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Business

Asian shares fall as Delta fears eclipse Wall Street uptick

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HONG KONG, Aug 12 (Reuters) – Asian shares failed to follow a strong close on Wall Street with fears about the spread of the Delta variant of the coronavirus weighing on sentiment even as tame U.S. inflation eased fears the Federal Reserve would rush to reduce its economic support.

That data also caused dollar to retreat against most major currencies and U.S. Treasury yields to edge down overnight though both were steadier in Asian hours.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) dropped 0.25% in early trading, dragged by a 0.24% decline in Chinese bluchips (.CSI300). The Hong Kong benchmark (.HSI) fell 0.2% while Australian shares (.AXJO) were largely flat and Japan’s Nikkei (.N225) rose 0.35%.

U.S. stock futures were little changed, with S&P 500 e-minis down 0.02%.

The weaker performance by Asian benchmarks contrasts with the situation elsewhere in the world. On Wednesday the MSCI all-country index (.MIWD00000PUS), a gauge of stocks across the globe, hit a record high.

In comparison the Asian benchmark is down over 10% from its February peak.

“The money is just in the U.S. and European markets right now, and that’s our preferred market too,” said Daniel Lam, senior cross-asset strategist, Standard Chartered Wealth Management.

Lam pointed to a strong U.S. earning season and Europe’s high vaccination rates meaning the pace of reopening has been less harmed by the spread of the Delta variant of the new coronavirus, and “recent China regulation blues” in sectors such as education and technology.

“I think that the rotation from emerging markets to Western markets could continue in the near-term,” said David Chao, Global Market Strategist, Asia Pacific (ex-Japan) at Invesco.

“The APAC region’s zero-tolerance policy coupled with a relatively low vaccination rate has led to vicious lockdown-release cycle which could continue for a while.”

The Dow Jones Industrial Average (.DJI) and S&P 500 (.SPX) closed at record levels on Wednesday, after the U.S. Labor Department reported the largest drop in month-to-month inflation in 15 months, easing concerns about the potential for runaway inflation.

U.S. policymakers are publicly discussing how and when they should begin to trim the massive asset purchases launched by the Fed last year to stabilise financial markets and support the economy through the coronavirus pandemic. read more

The easing of fears about inflation reduces the pressure to taper those asset purchases soon rather than later in the year, after strong employment figures last week had given ammunition to those with a more hawkish tilt.

As a result, U.S. Treasury yields fell on Wednesday across most maturities, though trading was choppy.

Moves were more muted in Asian hours. Yields on benchmark 10-year Treasury notes was last 1.3455% compared with its U.S. close of 1.359%.

The dollar hovered below a four-month peak against major peers on Thursday, after retreating overnight as yields dropped.

“I expect the dollar to be range-bound on the recent strong unemployment and tempered CPI data,” said Invesco’s Chao.

Oil largely held onto gains from earlier in the week, U.S. crude dipped 0.03% to $69.23 a barrel. Brent crude was flat at $71.43 per barrel.

Gold also held on to overnight gains on Thursday, with the spot price down 0.1% having risen 1.3% in the previous session. Easing of fears about higher interest rates would typically help the non-interest bearing asset.

Editing by Lincoln Feast

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Business

Fed officials say tapering is near, advancing discussion on rate hike

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Aug 9 (Reuters) – Two Federal Reserve officials said on Monday that the U.S. economy is growing rapidly and that while the labor market still has room for improvement, inflation is already at a level that could satisfy one leg of a key test for the beginning of interest rate hikes.

Atlanta Federal Reserve Bank President Raphael Bostic said he is eyeing the fourth quarter for the start of a bond-purchase taper but is open to an even earlier start if the job market keeps up its recent torrid pace of improvement. Moreover, he and Richmond Fed President Tom Barkin both said they believe inflation has already achieved the Fed’s 2% threshold, according to their separate assessments. That is one of two requirements to be met before rate hikes can be considered.

