TOKYO, Feb 2 (Reuters) – Japan’s Honda Motor Co (7267.T) said it will start producing a new hydrogen fuel cell system jointly developed with General Motors Co (GM.N) this year and gradually step up sales this decade, in a bid to expand its hydrogen business.
Honda will target annual sales of around 2,000 units of the new system in the middle of this decade, the company said on Thursday, aiming to boost that to 60,000 units per year in 2030.
The Japanese carmaker is seeking to expand the use of its new system not only for its own fuel cell electric vehicles (FCEVs), but also commercial vehicles such as heavy trucks, as stationary power stations and in construction machinery.
Honda will start production of the hydrogen fuel cell system through its joint venture with GM this year, Honda senior managing executive director Shinji Aoyama told reporters during a company event in Tokyo.
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With the “next-generation” system, the company aims to more than double durability compared with its older fuel cell system and to bring costs down by two-thirds.
“While commercial vehicles are in use all over the world, they’ll likely see electrification just as with passenger cars,” said Tetsuya Hasebe, general manager of Honda’s hydrogen business development division.
That would likely lead to a divergence in trucks using batteries and those running on fuel cells, he added.
Reporting by Daniel Leussink; Editing by Chang-Ran Kim and Jamie Freed
Our Standards: The Thomson Reuters Trust Principles.
Biden says ‘no’ when asked about F-16s for Ukraine
Zelenskiy says Moscow seeks ‘big revenge’
Russian administrator claims foothold in Vuhledar
Kyiv could recapture ground when Western weapons arrive – group
KYIV, Jan 31 (Reuters) – Ukraine’s defence minister is expected in Paris on Tuesday to meet President Emmanuel Macron amid a debate among Kyiv’s allies over whether to provide fighter jets for its war against Russia, after U.S. President Joe Biden ruled out giving F-16s.
Ukraine planned to push for Western fourth-generation fighters like F-16s after securing supplies of main battle tanks last week, an adviser to Defence Minister Oleksiy Reznikov said on Friday.
Asked at the White House on Monday if the United States would provide F-16s, Biden told reporters: “No.”
But France and Poland appear to be willing to entertain any such request from Ukraine, with Macron telling reporters in The Hague on Monday that “by definition, nothing is excluded” when it comes to military assistance.
In remarks carried on French television before Biden spoke in Washington, Macron stressed any such move would depend on several factors including the need to avoid escalation and assurances that the aircraft would not “touch Russian soil.” He said Reznikov would also meet his French counterpart Sebastien Lecornu in Paris on Tuesday.
In Poland on Monday, Prime Minister Mateusz Morawiecki also did not rule out a possible supply of F-16s to neighbouring Ukraine, in response to a question from a reporter before Biden spoke.
Morawiecki said in remarks posted on his website that any such transfer would take place “in complete coordination” with NATO countries.
Andriy Yermak, head of the Ukraine president’s office, noted “positive signals” from Poland and said France “does not exclude” such a move in separate posts on his Telegram channel.
NATO Secretary-General Jens Stoltenberg was in Japan on Tuesday where he thanked Tokyo for the “planes and the cargo capabilities” it is providing Ukraine. A day earlier in South Korea he urged Seoul to increase its military support to Ukraine.
Biden’s comment came shortly after Ukrainian President Volodymyr Zelenskiy said Russia had begun exacting its revenge for Ukraine’s resistance to its invasion with relentless attacks in the east, where it appeared to be making incremental gains.
Zelenskiy has warned for weeks that Moscow aims to step up its assault after about two months of virtual stalemate along the front line that stretches across the south and east.
Ukraine won a huge boost last week when Germany and the United States announced plans to provide heavy tanks, ending weeks of diplomatic deadlock on the issue.
While there was no sign of a broader new Russian offensive, the administrator of Russian-controlled parts of Ukraine’s eastern Donetsk province, Denis Pushilin, said Russian troops had secured a foothold in Vuhledar, a coal-mining town whose ruins have been a Ukrainian bastion since the outset of the war.
Pushilin said that despite “huge losses” Ukrainian forces were consolidating positions in industrial facilities.
‘BATTLE FOR EVERY METER’
Pushilin said Ukrainian forces were throwing reinforcements at Bakhmut, Maryinka and Vuhledar, towns running from north to south just west of Donetsk city. The Russian state news agency TASS quoted him as saying Russian forces were making advances there, but “not clear-cut, that is, here there is a battle for literally every meter.”
