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Business

Global shares retreat after Fed inflation nudge

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LONDON, Jan 10 (Reuters) – Global shares fell for the first time in three days on Tuesday, after comments from two Federal Reserve officials injected a note of caution over the U.S. rate outlook, knocking equities, commodities and other risk assets.

The MSCI All-World index (.MIWD00000PUS) fell 0.2%, but remained in sight of Monday’s three-week high, while the dollar – a gauge of investor risk appetite – edged up against a basket of major currencies.

In the past six weeks, China has dismantled its zero-COVID policy even as cases have surged around the country, which has given markets a bumpy ride as investors weighed up the economic benefits of reopening against the impact to activity from the wave of infections.

Adding to that has been a sense of optimism that inflation has peaked, especially in the United States, and, as such, the Fed will not have to raise rates as much as many had feared.

However, with consumer price pressures still well above the central bank’s target of 2%, two Fed officials on Monday issued a stark reminder that interest rates will have to keep rising, no matter what investors have priced in.

“The market is trying to get one step ahead of the Fed, but it’s not actually listening to what it’s saying. And the Fed is being quite clear with its message – that rates are going to push higher and they’re going to stay higher for longer,” CityIndex strategist Fiona Cincotta said.

“If we look at expectations of inflation later this week – the big focus – core inflation is still expected to remain high. It doesn’t matter which way you look at it. It’s still higher than the target the Fed is aiming for,” she said.

U.S. consumer price data, due on Thursday, is expected to show headline inflation slowed to 6.5% in December from 7.1% in November.

The data could be key to setting expectations for what happens with rates at the Fed’s next policy meeting and beyond.

San Francisco Fed President Mary Daly told the Wall Street Journal she would pay close attention to Thursday’s data and both 25- and 50-basis point hikes were options for her. Atlanta Fed President Raphael Bostic said his “base case” was for no rate cuts this year or next.

“The main theme overnight was cautiousness in the equity space as stocks pared gains after hawkish comments from two Fed officials. Raphael Bostic and Mary Daly said the Fed would likely hike (interest) rates to above 5% and hold them there for some time,” Commerzbank said in a note.

Fed Chair Jerome Powell addresses a conference on central bank independence later on Tuesday and investors will likely scour his remarks for any signal on monetary policy.

“Given that the recent rebound in equity markets and fall in bond yields and the US dollar is loosening financial conditions, today might offer an opportunity for Fed chairman Jay Powell to reset the narrative slightly,” CMC Markets chief strategist Michael Hewson said.

FRAGILE CHINA

In Europe, the STOXX 600 (.STOXX), which on Monday hit its highest in eight months, fell 0.7%, led by a decline in industrials. London’s FTSE 100 (.FTSE) lost 0.2%, while Frankfurt’s DAX (.GDAXI) fell 0.5%.

U.S. stock index futures , fell 0.3%, indicating Wall Street could open a touch lower after a volatile session the previous day.

The dollar carved out gains against the Australian dollar , which is highly sensitive to the Chinese economy and has gained 3.5% in the last three weeks alone, based on the optimism around reopening.

The Aussie was last down 0.5% at $0.6877, while the offshore yuan lost 0.1% against the dollar to trade around 6.7913. It reached its strongest level since mid-August the previous day.

The dollar index rose 0.2%. The euro was flat, while the pound fell 0.3%. The yen fell 0.1% against the dollar to 132.06, even after data showed a faster pick-up in Tokyo inflation that could prompt the Bank of Japan to tighten monetary policy more quickly.

Strategists at BlackRock, the world’s largest asset manager, on Tuesday said they expected the Chinese economy to grow by 6% this year, which should cushion the global slowdown as recession hits developed-market economies. But any bounce may be fleeting.

“We don’t expect the level of economic activity in China to return to its pre-COVID trend, even as domestic activity restarts. We see growth falling back once the restart runs its course,” Wei Li, who is global chief investment strategist for the BlackRock Investment Institute, wrote in a note.

Copper eased back from six-month highs , as bullishness from China’s emergence from COVID-19 was offset by concern about the risks of a broader global downturn.

London Metal Exchange copper futures fell 0.5% to $8,813 a tonne, having hit their highest in over six months on Monday, while zinc fell 0.7% and lead dropped 2%.

Oil pared earlier losses, but concern persisted that China returning to more normal activity may not translate into a boom in energy demand.