Their remarks are a sign that as Fed officials hold discussions about how and when to taper their asset purchases, they are also getting more detailed in their debate about what it will take to satisfy the Fed’s inflation target under the new framework.

Bostic, who has already penciled in late 2022 for the start of rate hikes, pointed to the five-year annual average for the core personal consumption expenditures index, or core PCE inflation, which by his calculation reached 2% in May.

“There are many reasons to think that we may be at that goal target right now,” Bostic told reporters. But he said the committee has yet to agree on the metrics it will use to measure that progress, something policymakers will need to discuss.

Barkin said high inflation seen this year may have satisfied one of the Fed’s benchmarks for raising rates, though there is still room for the job market to heal before rates should rise. Under the Fed’s current policy guidance, rates will rise “when inflation hits 2%, which I think you can argue it already has, and it looks like it is going to sustain there,” Barkin said at the Roanoke Regional Chamber of Commerce in Virginia.

Their remarks echoed comments made by St. Louis Fed President James Bullard last month, who said that the current pace of inflation, at 3.5% annually by the Fed’s preferred measure, is well above the central bank’s 2% target, and adequate in his view to make up for past weak inflation as required by the central bank’s new framework.

LABOR MARKET STILL BEHIND

Under a new framework unveiled last year, Fed officials agreed to leave rates at near-zero levels until the labor market reaches maximum employment, and inflation averages 2%, on track to moderately exceed 2% for some time.

Policymakers said in December they would continue purchasing government bonds at the current pace of $120 billion a month until there is “substantial further progress” toward the central bank’s goals for inflation and maximum employment.

With the elevated inflation levels reached during the pandemic, Bostic said, the Fed has effectively achieved the “substantial further progress” goal for inflation.

More progress is still needed in the labor market, but that goal could be accomplished after another month or two of strong job improvement, Bostic said. That puts the Fed on a path to begin trimming purchases between October and December, or sooner, if the gains in August are stronger than expected, he said.

Boston Fed President Eric Rosengren said on Monday during an interview with the Associated Press that the “substantial further progress” goal had been met for inflation but that more improvement was needed in the labor market. He said the tapering standard for employment could potentially be met by September.

“I would expect if we continue to have (jobs) reports like we’ve had over the last two, with very substantial payroll employment gains, that by the September meeting, we would, in my view, meet the substantial further progress criteria, and that would imply starting to taper sometime this fall,” Rosengren said.

Barkin did not specify a timeline for when the Fed may start to reduce its asset purchases, but said he is watching the employment-to-population ratio to evaluate whether the labor market has made enough progress toward the Fed’s goals.

In terms of how to structure the taper, Bostic said he supports a “balanced” approach that reduces mortgage-backed securities and Treasury securities at the same rate. He also said he would be in favor of tapering asset purchases over a shorter period than what the Fed has previously done. “I am in favor of going relatively fast,” Bostic said.

Reporting by Jonnelle Marte and Howard Schneider; Editing by Steve Orlofsky, Chizu Nomiyama and Jonathan Oatis

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Business

Asia stocks spooked by sudden slide in gold

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  • Asian stock markets : https://tmsnrt.rs/2zpUAr4
  • Gold drops more than 4% at one stage, oil prices slide
  • Strong U.S. jobs report brings Fed tapering nearer
  • Rising Treasury yields lift dollar to 4mth high on euro

SYDNEY, Aug 9 (Reuters) – Asian shares wobbled on Monday amid sharp losses in gold and oil prices, while the dollar held near four-month highs after an upbeat U.S. jobs report lifted bond yields.

Sentiment was shaken by a sudden dive in gold as a break of $1,750 triggered stop loss sales taking it as low as $1,684 an ounce . It was last down 2.2% at $1,723.

Brent sank almost 2% on concerns the spread of the Delta variant would temper travel demand.

Holidays in Tokyo and Singapore made for thin trading conditions, leaving MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) down 0.1%.

Japan’s Nikkei (.N225) was shut but futures were trading just below Friday’s close. Nasdaq futures slipped 0.5% and S&P 500 futures 0.3%.