Ukrainian military analyst Oleh Zhdanov said Ukraine still controlled Maryinka and Vuhledar, where Russian attacks were less intense on Monday.
Pushilin’s adviser, Yan Gagin, said fighters from Russian mercenary force Wagner had taken partial control of a supply road leading to Bakhmut, a city that has been Moscow’s focus for months.
A day earlier, the head of Wagner said his fighters had secured Blahodatne, a village just north of Bakhmut, although Kyiv said it had repelled assaults on Blahodatne.
Reuters could not independently verify the battlefield reports. But the locations of the reported fighting indicated clear, though gradual, Russian gains.
In central Zaporizhzhia region and in southern Kherson region, Russian forces shelled more than 40 settlements, Ukraine’s General Staff said. Targets included the city of Kherson, where there were casualties.
The Russians also launched four rocket attacks on Ochakiv in southern Mykolaiv, the army said, on the day Zelenskiy met the Danish prime minister in Mykolaiv city, to the northeast.
WESTERN DELAYS
Zelenskiy is urging the West to hasten delivery of its promised weapons so Ukraine can go on the offensive, but most of the hundreds of tanks pledged by Western countries are months away from delivery.
British Defence Minister Ben Wallace said the 14 Challenger tanks donated by Britain would be on the front line around April or May, without giving an exact timetable.
Kremlin spokesperson Dmitry Peskov said Western countries supplying arms leads “to NATO countries more and more becoming directly involved in the conflict – but it doesn’t have the potential to change the course of events and will not do so.”
The U.S.-based Institute for the Study of War think-tank said “the West’s failure to provide the necessary materiel” last year was the main reason Kyiv’s advances had halted since November.
The researchers said in a report that Ukraine could still recapture territory once the promised weapons arrive.
The Belarusian defence ministry said on Tuesday that Russia and Belarus had started a week-long session of staff training in preparation for joint drills in Russia in September.
The Russian invasion of Ukraine, which Moscow justifies as necessary to protect itself from its neighbour’s ties with the West, has killed tens of thousands of people and driven millions from their homes.
Reporting by Reuters bureaus; Writing by Doina Chiacu and Stephen Coates; Editing by Cynthia Osterman & Simon Cameron-Moore
Our Standards: The Thomson Reuters Trust Principles.
Think-tank says delay in Western arms halted Ukraine’s advance
KYIV, Ukraine/WASHINGTON Jan 30 (Reuters) – The United States will not provide the F-16 fighter jets that Ukraine has sought in its fight against Russia, President Joe Biden said on Monday, as Russian forces claimed a series of incremental gains in the country’s east.
Ukraine planned to push for Western fourth-generation fighter jets such as the F-16 after securing supplies of main battle tanks last week, an adviser to Ukraine’s defence minister said on Friday. A Ukrainian air force spokesman said it would take its pilots about half a year to train on such fighter jets.
Asked if the United States would provide the jets, Biden told reporters at the White House, “No.”
The brief exchange came shortly after Ukrainian President Volodymyr Zelenskiy said that Russia had begun exacting its revenge for Ukraine’s resistance to its invasion with relentless attacks in the east.
Zelenskiy has warned for weeks that Moscow aims to step up its assault on Ukraine after about two months of virtual stalemate along the front line that stretches across the south and east.
Ukraine won a huge boost last week when Germany and the United States announced plans to provide heavy tanks, ending weeks of diplomatic deadlock on the issue.
“The next big hurdle will now be the fighter jets,” Yuriy Sak, who advises Defence Minister Oleksiy Reznikov, told Reuters on Friday.
While there was no sign of a broader new Russian offensive, the administrator of Russian-controlled parts of Ukraine’s eastern Donetsk province, Denis Pushilin, said Russian troops had secured a foothold in Vuhledar, a coal-mining town whose ruins have been a Ukrainian bastion since the outset of the war.
Pushilin said Ukrainian forces were continuing to throw reinforcements at Bakhmut, Maryinka and Vuhledar, three towns running from north to south just west of Donetsk city. The Russian state news agency TASS quoted him as saying Russian forces were making advances there, but “not clear-cut, that is, here there is a battle for literally every meter.”
