WORLDWIDE: HEADLINES
Geopolitics Has Hurt Trading And IPOs In Hong Kong, Says Bourse CEO
A “fragile” geopolitical environment has slowed trading volumes and initial public offerings on the Hong Kong stock exchange and created challenges for its commodities business, especially nickel, the bourse’s CEO said on Tuesday.
China-U.S. tensions, exacerbated by the Russia-Ukraine conflict, questions around the tightening regulatory environment for tech and platform companies and concerns about persistent global inflation have “weighed heavily on our markets”, Nicolas Aguzin, chief executive of Hong Kong Exchanges and Clearing (0388.HK), said.
“We’re keenly aware that our commodity business, especially nickel has been facing some challenges after the Russia Ukraine crisis,” added Aguzin, speaking at an event setting out HKEX’s corporate strategy for the coming years.
Full coverage: REUTERS
Australian Retail Sales Jump In Feb, Augur Well For Q1 Growth
Australian retail sales beat forecasts again in February as shoppers defied storms and coronavirus waves to return to cafes and department stores for the second-best month ever of spending.
Data from the Australian Bureau of Statistics out on Tuesday showed retail sales climbed 1.8% in February from the previous month to A$33.1 billion ($24.76 billion), handily beating forecasts of a 1.0% gain.
That left sales up a huge 9.1% on February last year and followed a surprisingly upbeat 1.6% gain in January, suggesting household spending overall was set for a strong first quarter.
“Most discretionary spending industries experienced strong rises once again as consumer cautiousness lessened, leading to an increase in mobility and improved business conditions,” said Ben James, an ABS director of statistics.
Cafes and restaurants saw gains of 9.7% in February, from the previous month, while the department store and clothing sectors both climbed more than 11%.
The splurge looks to have continued with the latest card data from Commonwealth Bank of Australia (CBA) showing further gains in the two weeks to March 25 as flooding on the east coast caused only a brief dip.
“Spending on recreation continued its recent strength with clothing and footwear and dining out also strengthening in the fortnight,” said CBA economist Harry Ottley. “Spending on transport remained elevated, reflecting high petrol prices.”
The record cost of petrol has been punishing for consumer sentiment, however, with ANZ Bank’s weekly survey showing the mood on personal finances was the worst since the depths of the pandemic in mid-2020.
The rising cost of living has become a hot political issue ahead of an election expected in May and the government will try to use its budget later on Tuesday to appease voters with cash handouts and temporary cuts to fuel taxes.
The ANZ survey also showed consumer inflation expectations surging to decade highs, a headache for the Reserve Bank of Australia (RBA) which is weighing when to start raising interest rates from all-time lows of 0.1%.
The central bank has said it would be patient in the hope wages would pick up, and a hike was likely later in the year.
Markets are wagering it will have to act much more aggressively to head off inflation and have a rise to 0.25% priced in by June, and then a string of hikes to at least 1.75% by year end.
Full coverage: REUTERS
WORLDWIDE: FINANCE/BUSINESS
Stocks Look Past Rate Risks In Late Rally, Yen Wilts
World stock markets cast aside fears of rising interest rates on Monday with the tech-heavy U.S. Nasdaq index rallying 1.3%, even as parts of the Treasury yield curve signaled recession risks while oil prices tumbled on fears of weaker Chinese demand.
After a choppy session where stocks oscillated between gains and losses, U.S. shares finally broke higher, with electric car marker Tesla (TSLA.O) surging almost 8% on news that it will seek investor approval for a stock split.
But the buoyancy in stocks was foreshadowed by several signs and analyst warnings that it may not last, as global interest rates will likely climb higher this year and could drag on economic growth.
In the Treasuries market, for example, the yield curve for two- and 10-year Treasuries presaged growing recession risks on Monday, even though the curve for three-month bills and 10-year Treasuries still pointed to robust economic expansion.
Expectations of rising global interest rates prolonged a sell-off in European government debt, enabling Dutch and Belgian two-year bond yields to turn positive for the first time since 2014.
The tide of rising global yields led Japan’s central bank to declare on Monday a steadfast attempt to defend its 0.25% yield cap, vowing to buy an unlimited amount of government bonds for the first four days of the week.
The announcement sent the yen reeling to a six-year low at one point. Unlike other major economies that are battling surging price pressures, inflation in Japan remains well below its 2% target.
By early evening, MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 0.39%.
