SHANGHAI, Dec 5 (Reuters) – Tesla (TSLA.O) plans to cut December output of the Model Y at its Shanghai plant by more than 20% from the previous month, two people with knowledge of electric vehicle (EV) giant’s production plan said on Monday.
Tesla did not immediately respond to a request for comment on the planned cut, first reported by Bloomberg, and Reuters was unable to immediately ascertain the reason for reduction.
Inventory levels at Tesla’s Shanghai plant rose sharply after it completed an upgrade of the manufacturing facilities in summer, with EV inventory increasing at its fastest pace ever in October.
The U.S. automaker has cut prices for Model 3 and Model Y cars by up to 9% in China and offered insurance incentives, which helped boost the November sales of its China-made cars by 40% from October and 89.7% more compared to a year ago.
Tesla delivered 100,291 China-made EVs in November, the highest monthly sales since its Shanghai factory opened in late 2020, Xinhua reported on Monday citing Tesla.
Tesla’s high inventory levels in Shanghai come as China’s auto market faces slowing demand and disruptions to local supply chains.
Uncertainty over when China will make significant move to relax its “dynamic zero-COVID” strategy have clouded the outlook for the world’s largest car market, though some Chinese cities have taken steps to ease some restrictions following protests in recent weeks.
Globally, Tesla had planned to push production of the Model Y and Model 3 EVs sharply higher in the fourth quarter as newer factories in Austin, Texas and Berlin ramp production, Reuters reported in September.
The company is planning to start production of a revamped version of Model 3 in the third quarter of 2023 in Shanghai, as it aims to cut production costs and boost the appeal of the five-year-old electric sedan. read more
Reporting by Zhang Yan and Brenda Goh; Editing by Kim Coghill, Kenneth Maxwell and Simon Cameron-Moore
Our Standards: The Thomson Reuters Trust Principles.
Cap on Russia oil comes into effect, impact uncertain
SYDNEY, Dec 5 (Reuters) – Asian shares extended their rally on Monday as investors hoped steps to unwind pandemic restrictions in China would eventually brighten the outlook for global growth and commodity demand, nudging the dollar down against the yuan.
The news helped oil prices firm as OPEC+ nations reaffirmed their output targets ahead of a European Union ban and price caps on Russian crude, which begin on Monday.
More Chinese cities announced an easing of coronavirus curbs on Sunday as Beijing tries to make its zero-COVID policy less onerous after recent unprecedented protests against restrictions. read more
There were also reports Beijing might lower the threat classification for COVID-19, though clarity was lacking on timetables for future steps. read more
“While the easing of some restrictions does not equate to a wholesale shift away from the dynamic COVID zero strategy just yet, it is further evidence of a shifting approach and financial markets look to be firmly focussed on the longer term outlook over the near-term hit to activity as virus cases look set to continue,” said Taylor Nugent, an economist at NAB.
Chinese blue chips (.CSI300) gained 1.7%, on top of last week’s 2.5% bounce, while the Hang Seng (.HS11) jumped 3.5%.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 1.7% to a three-month top, after rallying 3.7% last week. Japan’s Nikkei (.N225) edged up 0.1%, while South Korea (.KS11) eased 0.4%.
EUROSTOXX 50 futures added 0.1%, while FTSE futures were flat. S&P 500 futures and Nasdaq futures both fell 0.1%.
Wall Street had lost some momentum on Friday after November’s robust U.S. payrolls report challenged hopes for a less aggressive Federal Reserve, though Treasuries still ended last week with solid gains. read more
Indeed, 10-year note yields have fallen 74 basis points since early November, effectively undoing much of the tightening of the Fed’s last outsized increase in cash rates.
Markets are wagering Fed rates will top out at 5% and the European Central Bank around 2.5%.
“But U.S. and Euro area labour demand remain surprisingly strong, and alongside a recent easing in financial conditions, the risks are shifting toward higher-than-anticipated terminal rates for both the Fed and the ECB,” warns Bruce Kasman, head of economic research at JPMorgan.