Pushilin’s adviser, Yan Gagin, said fighters from Russian mercenary force Wagner had taken partial control of a supply road leading to Bakhmut, a city that has been Moscow’s main focus for months.
A day earlier, the head of Wagner said his fighters had secured Blahodatne, a village just north of Bakhmut.
Kyiv said it had repelled assaults on Blahodatne and Vuhledar, and Reuters could not independently verify the situations there. But the locations of the reported fighting indicated clear, though gradual, Russian gains.
Zelenskiy said Russian attacks in the east were relentless despite heavy casualties on the Russian side, casting the assaults as payback for Ukraine’s success in pushing Russian forces back from the capital, northeast and south earlier in the conflict.
[1/7] U.S. Air Force F-16 Fighting Falcon from the 140th Wing of the Colorado Air National Guard during NATO exercise Saber Strike flies over Amari military air base, Estonia June 12, 2018. REUTERS/Ints Kalnins
“I think that Russia really wants its big revenge. I think they have (already) started it,” Zelenskiy told reporters in the southern port city of Odesa.
Mykola Salamakha, a Ukrainian colonel and military analyst, told Ukrainian Radio NV that Moscow’s assault in Vuhledar was coming at huge cost.
“The town is on an upland and an extremely strong defensive hub has been created there,” he said. “This is a repetition of the situation in Bakhmut – one wave of Russian troops after another crushed by the Ukrainian armed forces.”
WESTERN DELAYS
The hundreds of modern tanks and armoured vehicles pledged to Ukraine by Western countries in recent weeks for a counteroffensive to recapture territory are months away from delivery.
This leaves Kyiv to fight through the winter in what both sides have described as a meat grinder of relentless attritional warfare.
Moscow’s Wagner mercenary force has sent thousands of convicts recruited from Russian prisons into battle around Bakhmut, buying time for Russia’s regular military to reconstitute units with hundreds of thousands of reservists.
Zelenskiy is urging the West to hasten delivery of its promised weapons so Ukraine can go on the offensive.
Kremlin spokesman Dmitry Peskov said Western countries supplying arms leads “to NATO countries more and more becoming directly involved in the conflict – but it doesn’t have the potential to change the course of events and will not do so.”
The U.S.-based Institute for the Study of War think-tank said “the West’s failure to provide the necessary materiel” last year was the main reason Kyiv’s advances had halted since November.
That allowed Russia to apply pressure at Bakhmut and fortify the front against a future Ukrainian counter-attack, its researchers said in a report, though they said Ukraine could still recapture territory once the promised weapons arrive.
Zelenskiy met Danish Prime Minister Mette Frederiksen on Monday in Mykolaiv, a rare visit by a foreign leader close to the front. The city, where Russia’s advance in the south was halted, had been under relentless bombardment until Ukraine pushed the front line back in November.
Russia’s invasion, which it launched on Feb. 24 last year claiming it was necessary to protect itself from its neighbour’s ties with the West, has killed tens of thousands of people and driven millions from their homes.
Additional reporting by Pavel Polityuk, Kevin Liffey, Ronald Popeski and Reuters bureaus; Writing by Peter Graff, Philippa Fletcher and Doina Chiacu; Editing by Gareth Jones, William Maclean and Cynthia Osterman
Our Standards: The Thomson Reuters Trust Principles.
LONDON, Jan 30 (Reuters) – Stock markets worldwide halted their January rally on Monday, pausing for breath at the start of an agenda-setting week of central bank rate hikes and data releases that will clarify if progress has been made in the battle against inflation.
Investors expect the Federal Reserve will raise rates by 25 basis points on Wednesday, followed the day after by half-point hikes from the Bank of England and European Central Bank, and any deviation from that script would be a real shock.
Europe’s benchmark STOXX index fell 0.8% on Monday morning, echoing a slight dip in MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), which has surged 11% in January so far as China’s reopening bolsters sentiment.
The U.S. Nasdaq index is likewise on course for its best January since 2001, a rally that will be tested by earnings updates from tech giants this week.
U.S. stocks were set to follow the nervous Monday mood with S&P 500 futures down 1% and Nasdaq futures falling 1.3%, as investors await guidance later in the week on the Federal Reserve’s policy.