Chinese trade data out over the weekend undershot forecasts, though figures due later Monday should show inflation is no barrier to more policy stimulus. read more

The U.S. Senate was closer to passing a $1 trillion infrastructure package, though a single Republican lawmaker was holding up a vote on Sunday. read more

Investors were still assessing whether Friday’s strong U.S. payrolls report would take the Federal Reserve a step nearer to winding back its stimulus.

“There is not a lot of disagreement on a taper announcement coming sometime between September-December followed by actual tapering sometime between November and January,” said Rodrigo Catril, a senior FX strategist at NAB.

However, the pace of tapering was still up in the air and would decide when an actual rate hike came, he said. The Fed is currently buying $120 billion of assets a month, so a $20 billion taper would end the programme in six months whilst a $10 billion tapering approach would take a year.

The spread of the Delta variant could argue for a longer taper with U.S. cases back to levels seen in last winter’s surge with more than 66,000 people hospitalised.

Figures for July CPI due this week are also expected to confirm inflation has peaked, with prices for second hand vehicles finally easing back after huge gains.

There are four Fed officials speaking this week and will no doubt offer their own take on tapering.

In the meantime, stocks have been mostly underpinned by a robust U.S. earnings season. BofA analysts noted S&P 500 companies were tracking a 15% beat on second quarter earnings with 90% having reported.

“However, companies with earnings beats have seen muted reactions on their stock price the day following earnings releases, and misses have been penalized,” they wrote in a note.

“Guidance is stronger than average but consensus estimates for two-year growth suggest a slowdown amid macro concerns.”

Financials firmed on Friday as a steeper yield curve is seen benefiting bank earnings, while also penalising the tech sector where valuations are sky high.

Yields on U.S. 10-year notes were up at 1.30% in the wake of the jobs report, having hit their lowest since February last week at 1.177%.

That jump gave the dollar a broad lift and knocked the euro back to $1.1744 , its lowest since April. The dollar likewise climbed to 110.28 yen and away from last week’s trough of 108.71.

That took the U.S. currency index up to 92.882 and nearer to the July peak of 93.194.

Oil prices eased further after suffering their largest weekly drop in four months amid worries coronavirus travel restrictions would threaten bullish expectations for demand.

Brent fell $1.30 to $69.40 a barrel, while U.S. crude lost $1.29 to $66.99.

Editing by Shri Navaratnam

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Business

U.S. Postal Service finalizes plan to slow some mail deliveries

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WASHINGTON, Aug 6 (Reuters) – The U.S. Postal Service (USPS) on Friday finalized a plan effective Oct. 1 to slow down some first-class mail deliveries as part of efforts to cut red ink.

Postmaster General Louis DeJoy proposed in March to revise existing one- to three-day service standards to one to five days for first-class mail. USPS said on Friday that 61% of first-class mail will remain at its current standard.

USPS said in a notice published in the Federal Register current standards require it “to rely heavily on air transportation, using air cargo transportation carriers and commercial passenger air carriers.”

Delivery standards will be slower for about 7% of periodicals.

Airplanes, USPS added, are less reliable than surface transportation and costs much more because of “weather delays, network congestion, and air traffic control ground stops.”

The “addition of one or two days to current service standards for first-class mail and periodicals would enable the Postal Service to convey a greater volume of mail within the contiguous United States by surface transportation,” it said.

While acknowledging “some uncomfortable changes,” DeJoy defended the plan earlier on Friday at a board of governors meeting, saying it makes a commitment to deliver to “every address in the nation, six days a week, and strives for financial sustainability.”

USPS on Friday posted a $3 billion quarterly net loss, with a 1.1% rise in first-class mail deliveries to 12.1 billion pieces. But “volumes remain lower than pre-pandemic levels and we expect continued secular declines,” it added.

For the minority of first-class mail affected by the slower delivery window “the standard would only change by one or two days (with most of such volume experiencing a one-day change),” USPS said.

USPS added it has been unable to achieve existing “service performance targets for many years, and that these service failures illustrate the weakness of the current transportation model.”