“The combination of labour market resilience with sticky wage inflation adds to the risk that the Fed will deliver a higher than 5% rate forecast at its upcoming meeting and that Chair Jerome Powell’s press conference will shift to more open-ended guidance regarding any near-term ceiling on rates.”
DOLLAR VULNERABLE
The Fed meets on Dec. 14 and the ECB the day after. Speaking on Sunday, French central bank chief Francois Villeroy de Galhau said he favoured a hike of half a point next week. read more
Central banks in Australia, Canada and India are all expected to raise their rates at meetings this week.
The steep decline in U.S. yields has taken a toll on the dollar, which fell 1.4% last week on a basket of currencies to its lowest since June.
It lost 3.5% on the yen alone and last traded at 134.34 , leaving October’s peak of 151.94 a distant memory. The euro resumed it rise to $1.0578 , having added 1.3% last week to its highest since early July.
The dollar also slipped under 7.0 yuan in offshore trade to hit the lowest in three months at 6.9677.
The drop in the dollar and yields has been a boon for gold, which was up 0.5% at a four-month peak of $1,807 an ounce after rising 2.3% last week.
Oil prices bounced after OPEC+ agreed to stick to its oil output targets at a meeting on Sunday.
The Group of Seven and European Union states are due on Monday to impose a $60 per barrel price cap on Russian seaborne oil, though it was not yet clear what impact this would have on global supply and prices. read more
Brent gained $1.67 to $87.24 a barrel, while U.S. crude rose $1.46 to $81.44 per barrel.
Reporting by Wayne Cole; Editing by Sam Holmes
Our Standards: The Thomson Reuters Trust Principles.
OPEC+ sticks to plans to cut production by 2 mln bpd
More Chinese cities relax COVID-19 restrictions
MELBOURNE, Dec 5 (Reuters) – Oil prices rose as much as 2% on Monday after OPEC+ nations held their output targets steady ahead of a European Union ban and a price cap kicking in on Russian crude.
At the same time, in a positive sign for fuel demand, more Chinese cities eased COVID-19 curbs over the weekend, though a patchwork easing in policies sowed confusion across the country on Monday.
Brent crude futures were last up 72 cents, or 0.8%, to $86.29 a barrel at 0430 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 70 cents, or 0.9%, to $80.68 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together called OPEC+, agreed on Sunday to stick to their October plan to cut output by 2 million barrels per day (bpd) from November through 2023.
Analysts said the OPEC+ decision was expected as major producers wait to see the impact of the EU import ban and Group of Seven (G7) $60-a-barrel price cap on seaborne Russian oil, with Russia threatening to cut supply to any country adhering to the cap.
“While OPEC remained steady on output over the weekend, I expect they will continue to balance the market,” said Baden Moore, head of commodity research at National Australia Bank.
“(A) Roll-off of the SPR releases, and implementation of the EU sanctions and price cap act to tighten the market, although we’d expect the market has already positioned for this outlook,” he said, referring to the U.S. strategic petroleum reserve.
The European Union will need to replace Russian crude with oil from the Middle East, West Africa and the United States, which should put a floor under oil prices at least in the near term, Wood Mackenzie vice president Ann-Louise Hittle said in a note.
“Prices are currently weighed down by expectations of slow demand growth, despite the EU oil import ban on Russian crude and the G7 price cap. The adjustment to the EU ban and price cap is likely to support prices temporarily,” Hittle said.
A key factor that has weighed on demand is China’s zero-COVID policy, but that appears to be easing now after protests were followed by several cities, including Beijing and Shanghai, relaxing restrictions to varying degrees.
Hittle added that the EU’s looming embargo on Russian oil products, in addition to crude oil, from Feb. 5 should support crude demand in the first quarter of 2023, as the market is short of diesel and heating oil.
Reporting by Sonali Paul in Melbourne and Emily Chow in Singapore; Editing by Cynthia Osterman and Kenneth Maxwell
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON/LOS ANGELES, Nov 29 (Reuters) – The U.S. House of Representatives was set to vote Wednesday to block a rail strike that could potentially happen as early as Dec. 9, after President Joe Biden warned of dire economic consequences and massive job losses.