Analysts expect a hawkish tone suggesting that more needs to be done to tame inflation. read more
“With U.S. labour markets still tight, core inflation elevated and financial conditions easing, Fed Chair Powell’s tone will be hawkish, stressing that a downshifting to a 25bp hike doesn’t mean a pause is coming,” said Bruce Kasman, chief economist at JPMorgan, who expects another rise in March.
“We also look for him to continue to push back against market pricing of rate cuts later this year.”
There is a lot of pushing to do given futures currently expect rates to peak at 5% in March and to fall back to 4.5% by year end.
Europe offered a brisk reminder that the fight against rising prices is far from over, as bond yields in the region rose sharply on Monday in the wake of stronger-than-expected Spanish inflation data.
The data showing inflation rose 5.8% year-on-year in January, against expectations of 4.7%, pushed up the zone’s benchmark German 10-year government bond yield 7 basis points (bps) to 2.3190%, its highest since Jan. 10.
Italian and Spanish yields also inched up.
The dollar index was flat ahead of the week’s key data, on course for a fourth straight monthly loss of more than 1.5% on growing expectations that the Fed is nearing the end of its rate-hike cycle.
APPLE’S CORE
Yields on 10-year notes have fallen 33 basis points so far this month to 3.50%, essentially due to easing financial conditions even as the Fed talks tough on tightening.
That dovish outlook will also be tested by data on U.S. payrolls, the employment cost index and various ISM surveys.
Reading on EU inflation could be important for whether the ECB signals a half-point rate rise for March, or opens the door to a slowdown in the pace of tightening. read more
As for Wall Street’s recent rally, much will depend on earnings from Apple Inc (AAPL.O), Amazon.com (AMZN.O), Alphabet Inc (GOOGL.O) and Meta Platforms (META.O), among many others.
“Apple will give a glimpse into the overall demand story for consumers globally and a snapshot of the China supply chain issues starting to slowly abate,” wrote analysts at Wedbush.
“Based on our recent Asia supply chain checks we believe iPhone 14 Pro demand is holding up firmer than expected,” they added. “Apple will likely cut some costs around the edges, but we do not expect mass layoffs.”
Market pricing of early Fed easing has been a burden for the dollar, which has lost 1.6% so far this month to stand at 101.85 against a basket of major currencies.
The euro is up 1.5% for January at $1.0878 and just off a nine-month top. The dollar has even lost 1.3% on the yen to 129.27 despite the Bank of Japan’s dogged defence of its ultra-easy policies.
The drop in the dollar and yields has been a boon for gold, which is up 5.8% for the month so far at $1,930 an ounce .
The precious metal was flat on Monday ahead of the slew of key central bank moves and data releases.
China’s rapid reopening is seen as a windfall for commodities in general, supporting everything from copper to iron ore to oil prices.
Oil steadied on Monday after earlier losses, with prices bolstered by rising Middle East tension over a drone attack in Iran and hopes of higher Chinese demand.
Brent crude rose 10 cents, or 0.12%, to $86.76 a barrel by 1200 GMT while U.S. West Texas Intermediate crude added 4 cents, or 0.05%, to $79.72.
Reporting Lawrence White and Wayne Cole; Editing by Christopher Cushing, Arun Koyyur and Christina Fincher
Our Standards: The Thomson Reuters Trust Principles.
Jan 25 (Reuters) – Tesla Inc’s (TSLA.O) aggressive price cuts have ignited demand for its electric vehicles, Chief Executive Elon Musk said on Wednesday, playing down concerns that a weak economy would throttle buyers’ interest.
The company slightly beat Wall Street targets for fourth-quarter revenue and profit earlier on Wednesday despite a sharp decline in vehicle profit margins, and it sought to reassure investors that it can cut costs to cope with recession and as competition intensifies in the year ahead.
Deep price cuts this month have positioned Tesla as the initiator of a price war, but its forecast of a 37% rise in car volume for the year, to 1.8 million vehicles, was down from 2022’s pace.
However, Musk, who has missed his own ambitious sales targets for Tesla in recent years, said 2023 deliveries could hit 2 million vehicles, absent external disruption.
Tesla’s sales prospects, as it confronts a weaker economy, are a key focus for investors. The company said it maintains a long-term target of a compounded 50% annual rise in sales.
Musk addressed the issue at the start of a call with investors and analysts.