“The social vitality of major Chinese cities is rapidly recovering, and the restart of China’s demand is worth looking forward to. However, considering that the recovery of consumption is still at the expected stage, the oil price will most likely remain low and range-bound,” analysts from Haitong Futures said.

Brent crude futures were last up 0.4% to $80.00 a barrel. The oil price is about 2.3% below where it was a year ago and 45% below the highs around $139 after Russia invaded Ukraine last February.

Additional reporting by Selena Li in Hong Kong; Editing by Muralikumar Anantharaman, Angus MacSwan and Chizu Nomiyama

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Business

Dollar set for biggest one-day gain in three months, equities rally

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  • Global shares edge up
  • Correlation with dollar softens
  • Yen takes a breather from recent rally

LONDON, Jan 3 (Reuters) – The dollar headed for its largest one-day rise in over three months on Tuesday, while equities rallied in a macro-packed week that could offer a steer on when, and at what level, U.S. interest rates might peak.

The MSCI All-World index (.MIWD00000PUS) was roughly unchanged, although European stocks, led by hefty gains in anything from financials, to oil and gas stocks, to healthcare, bounced to two-week highs.

Typically, stocks tend to fall when the dollar gains, but that negative correlation between the two softened on Tuesday to its weakest since early September. The dollar index was last up 1% at 104.69.

The euro was the worst-performing currency against the dollar , falling by the most since late September, after German regional inflation data showed consumer price pressures eased sharply in December, thanks in large part to government measures to contain natural gas bills for households and businesses.

Data on U.S. payrolls this week are expected to show the labour market remains tight, while EU consumer prices could show some slowdown in inflation as energy prices ease.

“Energy base effects will bring about a sizeable reduction in inflation in the major economies in 2023, but stickiness in core components, much of this stemming from tight labour markets, will prevent an early dovish policy ‘pivot’ by central banks,” analysts at NatWest Markets wrote in a note.

They expect interest rates to top out at 5% in the United States, 2.25% in the EU and 4.5% in Britain and to stay there for the entire year. Markets, on the other hand, are pricing in rate cuts for late 2023, with fed fund futures implying a range of 4.25 to 4.5% by December.

“The thing that makes me nervous about this year is that we still do not know the full impact of the very significant monetary tightening that’s taken place across the advanced world,” Berenberg senior economist Kallum Pickering said.

“It takes a good year, or 18 months, for the full effect to kick in,” he said.

Central banks have expressed concern about rising wages, even as consumers have struggled to keep up with the soaring cost of living and companies are running out of room to protect their profitability by raising their own prices.

But, Pickering said, the labour market tends to lag the broader economy by some time, meaning that there is a risk that central banks could be raising interest rates by more than the economy can withstand.

“What central banks are inducing is essentially excess cyclicality, which is – they overstimulated in 2021 and triggered an inflationary boom and then overtightened in 2022 and triggered a disinflationary recession. It’s exactly the opposite of what you want central banks to do,” he said.

Investors will get their first insight into central bank thinking later this week when the Federal Reserve releases the minutes from its December policy meeting.

The minutes will likely show many members saw risks that interest rates would need to go higher for longer, but investors are conscious of how much they’ve risen already.

On the markets, European shares rose thanks to gains in classic defensive sectors, such as healthcare and food and beverages. Drugmakers Novo Nordisk (NOVOb.CO), Astrazeneca (AZN.L) and Roche (ROG.S) were among the biggest positive weights on the STOXX 600 (.STOXX), along with Nestle (NESN.S)

The STOXX, which lost 13% in 2022, rose 1.1%. The FTSE 100 (.FTSE), the only major European index not to trade on Monday, rose 1.3%.

U.S. stock index futures gained between 0.4-0.5% , , pointing to an upbeat start at the opening bell.

Markets have for a while priced in an eventual U.S. easing, but they were badly wrong-footed by the Bank of Japan’s shock upward shift in its ceiling for bond yields.

The BOJ is now considering raising its inflation forecasts in January to show price growth close to its 2% target in fiscal 2023 and 2024, according to the Nikkei.

Such a move at its next policy meeting on Jan. 17-18 would only add to speculation of an end to ultra-loose policy, which has essentially acted as a floor for bond yields globally.

The policy shift has boosted the yen across the board, with the dollar losing 5% in December and the euro 2.3%.