House Speaker Nancy Pelosi said lawmakers will vote Wednesday to impose a tentative contract deal struck in September on a dozen unions representing 115,000 workers.
Pelosi said the House would vote separately on Wednesday on a proposal to give seven days of paid sick leave to railroad employees.
“I don’t like going against the ability of unions to strike but weighing the equities, we must avoid a strike,” she said Tuesday after a meeting with Biden.
Biden had warned Monday of a catastrophic economic impact if railroad service ground to a halt, saying up to 765,000 Americans could lose their jobs in the first two weeks of a strike.
“Congress, I think, has to act to prevent it. It’s not an easy call, but I think we have to do it. The economy is at risk,” Biden said.
Despite the close ties between unions and the Democratic Party, several labor leaders criticized Biden asking Congress to impose a contract that workers in four out of 12 unions rejected over its lack of paid sick leave.
The Brotherhood of Maintenance of Way Employes, one of four unions that voted against the contract, objected to Biden’s call to Congress to intervene, saying “the railroad is not a place to work while you’re sick. It’s dangerous…. it is unreasonable and unjust to insist a person perform critical work when they are unwell.”
There are no paid sick days under the tentative deal after unions asked for 15 and railroads settled on one personal day.
[1/2] U.S. President Joe Biden meets with congressional leaders including House Republican leader Kevin McCarthy, Senate Majority Leader Chuck Schumer, Speaker of the House Nancy Pelosi and Senate Republican leader Mitch McConnell at the White House in Washington, U.S., November 29, 2022. REUTERS/Kevin Lamarque TPX IMAGES OF THE DAY
The union push for paid sick time won support on Capitol Hill, where Senator Bernie Sanders threatened to delay the railroad bill unless he got a vote on the sick time issue.
“Guaranteeing 7 paid sick days to rail workers would cost the rail industry a grand total of $321 million a year – less than 2% of its profits,” Sanders said. “Please don’t tell me the rail industry can’t afford it. Rail companies spent $25.5 billion on stock buybacks and dividends this year.”
Regulators and shippers have accused railroads of cutting staff to improve profitability. The railroads oppose giving their workers paid sick time because they would have to hire more staff. The carriers involved include Union Pacific Corp (UNP.N), Berkshire Hathaway Inc’s (BRKa.N) BNSF, CSX Corp (CSX.O), Norfolk Southern Corp (NSC.N) and Kansas City Southern.
The measure needs a simple majority to pass the House. The bill would require a supermajority of 60 out of 100 votes to pass the Senate.
“I can’t in good conscience vote for a bill that doesn’t give rail workers the paid leave they deserve,” Representative Jamaal Bowman, a Democrat, said on Twitter.
Biden on Monday praised the proposed contract for including a 24% wage increase over five years and five annual $1,000 lump-sum payments.
House Republican Leader Kevin McCarthy also criticized the effort but said “I think it will pass, but it’s unfortunate that this is how we’re running our economy today.”
A rail traffic stoppage could freeze almost 30% of U.S. cargo shipments by weight, stoke already surging inflation and cost the American economy as much as $2 billion per day.
Brian Dodge, president of the Retail Industry Leaders Association (RILA), said the idea of a rail shutdown “is just absolutely catastrophic” after companies spent the last year and a half trying to untangle gridlock in the supply chain. “We’d be setting ourselves back down that same path and it would take just as long to untangle the next time,” he said.
The U.S. Congress has passed laws to delay or prohibit railway and airline strikes multiple times in recent decades.
Reporting by David Shepardson in Washington and Lisa Baertlein in Los Angeles Steve Holland and Doina Chiacu; Writing by Kanishka Singh in Washington; Editing by Jonathan Oatis, Heather Timmons, Lisa Shumaker and Simon Cameron-Moore
Our Standards: The Thomson Reuters Trust Principles.