“These price changes really make a difference for the average consumer,” he said, adding that vehicle orders were roughly double production in January, leading the automaker to make small price increases for the Model Y SUV.
He said he expected a “pretty difficult recession this year,” but demand for Tesla vehicles “will be good despite probably a contraction in the automotive market as a whole.”
Shares rose 5.3% in extended trading.
CYBERTRUCK
The company is relying on older products and Musk said its Cybertruck, its next new electric pickup truck, would not begin volume production until next year. Reuters in November reported that the highly anticipated model would not be produced in volume until late this year.
Tesla will detail plans for a “next-generation vehicle platform” at its investor day in March.
Tesla’s vehicles “are all in desperate need of updates beyond software,” said Jessica Caldwell, Edmunds’ executive director of insights. She said Tesla will largely depend on the cheaper unit as well as Model 3 and Model Y to bring EVs to the masses.
“It’s unlikely that the Cybertruck will attempt to achieve mass-market volumes like the Detroit competitors.”
Reuters Graphics
[1/5] A Tesla supercharging station is seen in the early morning sun, in Kettleman City, California, U.S., January 25, 2023. REUTERS/Mike Blake
Reuters Graphics
Analysts said Tesla’s goal is bullish given the macroeconomic uncertainties.
“I think that you’re going to see some severe demand destruction across consumer spending and I think cars are going to take a big hit,” Edward Moya, senior market analyst at OANDA, said.
Tesla said it does not expect meaningful near-term volume growth from China, since its Shanghai factory was running near full capacity, rebounding from production challenges last year.
“Even a small cooling of demand will have significant implications for the bottom line,” said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.
Tesla said that its automotive gross margins, which dropped to a two-year low of 25.9% in the reported quarter, were pressured by the costs of ramping up battery production and new factories in Berlin and Texas, as well as higher raw material, commodity, logistics and warranty costs.
Tesla expected its automotive gross margin to remain above 20%.
Margins generally are expected to be under further pressure from its aggressive price cuts. Tesla, which had made a series of price increases since early 2021, reversed course and offered discounts in December in the United States, followed by price cuts of as much as 20% this month.
Analysts had said Tesla’s profitability gave it room to cut prices and pressure rivals. The company’s $9,000 in net profit per vehicle in the past quarter was more than seven times the comparable figure for Toyota Motor Corp (7203.T) in the third quarter. But it was down from almost $9,700 in the third quarter.
“In severe recessions, cash is king, big time,” Musk said, adding that Tesla is well positioned to cope with an economic downturn because of its $20 billion of cash.
The company’s stock posted its worst drop last year, hit by demand worries and Musk’s acquisition of Twitter, which fueled investor concerns he would be distracted from running Tesla.
Musk dismissed surveys that suggest his political comments on Twitter are damaging the Tesla brand. “I might not be popular” with some, he said, “but for the vast majority of people, my follow count speaks for itself.” He has 127 million followers.
Revenue was $24.32 billion for the three months ended Dec. 31, compared with analysts’ average estimate of $24.16 billion, according to IBES data from Refinitiv.
Tesla’s full-year earnings were bolstered by $1.78 billion in regulatory credits, up 21% from a year earlier.
Adjusted earnings per share of $1.19 topped the Wall Street analyst average of $1.13.
It ended the fourth quarter with 13 days’ worth of vehicles in inventory, more than four times higher than the start of 2022, and a record $12.8 billion in value.
Reporting by Hyunjoo Jin in San Francisco and Akash Sriram in Bengaluru, Additinoal reporting by Joe White and Ben Klayman in Detroit and Kevin Krolicki in Singapore
Writing by Peter Henderson
Editing by Sriraj Kalluvila, Matthew Lewis, Sam Holmes and David Goodman
Our Standards: The Thomson Reuters Trust Principles.
Jan 23 (Reuters) – Japanese Prime minister Fumio Kishida pledged on Monday to take urgent steps to tackle the country’s declining birth rate, saying it was “now or never” for one of the world’s oldest societies.
Japan has in recent years been trying to encourage its people to have more children with promises of cash bonuses and better benefits, but it remains one of the most expensive places in the world to raise a child, according to surveys.
Births plunged to a new record low last year, according to official estimates, dropping below 800,000 for the first time – a watershed moment that came eight years earlier than the government had expected.