The yen took a breather on Tuesday, easing 0.3% against the dollar to 130.96. The dollar earlier touched a six-month low of 129.52 yen . Against the dollar, the euro fell 1.1% to $1.05395, having dropped by as much as 1.4% earlier in the day.

“A theme we’ve often noticed is the euro’s negative seasonality in January, down around 1.3% since 1980 on average in January, with a 64% hit ratio. If history is any guide, it’s a rough month for euro longs,” Nomura strategist Jordan Rochester said.

Oil succumbed to the strength of the dollar, and reversed course, falling as concern about demand in China, the world’s second largest economy, added to the downward momentum.

A batch of surveys have shownChina’s factory activity shrank at the sharpest pace in nearly three years as COVID infections swept through production lines.

“China is entering the most dangerous weeks of the pandemic,” warned analysts at Capital Economics.

Brent crude lost 0.9% to trade around $85.15 a barrel, having hit a session high of $87.00 earlier on.

Reporting by Wayne Cole; Editing by Bradley Perrett, Sam Holmes and Chizu Nomiyama

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World

Russia trying to get ballistic missiles from Iran, says Britain

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UNITED NATIONS, Dec 9 (Reuters) – Russia is attempting to obtain more weapons from Iran, including hundreds of ballistic missiles, and offering Tehran an unprecedented level of military and technical support in return, Britain’s U.N. Ambassador Barbara Woodward said on Friday.

Since August Iran has transferred hundreds of drones – also known as unmanned aerial vehicles (UAVs) – to Russia, which had used them to “kill civilians and illegally target civilian infrastructure” in Ukraine, Woodward said.

“Russia is now attempting to obtain more weapons, including hundreds of ballistic missiles,” Woodward told reporters.

“In return, Russia is offering Iran an unprecedented level of military and technical support. We’re concerned that Russia intends to provide Iran with more advanced military components, which will allow Iran to strengthen their weapons capability,” she said.

She also said that Britain was “almost certain that Russia is seeking to source weaponry from North Korea (and) other heavily sanctioned states, as their own stocks palpably dwindle.”

The Iranian, North Korean and Russian missions to the United Nations did not immediately respond to a request for comment.

Iran last month acknowledged that it had supplied Moscow with drones, but said they were sent before the war in Ukraine. Russia has denied its forces used Iranian drones to attack Ukraine.

Iran has promised to provide Russia with surface-to-surface missiles, in addition to more drones, two senior Iranian officials and two Iranian diplomats told Reuters in October.

The United States said on Wednesday that it has seen the continued provision of Iranian drones to Russia, but that Washington had not seen evidence that Iran has transferred ballistic missiles to Russia for use against Ukraine.

Woodward spoke ahead of a Security Council meeting later on Friday, requested by Russia, on weapons from the Ukraine conflict that Russia says are “falling into the hands of bandits and terrorists” elsewhere in Europe, the Middle East and Africa.

The United Nations is examining “available information” about accusations that Iran supplied Russia with drones, U.N. Secretary-General Antonio Guterres told the Security Council in a report earlier this week in the face of Western pressure to send experts to Ukraine to inspect downed drones.

Britain, France, Germany, the United States and Ukraine say the supply of Iranian-made drones to Russia violates a 2015 U.N. Security Council resolution enshrining the Iran nuclear deal.

Russia argues that there is no mandate for Guterres to send U.N. experts to Ukraine to investigate the origin of the drones.

Guterres said in the latest report that the transfer of drones or ballistic missiles – with a range of more than 186 miles (300 km) – from Iran to another country would require prior approval from the Security Council.

Reporting by Michelle Nichols and Doina Chiacu; Editing by Chizu Nomiyama and Howard Goller

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World

China’s trade suffers worst slump in 2-1/2 yrs as COVID woes, feeble demand take toll

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  • China’s exports worst since Feb. 2020, miss forecast
  • Imports fall steepest since May 2020 on sluggish demand
  • Global economic slowdown, China’s COVID woes heap pressure
  • Politburo meet points to domestic demand key driver in 2023, analyst says

BEIJING, Dec 7 (Reuters) – China’s exports and imports shrank at their steepest pace in at least 2-1/2 years in November, as feeble global and domestic demand, COVID-led production disruptions and a property slump at home piled pressure on the world’s second-biggest economy.