WTI hits lowest since Dec 2021, Brent at lowest since Jan 2022
Clashes in Shanghai as COVID protests flare across China
Investors focus on next OPEC+ meeting on Dec 4
Nov 28 (Reuters) – Oil prices fell close to their lowest this year on Monday as street protests against strict COVID-19 curbs in China, the world’s biggest crude importer, stoked concern over the outlook for fuel demand.
Brent crude dropped by $2.67, or 3.1%, to trade at $80.96 a barrel at 1330 GMT, having dived more than 3% to $80.61 earlier in the session for its lowest since Jan. 4.
U.S. West Texas Intermediate (WTI) crude slid $2.09, or 2.7%, to $74.19 after touching its lowest since Dec. 22 last year at $73.60.
Both benchmarks, which hit 10-month lows last week, have posted three consecutive weekly declines.
Reuters Graphics Reuters Graphics
“On top of growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases, political uncertainty caused by rare protests over the government’s stringent COVID restrictions in Shanghai prompted selling,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Markets appeared volatile ahead of an OPEC+ meeting this weekend and a looming G7 price cap on Russian oil.
China has stuck with President Xi Jinping’s zero-COVID policy even as much of the world has lifted most restrictions.
Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over the restrictions flared for a third day and spread to several cities.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, will meet on Dec. 4. In October OPEC+ agreed to reduce its output target by 2 million barrels per day through 2023.
Meanwhile, Group of Seven (G7) and European Union diplomats have been discussing a price cap on Russian oil of between $65 and $70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets.
However, EU governments were split on the level at which to cap Russian oil prices, with the impact being potentially muted.
“Talks will continue on a price cap but it seems it won’t be as strict as first thought, to the point that it may be borderline pointless,” said Craig Erlam, senior markets analyst at OANDA
“The threat to Russian output from a $70 cap, for example, is minimal given it’s selling around those levels already.”
The price cap is due to come into effect on Dec. 5 when an EU ban on Russian crude also takes effect.
Reporting by Noah Browning
Additional reporting by Yuka Obayashi in Tokyo and Mohi Narayan in New Delhi
Editing by Kirsten Donovan and David Goodman
Our Standards: The Thomson Reuters Trust Principles.
Saudi Arabia and other OPEC producers eye output increase -WSJ
Chinese demand fears and strong dollar also weigh on prices
NEW YORK, Nov 21 (Reuters) – Oil prices plunged on Monday to their lowest since early January, after the Wall Street Journal reported that Saudi Arabia and other OPEC oil producers are considering a half-million barrel daily output increase.
Brent crude futures for January tumbled $4.07, or 4.7%, to $82.93 a barrel by 11:43 a.m. EST (1643 GMT). U.S. West Texas Intermediate (WTI) crude futures for December were down $4.48, or 5.6%, at $75.60 ahead of the contract’s expiry later on Monday. The more active January contract was down $4.05, or 5%, at $76.04.
An increase of up to 500,000 barrels per day (bpd) will be discussed at the OPEC+ meeting on Dec. 4, The Wall Street Journal reported.
Reuters was not immediately able to verify the report.
“It’s hard to believe they’re going into a market that is basically trading in contango,” said Bob Yawger, director of energy futures at Mizuho in New York, referring the effect of current oil futures trading at a discount to later dated contracts. “That’s playing with fire.”
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, recently cut production targets and de facto leader Saudi Arabia’s energy minister was quoted this month as saying the group will remain cautious.
Releasing more oil at the same time as weak Chinese fuel demand and U.S. dollar strength could move the market deeper into contango, encouraging more oil to go into storage and pushing prices still lower, Yawger said.
Expectations of further increases to interest rates have buoyed the greenback, making dollar-denominated commodities like crude more expensive for investors.
The dollar rose 0.9% against the Japanese yen to 141.665 yen, on pace for its largest one-day gain since Oct. 14. read more
“Apart from the weakened demand outlook due to China’s COVID curbs, a rebound in the U.S. dollar today is also a bearish factor for oil prices,” said CMC Markets analyst Tina Teng.