The Nasdaq Composite (.IXIC) jumped 1.31%, the Dow Jones Industrial Average (.DJI) rose 0.27% and the S&P 500 (.SPX) climbed 0.71%.
A lockdown in China’s financial hub of Shanghai to contain surging COVID-19 cases, on the other hand, weighed on Chinese shares (.CSI300) and dragged on oil prices, as investors anticipated weaker demand from the world’s No 2 economy.
Full coverage: REUTERS
Yen On The Ropes As BOJ Defends Yield Target
The yen fought for a footing on Tuesday, following its worst session in 16 months, as the Bank of Japan pins down bond yields at a time when they are rising sharply in the rest of the world.
The Japanese currency fell as much as 2.4% to 125.10 to the dollar overnight, its lowest since August 2015, before recovering to 124.24 in volatile morning trade in Tokyo.
The U.S. dollar was broadly steady elsewhere, keeping the euro at $1.0988 and capping a recent rally in the Australian dollar to hold it at $0.7483.
Japan’s central bank bought a little more than $500 million in bonds on Monday and has vowed three more days of unlimited purchases to defend its 10-year yield target of 0.25%.
The move, a demonstration of resolve to keep Japan’s monetary policy ultra easy, underscores the stark contrast with an ever-more-hawkish sounding U.S. Federal Reserve and has tipped the already-sliding yen off a cliff.
It is down nearly 7% this month and almost 10% on a resurgent Aussie. But with Japanese government bond yields (JGBs) barely retreating it is clear that some investors doubt the longevity of Japan’s policy.
“Anyone who watched the RBA ‘cap’ blow is probably excitedly (and logically) short JGBs right now hoping for a similar move in Japan rates,” said Brent Donnelly, president at analytics firm Spectra Markets, referring to the Reserve Bank of Australia’s abandonment of its yield target in November.
Minutes from the Bank of Japan’s March meeting published on Tuesday showed policymakers stressing the need to keep monetary policy ultra-loose, even as some of them saw signs of growing inflationary pressure.
Yet economists see building pressure for a shift if persistent yen weakness exacerbates inflation by raising import costs, particularly for energy, and reckon that 125, roughly where dollar/yen peaked in 2015, is a key level.
“Japanese yen depreciation is a big problem for the Japanese economy, because the economy – especially households – is facing rising inflation and yen depreciation could accelerate that,” said Kentaro Koyama, chief economist at Deutsche Bank in Tokyo.
“If the dollar/yen rate exceeded 125 I’d expect some more severe verbal intervention.”
Full coverage: REUTERS
Oil Falls On Ukraine Peace Talk Hopes, China Demand Fears
U.S. crude futures fell on Tuesday, extending losses from the previous day as Ukraine and Russia headed for peace talks and on fears of a drop in fuel demand in China after the financial hub of Shanghai shut down to curb a surge in COVID-19 cases.
Brent crude futures were trading down $1.07, or 1.0%, at $111.41 a barrel at 0107 GMT, having dipped as low as $109.97.
U.S. West Texas Intermediate (WTI) crude futures hit a low of $103.46 in an early trade and were down 79 cents, or 0.8%, at $105.17. Both benchmark contracts lost around 7% on Monday.
Ukraine and Russia were set to meet in Istanbul on Tuesday for their first peace talks in over two weeks. Sanctions imposed on Russia after it invaded Ukraine have curtailed oil supply and earlier this month sent prices to 14-year highs.
Russia calls its actions in Ukraine a “special operation” to disarm its neighbour.
“Oil prices are under pressure again on expectations for a peace talk between Ukraine and Russia, which could lead to an easing of sanctions or avoidance on Russian oil by the West,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“A successful ceasefire could also raise the prospect of reviving an Iranian nuclear deal,” he added.
Offsetting concerns about tight supply, Shanghai’s two-stage lockdown over nine days is expected to hit fuel demand in China, the world’s largest oil importer. The country’s financial hub accounts for about 4% of China’s oil consumption, ANZ Research analysts said.
The market is also waiting on a planned meeting on Thursday by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+.
The group will likely stick to plans for a modest increase in oil output in May, several sources close to the group said, despite a surge in prices due to the Ukraine crisis and calls from the United States and other consumers for more supply.
Worldwide demand has risen to nearly pre-pandemic levels, but supply has been hindered, as OPEC+ has been slow to restore supply cuts enacted during the pandemic in 2020.
Full coverage: REUTERS
