fed waited too long.

“They should have gone (cut rates) in July to kind of get ahead of it,” Phifer said.

Phifer further cited Goolsbee’s comments on employment. Goolsbee noted that the Fed may have to increase the pace of easing because when employment falls, it is going to fall more quickly. Goolsbee is not a voter this year on the Federal Open Market Committee, but will rotate into voting status in 2025.

“Goolsbee’s concern about employment is hitting back at that soft-landing narrative,” Phifer said.

In other maturities, US 30-year yields increased 1.6 bps to 4.088%%, also hitting a three-week peak of 4.134%.

On the front end of the curve, US two-year yields were up 1 bp at 3.582%.

The US rate futures market has priced in a 54% chance of a smaller 25-bp cut at the November meeting with a 46% probability of the bigger 50-bp easing, according to LSEG calculations. For 2024, the futures market is implying cuts of around 78 bps.

The benchmark overnight rate is currently at a target range between 4.75%-5.00%.

Other Fed speakers on Monday led by Atlanta Fed President Raphael Bostic and Minneapolis Fed President Neel Kashkari justified the central bank’s big rate move last week.

And there are plenty more speaking this week who should help guide the market on what the Fed could be doing at its November meeting.

“People are saying that recession risks are not anywhere in the near term here, but more like possible (in the) long term,” said Stan Shipley, managing director and fixed income strategist at Evercore ISI in New York. “So people are taking some risk-on positions and moving away from Treasuries for now.”

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Nick Zieminski and Will Dunham)

Gold strikes record high as Fed rate cut maintains bullish mood

Gold rose on Monday to an all-time high, as bullish market sentiment after the US Federal Reserve cut interest rates last week combined with geopolitical tensions drove prices despite a stronger dollar.

Spot gold gained 0.2% to USD 2,628.05 per ounce by 1:50 p.m. ET (1750 GMT) after hitting an all-time high of USD 2,635.29 earlier in the session.

US gold futures settled 0.2% higher at USD 2,652.50.

“The market is still reacting to the Fed’s 50 basis point cut last Wednesday … the US central bank has signaled that it is not particularly worried about inflation and that it is going to do its best to make sure that unemployment isn’t a problem in the US,” said Bart Melek, head of commodity strategies at TD Securities.

However, the Fed is not in a “mad dash” to a neutral rate of interest as policymakers engage in a “robust” debate about how far and fast rates may need to fall, Atlanta Fed president Raphael Bostic said.

If employment rates plummet, that would get the market to believe that the Fed might get a lot more aggressive on the cutting side which is very helpful for gold, said Melek, adding that a situation of regional instability in the Middle East could also further fuel gold’s rally.

Israeli Prime Minister Benjamin Netanyahu said Israel faced “complicated days” as it stepped up strikes against Hezbollah in southern Lebanon and he called on Israelis to stay united as the campaign unfolded.

Gold, a traditional hedge against geopolitical and economic uncertainty, is headed for it best year in fourteen.

Global physically backed gold exchange-traded funds (ETFs) saw modest net inflows of 3 metric tons last week, according to the World Gold Council.

Traders will be looking forward to comments from Fed officials over the week and US PCE inflation data due on Friday for further policy hints.

Spot silver fell 1.1% to USD 30.78 per ounce, and platinum lost 1.7% to USD 958.87, while palladium shed 2.4% to USD 1,042.03.

(Reporting by Anjana Anil in Bengaluru, Additional reporting by Polina Devitt; Editing by Vijay Kishore and Maju Samuel)

Oil settles lower on weak euro zone business activity

HOUSTON – Oil prices closed lower on Monday as worries about demand were compounded by disappointing eurozone business activity and a weak Chinese economy.

Brent crude futures for November settled 59 cents lower, or 0.8%, to USD 73.90 a barrel, while US crude futures for November fell 63 cents, or 0.9%, to USD 70.37.

Eurozone business activity contracted sharply and unexpectedly this month as the bloc’s dominant services industry flatlined while a downturn in manufacturing accelerated.

US business activity was steady in September, but average prices charged for goods and services rose at the fastest pace in six months, potentially hinting at a pickup in inflation in the coming months.

China, the world’s top oil importer, is meanwhile battling deflationary pressures and struggling to lift growth despite a series of policy measures aimed at spurring domestic spending.

“Disappointing economic numbers flowing from China along with a surprise slowdown in European manufacturing is placing crude demand at the lowest levels so far this year,” said Dennis Kissler, senior vice president of trading at BOK Financial.

Supply concerns stemming from Israel’s airstrikes on Hezbollah targets on Monday helped support oil prices.

After almost a year of war in Gaza, Israel is shifting its focus to its northern border, across which Hezbollah has been firing rockets in support of its ally Hamas.