In June, the attorneys general of 20 states asked the U.S. Postal Regulatory Commission to reject plans to slow down some first-class deliveries, saying allowing that to happen could harm local governments’ ability to fulfill essential functions.

DeJoy unveiled a plan in March to cut $160 billion in predicted losses over the next decade with the changes in service standards a key part.

USPS has struggled with poor delivery performance over the past year, facing a huge boost in packages and staffing issues due to the coronavirus pandemic. It said Thursday that through July it delivered 89% of first-class mail on time, up 1.5 percentage points.

Starting Aug. 29, USPS will raise prices of first-class postage stamps to 58 cents from 55 cents. Price hikes are needed because over the past decade, mail volume has declined by 46 billion pieces, or 28%, while single piece first-class mail declined 47%, USPS said.

Congress is considering a plan to provide USPS with $46 billion in financial relief over 10 years, including eliminating a requirement that USPS pre-fund retiree health benefits for 75 years.

The agency has reported net losses of about $90 billion since 2007. One reason is 2006 legislation mandating that it pre-fund more than $120 billion in retiree healthcare and pension liabilities, a requirement labor unions have called an unfair burden not shared by other businesses.

Reporting by David Shepardson; editing by Diane Craft, Marguerita Choy and Richard Chang

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Health

Masking guidance unchanged as Delta variant sweeps U.S.- CDC director

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July 22 (Reuters) – The U.S. Centers for Disease Control and Prevention has not revised its masking guidance, even as the Delta variant of the coronavirus sweeps the United States, driving up infections, CDC director Rochelle Walensky said on Thursday.

Walensky declined to say if the CDC is considering changing the guidance. The CDC in May relaxed its guidance so that fully vaccinated people do not need to wear masks in most public spaces.

Her comments coincided with reports that administration officials were discussing whether to shift guidance about masking in response to outbreaks caused by the Delta variant.

White House spokeswoman Jen Psaki said such a decision would be made by the CDC, and President Joe Biden said experts were studying any necessary changes.

“What they’re doing is they’re … investigating every aspect of any change that could or might take place,” Biden told reporters at the White House. “We follow the science.”

The president said on Wednesday that the CDC is likely to advise unvaccinated children to wear masks in school as districts around the country prepare to reopen for the coming school year. read more

People wait in a line stretching around the Jacob K. Javits Convention Center on midtown Manhattan’s west side, to receive a coronavirus disease (COVID-19) vaccine at the site which has been converted into a mass vaccination center in New York City, New York, U.S., March 2, 2021. REUTERS/Mike Segar

The seven-day average of new cases in the United States is up 53% over the previous week, Walensky said. The Delta variant, which was first found in India, now comprises more than 80% of new cases nationwide and has been detected in more than 90 countries.

Some hospitals around the United States are reaching their capacity limits as cases of COVID-19 continue to surge, Walensky said.

The uptick in cases is concentrated in regions with lower vaccination rates. Florida, Texas and Missouri account for 40% of all new cases nationwide, with around 1 in 5 of all new U.S. cases occurring in Florida, White House COVID-19 task for director Jeffrey Zients said.

Zients said that the United States will continue to distribute tens of millions of COVID-19 vaccines around the world.

The White House in June announced plans to distribute around 80 million COVID-19 vaccines globally. read more

Top U.S. infectious disease expert Anthony Fauci said there is no reason for people who received Johnson & Johnson’s (JNJ.N) COVID-19 vaccine to assume that they need to get an additional shot of Pfizer Inc’s (PFE.N) or Moderna Inc’s (MRNA.O) vaccines to protect themselves against new variants of the virus.

The CDC and U.S. Food and Drug Administration are reviewing data to see if there is waning immunity in vaccinated people to determine if additional booster shots are needed.