The downturn was much worse than markets had forecast, and economists are predicting a further period of declining exports, underlining a sharp retreat in world trade as consumers and businesses slash spending in response to central banks’ aggressive moves to tame inflation.

Exports contracted 8.7% in November from a year earlier, a sharper fall from a 0.3% loss in October and marked the worst performance since February 2020, official data showed on Wednesday. They were well below analysts’ expectations for a 3.5% decline.

Beijing is moving to ease some of its stringent pandemic-era restrictions, but outbound shipments have been losing steam since August as surging inflation, sweeping interest rate increases across many countries and the Ukraine crisis have pushed the global economy to the brink of recession.

Exports are likely to shrink further over coming quarters, Julian Evans-Pritchard, senior China Economist at Capital Economics, said in a note.

“Outbound shipments will receive a limited boost from the easing of (China’s) virus restrictions, which are no longer a major constraint on the ability of manufacturers to meet orders,” he said.

“Of much greater consequence will be the downturn in global demand for Chinese goods due to the reversal in pandemic-era demand and the coming global recession.”

Responding to the broadening pressure on China’s economy, state media reported on Wednesday that a high-level meeting of the ruling Communist Party held on the previous day had emphasised the government’s focus in 2023 will be on stabilising growth, promoting domestic demand and opening up to the outside world.

“The Politburo meeting held yesterday points to domestic demand as the major driver for growth for the next year, and the fiscal policy will remain proactive to support demand,” said Hao Zhou, chief economist at Guotai Junan International

Reuters Graphics

‘BUMPY REOPENING’

Almost three years of pandemic controls have exacted a heavy economic toll and caused widespread frustration and fatigue in China.

The widespread COVID curbs hurt importers too. Inbound shipments were down sharply by 10.6% from a 0.7% drop in October, weaker than a forecast 6.0% decline. The downturn was the worst since May 2020, partly also reflecting a high year-earlier base for comparison.

Imports of soybeans and iron ore fell in November from a year earlier while those of crude oil and copper rose.

This resulted in a narrower trade surplus of $69.84 billion, compared with a $85.15 billion surplus in October and marked the lowest since April when Shanghai was under lockdown. Analysts had forecast a $78.1 billion surplus.

The government has responded to the weakening economic growth by rolling out a flurry of policy measures over recent months, including cutting the amount of cash that banks must hold as reserves and loosening financing curbs to rescue the property sector.

But analysts remain sceptical the steps could achieve quick results, as the full-blown relaxation of pandemic controls will take more time and as both domestic and external demand remains weak.

Many businesses are struggling to recover, while surveys last week on factory activity in China and globally suggested many more months of hard grind ahead.

Apple supplier Foxconn (2317.TW) said that revenue in November dropped 11.4% year-on-year, after production problems related to COVID controls at the world’s biggest iPhone factory in Zhengzhou.

“The shift away from zero-COVID and step up in support for the property sector will eventually drive a recovery in domestic demand but probably not until the second half of next year,” Evans-Pritchard said.

With the Chinese yuan already down sharply this year, policymakers’ room for manoeuvre is also limited as hefty monetary policy stimulus at home at a time of rapidly rising interest rates globally could trigger large scale capital outflows.

The Ukraine war, which sparked a surge in already high inflation globally, has intensified geopolitical tensions and further undermined the business outlook.

China’s economy grew just 3% in the first three quarters of this year, well below the annual target of around 5.5%. Full-year growth is widely expected by analysts to be just over 3%.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, cautioned about China’s “bumpy reopening” process.

“As global demand weakens in 2023, China will have to rely more on domestic demand,” he said.

Reporting by Ellen Zhang and Ryan Woo; Editing by Shri Navaratnam

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Business

Nearly half of Meta job cuts were in tech, reorg underway – execs say

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OAKLAND, Calif., Nov 11 (Reuters) – Facebook owner Meta Platforms (META.O) told employees on Friday that it would stop developing smart displays and smartwatches and that nearly half of the 11,000 jobs it eliminated this week in an unprecedented cost-cutting move were technology roles.

Speaking during an employee townhall meeting heard by Reuters, Meta executives also said they were reorganizing parts of the company, combining a voice and video calling unit with other messaging teams and setting up a new division, Family Foundations, focused on tough engineering problems.

The executives said that the first mass layoff in the social media company’s 18-year history affected staffers at every level and on every team, including individuals with high performance ratings.