“Risk sentiment becomes fragile as all the recent major countries’ economic data point to a recessionary scenario, especially in the UK and euro zone,” she said, adding that hawkish comments from the U.S. Federal Reserve last week also sparked concerns over the U.S. economic outlook.
New COVID case numbers in China remained close to April peaks as the country battles outbreaks nationwide.
The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into contango, reflecting dwindling supply concerns.
Additional reporting by Noah Browning, Florence Tan and Emily Chow
Editing by Jason Neely, David Goodman and David Gregorio
Our Standards: The Thomson Reuters Trust Principles.
IAEA chief warns: ‘You’re playing with fire!’ after blasts
Russia, Ukraine trade blame for shelling
President Zelenskiy says eastern region hit by heavy artillery
‘Fiercest battles’ in Donetsk region, Zelenskiy says
LONDON/LVIV, Ukraine, Nov 21 (Reuters) – The head of the U.N. nuclear watchdog has warned that whoever fired artillery at Ukraine’s Zaporizhzhia nuclear power plant was “playing with fire” as his team prepared to inspect it on Monday for damage from the weekend strikes.
The attacks on Europe’s biggest nuclear power plant in the south of Ukraine came as battles raged in the east, where Russian forces pounded Ukrainian positions along the front line, President Volodymyr Zelenskiy said.
The shelling of the Zaporizhzhia nuclear power station follows setbacks for Russian forces in the Kherson region in the south and a Russian response that has included a barrage of missile strikes across the country, many on power facilities.
The International Atomic Energy Agency (IAEA) said more than a dozen blasts shook the nuclear plant late on Saturday and on Sunday. IAEA head Rafael Grossi said the attacks were extremely disturbing and completely unacceptable.
“Whoever is behind this, it must stop immediately. As I have said many times before, you’re playing with fire!” Grossi said in a statement.
Russia and Ukraine blamed each other for the shelling of the facility, as they have done repeatedly in recent months after attacks on it or near it.
Citing information provided by plant management, an IAEA team on the ground said there had been damage to some buildings, systems and equipment, but none of them critical for nuclear safety and security.
The team plans to conduct an assessment on Monday, Grossi said, but Russian nuclear power operator Rosenergoatom said there would be curbs on what the team could inspect.
“If they want to inspect a facility that has nothing to do with nuclear safety, access will be denied,” Renat Karchaa, an adviser to Rosenergoatom’s CEO, told the Tass news agency.
Repeated shelling of the plant has raised concern about a grave accident just 500 km (300 miles) from the site of the world’s worst nuclear accident, the 1986 Chernobyl disaster.
The Zaporizhzhia plant provided about a fifth of Ukraine’s electricity before Russia’s invasion, and has been forced to operate on back-up generators a number of times. It has six Soviet-designed VVER-1000 V-320 water-cooled and water-moderated reactors containing Uranium 235.
The reactors are shut down but there is a risk that nuclear fuel could overheat if the power driving the cooling systems is cut. Shelling has repeatedly cut power lines.
Russia’s defence ministry said Ukraine fired shells at power lines supplying the plant but Ukraine’s nuclear energy firm Energoatom accused Russia’s military of shelling the site, saying the Russians had targeted infrastructure necessary to restart parts of the plant in an attempt to further limit Ukraine’s power supply.
A view shows Zaporizhzhia Nuclear Power Plant from the town of Nikopol, amid Russia’s attack on Ukraine, in Dnipropetrovsk region, Ukraine November 7, 2022. Picture taken through glass. REUTERS/Valentyn Ogirenko/File Photo
‘FIERCEST BATTLES’
In eastern Ukraine, Russian forces battered Ukrainian front-line positions with artillery fire, with the heaviest attacks in the Donetsk region, Zelenskiy said in a video address.
Russia withdrew its forces from the southern city of Kherson this month and moved some of them to reinforce positions in the eastern Donetsk and Luhansk regions, an industrial area known as the Donbas.