“More attacks from Israel on Lebanon spawn fear that Iran will become more involved, which raises the probability of oil exports being at risk,” Kissler added.

A tropical disturbance near the Gulf of Mexico is also threatening the oil supply. Shell said on Sunday it would shut production at its Stones and Appomattox facilities in the region as a precautionary measure.

Norwegian oil producer Equinor on Monday said it is evacuating some staff as a precaution from its Titan oil production platform in the US Gulf of Mexico, while Chevron said it was evacuating nonessential personnel from its Gulf of Mexico platforms.

US crude oil stockpiles were expected to have fallen by about 1.2 million barrels last week, a preliminary Reuters poll showed on Monday.

Both oil benchmarks rose more than 4% last week, buoyed by the US Federal Reserve’s decision to cut interest rates by 50 basis points and signal further reductions in borrowing costs by the end of the year.

Chicago Fed President Austan Goolsbee on Monday said he expects “many more rate cuts over the next year” as the US central bank seeks a “soft landing” for the economy, where it controls inflation without crashing the labor market.

(Reporting by Arathy Somasekhar in Houston, Arunima Kumar in Bengaluru. Additional reporting by Ahmad Ghaddar in London and Emily Chow and Gabrielle Ng in Singapore; Editing by Kirsten Donovan, Paul Simao, and Lisa Shumaker)

Policy spotlight falls on RBA, BOJ’s Ueda

A mood of caution may hang over Asian stocks on Tuesday, following a fairly directionless US session the day before and as investors brace for an interest rate decision in Australia and remarks from Bank of Japan Governor Kazuo Ueda.

That said, the slender gains eked out on Wall Street kept the S&P 500 within 0.3% of last week’s record high, and pushed the Dow to a new peak of 42,190 points. The feel-good factor from last week’s Fed move has not faded just yet.

Indeed, the bullish case for risky assets may have gotten a boost on Monday from Chicago Fed president Austan Goolsbee, who said the Fed’s policy rate is still “hundreds” of basis points above neutral and that there are “a lot of cuts” to come over the next year.

This follows surprisingly dovish comments on Friday from Fed Governor Christopher Waller, who said inflation is softening much faster than he previously thought and August PCE inflation could be very low.

But there’s often a fine line between deep rate cuts encouraging investors to load up on risk, and concerns over why policy is being loosened so much so quickly. This is why all economic activity and labor market data between now and the Fed’s next meeting will be scrutinized so closely.

The Reserve Bank of Australia is the next major central bank to deliver its latest policy decision and guidance. With inflation running above the central bank’s 2%-3% target range and the job market looking strong, there is virtually no chance of a rate cut yet.

All 43 economists polled by Reuters expect the RBA to keep its cash rate on hold at 4.35% on Tuesday, and 40 of them say there will be no move on rates this year.

Aussie swaps markets are attaching a roughly two-in-three chance of a 25 basis point rate cut by the end of this year, and imply a full 100 bps of easing next year – significantly less than all G10 central banks except the Bank of Japan and Swiss National Bank.

The BOJ is the only major central bank raising rates, and investors will be looking to a speech from Governor Kazuo Ueda on Tuesday for clues on the pace and extent of tightening. The BOJ left rates unchanged on Friday and signaled it is in no rush to raise them again.

The People’s Bank of China, meanwhile, injected 14-day liquidity into the financial system on Monday for the first time in months, and at a lower rate than before. But investors will need a lot of convincing that Beijing’s stimulus efforts will be enough to fight off deflation and revive growth.

Here are key developments that could provide more direction to Asian markets on Tuesday:

– Australia interest rate decision

– BOJ Governor Kazuo Ueda speaks

– Japan flash PMIs (September)

(Reporting by Jamie McGeever)

Gold breaks USD 2,600 barrier as Fed cut bets prolong historic run

Gold soared above the USD 2,600 level on Friday for the first time, extending a rally boosted by bets for further US interest rate cuts, and rising tensions in the Middle East.

Spot gold was up 1.3% at USD 2,620.63 per ounce by 1:43 p.m. ET (1743 GMT), while US gold futures settled 1.2% higher to USD 2,646.20.

Bullion’s latest rally got a fillip after the Federal Reserve initiated an aggressive easing cycle on Wednesday with a half-percentage-point reduction, adding to the appeal for gold, which pays no interest.

Prices of the safe-haven asset have climbed 27% in 2024, their biggest annual rise since 2010, as investors also sought to hedge uncertainties spurred by prolonged conflicts in the Middle East and elsewhere.

The record rally could be poised for a correction, analysts said.

“Clearly, there’s still some buying activity associated with the Fed’s decision to begin their easing cycle with a big cut,” said Daniel Ghali, commodity strategist at TD Securities.

However, “the source of this buying activity remains off our radar,” given ETF inflows are relatively marginal and Asian buyers are still on a buyers’ strike, all signs of “extreme positioning,” Ghali added.

