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Asian shares track Wall Street’s retreat

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Asian shares track Wall Street's retreat

Shares retreated Thursday in Asia after U.S. stocks fell under the weight of higher yields in the bond market, with the Dow Jones Industrial Average giving up more than 400 points.

Tokyo’s Nikkei 225 benchmark shed 1.5% to 37,980.55 and the Hang Seng in Hong Kong declined 0.6% to 18,362.23.

The Shanghai Composite index edged less than 0.1% higher to 3,113.06.

Australia’s S&P/ASX 200 slipped 0.4% to 7,632.10, while the Kospi in Seoul sank 0.9% to 2,652.98.

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Taiwan’s Taiex lost 0.8%.

“Hotter and stickier than expected global inflation appears to be taking the air out of asset markets,” Mizuho Bank said in a commentary. “In other words, “Goldilocks” coming undone. And worries about adverse demand impact from higher rates seeping through,” it said.

On Wednesday, the S&P 500 dipped 0.7%, to 5,266.95, trimming its gain for May, which had been on track to be its best month since November. Four out of every five stocks in the index dropped.

The Dow industrials lost 1.1% to 38,441.54 and the Nasdaq composite slipped 0.6% to 16,920.58 after setting its latest all-time high.

American Airlines Group led a slump for airline stocks after cutting its forecast for profit and other financial targets for the spring. The carrier said fuel costs may be a bit lower than previously thought, but an important revenue trend would likely be as well. Shares fell 13.5%.

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Advance Auto Parts sank 11% after its results and revenue for the latest quarter came up just shy of analysts’ expectations.

Another climb in longer-term Treasury yields also weighed on the stock market, and the 10-year yield rose to 4.61% from 4.54% late Tuesday following an auction of $44 billion in seven-year Treasurys.

The 10-year yield is still down for the month, but it’s been creeping higher since dropping below 4.40% in the middle of May. Higher Treasury yields hurt prices for all kinds of investments.

This month’s swings in yields have also come as traders recalibrate their expectations for when the Federal Reserve could begin cutting its main interest rate, which is at its highest level in more than two decades.

With inflation stubbornly higher, traders have had to delay their too-optimistic forecasts for rate cuts several times this year.

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The Fed is trying to pull off the balancing act of grinding down on the economy just enough through high interest rates to get inflation fully under control, but not so much that it leads to widespread layoffs.

A report from the Fed released Wednesday said that it’s heard from businesses and other contacts around the country that consumers are pushing back against more increases to prices. That in turn is eating into companies’ profits as their own costs for insurance and other expenses continue to rise.

Despite worries about cracks showing in spending by U.S. consumers, particularly those making lower incomes, economists at BNP Paribas expect a healthy job market, slowing inflation and even gains made by some investors in cryptocurrencies to help support the main engine of the economy.

U.S. stocks have been continuing to set records despite worries about interest rates staying high in part because stocks related to artificial-intelligence technology keep rising. Nvidia’s latest blowout profit report helped drive the frenzy even higher. After briefly dipping in morning trading, it rose 0.8% Thursday for its most modest gain since its profit report..

On the winning side of Wall Street was Dick’s Sporting Goods, which jumped 15.9% after topping analysts’ expectations for profit and revenue in the latest quarter. The retailer also raised its forecast for profit over the full year.

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Chewy, an online seller of pet supplies, likewise reported stronger profit for the latest quarter than expected, and its stock jumped 27.1%.

In other dealings, U.S. benchmark crude oil added 11 cents to $79.34 per barrel in electronic trading on the New York Mercantile Exchange.

Brent crude, the international standard, was up 8 cents at $83.51 per barrel.

The U.S. dollar slipped to 157.42 Japanese yen from 157.65 yen. The euro fell to $1.0800 from $1.0803.

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Oil market likely to be in surplus next year, Morgan Stanley says

Oil market likely to be in surplus next year, Morgan Stanley says

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Oil market likely to be in surplus next year, Morgan Stanley says

The crude oil market is currently tight but next year will likely be in surplus, with Brent prices declining into the mid-to-high $70s range, Morgan Stanley said.

The tightness will hold for most of the third quarter, the bank said in a note dated on Friday, but equilibrium will return by the fourth quarter, “when seasonal demand tailwinds abate and both OPEC and non-OPEC supply return to growth.”

Three sources told Reuters last week that OPEC+ is unlikely to recommend changing the group’s output policy at a mini-ministerial meeting next month, leaving in place a plan to start unwinding one layer of oil output cuts from October.

Morgan Stanley said it expects OPEC and non-OPEC supply to grow by about 2.5 million barrels per day (bpd) in 2025, well ahead of demand growth.

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Refinery runs are set to reach a peak in August this year, and unlikely to return to that level until July 2025, it said.

Morgan Stanley left its forecast for Brent crude prices for the third quarter of 2024 unchanged at $86 per barrel. Earlier this month, Goldman Sachs also maintained its projection for the quarter at an average Brent price of $86 a barrel.