Overall, 54% of those laid off were in business positions and the rest were in technology roles, Meta human resources chief Lori Goler said. Meta’s recruiting team was cut nearly in half, she said.

The executives said further rounds of job cuts were not expected. But other expenses would have to be cut, they said, noting reviews underway about contractors, real estate, computing infrastructure and various products.

SMART DEVICES CUT

Chief Technology Officer Andrew Bosworth, who runs the metaverse-oriented Reality Labs division, told staffers Meta would end its work on Portal smart display devices and on its smartwatches.

Meta had decided earlier this year to stop marketing Portal devices, known for their video calling capabilities, to consumers and focus instead on business sales, Bosworth said.

As the economy declined, executives decided more recently to make “bigger changes,” he said.

“It was just going to take so long, and take so much investment to get into the enterprise segment, it felt like the wrong way to invest your time and money,” said Bosworth.

Portal had not been a major revenue generator and drew privacy concerns from potential users. Meta had yet to unveil any smartwatches.

Bosworth said the smartwatch unit would focus instead on augmented reality glasses. More than half of the total investment in Reality Labs was going to augmented reality, he added.

Chief Executive Officer Mark Zuckerberg on Friday reiterated his apology from Wednesday about having to cut 13% of the workforce, telling employees he had failed to forecast Meta’s first dropoff in revenue.

Meta aggressively hired during the pandemic amid a surge in social media usage by stuck-at-home consumers. But business suffered this year as advertisers and consumers pulled the plug on spending in the face of soaring costs and rapidly rising interest rates.

The company also faced increased competition from TikTok and lost access to valuable user data that powered its ad targeting systems after Apple made privacy-oriented changes to its operating system.

“Revenue trends are just a lot lower than what I predicted. Again, I got this wrong. It was a big mistake in planning for the company. I take responsibility for it,” Zuckerberg said.

Going forward, he added, he was not planning to “massively” grow headcount of the Reality Labs unit.

Meta shares closed up 1% at $113.02.

Reporting by Paresh Dave in Oakland, California, Katie Paul in Palo Alto, California, Chavi Mehta in Bengaluru; Editing by Aurora Ellis

Our Standards: The Thomson Reuters Trust Principles.

Paresh Dave

Thomson Reuters

San Francisco Bay Area-based tech reporter covering Google and the rest of Alphabet Inc. Joined Reuters in 2017 after four years at the Los Angeles Times focused on the local tech industry.

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Business

Dollar higher on risk aversion; euro revisits parity

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  • Euro under pressure as Russia to halt gas supplies
  • Yuan dips to nearly 2-year low as PBOC eases policy again

NEW YORK, Aug 22 (Reuters) – The U.S. dollar rose across the board on Monday, briefly driving the euro back below parity, as investors shied away from riskier assets amid growing fears that interest-rate hikes in the United States and Europe, aimed at curbing inflation, would weaken the global economy.

Against a basket of currencies, the dollar was 0.5% higher at 108.71 , not far from the two-decade high of 109.29 touched in mid-July.

The greenback has found support in recent sessions as several Federal Reserve officials reiterated an aggressive monetary tightening stance ahead of the Fed’s Jackson Hole, Wyoming, symposium this week.

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The latest of these officials, Richmond Fed President Thomas Barkin, on Friday said the “urge” among central bankers was toward faster, front-loaded rate increases. read more

“It’s risk being taken off the table after the market got a reality check from last week’s Fed speakers that an imminent dovish pivot is off the cards,” said Michael Brown, head of market intelligence at Caxton in London.

“With investors now clearly expecting a relatively hawkish message from Fed Chair (Jerome) Powell at Jackson Hole on Friday, it’s a perfect cocktail of risk-aversion and a hawkish Fed for the greenback to bound higher, especially when growth worries, especially in Europe, continue to mount,” Brown said.

The euro fell following Russia’s announcement late on Friday of a three-day halt to European gas supplies via the Nord Stream 1 pipeline at the end of this month. Investors worry that the halt could exacerbate an energy crisis that has weighed on the common currency in recent months. read more

The European Central Bank must keep raising rates even if a recession in Germany is increasingly likely, as inflation will stay uncomfortably high through 2023, Bundesbank President Joachim Nagel told a German newspaper.