The record rally has eroded retail demand in top consumers China and India.

The rally in gold “should not go on forever,” Commerzbank said in a note, citing the expectation for rate cuts of only 25 basis points each at the Fed’s next two meetings.

Still, some analysts said gold could see more upward spikes.

“Geopolitical risks, such as ongoing conflicts in Gaza, Ukraine, and elsewhere, will ensure to sustain gold’s safe-haven demand,” Forex.com analyst Fawad Razaqzada said in a note.

Continued weakness in the dollar, which makes gold cheaper for holders of other currencies, offered additional tailwinds, analysts said.

Elsewhere, spot silver gained 1.2% to USD 31.16. Platinum fell 1.1% to USD 978.50 and palladium shed 0.5% to USD 1,074.84.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Arpan Varghese, Barbara Lewis, Shreya Biswas, and Alan Barona)

US yields dip as market in consolidation mode, after dovish Fed comments

WASHINGTON – US Treasury yields dipped on Friday while the most watched part of the yield curve steepened back near its widest level in 27 months, consolidating moves after this week’s solid economic data and the Federal Reserve’s super-sized rate cut.

Comments from Fed officials validating the Fed’s 50 basis-point rate cut on Wednesday also weighed on yields.

The yield curve, a widely tracked barometer of the US economic outlook, steepened after the Fed’s announcement of a rate cut of 50 basis points on Wednesday. It steepened once more on Friday, with the spread between the two-year and 10-year yields hitting positive 15.8 bps, the widest gap since June 2022. It was last at 14.8 bps.

No economic data was scheduled for release on Friday, but Fed speakers are free to comment on the new monetary policy framework now that the pre-FOMC blackout period is lifted.

US yields dipped following separate remarks from Fed Governor Christopher Waller
and Philadelphia Fed President Patrick Harker on Friday, who both said the path of the economy justified the Fed’s 50-bp rate cut.

In afternoon trading, benchmark 10-year Treasury yields were last down 1.4 bps at 3.726%. They hit their highest level in about two weeks on Thursday following the release of stronger-than-expected initial jobless claims figures.

“The market has gotten too bearish on inflation expectations (and is) pricing in too many rate cuts” said Subadra Rajappa, head of US rates strategy at Societe Generale.

“All of the recent data points to continued strength in the economy,” she added, citing recent strong economic data such as the lower-than-expected claims and strong retail sales.

US yields rose earlier in the day after the Bank of Japan kept the country’s interest rates steady, tracking the move in Japanese government bonds. BOJ Governor Kazuo Ueda further signaled that it was in no rush to raise rates further.

On the front end of the curve, two-year yields fell 2.4 bps to 3.58%. For the week, however, the two-year yields gained nearly 3 bps, the largest weekly rise since early August.

Fed futures traders have priced in 77 bps in rate cuts by the end of this year, and nearly 200 bps in cuts by December 2025.

Meanwhile, the majority of economists polled by Reuters anticipate two more 25 bp rate cuts at the Fed’s final two meetings this year.

Societe’s Rajappa said she expects that yields on the long-end of the curve will have more room to rise in the near term, while front-end yields have less scope to decline from current levels.

The 30-year Treasury yield was flat at 4.077%, after hitting a two-week high on Thursday.

“Lower rates mean inflation might not continue to decline as much as projected, which makes long bond investors nervous and demand more yield,” said Bryce Doty, senior portfolio manager at Sit Fixed Income Advisors.

In a Friday note, Deutsche Bank analysts forecast the two-year and 10-year yields would settle around 3.50% and 4.05%, respectively, by the middle of next year.

Several major economic data releases are scheduled for next week, including August core-PCE figures which are expected to show a 0.2% monthly gain.

(Reporting by Matt Tracy; Editing by Nick Zieminski and Marguerita Choy)

Investor focus turns to data, election, earnings after Fed cut

NEW YORK – A roaring rally in US stocks will face a gauntlet of economic data, looming political uncertainty and a corporate earnings test in coming weeks as investors navigate one of the most volatile periods of the year for equity markets.

The benchmark S&P 500 this week hit its first closing all-time high in two months after the Federal Reserve unveiled a hefty 50-basis point rate cut, kicking off the first US monetary easing cycle since 2020.

The index is up 0.8% so far in September, historically the weakest month for stocks, and has gained 19% year-to-date. But the rocky period could carry over until the Nov 5 election, strategists said, leaving the S&P 500 vulnerable to market swings.

“We’re entering that period where seasonality has been a bit less favorable,” said Angelo Kourkafas, senior investment strategist at Edward Jones. “Despite the excitement about the start of the new rate-cutting cycle, it could still be a bumpy road ahead.”