“The fiercest battles, as before, are in the Donetsk region. Although there were fewer attacks today due to worsening weather, the amount of Russian shelling unfortunately remains extremely high,” Zelenskiy said.
“In the Luhansk region, we are slowly moving forward while fighting. As of now, there have been almost 400 artillery attacks in the east since the start of the day,” he said.
Ukraine’s military in an early Monday update confirmed heavy fighting over the previous 24 hours, saying its forces had repelled Russian attacks in the Donetsk region while Russian forces were shelling in the Luhansk region in the east and Kharkiv in the northeast.
In the south, Zelenskiy said troops were “consistently and very calculatedly destroying the potential of the occupiers” but gave no details.
Kherson city remains without electricity, running water or heating.
Ukraine said on Saturday that about 60 Russian soldiers had been killed in a long-range artillery attack in the south, the second time in four days that Ukraine has claimed to have inflicted major casualties in a single incident.
Russia’s defence ministry said on Sunday that up to 50 Ukrainian servicemen were killed the previous day along the southern Donetsk front line and 50 elsewhere.
Reuters was not able to immediately verify any battlefield reports.
Russia calls its invasion of Ukraine a “special operation” to demilitarize and “denazify” its neighbour, though Kyiv and its allies say the invasion is an unprovoked war of aggression.
Oleh Zhdanov, a military analyst in Kyiv, said that according to his information, Russian offensives were taking place on the Bakhmut and Avdiivka front line in the Donetsk region, among others.
“The enemy is trying to break through our defences, to no avail,” Zhdanov said in a social media video. “We fight back – they suffer huge losses.”
Reporting by Guy Faulconbridge in London, Pavel Polityuk in Kyiv, Caleb Davis in Gdansk and David Ljunggren in Ottawa; Additional reporting by Francois Murphy in Vienna and Lidia Kelly in Melbourne;
Writing by Guy Faulconbridge, David Ljunggren and Shri Navaratnam;
Editing by Robert Birsel
Our Standards: The Thomson Reuters Trust Principles.
LONDON, Nov 20 (Reuters) – Ukraine’s Zaporizhzhia nuclear power plant, which is under Russian control, was rocked by shelling on Sunday, drawing condemnation from the U.N. nuclear watchdog which said such attacks risked a major nuclear disaster.
More than a dozen blasts shook Europe’s biggest nuclear power plant on Saturday evening and Sunday, the International Atomic Energy Agency (IAEA) said. Moscow and Kyiv both blamed the other for the shelling of the facility.
“The news from our team yesterday and this morning is extremely disturbing,” said Rafael Grossi, head of the IAEA, whose team on the ground said there had been damage to some buildings, systems and equipment at the plant.
“Explosions occurred at the site of this major nuclear power plant, which is completely unacceptable. Whoever is behind this, it must stop immediately. As I have said many times before, you’re playing with fire!”
Repeated shelling of the plant in southern Ukraine, which Russia took control of shortly after its February invasion, has raised concern about the potential for a grave accident just 500 km (300 miles) from the site of the world’s worst nuclear accident, the 1986 Chornobyl disaster.
The Zaporizhzhia nuclear power plant provided about a fifth of Ukraine’s electricity before Russia’s Feb. 24 invasion, and has been forced to operate on back-up generators a number of times. It has six Soviet-designed VVER-1000 V-320 water-cooled and water-moderated reactors containing Uranium 235.
The reactors are shut down but there is a risk that nuclear fuel could overheat if the power that drives the cooling systems was cut. Shelling has repeatedly cut power lines.
SIDES SWAP BLAME
Both Kyiv and Moscow have accused each other of attacking the plant on several occasions during the conflict and risking a nuclear accident, and they again exchanged blame on Sunday.
Russia’s defence ministry said Ukraine fired shells at power lines supplying the plant, while TASS reported some of the site’s storage facilities had been hit by Ukrainian shelling, quoting an official from Russian nuclear power operator Rosenergoatom.