That most likely precipitated a further population decline in a country where the median age is 49, the highest in the world behind only the tiny city-state of Monaco.
“Our nation is on the cusp of whether it can maintain its societal functions,” Kishida said in a policy speech at the opening of this year’s parliamentary session.
“It is now or never when it comes to policies regarding births and child-rearing – it is an issue that simply cannot wait any longer,” he added.
Kishida said he would submit plans to double the budget for child-related policies by June, and that a new Children and Families government agency to oversee the issue would be set up in April.
Japan is the third-most-expensive country globally to raise a child, according to YuWa Population Research, behind only China and South Korea, countries also seeing shrinking populations in worrying signs for the global economy.
Other countries are also coming to grips with ageing and shrinking populations. Last week, China reported that its population dropped in 2022 for the first time in 60 years.
Reporting by Sakura Murakami; Editing by John Geddie and Gerry Doyle
Our Standards: The Thomson Reuters Trust Principles.
TOKYO, Jan 23 (Reuters) – Government officials who attended the Bank of Japan’s December policy meeting were given a half-hour adjournment to contact their ministries, minutes showed, underscoring the significance of the central bank’s decision to tweak its bond-market peg.
At the Dec. 19-20 meeting, the BOJ kept its ultra-easy monetary policy but shocked markets with a surprise change to its yield curve control (YCC) policy that allowed long-term interest rates to rise.
Before the nine-member board voted on the steps, the government representatives requested that the meeting be adjourned for about 30 minutes, the minutes showed on Monday.
Governor Haruhiko Kuroda approved the request as chair of the BOJ meeting, according to the minutes.
“The government understands the matters discussed today were aimed at conducting monetary easing in a more sustainable manner with a view to achieving the BOJ’s price target,” a Ministry of Finance (MOF) official attending the meeting was quoted as saying, referring to the central bank’s inflation objective.
Another government representative, who belonged to the Cabinet Office, urged the BOJ to be vigilant about the fallout from rising inflation, supply constraints and market volatility on Japan’s economy, the minutes showed.
The two representatives did not voice opposition to the yield control tweak nor any other elements of the BOJ’s discussion, the minutes showed.
Two government representatives – one from the MOF and another from the Cabinet Office – are legally entitled to attend BOJ policy meetings and voice the government’s views on policy decisions, though they cannot cast votes.
In a news conference on Monday, Finance Minister Shunichi Suzuki said he had been briefed by the MOF representative on the BOJ’s expected decision during the adjournment.
It is rare for the government representatives to seek adjournment in the BOJ meetings, which only happens in times of key decisions such as a change in monetary policy.
For example, the government was granted an adjournment during a meeting when the BOJ introduced negative interest rates in January 2016, according to minutes of that meeting.
Under YCC, the BOJ sets the short-term interest rate target at -0.1% and that of the 10-year bond yield around 0% with a small tolerance band.
At the December meeting, the band set around the 10-year yield target was doubled to 0.5 percentage point up and 0.5 percentage point down, a move aimed at ironing out market distortions caused by the BOJ’s heavy bond buying.
Reporting by Leika Kihara; Editing by Bradley Perrett and Jacqueline Wong
Our Standards: The Thomson Reuters Trust Principles.
LONDON/HONG KONG, Jan 17 (Reuters) – European shares paused their new year rally and Asian equities slipped after China reported weak fourth-quarter economic data on Tuesday, keeping investors on edge over the prospects of a global recession.
The Euro STOXX 600 (.STOXX) lost 0.2%, slipping from its nine-month high hit on Monday. Global equities have enjoyed a rally so far in 2022, spurred by hopes of a rebound in China’s economy and an easing of prices pressures in the United States and Europe.
But the Chinese data showed that the world’s second-biggest economy grew 2.9% in the fourth quarter of last year, beating expectations but underscoring the toll exacted by Beijing’s stringent “zero-COVID” policy.
China’s growth for 2022 of 3% was far below the official target of about 5.5%. Excluding a 2.2% expansion after COVID-19 first hit in 2020, it was the worst showing in nearly half a century.
Asia Pacific shares outside Japan (.MIAPJ0000PUS) widened losses in response, and were last down 0.4%. Shares in Hong Kong’s (.HSI) dropped 0.8% and China’s benchmark CSI300 Index (.CSI300) clawed back losses to close flat.