The weakness briefly drove the euro below $1 for the first time since July 14. The euro was last down 0.7% at $0.99715 .

“0.9950 seems to be the pivotal level, as that’s the prior low, if that gives way then we could see significant further losses, especially with the ECB’s window to tighten policy rapidly slamming shut,” Brown said.

China’s yuan dropped to its lowest in nearly two years after the country’s central bank cut its benchmark lending rate and lowered the mortgage reference by a bigger margin on Monday, adding to last week’s easing measures, as Beijing boosts efforts to revive an economy hobbled by a property crisis and a resurgence of COVID-19 cases. read more

Against the offshore yuan , the dollar was 0.55% higher at 6.8621.

Sterling fell to its lowest since mid-July against the dollar on Monday as surging energy costs and a summer of strikes highlighted the UK cost of living crisis and intensified fears for further economic slowdown. read more

The pound was last down 0.43% at $1.1781 , within a whisker of taking out the near 2-1/2 year low of 1.1761 touched in mid-July.

In cryptocurrencies, bitcoin was about 0.92% lower at $21,316, weighed down by broad risk aversion in markets.

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Reporting by Saqib Iqbal Ahmed; editing by Jonathan Oatis

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Business

Indonesia says Tesla strikes $5 bln deal to buy nickel products – media

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Tesla cars are seen parked at the construction site of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 20, 2022. REUTERS/Hannibal Hanschke/

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JAKARTA, Aug 8 (Reuters) – U.S. carmaker Tesla (TSLA.O) has signed contracts worth about $5 billion to buy materials for their batteries from nickel processing companies in Indonesia, a senior cabinet minister told CNBC Indonesia.

Southeast Asia’s biggest economy has been trying to get Tesla to set up a production facility in the country, which has major nickel reserves. President Joko Widodo met with Tesla founder Elon Musk earlier this year to drum up investment. read more

“We are still in constant negotiation with Tesla … but they have started buying two excellent products from Indonesia,” Coordinating Minister for Maritime and Investment Affairs Luhut Pandjaitan said in an interview broadcast on Monday.

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He said Tesla signed a five-year contract with nickel processing companies operating out of Morowali in Sulawesi island. The nickel materials will be used in Tesla’s lithium batteries.

Tesla did not immediately respond to a Reuters email seeking comment.

Indonesia is keen to develop electric vehicles and batteries industries at home and had stopped exports of nickel ore to ensure supply for investors. The move had successfully attracted investments from Chinese steel giants and South Korean companies like LG and Hyundai.

However, most nickel investment so far have gone to production of crude metal such as nickel pig iron and ferronickel.

The government plans to impose export tax on these metals to boost revenue while encouraging more domestic production of higher-value products, a senior official told Reuters last week.

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Reporting by Fransiska Nangoy; Editing by Kanupriya Kapoor

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World

Chile sinkhole grows large enough to swallow France’s Arc de Triomphe

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Aug 7 (Reuters) – A sinkhole in Chile has doubled in size, growing large enough to engulf France’s Arc de Triomphe and prompting officials to order work to stop at a nearby copper mine.

The sinkhole, which emerged on July 30, now stretches 50 meters (160 feet) across and goes down 200 meters (656 feet). Seattle’s Space Needle would also comfortably fit in the black pit, as would six Christ the Redeemer statues from Brazil stacked head-to-head, giant arms outstretched.

The National Service of Geology and Mining said late on Saturday it is still investigating the gaping hole near the Alcaparrosa mine operated by Canadian company Lundin Mining (LUN.TO), about 665 km (413 miles) north of Santiago.

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In addition to ordering all work to stop, the geology and mining service said it was starting a “sanctioning process.” The agency did not provide details on what that action would involve.

Lundin did not immediately reply to a request for comment. The company last week said the hole did not affect workers or community members and that it was working to determine the cause. read more

Lundin owns 80% of the property and the rest is held by Japan’s Sumitomo Corporation.

Initially, the hole near the town of Tierra Amarilla measured about 25 meters (82 feet) across, with water visible at the bottom. read more

The geology and mining service said it has installed water extraction pumps at the mine and in the next few days would investigate the mine’s underground chambers for potential over-extraction.

Local officials have expressed worry that the Alcaparrosa mine could have flooded below ground, destabilizing the surrounding land. It would be “something completely out of the ordinary,” Tierra Amarilla Mayor Cristobal Zuniga told local media.