The second half of September is historically the weakest two-week period of the year for the S&P 500, according to a Ned Davis Research analysis of data since 1950.

The index has also logged an average 0.45% decline in October during presidential years, data from CFRA going back to 1945 showed.

Volatility also tends to pick up in October in election years, with the Cboe Market Volatility index rising to an average level of 25 at the start of the month, as opposed to its long-term average of 19.2, according to an Edward Jones analysis of the past eight presidential election years. The VIX was recently at 16.4.

The market could be particularly sensitive to this year’s close election between Republican Donald Trump and Democrat Kamala Harris. Recent polls show a virtually tied race.

“Unless the data deteriorates considerably, we think US elections will start to be more at the forefront,” UBS equity derivative strategists said in a note.

Investors are also looking for data to support expectations that the economy is navigating a “soft landing,” during which inflation moderates without badly hurting growth. Stocks fare much better after the start of rate cuts in such a scenario, as opposed to when the Fed cuts during recessions.

The coming week includes reports on manufacturing, consumer confidence, and durable goods, as well as the personal consumption expenditures price index, a key inflation measure.

Attention will be squarely on employment after Fed Chair Jerome Powell said the central bank wanted to stay ahead of any weakening in the job market as the Fed announced its cut this week. The closely-watched monthly US jobs report is due on Oct 4.

“We’re going to have hyper-focus on anything that speaks to the strength of the labor force,” said Art Hogan, chief market strategist at B Riley Wealth.

Meanwhile, the rally in stocks has pushed up valuations. The S&P 500 has a price-to-earnings ratio of 21.4 times expected 12-month earnings, well above its long-term average of 15.7, according to LSEG Datastream.

With the scope for valuations to go higher now more limited, investors said that puts a greater burden on corporate earnings to be strong in order to support stock gains.

Third-quarter reporting season kicks off next month. S&P 500 earnings for the period are expected to have climbed 5.4% from the prior year, and then jump nearly 13% in the fourth quarter, according to LSEG IBES.

FedEx FDX.N shares tumbled on Friday after the delivery giant reported a steep quarterly profit drop and lowered its full-year revenue forecast.

“Extended multiples put pressure on macro data and fundamentals to support S&P 500 prices,” Scott Chronert, head of US equity strategy at Citi, said in a report.

(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Nick Zieminski)

Fed adrenaline keeps pumping, PBOC inertia may drag

The adrenaline from the Federal Reserve’s bold interest rate cut and signal of intent to keep easing still appears to be coursing through global financial markets, which should see risk assets in Asia start the week on a strong footing on Monday.

Nikkei futures are pointing to a rise of more than 1% at the open in Japan, with Japanese shares also getting a boost from the yen’s slide last week. The rise in longer-dated US Treasury yields, however, could temper some of the optimism.

Friday’s monetary policy decisions from Japan and China may also reverberate around Asian markets on Monday, and on that score, the picture is more mixed.

As was widely expected, the Bank of Japan decided not to raise rates, but it signaled it is in no hurry to raise them again. This helped push the yen to its weakest daily close since September 4, which in turn helped lift Japanese stocks.

The People’s Bank of China also left rates on hold but this was more of a surprise. Domestically, China’s weak economic and inflation dynamics appear to be screaming out for lower rates, and internationally, the Fed’s outsized rate cut of 50 basis points gave the PBOC cover to move.

But it didn’t, despite the mounting evidence that it perhaps should have. The latest figures to reflect investors’ gloomy view of China were foreign direct investment flows on Friday – in the first eight months of the year they were down 31.5% on the same period last year, the biggest fall since January 2009.

The yuan is its strongest in 16 months though, thanks to the central bank’s reluctance to cut rates and rising expectations that authorities will soon unveil stimulus that will revive growth, asset prices and confidence.

The yen, meanwhile, starts the week on a soft footing after a roller-coaster ride last week. It rallied through 140.00 per dollar for the first time in over a year but closed near 144.00 per dollar for a weekly loss of 2%, its worst week since April.

Japan’s top currency diplomat Atsushi Mimura said yen carry trades of the past are likely to have been mostly unwound, but Tokyo is watching for any rebuild that could heighten market volatility, public broadcaster NHK quoted him as saying.

US futures market positioning data shows speculators growing more optimistic on the yen for an 11th straight week, increasing their net long positions to an eight-year high.

The Asia and Pacific calendar on Monday is reasonably busy, with inflation figures from Malaysia and Singapore, flash September purchasing managers index (PMI) data from Australia and India, and New Zealand trade figures the highlights.

The Reserve Bank of Australia begins its two-day policy meeting too.

Here are key developments that could provide more direction to Asian markets on Monday:

– Australia flash PMIs (September)

– India flash PMIs (September)

– Malaysia inflation (August)

(Reporting by Jamie McGeever; Editing by Diane Craft)

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