In Europe, China-exposed financials HSBC (HSBA.L) and Prudential (PRU.L) fell 1% and 0.4% respectively. Economy-sensitive consumer staples such as Unilever and Danone (DANO.PA) also fell more than 1% each.
Market players said investors were taking stock of how economies would expand as inflation peaks and central bank tightening of monetary policy slows, with the China data underscoring doubts over whether it could act as a spur.
“What will be the thing that reinvigorates growth?” said Gaël Combes, head of fundamental research at Unigestion. “China is probably unlikely to provide the lift is has provided in the past, like during the global financial crisis.”
Wall Street was set to open slightly lower after a public holiday on Monday, with E-mini futures for the S&P 500 down 0.3%.
BOJ UNDER PRESSURE
The dollar index bounced from a seven-month low of 101.77 made a day ago, holding at 102.30, while the Japanese yen stayed close to seven-month highs as investors held their breath for a potential policy shift at the Bank of Japan (BOJ).
The yen steadied around 128.51 on Tuesday after hitting a top of 127.22 per dollar on Monday, with traders braced for sharp moves when the Bank of Japan (BOJ) concludes a two-day meeting on Wednesday.
The BOJ is under pressure to change its interest rate policy as soon as Wednesday, after its attempt to buy itself breathing room backfired, emboldening bond investors to test its resolve.
Euro zone bond yields inched up from month lows hit late last week, but trading in bonds globally was cautious ahead of the result of the BOJ meeting.
Across the world, the R-word continues to loom large.
Two-thirds of private and public sector chief economists surveyed by the World Economic Forum in Davos expected a global recession this year, with some 18% considering it “extremely likely” – more than twice as many as in the previous survey conducted in September 2022.
As equities rallied this year, other riskier assets also gained. The No.1 cryptocurrency bitcoin has clocked a gain of about a quarter in January, leaping over 20% in the past week alone, putting in on course for its best month since October 2021. It was last trading flat at $21,208.
Spot gold was down 0.5% at $1909.23 per ounce.
Reporting by Tom Wilson in London and Kane Wu in Hong Kong; Editing by Gerry Doyle, Neil Fullick and Alex Richardson
Our Standards: The Thomson Reuters Trust Principles.
BRUSSELS, Jan 16 (Reuters) – Microsoft (MSFT.O) is likely to receive an EU antitrust warning about its $69 billion bid for “Call of Duty” maker Activision Blizzard (ATVI.O), people familiar with the matter said, that could pose another challenge to completing the deal.
The European Commission is readying a charge sheet known as a statement of objections setting out its concerns about the deal which will be sent to Microsoft in the coming weeks, the people said.
The EU antitrust watchdog, which has set an April 11 deadline for its decision on the deal, declined to comment.
Microsoft said: “We’re continuing to work with the European Commission to address any marketplace concerns. Our goal is to bring more games to more people, and this deal will further that goal.”
The U.S. software giant and Xbox maker announced the acquisition in January last year to help it compete better with leaders Tencent (0700.HK) and Sony (6758.T).
U.S. and UK regulators, however, have voiced concerns, with the U.S. Federal Trade Commission going to court to block the deal.
Microsoft was expected to offer remedies to EU regulators in an attempt to avert a statement of charge and shorten the regulatory process, other sources familiar with the matter told Reuters in November.
The EU competition enforcer, however, is not expected to be open to remedies without first sending out its charge sheet, although there are ongoing informal discussions on concessions, the people said.
Microsoft last month reached a 10-year deal with Nintendo (7974.T) to make “Call of Duty” available on Nintendo consoles, saying it was open to a similar agreement with Sony, which is critical of the acquisition.
The deal has received the green light without conditions in Brazil, Saudi Arabia and Serbia.
Reporting by Foo Yun Chee
Editing by Mark Potter
Our Standards: The Thomson Reuters Trust Principles.
BOJ under intense pressure as it defends yield policy
Yen hits 7-mth high, yuan climbs as dollar eases
More earnings ahead, many central bank speakers
Britain’s FTSE flirts with record high
SYDNEY/LONDON, Jan 16 (Reuters) – Shares firmed on Monday as optimism over corporate earnings and China’s reopening offset concerns the Bank of Japan (BOJ) might temper its super-sized stimulus policy at a pivotal meeting this week, while a holiday in U.S. markets made for thin trading.