Reporting by Carl O’Donnell in New York and Jeff Mason and Lisa Lambert in Washington D.C., Editing by Marguerita Choy and Grant McCool

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World

Britain sanctions Venezuelan President Maduro’s envoy Saab

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LONDON, July 22 (Reuters) – Britain on Thursday sanctioned one of Venezuelan President Nicolas Maduro’s envoys, Alex Saab, in connection with an allegedly corrupt deal to obtain supplies for Maduro’s government-run food subsidy programme.

Saab, a Colombian national, is currently detained in Cape Verde facing extradition to the United States, which accuses him of helping Maduro’s government skirt U.S. sanctions imposed in 2019. read more

Britain said Saab had been sanctioned along with his associate Alvaro Pulido for exploiting two of Venezuela’s public programmes which were set up to supply poor Venezuelans with affordable foodstuffs and housing.

“They benefited from improperly awarded contracts, where promised goods were delivered at highly inflated prices,” the UK Foreign Office said in a statement. “Their actions caused further suffering to already poverty stricken Venezuelans, for their own private enrichment.”

Saab’s lawyers could not immediately be contacted but have previously called the U.S. charges “politically motivated.”

Venezuela’s foreign ministry responded in a statement that Britain was presenting itself as an “anti-corruption judge for the world, while acting as one of the main responsible parties for the theft of assets belonging to all Venezuelans.”

That was a reference to the Bank of England’s refusal to hand over nearly $1 billion in gold to Maduro’s government due to a dispute over whether the gold should go to opposition leader Juan Guaido, who Britain recognises as Venezuela’s legitimate president. read more

Saab was arrested last June in Cape Verde after Interpol issued a so-called red notice.

At the time of his arrest, Saab was en route to Iran to negotiate shipments of fuel and humanitarian supplies to Venezuela, his lawyers previously told Reuters. His plane had stopped in the archipelago nation off the coast of West Africa to refuel.

Also on Thursday Britain sanctioned Teodoro Obiang Mangue, the son of Equatorial Guinea’s president, for misappropriating millions of dollars which London said was spent on luxury mansions, private jets and a $275,000 glove worn by Michael Jackson. read more

Additional reporting by Brian Ellsworth in Caracas; Editing by William Maclean and Chris Reese

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World

Brazil’s Bolsonaro hospitalized to find cause of hiccups, presidency says

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Brazil’s President Jair Bolsonaro gets in a vehicle after attending Mass at a Catholic church in Brasilia, Brazil July 1, 2021. REUTERS/Adriano Machado/File Photo

BRASILIA, July 14 (Reuters) – Brazilian President Jair Bolsonaro was hospitalized on Wednesday to identify the cause of chronic hiccups, the president’s office said, in the latest health scare for the far-right leader who was stabbed in the gut on the campaign trail in 2018.

Bolsonaro went to the military hospital in Brasilia and is expected to be under observation for between 24 and 48 hours, although not necessarily in hospital, the statement said.

“He is feeling good and doing well,” it said.

Local media outlet Globo reported that Bolsonaro had been admitted for unspecified medical testing after feeling abdominal pains during the early hours of Wednesday.

Bolsonaro’s health has been an issue during his presidency, after he was stabbed and seriously injured in the intestines on the campaign trail in 2018.

He has had other scares. In July last year, Bolsonaro caught COVID-19 but recovered. In appearances over the last few months, he has had a stubborn cough. More recently, he has had hiccups, which have led to concerns about his health.

Reporting by Ricardo Brito; Editing by Christian Plumb and Chizu Nomiyama

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World

Cardinal among 10 indicted by Vatican for financial crimes

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  • Pope approved move against cardinal, who says he is innocent
  • Former head of Vatican Financial Intelligence denies charges
  • Becciu most senior Vatican official charged with financial crime
  • Trial to start July 27

VATICAN CITY, July 3 (Reuters) – A prominent Italian cardinal was among 10 people sent to trial in the Vatican on Saturday charged with financial crimes including embezzlement, money laundering, fraud, extortion and abuse of office.

Cardinal Angelo Becciu, formerly a senior official in the Vatican administration, as well as two top officials at the Vatican’s Financial Intelligence Unit will go on trial on July 27 over a multi-million euro scandal involving the Vatican’s purchase of a building in one of London’s smartest districts.