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Reporting by Marion Giraldo; Writing by Daina Beth Solomon; Editing by Lisa Shumaker

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Business

Russia gas flow lifts euro ahead of ECB rate meeting

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  • Resumption in Russia gas flows lifts euro
  • ECB set to hike rates by at least 25 basis points
  • ECB rate decision due at 1215 GMT
  • U.S. crude oil prices trade below $100 a barrel

LONDON, July 21 (Reuters) – Stock markets eased on Thursday as a resumption of Russian gas supplies to Europe lifted the euro ahead of the European Central Bank’s anticipated first interest rate hike in over a decade to quell inflation.

The flow of Russian gas resumed to Germany after a 10-day outage to ease Europe’s supply concerns for now, helping to ease worries about fallout on the economy. read more

The euro edged up, distancing itself further from last week’s parity against the greenback, the recovery bolstered by expectations the ECB might deliver a big 50 basis-point rate hike.

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Russian President Vladimir Putin has warned that supplies could be reduced further or even stop, prompting the EU to tells its members to cut usage.

“European markets are going to be pulled and pushed by Putin’s mood,” said Michael Hewson, chief markets strategist at CMC Markets.

Markets are looking to see how much the ECB will raise interest rates later at 1215 GMT on Thursday, with a 25-bps hike already price in, Hewson said. read more

Traders also await details of an ECB tool to contain stress in bond markets, made all the more urgent by a crumbling government in Italy, one of the euro zone’s most indebted countries.

Italian spreads and debt/GDP

Rate hikes from the U.S. Federal Reserve next week and from the Bank of England in August are also well anticipated by now, Hewson said.

The STOXX index (.STOXX) of 600 European companies was off 0.4%. The MSCI All-Country stock index (.MIWD00000PUS) eased 0.14%.

Italian bonds sold off sharply following the collapse of Mario Draghi’s government in the euro area’s third biggest economy. read more

Nadege Dufosse, head of cross-asset strategy at Candriam, said political turmoil in Italy is putting more pressure on the ECB to have its so-called anti-fragmentation tool in place to cap bond yields and reassure markets.

“I think they will have to deliver on that point, I think it’s the main risk today. It must convince investors that it will be efficient,” Dufosse said.

After the latest series of rate hikes, investors will be trying to gauge whether the economy is headed for a soft or hard landing as higher borrowing costs are absorbed, she said.

“It’s the expectations for the fourth quarter or next year that can really determine the trend in the market. For now we do not have the answer and we just have to be very pragmatic,” Dufosse said.

Bucking the trend, the Bank of Japan left monetary policy unchanged on Thursday, as expected, and raised its inflation forecasts a little bit. The yen held steady at 138.37 per dollar. read more

Nasdaq 100 futures fell 0.25% and S&P 500 futures fell 0.2%. Earnings from Blackstone, Dow Chemical, Philip Morris International, Twitter and American Airlines were due on Thursday.

CHINA CLOUDS

Wall Street indexes rallied overnight but even better-than-expected results from Tesla after hours couldn’t carry the positive mood into the Asia session. read more

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.1% and Japan’s Nikkei (.N225) gained 0.4%.

A cloud over Chinese growth due to its strict COVID-19 controls and fresh concern over the ailing property market is also casting gloom over the prospects for global demand.

Growth-sensitive commodities such as copper and iron ore have been sliding and this week Chinese banks and property stocks have been hurt by borrowers boycotting mortgage payments on unfinished homes. read more

“Past due mortgages doubled over the week, and … potential home buyers are waiting for a general drop in home prices for the housing market, including completed projects,” ING analysts said in a note to clients on Thursday.

“This is negative even for cash-rich developers.”

China’s yuan was slightly firmer at 6.7664 to the dollar. Against other currencies the greenback steadied after dipping earlier in the week. The Australian dollar bought $0.68650.

The benchmark 10-year Treasury yield held at 3.0415%, below the 2-year yield of 3.2359%, a market signal that often presages a recession.

Oil prices fell for a second straight session, as demand concerns outweighed tight global supply after U.S. government data showed tepid gasoline consumption during the peak summer driving season.

Brent crude was down 2.25% at $104.50 a barrel, while U.S. West Texas Intermediate dropped 2.6% to $97.32 a barrel.