“They shelled not only yesterday, but also today, they are shelling right now,” said Renat Karchaa, an adviser to Rosenergoatom’s CEO, adding that any artillery attack at the site posed a threat to nuclear safety.
Karchaa said the shells had been fired near a dry nuclear waste storage facility and a building that houses fresh spent nuclear fuel, but that no radioactive emissions had currently been detected, according to TASS.
Ukraine’s nuclear energy firm Energoatom accused the Russian military of shelling the site and said there were at least 12 hits on plant infrastructure.
It said that Russia had targeted the infrastructure necessary to restart parts of the plant in an attempt to further limit Ukraine’s power supply.
Reporting by Guy Faulconbridge in London, Pavel Polityuk in Kyiv and Caleb Davis in Gdansk; Writing by Guy Faulconbridge; Editing by Pravin Char and Frances Kerry
Our Standards: The Thomson Reuters Trust Principles.
HONG KONG, Nov 16 (Reuters) – Asian stocks dropped and the dollar gained on Wednesday after a blast in Poland that Ukraine and Polish authorities said was caused by a Russian-made missile.
Worries over a potential ratcheting up of geopolitical tensions spurred a drop of 1% in MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS).
Australian shares (.AXJO) fell 0.4%, while Japan’s Nikkei stock index (.N225) dropped 0.1%.
Hong Kong’s Hang Seng Index (.HSI) shed 1.1% and China’s CSI 300 (.CSI300) fell 0.4% by the midday break. The struggling property sector weighed on the markets, with China’s new home prices falling at their fastest pace in more than seven years in October, weighed down by COVID 19-related curbs and industry-wide problems.
U.S. stock futures, the S&P 500 e-minis , fell 0.2%.
In early European trade, the pan-region Euro Stoxx 50 futures lost 0.9%, German DAX futures dipped 1%, and FTSE futures fell 0.5%.
NATO member Poland said on Wednesday that a Russian-made rocket killed two people in eastern Poland near Ukraine, and it summoned Russia’s ambassador to Warsaw for an explanation after Moscow denied it was responsible.
“(It) interrupted what is a far more constructive tone in markets over the last three, four days,” said Dwyfor Evans, head of Asia Pacific macro strategy at State Street Global Markets in Hong Kong, who noted optimism in the financial markets that U.S. inflation was cooling.
U.S. President Joe Biden said the United States and its NATO allies were investigating the blast but early information suggested it may not have been caused by a missile fired from Russia.
“I do think President Biden’s comment was clear in representing the U.S. government,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
“Unless there’s evidence to the contrary, (market concerns) should dissipate.”
The safe-haven U.S. dollar pared gains against its major peers but was still mostly higher, led by a 0.63% advance versus the yen .
Sterling lost 0.32%, while the risk-sensitive Aussie dollar weakened 0.34%. The euro was flat.
“A lot of headlines are going on around today but there’s a feeling that this is not going to, at this stage… result in an escalation in tensions, or at least there is no appetite to go in that direction,” said Rodrigo Catril, senior currency analyst at National Australia Bank in Sydney.
The fact that the risk-sensitive, pro-growth Australia and New Zealand dollars retained most of their big gains from Tuesday, following soft U.S. PPI readings, is an indication that “there is a lot of appetite to push the U.S. dollar lower,” Catril said.
The yield on benchmark 10-year Treasury notes rose to 3.8068% in Tokyo, compared with 3.799% at the close of U.S. trading on Tuesday. It earlier fell as low as 3.757%, matching the previous session’s intraday trough, which was the lowest since Oct. 6.
U.S. crude dipped 0.74% to $86.29 a barrel. Oil prices rose on Tuesday after news that oil supply to Hungary via the Druzhba oil pipeline had been temporarily suspended due to a fall in pressure.
Gold was slightly lower, with spot gold trading at $1,778.17 per ounce.
Reporting by Xie Yu; Additional reporting by Ankur Banerjee; Editing by Edwina Gibbs and Edmund Klamann
Our Standards: The Thomson Reuters Trust Principles.