The trial will inevitably bring a swirl of media interest to the tiny city-state surrounded by Rome, and appears to underscore Pope Francis’ determination to cure the rot in Vatican finances, even if it involves messy public hearings.

Becciu, 73, whom the pope fired from his senior clerical post last year for alleged nepotism, and who has always maintained his innocence during a two-year investigation, becomes the most senior Vatican official to be charged with financial crimes.

The pope personally gave the required approval last week for Becciu to be indicted, according to a 487-page indictment request seen by Reuters. The Vatican announced the indictments in a two-page statement.

The charges against Becciu include embezzlement and abuse of office. An Italian woman who worked for him was charged with embezzlement and the cardinal’s former secretary, a priest, was accused of extortion.

Becciu said in a statement that he was a victim of a “machination” and reaffirmed his “absolute innocence”.

Two Italian brokers, Gianluigi Torzi and Raffaele Mincione, were charged with embezzlement, fraud and money laundering. Torzi, for whom Italian magistrates issued an arrest warrant in April, was also charged with extortion.

There was no immediate response to attempts to reach their lawyers, but both men have consistently denied wrongdoing.

Four companies associated with individual defendants, two in Switzerland, one in the United States and one in Slovenia, were also indicted, according to the document.

POLICE RAID

The investigation into the purchase of the building became public on Oct. 1, 2019, when Vatican police raided the offices of the Secretariat of State, the administrative heart of the Catholic Church, and those of the Vatican’s Financial Information Authority (AIF).

The then-president of the AIF, Rene Bruelhart, a 48-year-old Swiss, and AIF’s former Italian director, Tommaso Di Ruzza, 46, were charged with abuse of office for allegedly failing to adequately protect the Vatican’s interests and giving Torzi what the indictment request called an “undue advantage”.

Di Ruzza was also accused of embezzlement related to alleged inappropriate use of his official credit card, and of divulging confidential information.

Bruelhart said in a text message that he had “always carried out my functions and duties with correctness” and that “the truth about my innocence will emerge.”

Di Ruzza did not immediately respond to a voicemail requesting comment.

In 2014, the Secretariat of State invested more than 200 million euros, much of it from contributions from the faithful, in a fund run by Mincione, securing about 45% of a commercial and residential building at 60 Sloane Avenue in London’s South Kensington district.

The indictment request said Mincione had tried to deceive the Vatican, which in 2018 tried to end the relationship.

It turned to Torzi for help in buying up the rest of the building, but later accused him of extortion.

‘ENORMOUS LOSSES’

At the time, Becciu was in the last year of his post as deputy secretary of state for general affairs, a powerful administrative position that handles hundreds of millions of euros.

All told, the Secretariat of State sank more than 350 million euros into the investment, according to Vatican media, and suffered what Cardinal George Pell, the former Vatican treasurer, told Reuters last year were “enormous losses”.

Torzi was arrested in the Vatican in June 2020, and spent a week in custody.

According to the indictment request, Becciu is charged with five counts of embezzlement, two of abuse of office, and one count of inducing a witness to perjury. About 75 pages of the document are dedicated to Becciu.

It says Becciu tried to “heavily deflect” the inquiry into Vatican investments, including the London building, and tried to discredit the investigating magistrates via the Italian media.

Becciu continued to have influence over money transfers at the Secretariat even after he left the post, the document said.

The main charges against Becciu involve the alleged funnelling of money and contracts to companies or charitable organisations controlled by his brothers on their native island of Sardinia.

Another Sardinian, Cecilia Maronga, 40, who worked for Becciu, was charged with embezzlement. Her cellphone was not connected.

The indictment request said she had received about 575,000 euros from the Secretariat of State in 2018-2019.

She has said on Italian television that the money, sent to her company in Slovenia, was to ransom kidnapped missionaries in Africa. But the indictment request said much of it was used for “personal benefit”, including the purchase of luxury goods.

Reporting by Philip Pullella; Editing by Kevin Liffey

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