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Additional reportig by Tom Westbrook, Editing by Sam Holmes, Kim Coghill and Nick Macfie

Our Standards: The Thomson Reuters Trust Principles.

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Euro battles parity pressure ahead of U.S. inflation data

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LONDON, July 13 (Reuters) – Stocks slipped on Wednesday and the euro lurked just above parity against the dollar, as traders waited to see if U.S. inflation data later bolsters the case for another supersized Federal Reserve interest rate hike this month.

Recession worries meant Europe’s bourses were stumbling again after a relatively steady session in Asia Pacific where South Korea and New Zealand had jacked up their rates again.

London’s FTSE (.FTSE), Germany’s DAX (.GDAXI) and France’s CAC40 (.FCHI) were all down 0.6-0.8% , while the euro managed to claw up to $1.0050 even as gas prices jumped another 4.2% /FRX

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Copper, which is attuned to global growth, had hit a 20-month low too having now slumped 30% since April, although Wall Street futures were pointing higher.

UK economic growth data also delivered an unexpected rise but investors were far more focused on whether the U.S. inflation numbers due shortly show it pushing toward 9%, which would be the highest since 1981. read more

“Markets have been held up a bit in terms of parity in euro-dollar but we still have an incredible number of moving parts,” Societe Generale’s Kit Juckes said, explaining that the higher the U.S. inflation numbers, the clearer it will be that the Fed will crack on with rate hikes.

It increased them by a supersized 75 basis points at its last meeting, its first move of that scale since 1994.

“If that (high inflation reading) happens today, that could get the bond market a bit nervous again, invert the U.S. yield curve more and send the euro decisively through parity,” Juckes said.

Underscoring the global inflation concerns, South Korea’s central bank on Wednesday raised its rates by 50 basis points, the biggest increase since the bank adopted its current policy system in 1999, and New Zealand’s central bank also delivered its third straight 50 bps hike in a row. read more

It left fixed income markets all waiting on 1230 GMT U.S. inflation data. German government bond yields edged up to 1.15%, after falling sharply for two days , while 10-year U.S. Treasuries hovered at 2.97% as they also digested the IMF’s latest U.S. growth forecast cut. read more

Bond market recessionary warning signs are now flashing “with growing alarm” Deutsche Bank’s Jim Reid said. One in particular is the 2 year/10 year U.S. Treasury curve, which has inverted before every one of the last 10 U.S. recessions, and remains near its most inverted of this cycle so far at -8.5 bps.

PARITY WATCH

Wall Street futures were pointing to marginally higher starts for the main S&P 500, Nasdaq and Dow Jones indexes after a late slump on Tuesday.

Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gained 0.5%, snapping two straight days of losses and having slumped to its lowest in two years the day before.

Taiwanese stocks led the gains after Taiwan’s finance ministry said on Tuesday evening it would activate its stock stabilisation fund. The market (.TWII) had fallen to a 19-month low that day.

Japan’s Nikkei (.N225) finished up 0.5% after it had lost nearly 2% the previous day.

“Sharp weakness in oil prices in July suggests that June’s (inflation) may mark a peak, however. If so, the most dynamic phase of Fed tightening could conclude with a 75bps rate rise on 27 July,” analysts at ANZ said.

“However, our expectation is that underlying strength in core inflation and still deeply negative real policy rates means 50bps rate rises will still be appropriate after the summer.”

Worries that higher rates could bring the global economy to a standstill, or even worse into recession, has been the key driver behind both the 20% slump in world stocks this year and the surge in the safe-haven U.S. dollar.

The euro , which is down over 11% since January was last at $1.0050, as investors waited to see whether it would fall below one U.S. dollar for the first time since 2002.

It dropped to just a whisker away on Tuesday, falling as low as $1.00005.

The dollar was also firm on other peers, and its index measure against major rivals was holding at just under 108.

Oil prices paused their overnight declines. Brent crude was little changed at $100 a barrel with U.S. West Texas Intermediate crude at $96.31. Industrial metal copper though buckled another 0.75% on the London Metal Exchange (LME) to $7,310 a tonne having slipped as low as $7,202.50.

Leading cryptocurrency bitcoin meanwhile was up over 2% and looked on track to snap a three-day losing streak, though at $19,772 was still trading below the key psychological $20,000 mark.

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Additional reporting by Alun John in Hong Kong and Sam Byford in Tokyo;
Editing by Alison Williams, Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.

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