The yen climbed to its highest since May after rumours swirled the BOJ might hold an emergency meeting on Monday as it struggles to defend its new yield ceiling in the face of massive selling. read more
That had local markets in an anxious mood, and Japan’s Nikkei (.N225) slipped 1.3% to a two-week low.
Yet MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.27%, with hopes for a speedy Chinese reopening giving it a gain of 4.2% last week.
And European shares opened positively with the STOXX 600 (.STOXX) up 0.1% by 0850 GMT driven by healthcare stocks (.SXDP) which gained 0.6%.
Britain’s benchmark FTSE index (.FTSE) edged close to the record high of 7903.50 it hit in 2018, with banks and life insurance companies among the top gainers.
Earnings season gathers steam this week with Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Netflix (NFLX.O) among those reporting.
World leaders, policy makers and top corporate chiefs will be attending the World Economic Forum in Davos, and there are a host of central bankers speaking, including no fewer than nine members of the U.S. Federal Reserve.
The BOJ’s official two-day meeting ends on Wednesday and speculation is rife it will make changes to its yield curve control (YCC) policy given the market has pushed 10-year yields above its new ceiling of 0.5%. read more
The BOJ bought almost 5 trillion yen ($39.12 billion) of bonds on Friday in its largest daily operation on record, yet 10-year yields still ended the session up at 0.51%.
Early on Monday, the bank offered to buy another 1.3 trillion yen of JGBs, but the yield stuck at 0.51%.
“There is still some possibility that market pressure will force the BOJ to further adjust or exit the YCC,” JPMorgan analysts said in a note. “We can’t ignore this possibility, but at this stage we do not consider it a main scenario.”
“Although domestic demand has started to recover and inflation continues to rise, the economy is not heating up to the extent that a sharp rise in interest rates and potential risk of large yen appreciation can be tolerated,” they added.
THE YEN UN-ANCHORED
The BOJ’s uber-easy policy has acted as a sort of anchor for yields globally, while dragging down the yen. Were it to abandon the policy, it would put upward pressure on yields across developed markets and most likely see the yen surge.
The dollar has been undermined by falling U.S. bond yields as investors wager the Federal Reserve can be less aggressive in raising rates given inflation has clearly turned the corner.
The Japanese yen rose to a more than seven-month peak against the dollar on Monday, as market sentiment was dominated by expectations that the BOJ would make further tweaks to, or fully abandon, its yield control policy.
The yen jumped roughly 0.5% to a high of 127.215 per dollar, before easing to 128.6 by 0915 GMT.
The dollar index, which measures the U.S. unit against a basket of major currencies, recovered from a 7-month low touched earlier in the session to be at 102.6 .
Futures now imply almost no chance the Fed will raise rates by half a point in February, with a quarter-point move seen as a 94% probability.
Yields on 10-year Treasuries are down at 3.498%, having fallen 6 basis points last week, close to its December trough, and major chart target of 3.402%.
Alan Ruskin, global head of G10 FX Strategy at Deutsche Securities, said the loosening of global supply bottlenecks in recent months was proving to be a disinflationary shock, which increases the chance of a soft landing for the U.S. economy.
“The lower inflation itself encourages a soft landing through real wage gains, by allowing the Fed to more readily pause and encouraging a better behaved bond market, with favourable spillovers to financial conditions,” Ruskin said.
“A soft landing also reduces the tail risk of much higher U.S. rates, and this reduced risk premia helps global risk appetite,” Ruskin added.
Commodities prices which had rallied last week, dipped on Monday.
The drop in yields and the dollar had benefited the gold price, which jumped 2.9% last week, but the precious metal slipped 0.4% to $1,911 an ounce in early trading on Monday .
Oil prices slid as a rise in COVID cases clouded the prospects for a surge in demand as China reopens its economy.
Brent crude fell 73 cents, or 0.83%, to $84.57 a barrel by 0857 GMT, while U.S. West Texas Intermediate crude CLc1 was down 61 cents, or 0.6%, at $79.24 a barrel.
($1 = 127.8000 yen)
Reporting by Wayne Cole and Lawrence White;
Editing by Shri Navaratnam and Emelia Sithole-Matarise
Our Standards: The Thomson Reuters Trust Principles.