SYDNEY/LONDON, Nov 14 (Reuters) – Share markets continued last week’s rally in more modest fashion on Monday after a top U.S. central banker warned investors against getting carried away over one inflation number, while Chinese stocks gained on aid for the country’s property sector.
A modest miss on U.S. inflation was enough to see two-year Treasury yields dive 33 basis points for the week and the dollar lose almost 4% – the fourth biggest weekly decline since the era of free-floating exchange rates began over 50 years ago.
However, the resulting easing in U.S. financial conditions was not entirely welcomed by the Federal Reserve, with Governor Christopher Waller saying on Sunday it would take a string of soft reports for the bank to take its foot off the brakes.
Waller added the markets were well ahead of themselves on just one inflation print, though he did concede the Fed could now start thinking about hiking at a slower pace.
Futures are wagering heavily on a half-point rate rise to 4.25-4.5% in December, and then a couple of quarter-point moves to a peak in the 4.75-5.0% range.
Two-year yields edged down to 4.39%, after diving as deep as 4.29% on Friday.
“The CPI downside surprise aligns with a broad range of indicators pointing to a downshift in global inflation that should encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere,” said Bruce Kasman, head of economic research at JPMorgan.
“This positive message needs be tempered by the recognition that downshift in inflation will be too little for central banks to declare mission-accomplished, and more tightening is likely on the way.”
The benchmark European STOXX index rose 0.37% (.STOXX), and MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.73%, after jumping 7.7% last week.
U.S. markets looked set to open lower, with S&P E-mini futures down 0.26% .
EYES ON CHINA
Dealers were also waiting to see if Chinese stocks could extend their big rally amid reports regulators have asked financial institutions to extend more support to stressed property developers. read more
China’s real estate index (.CSI000952) jumped 3.5% in response. Blue chips (.CSI300) rose 1%, helped by a slew of changes to China’s COVID curbs, even as the country reported more cases over the weekend. read more
“It’s hard to see how the case news is anything but negative from an economic standpoint, but it’s the symbolism of the movement, however small, in the zero COVID strategy that markets are happily latching onto,” said Ray Attrill, head of FX strategy at NAB.
The support for China’s property sector, which consumes a vast amount of metals, boosted copper towards a five-month high. Three-month copper on the London Metal Exchange (LME) rose 0.3% at $8,519 a tonne by 0725 GMT.
U.S. President Joe Biden will meet Chinese leader Xi Jinping in person on Monday for the first time since taking office, with U.S. concerns over Taiwan, Russia’s war in Ukraine and North Korea’s nuclear ambitions on top of his agenda.
The news on COVID rules had stoked a short-covering bounce in the yuan, which added to broad pressure on the dollar as yields dived. The yuan was set 1.4% firmer on Monday – the largest such move since 2005.
The dollar index moved down a fraction on Monday at 106.69 , still well short of last week’s 111.280 top.
The euro eased a touch to $1.0308 , after climbing 3.9% last week, while the dollar firmed to 139.56 yen following last week’s 5.4% drubbing.
The dollar lost almost as much to the Swiss franc , steered in part by warnings from the Swiss National Bank that it would use rates and currency purchases to tame inflation.
Sterling eased back to $1.1755 ahead of the British Chancellor’s Autumn Statement on Thursday, where he is expected to set out tax rises and spending cuts.
Crypto currencies remained under pressure as at least $1 billion of customer funds were reported to have vanished from collapsed crypto exchange FTX.
Bitcoin recovered 2.9% at $16,785 , having shed almost 22% last week.
Oil prices pared earlier gains and fell on Monday, after hopes of a boost in China demand were offset by the firmer U.S. dollar. Brent crude futures were down 32 cents, or 0.3%, to $95.67 a barrel by 0725 GMT after settling up 1.1% on Friday
Reporting by Wayne Cole and Lawrence White; Editing by Shri Navaratnam, Kenneth Maxwell, William Maclean
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