Brent crude prices on Monday were up 0.54% at $83.08 a barrel by 0535 GMT, and US West Texas Intermediate crude futures were up 0.54% at $80.56. 

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Asia stocks skid as China trims rates; Biden steps aside

Asia stocks skid as China trims rates; Biden steps aside

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Asia stocks skid as China trims rates; Biden steps aside

Asian shares slid anew on Monday, getting little lift from a surprise rate cut by China’s central bank, while Wall Street futures firmed in the wake of President Joe Biden’s decision to bow out of the election race.

The People’s Bank of China cut short-term rates by 10 basis points, which pulled down long-term borrowing costs and bond yields. The move follows Beijing’s release of a policy document on Sunday outlining its ambitions for the economy.

Investors seemed underwhelmed with the move, in part as it only emphasised how weak the economy was, and Chinese blue chips slipped 0.9% along with the yuan.

“Basically all the fundamental factors point to the fact that China needs a lower rate environment, especially the real rate is really high…in this kind of disinflationary environment,” said Gary Ng, Asia-Pacific senior economist at Natixis in Hong Kong.

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“I think the general trend is that it’s pretty much in line with the fact that the economy is not that great, and it seems that there’s a bit of urgency from the authorities to stimulate it now.”

MSCI’s broadest index of Asia-Pacific shares outside Japan lost another 0.7%, having shed 3% last week.

Japan’s Nikkei dropped 1.2% and South Korea’s benchmark index fell 1.3%. Taiwan was having another tough session with a loss of 2.3% amid concerns about US restrictions on chip sales.

Investors seemed much better prepared for news President Biden would drop out of the election race and endorse Vice President Kamala Harris for the Democratic ticket.

Online betting site PredictIT showed pricing for a victory by Donald Trump had fallen 4 cents to 60 cents, while Harris climbed 12 cents to 39 cents. California governor Gavin Newsom, another possible Democratic challenger, trailed at 4 cents.

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Markets took the news in their stride, with S&P 500 stock futures nudging up 0.1%, while Nasdaq futures added 0.2%. Futures for 10-year Treasuries rose 2 ticks, while 10-year bond yields dipped 2 basis point to 4.22%.

EUROSTOXX 50 futures added 0.5%, while FTSE futures firmed 0.4%.

“As Trump’s polling results have lifted, markets have favoured positions that anticipate more trade barriers and possibly higher inflation,” ANZ analysts said.

“Some polls have Harris performing better than Biden against Trump, and the Democrats will be hoping the next polls feature a Harris-driven bump.”

EYE ON EARNINGS

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A packed week of corporate earnings will see Tesla and Google-parent Alphabet kick off the season for the “Magnificent Seven” megacap group of stocks.

Others reporting include General Electric, General Motors, Ford and Lockheed Martin.

The tech sector is projected to increase year-over-year earnings by 17%, while profit for the communication services sector is seen rising about 22%.

Such gains would outpace the 11% estimated rise for the S&P 500 overall, according to LSEG IBES.

Europe’s biggest banks also report this week, with eyes on whether the gains from higher interest rates have run out of steam and if recent political drama is weighing on sentiment.

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A busy week for economic news will culminate with the Federal Reserve’s favoured inflation measure out on Friday. The core personal consumption expenditures index is seen rising 0.1% in June, pulling the annual pace down a tick to 2.5%.

Markets are wagering heavily that a benign outcome will firm the case for a September rate cut, which futures are pricing as a 97% chance.

Also due are figures for advance gross domestic product that are forecast to show growth picking up to an annualised 1.9% in the second quarter, from 1.4% in the first.

The closely watched Atlanta Fed GDPNow indicator points to growth of 2.7%, suggesting some risk to the upside.

The Bank of Canada meets on Wednesday and is considered almost certain to cut its rates by a quarter point to 4.5%.

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In currency markets, the dollar gave back just a little of last week’s safe haven gains as the euro edged up 0.1% to $1.0886. The dollar was a fraction softer on the Japanese yen at 157.27.

In commodity markets, gold held at $2,406 an ounce and short of last week’s record high of $2,483.60.

Oil prices inched higher, with scant sign of progress on a ceasefire deal in Gaza as Israeli forces battled Palestinian fighters in the southern city of Rafah on Sunday.

Brent gained 44 cents to $83.07 a barrel, while US crude rose 41 cents to $80.54 per barrel.

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FinMin Aurangzeb set to visit China to reschedule $15 loans

FinMin Aurangzeb set to visit China to reschedule $15 loans

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FinMin Aurangzeb set to visit China to reschedule $15 loans

 In order to reschedul energy loans worth $15 billion, Finance Minister Muhammad Aurangzeb is all set to visit China for three days tomorrow.

The minister will discuss the loan rescheduling with the Chinese authorities. The minister will also discuss China’s energy circular debts worth Rs500 billion.

Read more: Finance Minister Aurangzeb leads delegation to US for IMF talks on new bailout package

The minister will also discuss Panda Bonds during the visit to get the $30 million bonds in China.

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